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 Half Year 2024 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Matteo Fantacchiotti, CEO of the Campari Group. Please go ahead, sir.

Thank you very much. So good morning, good afternoon and evening, everyone, and thank you very much for your interest in joining us for today's call. I'm here in the room with our CFO and COO, Paolo Marchesini; and Chiara and our Investor Relations team. Look, to me, we announced today a positive set of results, especially considering the current challenging industry context and broader macro context, which is still, as you know, quite volatile. We are braving the elements, a rain in Q2 in Europe, and tailwinds of inflation and yet we still outperform the market. We have solid brand momentum and growing brands in healthy categories. So in a sea of flattish, red, negative signs, with positive growth with organic net sales up 3.8%, with an acceleration as expected in Q2 plus 6.9%, driven by solid performance across global priority brands and markets. We see continued strength in aperitifs led by Aperol and Campari, especially in Americas and Germany but basically, both for Aperol and Campari in all markets, except Italy, France and U.K. where -- that were the market most affected with poor weather in Europe. Aperol Spritz is going from strength to strength and been selected recently as the most popular cocktail in the U.S. and is also topping drinks trends in Germany. Espolòn is literally on fire, I would say, with double-digit growth, incorporating further acceleration in Q2. So I will say we have a couple of brands that if you look at the size and the growth rate of those brands are probably 2 of the best-performing brands in the whole industry. Now if you look underneath the surface of these positive top line results, I think we had some temporary headwinds we need to be clear about. One is mix, which, if you remember, was supposed to be the main gross margin drivers for us this year, where given the high inflationary environment, we had soft pricing, still positive, but soft to offset some residual COGS increases and margin was going to be the driver. So far, margin has been obviously not going in the right direction, mainly due to weather conditions and it's obviously temporary because it made clear as soon as weather finally reflects the summer season and July started well so far, finger cross. On top of mix, some COGS headwinds, part of which we need to bear the consequence in H2. Why COGS headwinds? Number one, it's taking a bit longer than expected to deplete last year higher COGS aperitif inventory; and number two, we gradually take advantage of the COGS benefit but later in the year in 2025. So Paolo will elaborate further on this, and I'm sure there will be questions. But why do I say temporary? Basically I want to remind everyone that especially when it comes to the high inventory of aperitif this year, this was a result of our CapEx investment in Novi, production capacity expansion and the one-off extra productions we did ahead of the line opening. So we don't expect this to be an issue for next year. And our production stock is very much under control. So as a result of those headwinds, we still delivered EBIT organic positive growth of 2.1%, with margin at 23.6%, a 40 basis point negative versus H1 2023. And EBIT also accelerated in Q2, a plus 5.6%, minus 30 basis points versus previous year with dilutive effect of gross margin and some SG&A expansion. So gross margin is indeed impacted entirely by negative mix effect of fast growth Espolòn on one side, which is still decretive at gross margin level and poor weather affecting high-margin aperitifs in those 3 markets, especially in Europe. Pricing offsetting COGS and A&P is slightly accretive because, again, we couldn't activate our brands and especially aperitifs in Europe as much as we wanted due to a very poor May, but especially June summer weather, we had quite a lot of rain. The net debt to EBITDA adjusted is at 3.5x on a reported basis, and Paolo will give more color about this again later in the call. So net-net, our medium-term outlook remains the same. I need to say we're pleased about our industry outperformance, confident about the momentum of our brands and our future growth ambition, albeit we will need to discount some temporary margin headwinds. So going into the brands and the regions. So next chart. Growth has been driven mostly by Global Priority brands, which we see as a positive and primarily in Americas. And we consider Europe to be really resilient when it comes to the poor weather we had because, as you can see, Americas is at plus 6.8% and Europe still growing despite the weather, which again, to reiterate in some of the markets in Europe, affect aperitifs because they are very much an on-premise consumption business. Asia Pacific is still negative on the half at minus 10%, but with strong consequential improvements. In fact, Q2 was rather flattish, and we will expand later on, on the outlook for the region. Global Priority is growing at 6% and Regional and Local Priorities slightly declining. We will see why in a few charts. So giving a bit more color about performance in Americas, you can see U.S. solid growth, again, especially given the market context with Q2 acceleration of 7.2%. First half performance is obviously driven by double-digit growth in Espolòn and growth in Aperol and also positive performance in Grand Marnier, which we need to flag though had quite favorable comparison base in H1 last year due to some destocking. Wild Turkey is stable and SKYY is going down together with vodka, which is one of the problematic categories in U.S. But Q2 was positive. Overall, [ U.S. ] was positive. And I want to flag also when it comes to U.S., Aperol is still growing in a very healthy way and has still a lot of runway for growth. In fact, when you look at sellout data, it's growing double digit but we had a very high comp base in H1 in U.S. for Aperol, which is going to be much easier in H2. So we expect actually Aperol performance in U.S. to be faster in the balance of the year. Jamaica, quite volatile performance in H1, I will say, because you remember, Q1 was negative. Now Q2 is very positive and this is largely due to stock availability and production. The underlying consumption trend in the market is still positive. Most of our brands in rum and Magnum as well are growing well. Still, we had some supply shortages in Q1, which were offset then in Q2. And then in July, there was a thunderstorm, as you know, a typhoon and we have risk of production stock in Q3 and Q4 which we're still assessing. It was better than expected, but still not everything was playing. Other market in Americas growing well, and I will flag Brazil as probably the highlight among the other smaller markets with both local brands and aperitifs growing very nicely across all quarter and months. Moving to Europe. Like I said, Europe, to be honest, quite resilient because we have a business with aperitifs, which especially places like Italy, where if it is sunny, people will start probably already at lunch time, but definitely mid-afternoon to be out in the terraces and bars drinking Aperol Spritz. If it's rainy, they stay in the office and at home, and they drink very little. And in aperitifs in Italy, it's about socializing in on-premise. So we had a very rainy Q2 in Italy, France, U.K., to an extent, even in Germany. Italy is down 5.5% (sic) [ 5.2% ]. And especially in the North, the weather was bad, so that has an impact. I also need to say Italy had a quite high comp base in H1 last year, especially in aperitifs because remember, we discussed in Q1 call that H1 last year, first, we had big price increases in May. So there was a forward buying, especially in March and a bit of April of aperitifs. Secondly, price increases across both Aperol and Campari were high single digits. So obviously, in May and June, you have the net sales boosted by that price increase that was passed to the trade. So net-net, we are still seeing that in a reasonably soft market in Italy. We keep share with aperitifs. And with Aperol, we slightly gained share, very little share, which is still positive. Germany is doing really well, both Aperol and even our innovation Sarti Rosa is a double-digit growth. I need to say, the number you see in Germany, both in sell-in, but also if you look at the sell-out data, is also boosted by the fact that in the comp base, if you remember, we had delisting last year so you will see a much better number than the underlying performances, especially now in Q2 and a softer number in Q3. But when we get to the year-to-date after Q3 and full year, I'm sure you will see a very positive strong growth because our Germany business is doing really well. France, like I said, another poor weather story impacting Aperol, Riccadonna, although Campari and Picon are growing. But again, to be clear, because you will wonder why Aperol is not growing, Campari yes, Campari had an easy comp base because there was some delisting last year in France. Those were all the delisting stories for 2, 3 months around our high price increases that then were all resolved in Q3. U.K., soft performance. I think you can see it across the industry. It's a combination of poor weather and macro. And we had also a very tough comp base with H1 last year, plus 21%. I need to say though that outside of those 3 problematic weather market and Germany doing really well instead, the other markets in Europe are all doing very well. Spain is growing. Greece, very strong results from our newly created IMC also in terms of market share gain. Other smaller markets and distributor market, all growing, and GTR is growing as well. Moving to Asia. Asia is really a tale of 3 clusters, I would say. Australia, challenging environment, also a challenging trading environment, consumer confidence not great, spirits category suffering. Probably the one category that is growing, doing really well are vodka-based, white spirit-based RTDs with basically one player doing well. Most companies are losing share. We are holding share, and this is basically due to aperitifs and particularly Aperol growing nicely, but bourbon glass and bourbon RTDs that are a big business for us have been struggling. Now we've been seeing positive signs on bourbon RTDs in Q4. We have seen sequential improvement. In fact, Q2 was very low single-digit negative, whereas if you look at the half, it's double digits. So Q2 was much better. And we're -- also have some innovation kicking in, in July. So Australia, we're a bit more confident about Q3 and Q4. The second cluster is our route-to-market changes that are also going a little bit at different speeds. China is done. China is positive. We have a lot of confidence in China. We see a lot of opportunities. The team demonstrated high capabilities in executing the market change as per plan and we started to see growth already in Q2, also depletion level. India has taken a bit longer, and it was due to timing of registration, delaying due to elections, and it will be completed in H2. And I think for India this year, as we said at the beginning, also due to some leadership changes and strategy resetting is going to be a transition year to remind everyone, India for us is very, very small, less than 1% of our revenue. And the rest of Asia is the third part of the story, which is growing very nicely. Some of our recently launch in the last 3, 4 years, IMC are growing share every month. Japan is doing well. South Korea is doing well, except we had some Q1 phasing if you remember. New Zealand is also growing nicely, especially with aperitifs and some of the distributor markets are also growing. So then Asia, Q2 was difficult. Q1 was difficult. Q2 was better, we think H2, Asia will be back at the right trend that we need to see from that region, which is definitely double digit. Now going to the brands and starting, of course, with Aperol. Now I just want to be very clear about Aperol. We're growing 5%, which is not the usual double-digit rate you will see with Aperol. This is this is really, first of all, growing despite the poor weather, but this is really driven by Italy and France performance and tough comparison base we had H1 last year was up 32%. This being said, with Aperol, we have positive growth basically across each and every other market hasn't been impacted by weather and it's typically double-digit growth again. The growth you will be accustomed to see. And that is really in Brazil, in Mexico, in Canada, in Germany, Spain, in Greece, in Japan, New Zealand, Australia, GTR. You name it, all the key markets are growing double digits. And like I said, U.S. was low single digit in H1 with Aperol, which is mostly a phasing because you can see both in the Nielsen and NABCA number, Aperol in U.S. is growing double digit. So it's important to give you confidence that Aperol is in a good place. And we're very pleased about the growth trend of this brand, and we will have a couple of charts to share later on that will probably give you also that sense. Campari as well growing nicely, is up 9% accelerated growth in Q2, led by Americas, Brazil, Jamaica, Greece, GTR, France. Espolòn also against a very high comp base last year of plus 43%. It's been growing 22% on the half and 30% on Q2. So since the brand is really unstoppable and growing U.S. but also in Australia, in Italy, and even GTR from a small base, where we're really making sure through our GTR team that's in line with this brand to be a Global Priority brand, in all your key airports internationally, you will see and find Espolòn. Wild Turkey is a bit milder. I think there is a positive trend in Q2 where it's definitely growing. And you know that Q1, we had some phasing, especially with some markets like Korea which is now becoming 1 of the top 5 markets for the brand. And we look at this brand into this transition phase where we repositioned the brand. We're really looking at value versus volume, and we're quite positive midterm about our bourbon leg strategic category plan. When it comes to Jamaican rum, is basically reflecting a bit what I said about Jamaica. The performance is resilient I think especially Appleton is a great brand with a lot of premium innovation we're launching and that is delivering really well. We had some phasing in between Q1 and Q2 in terms of stock availability, and we flagged some possible risk on this portfolio, still to be validated with the supply team as they're looking into all the consequences of the hurricane. Grand Marnier is very positive. I need to flag here though that, as I said, for Aperol is a positive story because we had some phasing in between Q1 and Q2, is going to be better. And instead Grand Marnier double digit is probably also reflecting some easy comp last year and restocking in the U.S. market, so easy comp base. Of course, we have increased marketing focus, but we expect that H2 might not definitely grow at that pace. And we did comment about SKYY already. When it comes to Regional Priorities and Local Priorities, sparkling wine, champagne and vermouth are growing nicely. When it comes to other whiskeys, it's mostly a phasing one-off issue. As you know, especially GlenGrant is mostly -- is very much skewed into Asia. We had a very high comp base last year, plus 31%. And obviously, some of the route-to-market changes and the phasing in Korea affected the half but we see GlenGrant on a full year basis would go back to very positive performance because in terms of market share is doing very well in Asia, off a small base but starting to really pop up definitely the top 10 or in some markets, even top 5 brands in single malts. Other specialties, the decline is mainly driven by Magnum Tonic. And to flag, although the minus 1% is not that positive, but on non-alcoholic is really a Crodino story, which is our nonalcoholic play on aperitif is our nonalcoholic spirits. And everywhere is growing double digit, and we're really quite excited about the opportunity with this brand. We have very strong plans starting from Europe and then to expand possibly in other regions next year. The decline is mostly a combination of weather in Italy and then streamlining the range to really focus now on very focused gain on the nonalcoholic spirits variant, and we basically delisted some of minor flavors, which we have in the base in Italy. When it comes to Local Priorities, I would say Campari Soda is again about Italy and weather. And I think worth mentioning, Wild Turkey RTDs which, like I said before, yes, Q1 was, if you recall, negative double digits and Q2 is positive, so is plus 2%. So there is ongoing pressure on the category, but at least we see that the brand is responding to the activities that will be put in place. Now before moving to some of the usual marketing highlights, just one page on Aperol, which is a number of consumer insights and studies we received recently that are giving us quite some confidence that we knew already, but it's always good when you have news that are confirming what we think. First of all, there was a study in U.S. that found that Aperol Spritz is the most popular cocktail in the United States with 22 states ranking it as their favorite. The source of this study was Forbes Magazine. By the way, very interesting for us to see that coincidentally or maybe not coincidently where Aperol is #1 drink in the map, which is where you see the light green color. It's mostly overlapping to the places we always told you we were investing in field activation for Aperol. But equally, we can see that then the opportunity we still had elsewhere to try to make the whole map light green is definitely there and especially in the red central areas. Same with Nielsen in Germany. There was a study on the on-premise market recently that founded Aperol is still gaining considerable traction among German consumers as the top gastronomic drink in 2024. It has emerged as the most on-trend drink category with increase of 9% in consumer preference. Then another article that was talking about Aperol as the it drink of the summer season. This is happening every summer. We see that. And then it is more across the portfolio, but I think something that again give us very strong confidence in our team capabilities and the impact in the U.S. As you -- most of you know, recently, there were the Spirited Awards at Tales of Cocktails in U.S. And within the Spirited Awards, they did a survey in the 135 venues that are subject of these awards that are typically the best bars in the U.S. or the ones that are voted as the best bars in the U.S. and they analyzed all the menus, which meant they analyzed more than 1,000 cocktails to understand what were the most utilized ingredients. And basically, Campari Group was the #1 supplier among these surveys of all and the best place in terms of cocktail presence and our drink strategy executed in those accounts. So those are some highlights that are giving us, again, the usual strong confidence, especially on our aperitifs portfolio and Aperol. Now when we move to some of the marketing highlights, we discussed last time about our Campari activations and 2024 marking the return of Campari to the Cannes Film Festival for the third year as an official partner. Now this is the pinnacle of the many international film festivals that we're popping on with this brand, trying to establish a mental link and associating the image of Campari with cinema. This year, we further announced our presence in Cannes with 2 locations, the Campari Lounge overlooking the red carpet at the Palais de Festival and the Campari Beach, which was a new iconic space on Boulevard de Croisette, where we hosted movie stars and guests with a rich program of events open throughout the whole day. And as we did for the Australian Open, you recall in Q1, we discussed about our 360 experience activation, with integrated on and off-line touch point activation through on and off-premise airport and digital and also partnerships with media and celebrities. This is what we did in Cannes, including key movie partnership, a strong focus on digital communication and media partnership with Condé Nast. A lot of cinema-related talents. You can see here in the picture some beautiful actresses where I actually forgot the name. But you can see I was enjoying the very entertaining company of one of our guests, Adrien Brody, in the picture, which if you recognize him, he's -- he did many movies, but I think what most of us know is The Pianist. But long story short, those are people that are really amplifying through their channels, our activations and really sitting in culture and in everyone that's interested in cinema and coveted events like Cannes, our brands into society. And the results, very good. Campari indeed ranked #1 for earned share of engagement across the all other sponsors. And I can tell you there were a lot of activation from other sponsors. So we're #1. We achieved 3.6 million of earned engagements, significantly high versus last year, serving then in our venues more than 20,000 Campari cocktails, which is bringing liquid to lips to a very selected number of individuals. We did the same in Art Basel, which is another, obviously very prestigious art fair. This year, we announced our presence with basically the team from Camparino, bringing to life what I call the best of Italian hospitality which means that under the flagship of Campari, we can also leverage the full portfolio and again, with a lot of media partnership and talent to amplify our presence. Again, here, great results, 2 million of impressions. We were ranking #1 for earned share of mentions and engagement across all sponsors again, and we are also 7,000 guests in our lounge. What I also like to bring to life here is that our Camparino property really bringing to life the Italian -- the art of Italian hospitality and mixology is something that we can leverage really well in those events and in some prestigious locations, which is what you can see in the next chart, which is mostly an invite to go and visit for everyone. That will be in Europe during summer in the beautiful garden of Hotel Hermitage in Monte Carlo in Monaco. You will find the beautiful Campari Lounge, which is also showcasing some of our Camparino bartenders creating amazing drinks. So that's mostly about Campari. When it comes to another priority brand like Espolòn, first of all, this year, it marks the 25th anniversary of this brand. I just want to remind everyone, this is a brand that we grew 22x since -- in the last 10 years. So it's really an anniversary that celebrate the great success of this brand, which is now a Global Priority brand. And as such, we launched the first global campaign. We just launched it, so we don't have results yet but we're very proud of this campaign, which is called To the Bone launch for us for now in U.S. and Australia. A bit of a departure from the industry standards backdrop of agave fields, this campaign is shot in the inspiring creative hub of Mexico City, really highlighting the contemporary on-stage vibrance of Mexican culture, which is at the core of our brand. Moving into Aperol. I'm going to go a bit faster here because we already presented a lot of details in previous calls but just to give you some highlights and pictures and bring to life our presence in the big festivals across the world. And actually, I would say, from big festival to small events to focused city, Orange Wave, activations. So you can see Coachella and Primavera Sounds, which are some of the biggest festivals -- music festivals in U.S. and Europe, Spain, namely in the first chart. In the second part -- chart, you can see some of our 360 activation in Greece across beach bars but also with a full 360 consumer journey, activating also visibility in transport, in stations, in digital and then in on and off-premise. Similarly in Germany, in U.K. And then we have a city strategy in Asia Pacific and especially during the summer season where we think we can also leverage the presence of a lot of tourists in the seasonal hotspots we start to activate and this is what you see in this picture, places like Bali and Thailand. So that's Aperol. And by the way, I'm not going to bore you with the details, but also with Aperol, huge success in terms of our activation. I think we're becoming best in class in that respect. And I just want to mention one. At Coachella, we were the #3 brand for social share of mentions this year and Coachella is a brand that is activated by a large number of brands. We are not talking about drink brands. It's each and every brand is one of the biggest things that happen in U.S., probably after a few others like Super Bowl and so on. So #3 and of course, #1 in food and beverage. So being the second year, we do it, we're really very happy about that result. Moving into Wild Turkey. I really like this chart because I think it visualized really well the journey of this brand with 2 different elements. One is our visitor center. We just reopened it on May 1, the renovated, what we call, Jimmy Russell Wild Turkey Experience which is our business center named in honor of the legendary master distiller. And I think this -- you can see the quality of this destination, is a must visit stop in the Bourbon Trail with breathtaking views overlooking the Kentucky River. And the second one is Russell's Reserve 15 years old, which we just launched. And you look at the quality of these liquid and brand and SKU and it has all the rights to compete with any other luxury brand in the whiskey space. And I will say, if you look at where we started with this brand Wild Turkey years ago, which was much more of a mainstream brand. And I've been told when we did that for the first time we visited the center and the factory, unlike Courvoisier, we were not necessarily excited about the quality of what we have seen. Today, this is really becoming a brand that has all the ingredients to become a very premium brand in the whiskey space, and the direction that we see is very positive. Last but not least is a bit of, if you like, new element versus the usual content we share. As you know, we're pretty single-minded in not being trapped in the temptation to launch too many RTDs and flavors across the globe. Our focus is very selectively on RTD premium profit pools and very much in link with our drink strategy for any given brand that we decide to activate. So within that, we decided to launch in Australia, Espolòn RTDs, and this is in consistency with our Espolòn win strategy, the Paloma and then the Margarita. And so far, we just launched in July. The trade reception has been incredibly positive. So we hope the consumer will follow right away. And then we launched in Japan Wild Turkey Highball, a premium price versus the competition. It was a pilot this year and the result of the pilot were extremely positive. So we're going to make this also a permanent play from end of this year in Japan, possibly with some further announcements in the premiumness of the proposition. Just to say, in something that, as you know, a category that we consider not always in a totally positive light. But when it makes sense, we are also active, and we believe we do good things. Before I pass on to Paolo, just a few words on Courvoisier. Look, the integration is going well. It's going according to plan. From a supply chain, IT, admin, logistics, everything has been completed and went really well. We are integrating the brand into commercial platform and everything is also going well. We are live in all markets. We are selling and invoicing in all markets. We're now completed -- we have now completed the global team that will look after this brand with some senior appointments, and we're very pleased about the people that are now part of that team. But we are also hiring and we're almost done with hiring also in the couple of markets, especially U.S. and China, where we say we wanted to hire some additional people focused specifically on either south of China or South America in U.S. And the new team is really looking at the brand in every possible way to understand how to really restart the growth for these brands starting from next year. And then in the medium, long term, we built this brand as a luxury brand in the cognac category as it deserved to be. As you know, H2 is going to be a transition period where we integrate the brand, and we look at understanding as we go the full impact of H2. But medium term, I need to say that so far, the team is really positive, and we are all pretty excited about the opportunity that we see with this brand. And overall, I will say, in the medium term with the category as well. I will pass to Paolo bridging with this picture, which is just something we also recently launched which is the new line, which we call the Garden of Splendour of GlenGrant with 25 years old and 30 years old that are completing the range which, again, is showing that the brand today is in a totally different place versus a few years ago. And I think this is going to be, in the medium term, another successful brand transformation story that we have upped our leads.

So if you follow me to Page 20, a few slides before we go back to conclusion and outlook, and we open for the Q&A session. Page 20, you can see that the EBIT adjusted in organic terms grew in value by 2.1% with a margin of 23.6% and 40 basis point organic dilution. If you look at the second quarter in isolation, we had a sequential improvement of both net sales and EBIT, which showed an organic growth of 6.9% and 5.6%, respectively, with still a 30 basis point EBIT margin dilution in the second quarter on a stand-alone basis. Now on a year-to-date basis, gross profit was up 3.4%, with 30 basis point dilution. And in the second quarter, the gross profit organically was down in margin as a percentage of revenues by 60 basis points. The dilution of gross profit as a percentage of revenues was entirely due to the negative mix effect coming from both the fast growth of Espolòn that, as we all know, comes with dilutive gross margin or revenues as well as the impact of very poor weather conditions in EMEA, negatively impacting the high-margin aperitifs in the second quarter. On the other hand, if you look at pricing and COGS, the positive pricing impact, which was, as we said, skewed into the first quarter of the year still, on a year-to-date basis, fully offset the tiny inflation, which is still there which was largely driven by the negative carryforward effect of last year high cost stock that we've partly utilized in the first half of this year. Now if you look at the A&P, it grew in value by 2.1% with 30 basis point margin accretion. In the second quarter, the accretion was consistent at 40 basis points due to the very poor weather conditions that negatively impacted the second quarter and the start of the summer activations as a consequence of that. The SG&A were up 6% with a 40 basis point margin dilution. In the second quarter, the dilution was more minute at 10 basis points, reflecting the ongoing investments to ensure sustainable growth. On a reported basis, the EBITDA adjusted grew by 0.1% with a negative perimeter effect of 0.5% in value and 40 basis point dilution due to the negative effect of agency brand, which were partly offset by the first time consolidation of Courvoisier. Also, the effect -- sorry, the FX effect were negative in value by 1.5% with a 20 basis point dilution and again, this is the tail-end effect of the devaluation of the Mexican pesos versus both dollar and euro. EBITDA adjusted on a reported basis came in at EUR 418.8 million with a value growth of 1.9% which was driven by a healthy 3.5% organic growth, a negative 0.2% perimeter effect and again, a negative 1.4% foreign exchange effect. If we move on to the following page, segment analysis and review of EBIT by geography, Americas, which accounts for 44.9% of the overall group EBIT, the increase of EBIT in organically in value accounted for 6.5% with a tiny margin dilution of 10 basis points which was driven by a gross margin accretion of 10 basis points, where the favorable pricing impact in both Brazil and Jamaica was more than offsetting the COGS inflation and the negative mix effect due to the huge rise of Espolòn, bringing low gross margin on profit -- gross profits on revenues. The A&P in Americas was accretive by 50 basis points due to phasing and SG&A in Americas were diluted by 70 basis points due to the ongoing investments in commercial and marketing infrastructure buildup. In the EMEA region, which accounts for 56.5% of the group profit, the EBIT organic growth accounted for 3.6% with the margin accretion of 10 basis points which was driven by gross margin dilution of 70 basis points due to less favorable sales mix, as we said before, due to a softer performance of high-margin aperitifs which were impacted by very poor weather conditions, particularly in Italy and few other European countries. The A&P was accretive by 30 basis points, mainly due to delay in start of summer activations. And the SG&A on the contrary were accretive by 50 basis points, driven by the phasing of buildup investments. In the APAC region, which accounts for a negative 1.5% of the group overall profit, we had a dilution of 960 basis points, which was driven by a dilution of 60 basis points to the level of gross profit with favorable sales mix more than offset by a tough comp base effect from H1 of last year. The A&P and SG&A were impacted by robust activation and phasing of investments in new route-to-market capabilities in the region to support the accelerated growth going forward. And those 2 cost lines, A&P and SG&A, create a dilution of 180 to 730 basis points. If you move on to Page 22, other operating adjustments, which were primarily related to the Courvoisier acquisition, accounted for -- the structuring of the Courvoisier acquisition accounted for EUR 24.4 million in the first half. The total financial expenses came in at EUR 33 million, with a time increase versus a year ago of EUR 0.6 million. The exchange gains accounted for EUR 0.8 million versus exchange losses of first half of last year of EUR 10.5 million with benefit -- significant benefit from low volatility in exchange rates. Now if we exclude the tiny exchange gains of EUR 0.8 million, the financial expenses came in at EUR 33.8 million versus EUR 21.9 million of last year, driven by higher average net debt amount, EUR 1.9 billion this year versus EUR 1.7 billion last year due to the closing of the Courvoisier acquisition in the first half of this year and the higher and secondary higher average cost of funding following, on one hand, the redemption of mature bonds at low rates and the refinancing of those in a higher rate environment. Those were partly offset by the benefit of temporary high cash at end ahead of Courvoisier closing and debt repayments. The average cost of net debt, the coupon for the first half came in at 3.7%, so 1% higher than a year ago at 2.6%. Hyperinflation effect, this is Argentina. This is accounting remeasurement driving EUR 10.2 million of positive contribution to the bottom line. The adjusted pretax profit, came in at EUR 333.3 million, up 2.2% and the pretax profit, clean came in at EUR 310.7 million, flat versus a year ago. If we move on to following Page 23, taxation came in at EUR 94.1 million on a reported basis with recurring income taxes equal to EUR 97.4 million. The net profit adjusted came in at EUR 239 million, up 2.2%, where the recurring tax rate stood at 29.2% in the first half, actually up 110 basis points versus a year ago due to the unfavorable country mix. The deferred taxes related to the amortization of brands for tax purposes amounted to EUR 8.2 million in the first half of this year, down EUR 2.7 million versus a year ago and mainly due to the completion of the amortization of selected trademarks. Excluding the impact on noncash component linked to deferred taxes, the recurring cash tax rate came in at 26.7% in H1, showing an increase of 200 basis points versus a year ago due to the combination of the 2 effects, the increase in recurring tax rate and the decrease of deferred tax rate, but this is in line with what we have already anticipated. The group net profit reported came in at EUR 219.7 million up 1.3%, basic earnings per share adjusted at EUR 0.2 per share, down 4.2%, basic earnings per share at EUR 0.18. If we move on to following page, 24, we can see quite a remarkable improvement the recurring cash flow from operating activities before working capital changes. It came in at EUR 395 million in first half, up EUR 54.8 million or 16.1% versus a year ago and that was due to an increase in EBIT of EUR 7.8 million and a reduction in tax paid due to mainly this is phasing or phasing of tax payment cycles across the year in the different jurisdictions. The recurring free cash flow, excluding basically the extraordinary CapEx, was positive at EUR 130.8 million up EUR 222.4 million versus a year ago when recurring cash flow came in at a negative EUR 91.7 million. The increase of operating working capital in the first half accounted for EUR 190.9 million. But that increase was significantly lower than the increase the group registered a year ago of EUR 372.1 million. Net interest paid at EUR 26 million, marginally higher than a year ago by EUR 7.5 million due to the additional funding for the Courvoisier acquisitions. Excluding, as I said, the extraordinary CapEx, the maintenance CapEx came in at EUR 47.5 million, EUR 6 million ahead of last year. Now if you look at the extraordinary CapEx, that is basically the difference between total reported CapEx of EUR 219 million and the maintenance CapEx, the extraordinary CapEx in first half accounted for EUR 171.5 million, and those were mainly related to the production capacity expansion projects that we've announced remaining EUR 550 million over '24 and '25 as well as the new headquarter building payment that accounted for EUR 93 million in first half. The investments in extraordinary CapEx are expected to continue as planned in the remainder of this year as well as next year and thereafter, we're done with extraordinary CapEx. Operating working capital, Page 25, as a percentage of net sale at the back end of June, came in at 44.2% on a like-for-like basis, so excluding Courvoisier versus 37.9% of December last year and 39.1% at June of last year. Operating working capital increase in the first half accounted for EUR 648.5 million of which the organic increase accounted for EUR 190.9 million with inventory growing by EUR 53.8 million, and that was primarily driven by an increase of EUR 40 million in aging liquid. But still, the finished goods inventory increased by EUR 10 million driven by softer demand on aperitifs due to poor weather in Q2, limiting the envisaged reduction of finished goods. So this is where, in the Q&A, we may elaborate a little bit more, but this is where we're not exactly on track vis-a-vis the reduction of finished goods inventory that we will manage to achieve in the second half of this year. Changes in receivable and payables, accounting for EUR 120 million and EUR 16.8 million, respectively, are both in line with the seasonal trends. The perimeter effect is basically the first time consolidation of Courvoisier, accounted for a step-up in operating working capital of EUR 439.9 million with a prevailing component due to the maturing inventory, which accounts for EUR 388 million. The foreign exchange impact accounted in the first half for EUR 17.7 million, and it was mainly driven by the evaluation of dollar and pounds. If we move on to Page 26, net financial debt came in at EUR 2.553 billion as at June end, up EUR 699.7 million versus December and last year, reflecting the negative reported free cash flow of EUR 60 million largely due to cash absorption related to the extraordinary capital expenditures of EUR 171.5 million, which I've just mentioned before as well as the dividend payment of EUR 78 million and the net impact of the Courvoisier acquisition, which was, I said, a big cash outlay. Cash and cash equivalent at the back end of June stood at EUR 555 million, marginally down versus December of last year. As you know, the financing for the Courvoisier acquisition has been fully sorted out. The long-term Eurobonds and term loan amounted EUR 2.375 billion with an average coupon of 3.66%. On a reporting basis, net debt-to-EBITDA ratio came in at 3.5x. And this is included in the earnouts and put option for a total amount of EUR 333.6 million, so the existing one as well as the ones relating to the acquisition of Courvoisier. And that is about it on numbers. So we would happily hand back to Matteo for a conclusion and outlook.

Thank you, Paolo. So I think we gave quite a lot of details already. But again, to reiterate, we believe we have reason to be happy about our first half with a solid performance of about -- around at 4% and 7% in Q2, which is very much outperforming the industry and is very much driven by aperitifs, Aperol and Espolòn. So I will reiterate really driven by a couple of brands that are 2 of the best-performing brands in the industry, which is giving us a lot of also confidence that, for the remainder of the year, we can continue to outperform the industry, leveraging those strong brands in growing categories. Obviously, the market is still volatile. There is a soft environment. This can remain reasonably soft in U.S. And hopefully, we're going to be less dependent on weather for the balance of the year after August in Europe. But at the same time, we keep seeing that we can outperform by a couple of points at the industry and yet is growing, which is great. On a full year basis, we need to flag that our ability to expand gross margin might be impacted by the mix, which we hope is going to turn positive already from July. But let's be clear. Unless something really exceptional happens, we're not going to recover the mix dilution we had in May and June which is also weighing on some higher cost inventory to deplete on aperitifs. And then Paolo will expand on some agave supply contract renewals hurdles, which we're now addressing. So in a way, like I said at the beginning, we're braving the elements, a rain in Q2 and some [ tailwind ] inflation. And yet, we're doing, I believe, a great job. We're outperforming the industry. And for the medium term, we believe we can be really confident in underlying continued healthy brand momentum for our key brand-market combination. We see the opportunity to deliver consistent operating margin expansion. And obviously, we just need to face some temporary headwinds into this year impacted margins, but the medium-term outlook remain positive. So thank you very much. And I think we will open for questions now.

[Operator Instructions] The first question is from Simon Hales with Citi.

So a couple of questions, perhaps not surprisingly, the first one is about the margin outlook, Paolo. I wonder if you could just give a little bit more detail as to how you're thinking about that H2 gross margin development now compared to where we were earlier in the year when you gave guidance around those factors. I'm particularly keen to understand what's delaying the benefits of those low agave prices. I think historically, you'd said we should expect to see a EUR 50 million benefit from lower agave, EUR 30 million in 2024 and then the remaining EUR 20 million in 2025. How is that now phasing? And also related to sort of COGS development, can you update us on where we are on renegotiation of your glass supply contracts? So that was the first question. And then secondly around sort of recent trading trends. Clearly, Q2 weather was a headwind versus expectations. Can you elaborate a little bit more, Matteo, on what you've seen in July to date? I think the weather has been much better in Italy so far this month. And how you're thinking about lapping through what should be an easy, theoretically at least, Q3 weather comp from last year? What's built into your H2 gross margin guidance expectations right now for summer weather trends through July and August into September?

Thank you, Simon for the question. Wish I was somehow expecting. So let's start from the guidance. So as we've positioned the matter for this year, we said we think that if you look at pricing and COGS evolution for this year, the 2 should be fairly balanced with potentially some -- a little bit of tailwind accounting for roughly EUR 20 million, by and large, to be understood -- to be better understood depending on, as you correctly pointed out, agave, glass contract renegotiations. Now if you look at what has happened in the first half and particularly in the second quarter, so if you look at the first half, on -- let's start on what is really working, is pricing and COGS. Luckily enough, COGS are no longer -- the COGS increase is no longer outpacing our ability to take price. And even though for this year, we had given a moderate price increase guidance between 1% and 2% and even taking into consideration the exacerbated discounts, we're hitting our goal in terms of price increase. And eventually now COGS are growing still in the low single digit if you look at the first half, but below price. And we're not suffering any dilution in terms of margin from price and COGS in the first half. Now the problem comes in the second quarter on mix, which was clearly not evident in the first quarter and it is clearly due to the combination of, as I said, very poor weather conditions negatively impacting our aperitifs in the EMEA region as well as the still strong growth trajectory of the Espolòn brand, which, as we all know, is generating still in year 2024 some dilution to the overall group gross margin. So this is why we think that if you look at the gross margin guide -- and then I will elaborate on agave contract renewal and glass contract renewal. If you look at the gross margin guidance for the full year, we think we will not be able to hear to achieve gross margin expansion, which means that, basically, we're -- at this moment, our expectation is to reduce our gross margin by roughly, call it, between EUR 20 million and EUR 25 million. This is our current best estimate of which you can see basically 3 components. One is a permanent -- no, sorry, 1 is a temporary effect and 2 are permanent. And all of the 3, they account for 1/3, 1/3, 1/3, so call it 8, 8 and 8. So the first one is the agave renegotiation. This is a negative impact but this is phasing. So we don't see, at this stage, anything in terms of contract renegotiation that is not leading to the lending that we were expecting for 2025. So it's more in a phasing between 2024 and '25. Whilst the other 2 factors are to be seen as permanent, and those are the sales mix due to poor weather condition, and the fact that due to performance of aperitifs below our expectations, the fixed production cost absorption is below what we were originally expecting. This is another 8. So we have the first one, which is agave permanent sales mix and fixed production cost absorption as well as limited absorption of the last year, a very high cost inventory accounting for the remainder, and that this is permanent. Vis-a-vis contract renewal, which is your last point, we think on agave, as I said, it's stickier than expected, but we'll get it done. On the glass supply, we managed to pocket some of the upside this year due to the early renegotiation of the contract, but we still believe there is more to come in year 2025, as we don't believe this is the maximum efficiencies we can achieve on that front. So this is -- I hope answers your question in terms of price [ comps ] and mix for past half and what we see for the remainder of the year.

So when it comes to July and outlook for H2, well, as you know, we won't give a precise guidance for H2. And by the way, it will be quite difficult at the moment anyway, but I'm going to give you possibly some headlines in what we think. First of all, July, yes. Well, what we can say in Europe, now we can say we're literally at the end of the month. The weather has been good and obviously this is positive. So we're not going to complain about the weather when it comes to July. And performance-wise, we don't have yet sellout numbers and things like that. But the feedback from the field is positive. The brands are moving and especially in Italy, we see a lot of orange everywhere. Similarly, in London this weekend, we had news that it was good weather and a lot of orange in the city and so on and so forth. Trading condition, not easy. I mean, to be honest, everyone in the industry is under pressure. Everyone is promoting and activating life, health and especially in Europe, there is one category that is doing well in aperitifs and everyone is trying to promote spritzes or aperitifs. Everyone is trying to be an aperitif. I also mentioned there is even a beer brand, which I'm not going to name, but you'll find that is now having an ad that is saying what about this great aperitivo time with our brand. So this being said, what we see is basically, by the way, in some case, proliferation of menus with a lot of different offerings and then a lot of Aperol Spritzes consumed. So thank God there is a lot of brand call, especially in Italy. So overall, if weather continue in Europe, we expect to see better trends. When it comes to sell out, again, just to notice -- to manage expectation, we'll see a softening in Germany, and this is literally to re-pipeline fill after the delisting last year, which will pop up in our comp base sell-out numbers, not sell-in starting from July. U.S., look, it's same. U.S. at the moment is soft. Even our industry partners are looking at H2, wondering how H2 shape is going to be. Everyone is expecting some sequential improvement doing to a combination of interest rate cuts, elections and things that can get consumer confidence and discretionary spending to resume a bit. Now we've been growing in H1 with a reasonably flattish market, I would say, slightly negative volume-wise and probably flattish value-wise. If the market improve, we believe we can grow faster. We also have a slightly easier comp base, definitely for Aperol like I said, less for Grand Marnier but overall, slightly easier. And I need to say, when it comes to U.S., I was there for a number of days recently, yes, also a lot of competition. But what I notice is that unlike Europe, there is -- the softness of the market is making customers to focus even more on what is growing. So polarizing choices when it comes to choosing what to promote and activate, which overall can favor us. And then for what it's worth, because it's still a small part of our business, I said before, we expect H2 to go back to positive in APAC. We discounted our route-to-market changes and H2 should be positive.

The next question is from Andrea Pistacchi with Bank of America.

Two or 3 things, please, from me, a bit following up on some of the things we've just discussed. So on the U.S. now that the market is obviously soft, which you're saying you're outperforming. Nielsen has been pointing to quite a slowdown in your business in recent months. I know it's far from being very representative, Nielsen, but a lot of the softness in Nielsen is particularly with Wild Turkey, Russell's Reserve and you were talking before about the plans of strong brand equity. But in the short term, are you seeing anything there? And when you strip out various phasing effects, comps, et cetera, what is your sense of sort of the underlying performance that your business is delivering in the U.S. now as we go into H2? And then maybe for Paolo. On going back to the agave and the contracts that you're negotiating there, can you remind us of your agave purchases, how much is these long-term contracts versus spot, versus your vertical integration? And what are you aiming for with these negotiations? I mean, Agave prices has come, I mean, I think well below 10. So what sort of price are you hoping to secure there? And if I may, just this is also a bit of a clarification, Matteo, on what you were saying earlier on the more intense promotional environment, particularly in Europe. How is this -- I mean is this impacting you? Because your -- how you're responding to this? Are you having to respond to some of these promotions? Or is it effectively you're losing a bit of business that you otherwise would have been getting?

Sure, summer, so U.S. first. Look, when you look at U.S., we always try to look at both Nielsen and NABCA. None of them is precise. Often, we believe NABCA, from a channel standpoint, is a more accurate coverage of our performance. But when you combine those, we continue to outperform largely thank to Espolòn, which keeps ensuring Tequila and Aperol that keeps growing with healthy double-digit momentum across both Nielsen and NABCA. You spotted rightly Wild Turkey, which performance is a bit soft at the moment. Although when you look at SKU by SKU, there are a few elements to consider that are also in a way, affecting also value share. One is, as you know, we've been driving this transformation of the brand, and we're definitely focusing on 101 and upwards, which means slightly higher price points and that obviously can be part of a little bit of a slowdown of those price points across category in the U.S. The second part is there is definitely a lot of effort in building equity at the top, which I think, in the medium run, will give great equity to the brand and will benefit also 101 and even 81, which won't be forgotten by the way. It's just a temporary refocus to rebuild the equity of the brand, but we will go back to 81 with stronger plan. And that is everything that is from all that's good, the Maker's Mark and ultra-premium prestige price point of Wild Turkey. At the same time, if you look at -- and by the way, 101 is gaining share -- value share. Then if you look at Russell, you will see instead, share wise, there is a bit of slowing down actually, declining, but this is also in line with the repositioning and also refocus on Russell in high-priced SKUs because we said it a number of times, we didn't have enough Russell to sell and to keep up with the demand in U.S. and outside of U.S. So we're trying to shift the focus on Russell in value versus volume which is always on a short-term level might have some impact, but we believe it's the right thing to do. So what I will say on bourbon, I would not worry about the future. We are pretty confident on our bourbon gains for the future. There is also, on the performance, a bit of a slowdown from Longbranch, which, as you know, we exited the partnership with Matthew McConaughey last year. So now we're relooking into this brand without Matthew and we have also a very interesting plan. So on Wild Turkey and bourbon, I would say stay tuned, but we believe we are on the right track, although we have a bit of a flat momentum on these brands. Maybe before I pass to Paolo, I cover Europe. Look, Europe, I'm going to sound a bit like a broken record, but is what we always said. Especially when it comes to aperitifs, we don't believe to have a lot of price elasticity, and this has been proven by couple of years of high single-digit price increases in a row that compound again double-digit price increases, and we didn't see any slowdown. But obviously, the more you have competition and aggressiveness and the more is coming from all sides being fake, me-toos, gin, beer going into the territory, the more you really need to make sure your brand is staying very visible and top of mind. So what we did is, number one, we reported some of the A&P we had on some of the minor brands in field activation. So we're doing even more small micro events across both north, south, center and now even south of Italy for Aperol especially to make sure that it's really staying top of mind and the liquid to lips and the Orange Wave continue. And we are probably likely increasing the frequency of promo, not the intensity. And when I say increasing, by the way, it means also to go back to pre-pandemic periods, right? Because during pandemic, we really slowed down all promos because it wasn't necessary. So for now, this is what we're doing. What that means net-net is that obviously, we had soft price increases in Europe for the year, around 1%, 2%. And probably what we're going to deliver is going to be more skewed into very low single digit, more to 1% than to 2% because we're offsetting some of that with some incremental form of frequency.

Vis-a-vis the agave contract renegotiation, basically, it's a little bit complex, but I'll try to explain what we're trying to pursue. Basically, you have 3 types, different types of contracts. You have the long-term agreements. You have the short-term agreements and then you have the co-investments with different structures. So the long-term agreements are the ones which have been negotiated when there was very severe scarcity of agave plants in the period of time when there was a huge imbalance between supply and demand was outstripping supply. So those contracts have been negotiated at significantly higher prices vis-a-vis the current 10 pesos per kilo spot price. Then you have the second class, which is the short-term contract agreement, and those have spot prices by definition. And then you have the co-investments. These are contracts where you basically take some of the risk of the agricultural operation management. And those contracts, they are basically on average, the price for the agaves in line, if not, marginally below the spot price. Now the point is the conundrum is as we're renegotiating the long-term agreement to make sure that with the strategic suppliers, the one who can really -- and that's been loyal to the company in the past, providing the agave plants that prices were below the back then spot price. We remain in business. We extend the contract at prices that are as close as possible to the current spot price with some color, structures where basically we recognize a portion of the potential future increase in spot price, but to a certain limit because, of course, sooner or later, the price of agave will come back. On the spot, stays as spot and co-investment is co-investment. So the point of the year 2024, given the fact that we are still confident of renegotiating the long-term agreement to the price that I have a price structure that they have just defined is in terms of quantities, how much of the quantity is coming from spot long-term agreement and co-investments we pull to produce this year products? So it's more the weight of one versus the other. So at the beginning of the year, we said, if you look at last year, average cost per kilo of 24 pesos, 25 pesos. This year return of procurement, not what goes into the P&L, we're targeting 15 pesos, which is 10 pesos reduction, primarily coming from long-term agreements. That is where we have a little bit of delay. So we will not be able to [ appropriate entirely ] this year, leaving the 20 next year is more a little bit 8 moving into next year. But in terms of negotiation and everything, I think we're in a good spot. And then of course, demand plays role because the more we ship, we sell Espolòn, the more we absorb last year high-cost liquid that has been distilled and stored in 2023 at 24 pesos. And so the sooner we get rid of that stock, the better it is for us because we would have in the P&L cost of the agave that is as close as possible to the 10 pesos per kilo is the current spot price. I hope -- the answer is a little bit complicated, but it's marginally higher than the 50 pesos per kilo that I had mentioned before.

The next question is from Cedric Lecasble with Stifel.

Just a follow-up on the consequence of the weak start of the aperitifs season in Europe on your Q3 development. Could you maybe explain the spillover -- potential spillover impact, the start of season engagement, how fast you replenish and how we should look at the phasing of Q2 and Q3? You mentioned weather conditions to explain softer potential margin in Q3 as it's a start -- a weak start of the season would have a spillover impact on Q3. So any color on this would be very useful.

I think on the weather conditions, the comment we made were relating to second quarter, not the third quarter of this year, which negatively impacted the sales mix. Now clearly, in order to achieve the flat gross margin that we've alluded, we need to have a good third quarter with positive weather conditions, which can deliver a little bit of gross margin uptick in mix. So this is the base case scenario that we have in mind at this stage.

Sorry to interrupt. But the comps were pretty weak last year, especially in Italy. So weather conditions are pretty good since the beginning of July. So if you have very frequent replenishment, you shouldn't have too much impact on top line and top line would drive the mix. So should we understand that you still have the cost of the elevated COGS prices that you couldn't get rid of in your COGS in the products of finished goods in Q2 that you will sell in Q3 and that you will have this bite on the gross margin?

If I understand well, your question is more relating to the finished goods stock on hand that we have at the back end of June vis-a-vis our expectation to absorb the excessive stock that we built last year ahead of the change, the go live of the investments of the new bottling lines in Novi Ligure, so -- if this is the question. So yes, it's confirmed. So basically, we're planning even the fact that we've given an indication vis-a-vis the possibility of fully absorbing the EUR 150 million of finished increase that we had last year in year 2024, we plan production counting on a stronger pickup of volumes in the aperitif business in the second quarter of this year, which was negatively affected by poor weather conditions. So we are not in a position yet of having done fully the job of reducing the operating working capital that will be implemented in the second half of this year, probably not to the extent of absorbing entirely the EUR 150 million, which is probably more now between second half of this year and first half of next year. But talking to the third quarter, it's still a peak season for aperitifs. So the point is that in order to achieve the flat gross margin guidance, independently from the element of stocks we need to have on hand, we need to have good weather condition to deliver, in the third quarter of this year, positive sales mix effect in our gross margin. If that is achieved, then we're in a good spot to hit the flat gross margin guidance that we've given. That's why I think -- Yes. Yes, I think the stock on hand clearly is higher than what we hoped. But of course, the stock of last year has been mainly depleted in first half. It's still high, but it's high with costs that have been the 2024 costs.

The next question is from Sanjeet Aujla with UBS.

A couple from me please. Firstly, I think in the past, Matteo, you've spoken about your belief that the business is capable of doing high single-digit growth when the industry is weak. When the industry is back to normal, you can do low double digit. And I just wanted to gauge just given the weaker Q2 from a weather perspective whether you still think that high single digit is a reasonable way to think about fiscal '24 from an organic revenue standpoint at the group level. That's my first question. And then I just wanted to delve a little bit deeper into the pricing and promotional environment in the U.S. I think it's a topic we discussed in Q1. I just wanted to get a sense sequentially if you've seen a further escalation at all. And if so, which categories would you call out? And my final question is just on Courvoisier, please. Do you have a sense of when you put together all of the noise around sell-out, sell-in what sort of annualized net sales run rate would that brand be contributing in your P&L this year?

Sanjeet, okay, both very tricky questions, which I'm going to try to answer without giving you too much because, of course, it's also not easy at this point, and we know we don't give guidance. But when it comes to high single digit, low double digit, I will say this is still the case. Of course, we always say we believe with normal market context or a soft market context we are able to deliver high single digit. And when the market is good, we're going to deliver low double digit. Now I think the open question is how the market is going to be in H2. I would say, especially in U.S. Now do I believe we're going to be in between mid- and high single digits for the full year? Personally, yes, I do. But to what extent we're going to be closer to the bottom end of mid-single digit and more towards high single digit? I think it depends very much on the market, which, like I said, is very unpredictable. If you remember, in January, we say that we knew that Q1 in U.S. -- well, for us also in Europe, but talking about same in U.S., was going to be very soft. Q2 was going to still be problematic. And then there was a sentiment that Q3 will possibly improve especially driven by preelections and Q4 entering with momentum in the season will be good. Now this is not totally true anymore when we talk to the team and our partners. There is some still positive hope, but probably more of an expectation that things can get better from September going into Q4. We will see. So I think the equation still stay, but I think that we're still looking at H2 for U.S. to understand to what extent the single digit is going to be mid or a bit higher. When it comes to Courvoisier, it is tricky because we started to manage the brand very recently. There are markets where we are taking over the brand from the previous distributor, for instance, U.K., as we speak. There are markets that are pretty complex like U.S. and China in understanding not stocking the distributor, but stocking trade take a little bit of time. So to be honest with you, something that we are trying to understand also given the category volatility, especially in U.S. and China in the recent, let me say, 18 to 24 months, also ourselves is what is the right baseline to build our ambition. And look, one message that I want to give about Courvoisier is that while we are pretty confident both about the short term and even more about the medium, long term, shorter more tactically because we believe we have opportunities into next year in terms of mix pricing and some -- and we believe also the category is probably now hitting the floor, we have seen some very soft positive initial data in July, especially in U.S. on the category. This is a brand where we're going to do the right things. We are all about building a luxury brand in cognac, aiming to be at the top in cognac, and this is going to take patience. Now do we have already all the luxury in cognac capabilities in the company? No, but what we have and we historically had is patience and discipline that are 2 key ingredients to build luxury brands and I think we'll get there. So possibly by end of the year, we're going to be -- or going more towards the end of the year, we're going to be more precise in terms of the baseline, but not yet at the moment.

The next question is from Edward Mundy with Jefferies.

I've got a couple of questions on Aperol in the U.S. I think you demonstrated in the slide deck that you've seen really good momentum and a lot of popularity. I'd really like to double-click on that. So I mean, clearly, a big chunk of that is your execution activation in creating very strong consumer demand, but are you able to put your finger on why it's so popular and why it's really captured the imagination. Is it the color? Is it the sort of connotation? Is it sort of party drinks? Is it the sessionability? I mean what do you think that's really driving that popularity is the first part. The second part is how is the brand being built differently relative to Europe. And then third of all, could you just remind us whether you've got enough Prosecco orders, Prosecco in the market to continue to fuel the demand for Aperol Spritz?

Look, the line was a bit on and off. So I think I got the first question, which is U.S. Aperol is doing well. Why do we think this is the case? I didn't catch the second part of the question, if you can repeat, please.

Sure. So why is it doing so well? Let me just change this. Is that better? So first question is why is it doing well. Maybe you could provide some insights into over and above your execution. Second of all, how is it being built differently relative to Europe? And third of all, is there enough Prosecco to go around to fill that demand.

Yes. Look, I think it's one answer that probably cover both questions because why so popular, we believe, it's so popular because as everywhere else, we execute according to our playbook, which is very clear. We are single-minded and is focused on one drink, which is Aperol Spritz and the drink has some unique characteristics of image in a wine glass, orange captivating image Sessionability, it's refreshing. It's sparkling. It's bittersweet and it has a special taste. And we start in the on-premise liquid-to-lips event. And when people see other people drinking Aperol, they copy and we activate through digital. We amplify and this is where the Orange Wave starts and we have our growth model. This is a drink that in that respect also has, equally in U.S., quite a different consumption partner and velocity versus other spirits because unlike -- well, U.S., maybe they will drink 2 or 3. Maybe in Italy, 1. But unlike other cocktails, it's not 2 or 3 or 1, is more sessionable, is closer to beer in terms of repeated consumption and number of drink than to another cocktail, an Old Fashioned, a Negroni or whatever. And when it comes to U.S., equally as we did in Italy, we're really focusing on city strategy. We started being -- with particular focus on the cost initially in 2016, focus in New York, New Jersey, Florida, California, Vegas, Chicago, Boston. Those are the places where we're seeing the green dots in the map. And now slowly, we are expanding into other places, although I need to say even in California, I went there recently, we still have a lot of runway, and we haven't yet started in other places. So I don't think there is a lot of differences both in the model, in the execution and in why it's successful. Maybe the one single difference could be price, typically in place like Italy is quite cheaper and is offered often in combos with food and stuff, whereas in places like U.S. is more sold -- see them in an affordable price, but more like a drink, not in a combo with food. But other than that, the basically algorithm we see is basically the same, which is why we're pretty bullish about future of Aperol in the U.S. because we believe that we have all the similar partners we have seen in Europe which means that not only we still have a big runway for growth in certain places like, for instance, I just mentioned California, but also then we have all the remaining states, state by state, city by city to activate, putting more people on the ground, more investment.