Davide Campari-Milano N.V. ($CPR)

Good evening. This is the Chorus Call conference operator. Welcome, and thank you for joining the Campari Group First Quarter 2026 Financial Results Conference Call. [Operator Instructions] Today's call will be hosted by Simon Hunt, Chief Executive Officer; and Francesco Mele, Chief Financial Officer. At this time, I would like to turn the conference over to Mr. Hunt. Please go ahead, sir.

Great. Thanks very much. Good afternoon, everyone, and thank you for joining us. Today, we're going to go through our quarter 12026 net sales in this new format and also cover the outlook for the balance of the year. Francesco is here with me. And as always, our IR team is available after the call for any follow ups. So let's start with the summary. In our smallest quarter, we continue to gain share in almost all of our markets, and we recorded plus 2.9% organic growth, in line with our full year expectations, and this reflects the resilience of our business and the effectiveness of our strategy, and we achieved this against a challenging operating backdrop that we continue to view as largely cyclical, including additional recent impacts like increasing gas prices and further economic pressure on consumers. A key indicator for us is the moving annual total growth covering a 12-month rolling period. As the chart shows, our performance has improved consistently over the last year, and we remain one of the only spirits companies delivering sustained growth in -- against this challenging backdrop. Now this growth is, in fact, fully aligned with our strategy that we announced at our CMD last year with 5 key drivers: first, sharper portfolio choices with fewer bigger bets. In fact, you will clearly see in our sell-out data that we are growing exactly in the brands and categories that we've identified across the regions and especially in the on-premise. Second, winning the first shared drink with new formats for new occasions. The innovation pipeline is accelerating rapidly to ensure we tap into occasions where we were not able to play in the past. For example, with the Campari Spritz ready to serve small bottle launch in Italy, Austria and Germany towards the end of Q1 and and the Aperol ready-to-drink can launch in the U.K., Belgium, Switzerland and Austria in Q2 so far, with more countries to come in the upcoming weeks and months. Third, accelerating our geographic expansion, supported by our new regional setup, we are progressing with a clear playbook and already making good progress. In fact, in quarter 1, we had broad-based growth across our houses and regions with 18 countries, all in growth. Both continuing to leverage our investments to work harder against our new strategy, and fifth, driving our efficiencies across each line of the P&L to allow us to invest more behind our brands, which means that while we contain SG&A, we are able to accelerate our investments in A&P, as we told you. in a period that is the most cost-effective moment to gain market share. In fact, in Q1, we continue to activate heavily to deseasonalize and expand further. In Q1, we also took the opportunity to carry out some targeted inventory optimization in the U.S. together with our partners on our nonpriority brands, and this is supported by the very strong performance of our key brands like Aperol. This amount, which is around EUR 10 million will not be recovered, and we may potentially be doing some more in Q2, depending on the performance of our priority brands. Clearly, it impacts the quarterly figures, but it's a rounding error, considering our full year top line of circa $1 billion in the U.S. What is important is that we confirm our trajectory to reach our full year guidance of circa plus 3% growth as we head into the peak season and execute exactly what we told you. We've had a bunch of questions on the Aperol to go launch, so I want to share some early visuals regarding this launch. On this page, you can see some of the initial marketing and placement of our new offering. The Aperol to go can, which has now been launched in selected European markets, as I already mentioned. And we'll share more with you as our rollout progresses. But I can say the initial reactions are very positive with excitement from the trade and on social media. So now let's dive into details, which as already anticipated during the full year results and only at a net sales level. Of course, further details will be provided in the half and the full year results. As you can see, the top line growth of plus 2.9% that I mentioned was broad based across all regions and most thousands. The health of whiskey has been impacted by the fact we continue to have demand-led supply constraints on Russell's Reserve, which will be strategically managed going forward. in order to have a more consistent aging liquid profile over the coming years. The rest of the brands in the house continued to grow nicely. In terms of FX, the main impact is coming from the U.S. and Jamaican dollar while the perimeter impact is in line with what we previously told you, mainly regarding the disposals of Cinzano and our Australian plant. So now let's have a look at sell-out, our outperformance and share gains continued in most markets. In the U.S., we are outperforming across all channels with robust growth in our key operative and tequila brands. The performance in the on-premise, especially shows the marked outperformance versus the sector, which is exactly what we aim for, to build awareness and trial. More broadly, the fact that the on-premise is growing faster than the off-premise but with smaller ticket sizes, solidifies our belief that social interaction and the role of ACO in consumers' lives is still very much relevant and the current pressure is cyclical. Accordingly, we are investing for the long term as we execute our strategy to ensure that we are strongly positioned for when the environment improves and it makes sense to do that now. In Europe, we are outperforming across most markets with significant growth in our parities portfolio. Germany has been impacted by some promotional phasing on nonpriority brands, but a parities continue to perform extremely well. This is fully aligned with our focus on fewer, bigger bets and a clear sign that our strategy is working. Let's now start looking at the top line growth by region, starting first with Europe. Europe delivered plus 1.9% organic growth in Q1, led by continued strength in the U.K. positive performance in our core markets of Italy and Germany. In fact, all of our key markets were in growth except for France, which was impacted by a high comparison base due to the relisting of Campari a year ago. Aperol and Sparkling wines continue to grow nicely in France, which clearly confirms the sprits trend is accelerating. If we look at what drove this growth in terms of houses and brands or parities and sparkling wines were solid contributors. For Aperol, while the bottle remains in growth, there are also early encouraging performances from the availability of the ready-to-serve in new markets and the expansion of Aperol on TAP. Crodino benefited from campaigns, especially during dry January with 12 countries growing at more than 20%. And at the same time, Espolon and COVAZIE also contributed to the growth. During Q1, while Easter phasing positively impacted by with some shift into Q2, we didn't achieve the full execution with the European retailers during negotiations why we held the line on pricing. Since then, the European alliance negotiations have closed successfully. Although the environment remains challenging, and we're monitoring consumer confidence closely, especially in light of rising energy and fuel prices. Looking at the MAT growth, we see a positive momentum over the last year. Now moving on to North America. We recorded plus 2.2% organic growth driven by solid underlying trends in the U.S. and recovery in Jamaica. Although the performance in the U.S. was impacted by the targeted inventory optimization, as I said before, the April franchise recorded very solid growth and Espolon continue to grow positively in a competitive market. Now before I move on, I'm sure many of you are wondering how the additional investment we're putting behind Aperol in the U.S. is developing. And we're doing exactly what we said we would. The additional 21 people have been deployed as brand activator since February across 4 key states, and we are already seeing encouraging early progress on velocity and distribution. In fact, it's early days, but based on 8 weeks' worth of data, we are seeing velocity at nearly 3x the rest of the market in those target accounts. And having met with the team there, the enthusiasm from the trade is fantastic and they really appreciate our commitment to the on-trade in these tricky times. Now we also started deploying additional A&P ahead of the peak season. And as we have updates, we'll share them in upcoming calls. In Jamaica, the recovery following the hurricane at the end of October 2025, it's on track, and our brands benefited with mid-single-digit growth, especially driven by Ray & Nephew. For the rest of the region, there was growth across all countries, except for Mexico due to some minor shipment timings that affected the quarter. Now to discuss our newest region, developing markets. As most of you know, we formed this region at the beginning of the year in order to become more agile and benefit from a repeatable playbook across some of our seeding markets. It's early days, but we're already seeing some of the benefits of this increased focus. Overall, the region recorded plus 12.7% organic growth Italy, off an easy comparison base of negative 4% and especially driven by the 2 largest countries in the region, Brazil and Argentina but also with widespread growth across most of the other countries. Brazil was positively impacted by increasing appeal penetration with more innovation to come while Argentina continues to perform positively due to the ongoing popularity of SKYY Cosmic. The main driver of growth in the rest of the countries was April, once again, demonstrating the power of the brand and the benefit of our increased focus on fewer bigger bets. On the next page, you can see that APAC registered a 1.6% negative organic change, but this was entirely driven by GTR, Travel Retail, should I say, with a decline of 13.5%. The rest of the region grew by positive 1.9%. Australia was positive, supported by double-digit growth in both the April franchise as well as Espolon RTD in bottle while Wild Turkey ready-to-drink offset some of the gains as preferences continue to move towards white spirit ready-to-drinks. We also recorded decent growth in China, India and other partnership markets. And in the rest of the region, we have fully set up the new management teams and finalized the acquisition of our distribution companies in Japan and South Korea to ensure we are well positioned for future growth. We are confident of the potential of our brands in this region. So base our performance so far and our perspective for the peak season, we are confirming our 2026 guidance despite the challenging operating backdrop. Not much time has passed since we originally provided this guidance on the fourth of March. But at the same time, there continues to be a lot of major developments in the global geopolitical and operating backdrop, which remains very volatile. We're focusing on what we can control and executing the strategy that we shared with you during our CMD. And that means focusing on fewer bigger bets, focusing on the launch of new formats for new occasions and focusing on the acceleration of our geographic expansion. You saw clearly our outperformance in the sellout in Q1 and the data continues to trend positively in Q2. We top line growth guidance of circa 3% for the entire year incorporates the impact of the inventory optimization and the quarterly movements that we have seen and may continue to see in the upcoming quarters as we navigate the volatile backdrop and the evolution of the water conditions. What is important for us is to progress on our path towards the midterm targets and deliver what we promised. On the P&L side, we are again focusing on what we can control while continuing our investments at full pace as we previously guided. The direct impact for us of the volatility in the operating environment remains limited for now, but we are monitoring it closely, especially with the evolution of potential additional increases in costs like energy, logistics and insurance. So I won't go through the rest of the lines on this page as they essentially remain the same, but I'm happy now to open up the floor for any questions you may have on our Q1 performance.

[Operator Instructions] The first question comes from Trevor Stirling of Bernstein.

simon, big picture question, maybe one smaller one. In your guidance of 3%, you also highlighted your MAT growth is running at 3.9%. So I guess your guidance is sort of assuming there's quite a strong risk of a deceleration in the second -- in the next 3 quarters to come. And I was wondering just where you think the risks of that deceleration are highest, which brands and which countries are you most nervous about? And then second detailed point is those European negotiations that you mentioned are all your European negotiations fully closed now. So as of Q2 onwards, we shouldn't be expecting any disruption from those retailer negotiations.

Trevor, thanks for the questions. Maybe I'll cover the second one first. The European negotiations are closed and very pleased with the team managed to close this successfully. So our focus is now executing at retail through the key seasons coming up. I'm taking your first one. I think in terms of the overall shape of the curve. We are operating in a highly volatile environment. So I think we are being cautious in terms of our outlook, recognizing the fact there's a lot of stuff happening, we can't control. So I think the team and I are really looking at is saying, what can we control and how are we comfortable making sure we can actually deliver the full year guidance that we've already provided.

The next question is from Mitch Collett of Deutsche Bank.

Simon, I'm going to ask a similar question to one I asked on the full year call about the pricing environment. specifically in the U.S., but I'm conscious at the time I asked about what you thought was the right way to approach pricing? And I think you said that you didn't think reducing prices was a good way to build brand equity. I'm conscious that the industry environment has moved on a bit since then. I think you're -- one of your peers today, certainly sounded like they were interested in increasing competitiveness. And I'm also conscious that on some of your brands, I think Espolon, in particular, there are some signs that prices are moving lower. So I just wondered what were your thoughts on how you see industry pricing evolving, particularly in the U.S. and what your response will be if you do see peers reducing prices, I guess, more materially than we're currently seeing.

Mitch, yes, it seems to be a topic of the week in terms of pricing from what I'm seeing in terms of coverage. Look, I think I'll reiterate kind of 2 big comments then I'll answer a bit more specifically. So the pricing is always relative. Pricing is always relative to our competitors and how our consumers actually see the value in our brands and whether or not those values actually support the price that's being charged. So I think that's the most important thing. So at least my second point on well, I don't believe that reducing price long term, build equity. I think it will give you a short-term lift, and that's part of what you're seeing. But as we talked about before, building the price of these brands and building the value into these brands takes a lot longer than a couple of quarters. And as a result, our focus is reinforcing the value with our consumers for our brands -- so they see the value when they're feeling the pinch and they feel good about purchasing the brand. So I think that's the overriding point. I think more specifically, as I said through Q4, we continue to monitor what's happening in some of the categories. we will maintain our shelf pricing, but we will also make sure that we are optimizing our promotional pricing to ensure that we are picking up those incremental opportunities. And I think that's really what you see on our sellout data. So if you look at the promotion volume, we've seen a bit of movement on a couple of the brands, but ultimately on this, if you look at the performance, whether it's in off-premise, on Espolòn at plus 5% or [indiscernible] plus 14% or in the on-premise at plus 22% and that's not all driven by price. That's driven by consumers and customers seeing value in Espolon

The next question is from Simon Hales of Citi.

Francesco. My first question was just coming back to the comments you made about the inventory optimization you've been doing in the U.S. I just wanted to clarify I heard you right so that you said it was noncore brands. I don't know if you can provide a bit more detail there. And if there is further inventory reduction in Q2? Will it be on a smaller scale, do you think than you saw in Q1 in euro terms? And is it around the same brand? Or could we see broadening out to sort of other brands in the portfolio? That's my first question. And then secondly, around the 3% guidance for the full year. I appreciate the backdrop, as you say, is volatile. But what assumptions are you making at the moment around the knock-on impact from the Middle East conflict given that you saw that GTR disruption hitting your Asia Pacific region already at the end of Q1.

Simon, thanks for the questions. I think we start maybe just with the inventory optimization. As I said this on noncore brands, I'm happy to provide a bit more color on that. This is primarily on Skyy and on Granada and a couple of the other brands, but you see the sell-out data on some of those brands where we have seen it affected by the downturn in the U.S., we have then decided to make sure that our inventory is down at the right level, reflecting what's happening on the sellout. Just to reiterate this, this is on nonpriority brand. None of the brands that we are prioritized, we are doing this on, and we saw the opportunity, given the performance in Q1 to be able to take that down. We'll continue to review it. I don't anticipate a significant movement in Q2. This is just about responsible inventory management as you see the trends ebb and flow in the current environment. I think on your second question, there are probably 3 areas that we're looking at in the 3%. And the reason we're still guiding on a full year at -- can circa 3 is a little bit leading maybe back to Trevor's point, which is we also have some upside and some ways that we can manage it. So net-net, we are confident that we can manage some of the downside risks that we're seeing. The first one would be looking at the cost base and the knock-on effect of the inflationary environment on input costs. While we have a lot of long-term contracts on the procurement side, some of them do have clauses where if there is a significant volatility, we would renegotiate. So an example of that would be glass, about 16% of our cost of goods. The other one that's probably more immediate is more on the logistics. Again, we have contracts there, but that is one that I think you'll see continue to be quite tricky as the situation either continues or even once it's resolved, we see that lagging for a bit of time. I think the second area, as you rightly said, is on GTR. Now you saw, I think, in the news that today, nearly 2 million passengers will be cut out during May. No one's quite clear what that means yet because it depends on which routes, which consumers, how much brand they'd normally be picking up in GTR. So we've got a healthy business but it's a smaller part of our business overall. And so I think that's where we see the downside risks are balanced with some of the upside risk opportunities that we're seeing.

The next question is from Richard Withagen of Kepler Cheuvreux.

Question is on apposed to go. I mean you say it's been launched in several European markets. I mean, what are the early KPIs? Are you looking at distribution, repeat purchase, incrementality versus cannibalization? And can you say what the gross margin is versus standard Aperol?

Richard, yes, it is -- look, it's very early days, and I'm not going to give too much information because we're still waiting for it to come through. But in terms of more at this stage, what we're looking at is the distribution builds and the assumption we're targeting specific occasions that we cannot compete in today with our existing format. So whether that be in cash & carry or whether it be in convenience stores. I think quite important in terms of the targets that we have there. One of the key measures on this is velocity. So we can see for point of distribution, are we getting the rotation ahead of the competitive set. And that is that will be a second one. The third one is really more anecdotal, which is are we getting the brand into the occasions we want to which is more about how we see pool consuming the brand and that will vary across different markets. In terms of answering your question from a margin point of view, as I guided before, the margins at this stage, we're making good progress on, but they will continue to improve as we scale this opportunity, but they are broadly in line with the company average.

[Operator Instructions] The next question comes from Chris Pitcher of Rothschild & Co.

Can I just get a little bit more detail on the performance behind Gram Manie and Courvoisier. I mean you flagged that on Grand Mana and it's not a priority brand. But historically, quite a bit was made about the sales growth behind that brand and how much of that was actually really just stop build up. Can we get a sense for what the impact on [indiscernible] was in the quarter? And then on Courvoisier, encouraging to see that it's still growing and as it starts to cycle some tougher comparatives. Can you give us a sense of where that growth is coming from? Because you highlight that the U.S. is still weak.

I think, look, in terms of [indiscernible] what we're seeing at the moment is the more encouraging signs in the on-premise in the U.S. is actually helping the brand. Where we're seeing it having a tougher time, as you will have seen in the Nielsen is in the off-premise. And I think that's where consumers are being quite careful with where they spend their money at the moment. And as we see trading down to small sizes, trading out of the category into ready-to-drinks continue to be a broad trend. So I think from that point of view, I wouldn't read anything than the fact that we are working through a slower sales momentum on [indiscernible] as a result, adjusting the inventory accordingly. I think on the second question on Courvoisier, -- what was the second question? answer second something got it.

Where is the growth coming from? Because it sounds like the U.S. is still tough for cognac. And you mentioned Courvoisier was in growth.

Yes. I think -- sorry, on that point, yes, it is still tough in the U.S. Courvoisier, we actually saw positive growth coming through on a number of the European markets. It was small, but it was positive. And given the trends in cognac at the moment, we'll take it. So yes, the U.S. still remains quite challenged in terms of it. We are still working on the plans for a second half relaunch, as we've talked to you about before. But we're also making sure that given what's happening in the category, we're going to get one shot of this. We want to make sure we get it right. And as a result, we're not rushing it.

The next question is from Celine Pannuti of JPMorgan.

My first question is on Europe. You -- it seems that the retail negotiation has been difficult and have been closed now. Do you expect any sell-in benefit in the second quarter from that? And then maybe I missed it, can you comment on the Italian market? I have missed that you did during the presentation? And my second question, coming back on the guidance and the building blocks. So putting that around 3% for the year. Now if I look through the year, you have tougher comparative, there may still be some impact from inventory cleanup in the U.S. So what gives you the visibility and the confidence given what you said is a challenging environment around the 3%. Can you -- are there some building blocks in terms of sizing of innovation or recover in some markets that helped -- could help us understand the 3% a means a tougher comp in the second half.

Yes. Celine. Yes, look, good question. Thanks. On the European negotiations, as we said, we saw -- as we went through that and we held our discipline on pricing. As you would have heard from other people, it's always a bit of a an interesting couple of weeks as we work through that. But it meant that some of our brands didn't get the full activation during Q1 than we would have seen. So I think as we see the brands now having full listing, we've managed to not be delisted anywhere. We've also maintained our pricing on -- across the board. We're now focusing with the retailers to ensure that we deliver against their expectations in terms of sell-out as we head into the key period. So I don't have to say a big benefit, but I see a more positive benefit coming through than we had in Q1 given the fact we have full activation, whereas in Q1, we didn't. I think the second one is in terms of the Italian market. The team, I think, is at a solid Q1, as you've seen in terms of performance. The second part on this is we have more innovation going into the Italian market than we've had in prior years. So the launch of the Campari Spritz ready to serve given the size of the Campari brand here, the initial results are encouraging in terms of that. And also I think a recognition that the company is innovating into some new formats is getting a good level of support from the trade. In addition to that, the launch of April on TAP has allowed us to really get into some of the higher volume accounts where previously we were a bit challenged in there because other people have gone in. So we've now been able to go in, regain some of our real estate for the brand and accelerate the growth. I think more generally in terms of the confidence around the 3%, as I said on the earlier question, it's a balance. As I've said to you all before, I'm always a bit cautious with the crystal ball. But what we're trying to do is balance out what we're seeing is risks through the balance of the year with the opportunities. And on the opportunities, the initial response on the ready to go on tap on the ready-to-serve Campari spreads is looking encouraging. I think the expansion into new markets, as you see, the momentum is looking good. Our focus on fewer brands in the strategic channels like the on-premise -- there are, I think, no other companies growing at spot as plan at plus 22% in the U.S. Aperol at plus 15%. Campari's at plus 21%. So our strategy is working in the strategic channels we're investing in. And as a result, that gives us some confidence to say we can balance out both the positives and negatives through the balance of the year.

The next question is from Alessandro Tortora of Mediobanca.

Evening to everybody. So just a follow-up on the ready to go commercial strategy. Are you planning at a certain point to bring this format also in the U.S. because you mentioned selective petition just in Europe [indiscernible]?

Alessandro. Yes, it's funny. It's the fourth time I've been asked that today actually. So I think, look, -- at this stage, we've recognized that half of America doesn't know Aperol at all. And so we have a job to do in terms of building that. That's why we put more people on the street. That's why we're getting into the accounts of why we're focusing those target accounts. As I've said before, to make sure that we turn the neighborhood's orange and then we move to the next one. So I think, look, we're looking at it. We're having a look at what that could mean. Unlike some of our competitors, for us, this is delivering a finished shrink in an occasion we can't compete in today. And that's why there is a big difference for our strategy versus, I think, others. So as we look at that, we'd probably look at a state-by-state approach based on where we see Aperol, the stage of development, and that we make sure that American consumers recognize that perfect serve comes in a glass with lots of ice and a slice of orange. And that's where we're going to start. So when they want to enjoy that different occasion, that's where the ready to go has a role. So I think we'll be careful in terms of how we look at it. But ultimately, on this, yes, I would see it going into the U.S.

The next question is from Gen Cross of BNP Paribas.

Simon, Francesco. Just one question from me. I just need to understand your view of the kind of underlying growth rate of the business kind of from a setup perspective at the global level, I appreciate probably don't have sell-out data for every market. But if I just think about the sell-in, obviously, there's quite a lot going on in the Q1 with a bit of destocking in the U.S., impact of retailer negotiations in Europe. But if you think about the kind of sequential trend in the business between Q4, which was looking pretty strong, I think it was about 7% underlying, excluding the impact of the gain in Jamaica and where the business is now in Q1. Would you say that there's been any significant shift on an underlying basis, maybe excluding the impact of the Middle East conflicts on the GTR business?

Yes, Jim, I think, look, ultimately, on the sell-out on a global level is just about impossible too many channels and complexity around the different markets. I think what I would say is if you look at our performance through Q4, you then look at our Q1, and you actually recognize that we took EUR 10 million out, the underlying performance in Q1 is pretty close to the consensus you all had. Now it's a decision we make, so it's the right decision to make in terms of optimizing the inventory because on the priority brands, we are seeing some really good performance coming through. So I think that's more the way that we're looking at it. So I don't have a significant shift. I think we are getting tighter on the strategy we're executing, as I said. The fewer bigger bets, all the things we talked about in now is getting better and better at how we're executing there, which gives us more confidence in terms of the full year number. As you know, on a 12-week period, there can be volatility a lot. In the current environment, there can be even more given what's going on with the geopolitical situation and also what we're seeing with consumer behavior. So we're kind of looking at ensuring we deliver what we told you for the full year. There may still be volatility going through different quarters for things that are potentially outside of our control.

The next question is from Edward Mundy of Jefferies.

Two questions, please. The first one is on Page 5 of the slide deck, where it's -- and I appreciate that Nielsen on-prem in the U.S. is not the entirety of the on-prem, but it's quite noticeable how the on-prem is doing quite a lot better than the off-prem. And I know the off-prem number doesn't include ready-to-drinks. But I'd just love to get your perspective on why you think the on-prem is doing better than the off-prem given some of the pressures on the industry that's my first question. And then my second is on both the new formats for Aperol in terms of both the ready-to-serve and also they're ready to drink and can format. Is there any experimentation going on by consumers putting perhaps a slight orange into the bottle like what you might see with the corona to try and preserve that perfect stuff? And if not, does the absence of an orange slice, does that sort of hold back the brand a little bit in that format.

Look, I think in terms of the different trends that you're seeing in off and on, and this is not unique to us, just to be clear, if you look at the industry shape, with on trending at plus 5% and offer a negative 4% on Nielsen, and that's kind of negative 3. I mean you see our performance across all of them, which is encouraging. But I think there's some fundamentals we talked about during the Capital Markets Day. And that is we still believe that the big challenges we're seeing are cyclical. Consumers still want to get together, they still on the social interaction. They still want to have those moments of sociability out with their friends in bars and restaurants. And that's exactly what we're seeing come through in the on-premise in America. What we're seeing at this stage is that traffic is up, but the ticket is marginally down, but net-net, the overall is up. So I think that's where we see our brands really fitting into that and then also accelerating for the long term. As you all know, you build the brands in the on, you then take them to the off. That's exactly for me what this chart is showing. I think the second part on the can, and again, we're only in cans at this stage. We haven't done bottles. As we said in the CMD, we'll have a look at that. On cans, I haven't seen on putting orange on the top of the can yet. But Ed, I really like it, if it's a trend you could start that would be helpful. But so far, the initial feedback we've had is encouraging velocity even without an orange going into the can. But I think we'll see how we go with it.

The next question is from Tilly Eno of Morgan Stanley.

I just had a couple of follow-ups on the Europe point. Could you just clarify which countries you saw those retailer disputes in? In particular, was there anything in Italy and then I think at the end of last year, there was maybe a little bit of pre-shipping ahead of the Milan Winter Olympics. Was Europe Q1 performance also weighed on by a bit of an unwind of that? Or there any comment on the sort of Q1 specific dynamics.

Look, I think in terms of the -- we don't comment on individual retailer conversations, I think more generally, in Q1, what I'd say is, as we're having these negotiations, we are not getting the full attention and the full promotional calendar that we want to see in at certain times of year. And as a result of that, I think there's a bit more muted in some of those accounts. But again, within that, we saw probably a bit more in Germany. We didn't see it in Italy or maybe a bit more in Switzerland. But again, the fact that we've now successfully closed those, I think, is a great testament to the team. I think in terms of -- for Q1 more generally, there wasn't really -- it's a tiny bit of shipping, but nothing material. We didn't load up the end of the year and then try to have to destock in January. We saw pretty consistent depletion shipment growth through each of the months, which you wouldn't get if we are heavy on inventory.

The next question is from Sanjeet Aujla of UBS.

Simon, my question is just on the gross margin outlook. And just going back to the point you made earlier on your glass contracts. Can you just remind us how those contracts are structured? And at what point could that be triggered? And if that's the case, what sort of contingency plans do you have whether it be on cost or pricing to maybe mitigate that.

Thank you, Sanjeet. Clearly, we -- glass is 16% of our cost. So it's an important component. We have a long-term contract. 90% of our procurement is under long term is diversified with under different even geographically located provider. They are clearly based on fed contract where there is a price adjustment formula, which is triggered if in the event certain component items like energy cost trigger certain thresholds. I have to say that we already renegotiated in 2026, these triggers. So for the time being, we are achieving some efficiency still on glass, but clearly it depends where the oil price is going to be. And then the energy. But at the moment, through diversification and this type of contract, we actually are containing our costs.

And just a quick follow-up on that, Francesco. Like if energy costs and oil stay at current levels for the next 3 months, at the spot group levels at a point which would potentially trigger it or it's not at that point yes.

No, no, absolutely not.

[Operator Instructions] Mr. Hunt, gentlemen, there are no questions registered at this time.

Great. Well, listen, thanks, everyone, for joining us. Look, certainly, please do feel free to follow up with the IR team directly. But I think you can see we've had a solid start to the year despite the backdrop, and we are on track for the full year target. So thanks very much for your time.

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