Diageo plc (DGE) Earnings Call Transcript & Summary

Good morning, everyone, and thank you for joining our 2023 capital markets event, which we last did 2 years ago. I'm Debra Crew, Diageo's Chief Executive Officer. But first, here are our regulatory statements. So here's our plan for today. First, I will kick things off by discussing the current business environment for the industry in Diageo, highlighting positive trends while also recognizing the challenges that remain, I will also give a bit more color on the RNS shared last Friday. Then I will be recapping the foundational facts about this very attractive industry and Diageo's strong position within it. We are confident that our advantaged portfolio and footprint provides us an industry-leading sustainable growth opportunity. We will then move on to the four key strategies, which leverage our competitive advantages and will help us capture this growth. Members of my executive team, management team will join me to bring this to life with examples from around the world. They will showcase how we will use cutting-edge consumer insight and move with speed and agility to continue to drive growth in our largest categories with our amazing brands, unleash the power of the portfolio to expand our footprint across the world, innovate to recruit into new occasions, winning with more consumers and go from strong to stronger by raising the bar on execution. After lunch, we will then get in and have plenty of time for our guidance for the future and we will close after you hear from our CFO, Lavanya, who will discuss how our growth algorithm is set up to continue delivering consistent results in a volatile world. So let me start by talking about how the current environment is evolving internally and externally. As you are all aware, the external environment continues to be dynamic and volatile. Let me start with the positives. TBA continues to grow, and Spirit continues to grow faster than TBA. While consumers show a combination of concern around cost of living and recession, they are also expressing signs of optimism, particularly with regards to our industry. On the other hand, geopolitical volatility is worsening. In addition to the war in Ukraine, which has disrupted the market for over a year now, we also have rising geopolitical tensions in the Middle East, impacting several markets. This is all leading to increased volatility in commodities. An example of this is the price of oil, which having dropped to around $70 in the spring is now back at nearly $80. And we are seeing retailers face a variety of pressure points, which I will cover in further detail in a moment. But first, let's dive a little deeper into consumer sentiment. We have a proprietary tracker where we monitor consumer sentiment in our industry on a quarterly basis. And it shows that consumer confidence is actively improving. Their desire to increase spending in alcohol and premium alcohol has gone up by over 12 percentage points from a low point reached in February 2022. We also see other positive signs for the future, 89% of consumers say socializing with friends is more important. 76% won't change what they spend on things that they love and 88% want new experiences to make -- that make them laugh and smile. As for the upcoming holidays, our U.S. tracking is showing more -- showing positive momentum in planned holiday spending relative to last year. This includes holiday spending overall, spending on name brand alcohol, trips to the on-premise and holiday gatherings. For the on-premise, there is an overall 10% planned net improvement versus last year. And these indicators give us the confidence that our brand investments can continue to yield positive results as we move through this volatile environment. While consumers are regaining confidence, our customers remain cautious. A persistently tight labor market means the off and especially the on-trade are still dealing with staff shortages that affect their ability to successfully activate our category. And at the same time, high interest rates have added pressure to retailers and we have seen groups cut back on investments in inventories. This pressure is worldwide and particularly acute in regions such as Latin America, where the impact of U.S. interest rates is most immediately felt. We are navigating these challenges and the consumer opportunity through a combination of innovation and agility. So now looking at our business in the short term. As we shared on Friday, we are seeing slower-than-expected growth and we are no longer expecting fiscal '24 first half to be stronger than fiscal '23 second half. This is due to materially weaker performance in LAC, which makes up nearly 11% of Diageo's net sales value. Importantly, we have momentum continuing in four out of five regions, including seeing sequential improvement in our largest region of North America. I will come back and talk about LAC, but let's start with what we are seeing in the other 90% of our portfolio. Starting in the East. We are seeing strong momentum in APAC, despite the slower recovery in China. While our Baijiu business is proving to be more resilient, we are seeing less momentum than we expected on the international spirits business, which is true also for the industry in general. In Europe, we still see momentum, although slower than in the second half of fiscal '23. With geographical tensions escalating, trading has unfortunately stopped in key geographies in the Middle East, where we hold leading positions in spirits. In Africa, we do expect to see improvement in the rate of net sales growth in the first half of fiscal '24, compared to the second half of fiscal '23. And finally, in North America, we also expect sequential improvement in organic net sales growth in the first half of fiscal '24, compared to the second half of fiscal '23. So diving a little deeper into the U.S. The category, which grew between 4% to 6% historically peaked at double-digit growth in the COVID super cycle and drop back for a time in between as we lapped reopenings and a return to pre-COVID activities. Now the spirits industry growth is nearly mid-single digit. While we're not yet back to winning share in TBA, trends have stabilized and we are taking bold steps to change the trajectory. And you're going to hear more about that from Sally and Claudia later today. Given the interest in this topic, I will once again address wholesaler inventory levels in the U.S. In summary, at the end of fiscal '23, I was comfortable with the U.S. distributor inventory levels. And if you recollect, elevated demand during the pandemic drove inventory to severely low levels, this was particularly true on our most popular brands, such as Crown Royal and Bulleit. We leveraged our supply chain capabilities through fiscal '21 and fiscal '22 to get product to distributors and get back on retailer shelves as quickly as possible. At the same time, we saw distributors increase inventories of our imported products in response to the shipping and logistical challenges in fiscal '22. And in fiscal '23, distributor inventory levels were in line with pre-COVID historical levels. So as we've moved into fiscal '24, nothing has changed. We remain a sell-out culture focused on running the business the right way. So now let's discuss the current situation in LAC. The business grew 20% in the first half of last year versus a 15% 4-year CAGR. So to begin with, we are lapping a high comp. But the following three things have also happened. First, if you recall, during our results at the end of the last fiscal, we said that we ended the year with higher inventory levels in Latin America and specifically in Brazil. We also talked about the weaker consumer environment during the World Cup and after, that led to that buildup. Going into this fiscal, the team expected to have worked through this by the end of the first quarter. Unfortunately, macroeconomic pressures have persisted, resulting in lower consumption than expected and consumer down trading. For perspective, currently in tracked channels, Spirits is down around 5% fiscal year-to-date in Latin America. We are gaining share in most markets, the main exception being Mexico, but regardless, this has slowed down the region's ability to work through channel inventory to manage to appropriate levels for the current environment in the marketplace. Finally, unlike in developed markets, so like NAM in Europe, there is more limited point-of-sale data available. So while we have good visibility in inventory levels through our distributors, we have less visibility to inventory at the wholesalers and the retailers that they sell to. We've taken multiple rounds of pricing through fiscal '22 and '23. And in an environment of benign interest rates, these channels also may have purchased ahead of anticipated consumption. We do have a very experienced team and LAC and they would normally be able to recognize this is happening and prevent it. But in an environment of extreme volatility through the COVID super cycle in some places like Mexico it was hard to see through what part of this was true consumption growth versus inventory increases in these opaque layers. This also makes it difficult to predict precisely how quick we can move through this disruption. The upcoming holiday season is an important consumption time period. And the team has robust retail activity scheduled. So for perspective, historically, LAC has sold 63% of its annual scotch sales in the first half, with the majority of depletions happening in the October, November, December time frame. We absolutely recognize the magnitude of this and are putting together the right action steps to manage it. I will come back to you during interim results in January 2024 to give you more information and status on those actions being taken. But this is an isolated issue. We have been and remain a sell-out culture. Also remember, our LAC region, in F23 was around 60% on a constant basis, bigger than 4 years ago and continues to be margin accretive to the group. Most importantly, the rest of our regions, which is 90% of our portfolio are on their expected trajectories. So as we said on the call last week, we still expect to see growth and gradual improvement through fiscal '24, while there are many green shoots, we also continue to experience headwinds and the operating environment is likely to remain challenging. These are, however, short-term challenges, and we run this business for the long term. We will continue to invest in our brands as I am confident in the resilience and growth potential of our business, which will generate substantial and sustainable value for you, our shareholders. So let's move on to why I have confidence in the long-term growth trajectory of the business. So let's start with the industry that we play in. TBA is a large category and it's growing. Two, international spirits is growing faster than TBA driven by favorable consumer trends. And three, Diageo is well positioned to win as we have great strength of brands, footprint capabilities and talent. I will cover each of these in more detail. TBA is almost $1 trillion, substantially bigger than nonalcoholic categories combined. TBA has grown for over a decade with strong value and reliable volume growth. These trends are expected to continue into the future. Strong consumer demographics underpin the growth in the total beverage alcohol market. We expect 600 million new legal purchase age or LPA consumers to enter the market by 2030. India is expected to account for 1/4 of LPA growth. The expanding middle class around the world should further contribute to industry growth. Moreover, alcoholic beverages are a small fraction of consumer spending, and there is clearly room for this to grow as disposable incomes grow. We believe the low level of spend on our category is also a key driver of the resilience of the category, which I will cover in a few minutes. Moving on to International Spirits. This has been growing ahead of TBA, effectively recruiting and gaining share from beer and wine occasions. Over the past 5 years, international spirits have grown value at 6% CAGR, 1.4x faster than TBA, contributing to roughly 1/3 TBA value growth. Looking ahead, we expect international spirits to grow at 5% CAGR in retail sales value or RSV, ahead of TBA at 4% per year. So why is Spirit's gaining share from beer and wine? Well, because spirits is a particularly attractive category that offers consumers a breadth of participation choices. From casual gatherings over food at home to high-tempo celebrations and convenient formats, spirits play in a wide range of occasions. As many of you saw in our culture will last night, spirits play in many occasions in popular culture. This shows up through inclusion in popular movies and songs to sport sponsorships and creative artists collaborations. Finally, it has a much wider price ladder than categories such as beer or wine. Spirits can appeal to several consumer segments and accommodate shifts in repertoires in different price tiers, depending on the occasion or motivation. This supports consistent, resilient growth regardless of the economic environment and consumer behavioral shifts. Spirits is also a dynamic category because it capitalizes on macro consumer trends. Take premiumization, for example. Consumers are clearly choosing to drink better, not more. In the last 10 years, premium and above spirits grew from 25% of category value to almost 35%. Super premium plus spirits have grown at value more than 2x faster than other price tiers in the category. This price tier gained almost 700 basis points of share of international spirits RSV since 2012. A second key consumer trend is wellness. And as consumers prioritize this, they look for moderation, lower-calorie alternatives and more natural ingredients. This has fueled the growth of spirits in many areas. The fact that tequilas, keto diet-friendly is one example and the growth of non-alc spirits would be another example. Non-alcohol spirit products, while still small, have grown 13x since 2017. Convenience is already a significant part of many CPG categories, including TBA ready-to-drink has been the fastest-growing segment of TBA for several years. Increasingly, consumers have begun trading up from beer and malt-based convenience into the higher-priced spirit-based products as well as directly recruiting new LPA plus drinkers. And importantly, international spirits is a very resilient category. This has proven out during the biggest economic downturn of the last 20 years, the global financial crisis in 2008, 2009, during this time, the category grew despite GDP contraction. In the U.S., for example, spirits were 3.5x less impacted than TBA despite the increased unemployment across all income groups during this time period. As we look at Diageo, within the most vibrant parts of TBA, we have an advantaged portfolio that has the broadest range of regions, categories and price tiers. So starting with the brand portfolio. We lead many of the largest international spirits categories and are #1 in international spirits and RSV globally, 1.4x bigger than the near spirits competitor, in fact, we are bigger than four of our top 10 competitors combined. Scotch and tequila have been the biggest drivers of our growth, but we have an extensive high-quality portfolio that allows us to win wherever the consumer goes. Shui Jing Fang was a significant source of growth when Baijiu went through its huge premiumization wave. Tanqueray spearheaded the gin boom and Guinness continues to thrive in the fastest-growing segment of beer. With such a broad portfolio, I have the confidence that we can pivot quickly to changing consumer trends wherever they occur. That being said, while we are custodians of incredible traditional brands, we are not standing still. We are also active portfolio managers. Since fiscal '17, we made 16 acquisitions, all in the premium and above price tiers. Our Casamigos acquisition put us at the forefront of the tequila explosion in North America. Since then, we have acquired other amazing fast-growing brands such as Aviation Gin, 21 Seeds flavored tequila, Balcones American Single Malt, the premium rum Don Papa and Mr. Black Cold Brew coffee liqueur. Active portfolio management, along with innovation and brand investment has enabled the continued premiumization of our business. In developed markets, premium and above products gained 18 percentage points of share of net sales value since fiscal '17. They now account for over 70% of our NSV. In emerging markets, premium and above gained 13 percentage points of share of our NSV. That said, our business is balanced across price tiers. Scotch and tequila SKU premium, but 45% of our sales outside these categories are in the standard and value price tiers. Even within scotch, our brands and variants cover a wider range of price points, this is important as it gives us optionality through volatility. If we take Johnnie Walker as an example in the global financial crisis, Johnnie Walker Red volume was 50% less affected than the total Johnnie Walker volume and allowed us to retain down-trading consumers within the franchise. Our portfolio is well balanced, not only across price tiers and categories, but also across geographies, this supports the delivery of long-term, consistent, reliable growth regardless of the short-term economic volatility that we can experience. This is an advantage we must continuously nurture including investments to improve our exposure to some of the world's largest and fastest-growing consumer markets. In China, we are proud of our participation in Baijiu through Shui Jing Fang, putting us in a unique position among global spirits players operating in the market. We are investing and expanding supply of Baijiu and it was fabulous to see the construction in progress when I visited Chengdu a few months ago. I'm equally excited that our Chinese malt distillary will be operational by the end of the calendar year, located in Yunan. It will be carbon neutral and positions us to win in an emerging category with incredible potential in China. In India, we reshaped our participation in mainstream whiskey by divesting and franchising out a significant portion -- a significant portion of the portfolio to focus on where the growth is at in the premium tiers. Last year, India had the highest growth of super premium plus international spirits have the highest growth of super premium plus international spirits, excluding global travel. Indian consumers repertoires are growing with the desire to drink less but better. We are investing in and growing our presence at the top end of the price ladder both in whiskey and other categories such as tequila. In the U.S., we continue to invest in brand building and have expanded our capacity for growth. Since fiscal '17, we've almost doubled our absolute A&P investment in the U.S., taking our reinvestment rate from 15% to 20%. This has supported the 9% CAGR we have delivered on this business over the past 4 years. We're also investing in capacity expansion to support future growth, including key brands such as Bulleit and Crown Royal. In summary, we have an advantaged portfolio, which we are continuing to strengthen, giving us confidence that we can grow our business ahead of the market. So let's now move to our strategy to continue to drive growth in this dynamic category. Let's start with where we want to go. In 2022, we reached 4.7% value share of TBA. While we're proud of this milestone, we want to go further, adding almost 30 billion new serves globally to reach 6% share of TBA by 2030. This is a vision we've shared before. And despite the short-term volatility and formidable competition, we remain confident about. Our ambition and purpose have not changed either. At Diageo, we are about celebrating life, every day, everywhere. We want to be one of the best performing, most trusted and respected consumer products companies in the world. We've laid out the four key growth strategies, which I want us to focus on in order to deliver against this exciting ambition. I'll give you a brief overview of the main strategic areas and then my colleagues will explore them further after the break, bringing them to life with a few examples and case studies from around the world. The first is that we need to continue to drive growth in our biggest categories. Our biggest categories are large and growing. As I discussed a few minutes ago, we are the #1 company globally by RSV in scotch, tequila, rum, vodka, Canadian whiskey and liqueurs. In scotch globally, we sell a bottle of Johnnie Walker every 7 seconds. And we've grown the business at an 8% CAGR over the last 4 years. And as I've reviewed with you, we believe there's still huge headroom for growth. Growing these categories gives us scale and resilience and this scale allows us to go after even more opportunities. The second strategy is to unleash the power of the portfolio and expand our global footprint. We have sales in nearly 180 countries. And as I described earlier, an incredible portfolio, one which is unrivaled in both the heritage of our brands and the consumers that they reach. And yet, our big brands are not present in many important markets. We have an opportunity to expand our key brands so that more consumers around the world can enjoy them. We also have an opportunity to take what is working in a market and reapply it with speed into other markets. This includes some of our most exciting innovations. Third, we also want to use our superior innovation capabilities to tap into new consumer occasions and recruit into our categories and brands. This is a core strength of Diageo and has been a big driver for us in the past. I'm excited about the pipeline and the scale of what I know is coming in emerging occasions for us like Non-alcohol. Lastly, we will continue to raise the bar on execution, winning with consumers and customers, more known for our scale and the quality of our execution in many areas, yet I believe we can do more. I want excellence in every consumer touch point and also in our end-to-end operations. We've driven an annual average of $500 million of productivity in the past several years, which we stepped up in fiscal '23, which we reinvested into the business. I know we have the opportunity to step change this further. Lavanya will cover this in more detail later in the day. We will also highlight one of our strongest markets, North America and how they continue to raise the bar on execution. These growth drivers are all supported by critical enablers. It requires deep consumer understanding, engage talent and embedding our spirit of progress plan into everything we do. So let's start with our Society 2030 spirit of progress plan. We run our business with the long term in mind. It's our license to operate. It creates a diverse and productive culture for us to thrive. It is the right thing to do in our communities and for the planet where we lay down maturing stock for more than a decade. The Spirit of Progress plan, which we laid out in 2020 when we completed the previous 10-year plan is a key enabler for us to continue to deliver long-term sustainable growth. I passionately believe that building a resilient business means delivering on our ESG plan. To be clear, spirit of progress isn't a nice to do. It truly makes Diageo a better business and it's embedded in everything we do. But we also know it's about being smart and efficient as well. So we look for what we call the triple wins. So what do I mean by that? I mean we will do the right thing that benefits our communities, benefits our customers and consumers and will also benefit Diageo's bottom line. If you look across our three main areas of BSG, positive drinking, inclusion and diversity and sustainability, you will see this triple win strategy in action. To bring this to life, I will play a quick video that demonstrates how Society 2030 spirit of progress plan impacts our business. [Presentation]

A further enabler for us is our engaged workforce. We have over 30,000 talented individuals working with a clear purpose and with speed and agility to deliver our performance. We have a highly competitive employer brand that helps us attract, grow and retain the best talent in a fiercely competitive talent marketplace. In fiscal '23, we attracted 4,977 new employees to work at Diageo and we saw a year-on-year increase of 22% in applications to join the company. Additionally, 5,092 employees took on new career opportunities within Diageo in fiscal '23, that's 14 people making career moves per day. We know from our annual survey that our employees take ownership and have immense pride for Diageo's brands and performance. The Net Promoter Score for employees recommending Diageo's products was plus 80. For context, an index score of plus 10 to plus 30 is considered great. And anything plus 30 is considered excellent. We have a strong and diverse bench of leadership talent. On diversity, at the end of fiscal '23, 44% of our leadership cohort are female. That's an increase of 5 percentage points versus the year ending fiscal '20 and 43% are ethnically diverse. In our Board, 70% are women and 40% are ethnically diverse. Finally, we are committed to developing the skills and capabilities of our people in line with our future growth opportunities. Employees undertook 526,500 hours of learning and 11,538 digital learning in fiscal '23, but don't just take my word for it. Let's hear directly from some of our employees from around the world. [Presentation]

Lastly, I would like to talk about two new key tools, which we are adding to our suite of tools that we've talked to you about in the past. These tools are enabling us to deliver on our ambition or these tools are enabling us to deliver our ambition. The fact is that we have an opportunity to grow in almost every category in almost every market. And as you will appreciate, we cannot do all at once. These two proprietary tools are helping us focus and prioritize our investments toward our biggest growth opportunities with the highest opportunity for return. The first is the consumer choice framework. It's a methodology that allows us to transcend category thinking and use an occasion-led lens to understand consumer motivations, trends and opportunities. This tool enables us to direct investments in our portfolio, keep our brands relevant to changing consumer tastes and capture the growth cycles of categories within TBA at speed. The second tool is the market growth framework, which establishes clear roles for each of our markets based on external and internal factors. And these roles help us define growth priorities, KPIs and where our investments should be directed. Ultimately, it helps us remain agile, act fast and effectively channel the full power of our scale where it matters in this volatile world. So thank you for your attention. I'm going to now open the floor to Q&A. Remember, this is the first of four opportunities that you will have today. So following this, you will then hear from some of my executive leadership team members who will share some compelling examples of how we're executing against the strategic growth drivers that I mentioned a moment ago. And I think at this point, I'll invite Lavanya up. And like I said, there's four Q&As. So just so you know when those Q&As will break and if we can try to keep sort of the questions within the pieces it will just be helpful. This first part on sort of my section on kind of the foundational facts current context, then we'll have one again after, we've got a lot of the executive team and presidents coming up to present the growth strategies. We'll have actually two in that section. We'll do one that I would say will be more of a focus on rest of world Q&A. And then we have split out North America Q&A and then we'll also have a Q&A to talk about the medium-term guidance after Lavanya and I go through that and to talk about that. So that sort of frames it up.

I just want to come back to LAC Again, I'm just still struggling just to really understand what really changed between the end of September of the AGM statement and where we are today. I mean, is there something in terms of the internal management information systems that you have that meant there's perhaps a delay in you recognizing at the center, what was really happening on the ground. How do we have confidence that there's not a risk in other markets of a repeat. I appreciate what you said about LAC being an isolated incident. But I'm still just trying to contextualize it all.

Sure. Well, first of all, I will say, remember October is a very important month for us. And so there is a lot of information that comes in to October. I mentioned in the presentation how much of scotch is sold in Latin America in the first half and the vast majority of kind of those depletions all happen in sort of the October, November, December time frame. Actually, what might be helpful because I've kind of talked about it, but maybe Alvaro, I mean Alvaro's here, we've got the President of Latin America here. So maybe if you want to talk a little bit about what you've seen, you've been on the ground, I think you have, what, 20 years or so in the region pretty well.

Hi, everybody. Can you hear me well? Sorry that my voice is a little bit soft, but I've been talking a lot in the last few days. So look, I think the question is about what has changed. Yes. I think in August, we signaled some first of all, some weakness on consumer, some consumer down trading, more volatility than expected and some inventory issues, as Debra said, and specific in Brazil. So what has happened after that? So consumer volatility continue there. But there are two important aspects. One is Spirits has been underperformed in TBA, which is the first time that we are seeing this. For example, in the case of Mexico, during the last 2 years, spirits have been growing between 8% to 10%. Q1 showed a decline of 5%, which was a very rapid change that to adjust for us. In Latin America, Scotch is our largest category, yes? and 63% of our sales, as Debra said, happens in H1, yes? The depletions of that, the majority is between October, November and December. So the other important data point was between September and October when we got the orders from our distributors and the modern trade, which is the first channel that we attend, they were lower than what we expected. And at that moment in time, we knew that we had a bigger issue that we were expecting for. Why is that? It's because we do have -- so how is our road to consumer in Latin America. We have -- we attend distributors, the model trade and a few wholesalers. For that level of our road to consumer, we have robust and solid information from sales, stock in trade. The second layer, which is more wholesalers, distributors that goes to the fragmented on-trade and off-trade, we have less information. So -- and that has been what is causing the program for us to really anticipate -- to understand the entire value chain of the stock in trade that we have. So we have visibility on this first layer. And this is one of the first actions that we are taking is normalizing, this first part of the -- of our go-to consumer. And we are making significant addition of that. We are confident that by the end of H1, that job is going to be done. Then the second action for us that we are taking and maximizing our first peak season, which is the most important part of the year for us, yes. And to make sure that the execution happens to accelerate the depletions to help us to clean what is less clear for us, which is around nice, just not for us, it's for the entire industry. That is the second layer of stocking and 10 layers of stocking trade that is in the market. In that context, we are gaining market share. Yes. And the only market that was an exception for that was Mexico. And during the last 4 weeks, we are seeing early signs that our market share is improving to getting to positive. So I think that was the combination of the volatility after a faster growth plus the visibility that we have in the road to consumer is what we are dealing with at this moment in time to address the issue. We are taking immediate action, as I said, and we are taking this very seriously. To address this first part. And then in January, we will have better visibility of after the execution of O&D.

Very good. And then your second question on other markets.

There are more questions about LAC?

Well, I'm sure there will be questions about LAC. But we know where you are. As far as other markets, look, this is quite a unique situation. Certainly, in developed markets. We've got more visibility all the way through that chain. And then I will say, actually, other emerging markets like Dayalan will talk about Africa at some point, we'll get them up here to -- but in places like Africa, first of all, it's mostly a beer business, which you just -- because of the expiration dates, nobody wants to drink [stale], again us. So it's just a different set up there. And then the other thing is that opaque layer is more like a mom-and-pop shop versus in Mexico where you're talking about other wholesalers, right? So it's -- it's just a different level there. And then also, of course, John, in APAC, that's another kind of emerging market in the world where sometimes you won't -- you don't have as good a visibility, but the difference there, that's quite a luxury portfolio in many of the markets like Malaysia, where it's just -- you don't have the same kind of -- remember, LAC has grown in our business tremendously over the past 4 years. It's a great business with great margins and we've expanded that -- so over time, you're seeing a lot of growth there. That's really where it can be sometimes difficult to see exactly what's actually true consumption versus anybody building inventory, until they stop ordering. But in this case, I think -- look, the team is absolutely all over it. We will come back to you in January and give you an update. But we do feel -- certainly, as we look around the globe, we knew we had an inventory problem in Brazil. Certainly, we did also flag that we had weaker consumer conditions but things like this Mexico thing was really the, I would call it, the newer news in that 5 weeks. And of course, this is an important consumption time period. So we will know more about the status of this in January.

Thank you, Alvaro, for all your answers and everything for the last couple of days. Slightly in your defense, are we missing the real issue here that LAC, let's say it missed by 10%, 10% of the group, that's 1 point. But you put up a chart saying the U.S. market is growing 3% to 4%. Your sequential improvement perhaps doesn't been your back into positive territory. So actually, what's happening here is the U.S. has not recovered as quickly as you hoped to provide the safety net for all the other regions. And so what happened in LAC in June, we were talking about the risk of a cyclical downturn in LAC. We've been through this many, many times. What we haven't been through is the sort of gap seeing between the market and your sales today in the U.S. and actually the U.S. is the issue, not LAC.

Well, actually, we are still looking at sequential improvement in North America. And remember, we did talk about -- this is a supply chain that has been normalizing. It is a consumer that's been normalizing. But look, you look over the last 12 months in measured channels, what is it 3.8%, 3.9% growth. So actually, we're getting back -- you're seeing from a consumer standpoint, kind of that normalization back to mid-single digits. And then we had said all along it would be gradual improvement in North America. And so that is what we're seeing. No doubt like as you look at North America sort of month-to-month it is sort of -- that's why I say normalizing instead of normalized. But certainly, we are still seeing that sequential improvement. And so -- of course, we would always like to see that come faster. But you also have to remember, in North America, we were still cycling. There were a lot of price increases last year, not just us but elsewhere in the industry. So you still have a lot of things that I would say that are kind of normalizing out. But we're excited about what we see from consumer sentiment. We're excited to see that point of sale and the consumer really come back. And the rest of the supply chain things will, of course, follow along.

Just to the consumer sentiment you put on. How long have you been running that time series? How efficient has it been proven? And particularly, your commentary around quite optimistically on the on-trade going into Christmas. That notoriously can change very quickly. How comfortable are you as that a predictive tool? Because I come back to a sequential improvement. You haven't confirmed growth. So you could still be negative. And the gap to the market is 4, 5 points, which we haven't seen in a long while. So how confident are you in those predictive tools?

I mean look, it's sentiment. So as you know, consumers always -- actually, they usually -- we actually find they usually under say what they're going to spend. Most people plan to spend less, and then they end up spending more. That being said, that's why the most important thing is to really look at things sort of year-on-year is what I would say. And so that's where we saw this low point back at February 20 -- February 2022. Actually, if you look at industry and how the industry grew in 2022, there was not a lot of growth. So actually, that was quite, I would say, quite aligned with ultimately what we saw in the market. And we also have external Morning Consult and sort of these type of things that there they wouldn't have -- they would have said kind of July of 2022, sort of a consumer low point. So we've got multiple both external and internal sources that sort of pointed to that kind of time period of being fairly low for the consumer and that the consumer is actually feeling better. Remember, this is questions about sort of our industry, right? So I would say, look, we've got great tools like demand radar that actually pull in and scrape external stuff plus internal. We see it aligning with what then ultimately we see in the marketplace. But granted, it is, of course, sentiment and there are things that happen. So it's not entirely predictive. But we do find that when we combine these data sources, we tend to get kind of the best view of it. And we are feeling good that it is not giving us a lower number. We're quite pleased to see that it's higher.

And we get it every month. We're looking at it every month, Chris. -- if it changes, we will see it right away. Robert?

Robert Ottenstein Evercore. Just wondering if you can talk about your exposure to the Middle East, which doesn't look like it's going to get better anytime soon. And both kind of the direct impact, I believe you have very large businesses in Israel and Lebanon. So probably not counting on too much growth there. But also and more importantly, as well, how you think other things may happen, things that we aren't seeing today, but if all of a suddenly retailers have become more cautious, if travel, international travel has started to slower, any other kind of sort of ramifications around the world that could that you're monitoring that you're starting to see perhaps initial changes in trends.

Yes. I mean you want to talk about it, what it means from a group level.

Yes, So look, it's not a huge part of the total growth, but it's meaning -- it has had a meaningful impact on Europe. Now Europe's growth in this half is going to be strong. We were expecting it to be stronger, if not for this -- the impact in the Middle East. And the impact we're seeing there is the direct impact, as you said, Robert, on Israel and Lebanon where things have come to a complete halt. But we've also seen a significant pullback in the business that we have in the rest of the Middle East, that's in the kind of the Gulf state. I think there are secondary impacts definitely that we will see from this. I mean you're seeing the impact -- I mean, with the combination of the Ukraine war and the crisis in the Middle East, I mean, you see what's happening in Continental Europe and GB as well. I mean people you're seeing the rallies, you're seeing consumer sentiment being impacted by it. That's definitely for sure. And I don't know if John wants to add something about Global Travel.

[indiscernible] Sorry, I can hear me now. Just to set some context in global travel, just passenger numbers are actually quite good globally. Apart from Asia where the Chinese consumer isn't yet traveling at the rate we had expected. In fact, in Europe, they're actually higher than pre-COVID levels. But we are seeing a bit of a fallout through some of the Middle East hubs and some travel. So that is going to be kind of, I would say, a secondary impact on what is already -- what has otherwise been a relatively buoyant channel for us.

Celine Pannuti from JPMorgan. Maybe I would like to go to a bit more of the midterm, Debra. You presented the key points today and some of them, as you said, we're already from past strategy. So I wanted to understand what do you think you will do differently. You mentioned that you think you could do better in terms of execution. So if you could give us a bit of a steer on what exactly that means. I also noted -- I know it may be more about Lavanya presentation, but that within that midterm, it also means that you are increasing your A&P spend. to deliver the same. So I mean, is it -- you can do more, but you need more resource? How do we think about the return on all of that?

Yes. I think -- and you'll get a chance, we will actually take you through some of these key places where we're really looking to invest behind actually in this next session. So I won't steal too much of the thunder other than to say I laid out the four kind of key growth strategies. The driving on the -- our big brands, that is certainly more of a continue of what we've been doing at Diageo right. We've -- many of you would have seen like our scotch presentation back in May. Certainly, tequila has been a big part of our growth and is one of our big brands and certainly Guinness. And so activating against all of our big global brands is clearly a big part, and our big global categories is certainly a chunk. But sort of the newer areas is, I think this is about expanding some of our footprint around the world. And I talked about this actually at the end of fiscal '23 about taking tequila around the world -- we'll talk a little bit about that today. There are also pockets of other opportunities for some of our brands. And you will hear from our presidents where we see those opportunities to more lift and shift, I would say, of some of the really exciting things that are happening. We are seeing the speed of the consumer around the world, really pick up on these trends quite quickly. And so we want to be able to be there and be leading in those emerging trends much faster. We also have -- innovation has always been part of the Diageo. Frankly, I think it's a real core strength of ours. We tend to always have some of the best -- if you think about our share, we tend to always overshare on our innovation that we launch. But some of these new occasion areas, and I think our frame of moving from kind of category and very brand out to really looking at the consumer landscape of occasions and where we can play. So think about all the adjacency sort of areas, of which convenience has exploded. But there are certainly pockets already that things like non-ALC that we really see an opportunity in and really going after these new occasions that are quite not just great for Diageo really is quite expansive for the category as well. So Look, as we look at A&P and we'll talk about more how this rolls up in the medium-term guidance and how this will work. We've been investing as Diageo. We want to continue to do those investments. There's just some things in the operational -- sort of the world at which we'll be operating in that's a little different going forward. But we can talk about that this afternoon. But -- and then the fourth strategy on raise the bar on execution, we will -- that's in your session. So the final session, we will talk about productivity at length. This is key for us. We see great opportunity here but that is also going to -- these are big programs. This isn't just the everyday efficiency stuff. We've got some very big programs. And then also, I'm not going to steal Claudia's Thunder, Sally's thunder on what we're doing in North America as well on execution and specifically around addressing some of this -- how we show up at point of sale and our route to consumer. So Stay tuned. And if we don't answer your question, by the end of the day, we'll come back to you.

It's Laurence from Barclays. Debra, on Slide 19 about the power of the middle class. You highlighted some statistics on both India and Latin America about the potential of those growing middle classes. Now when we look at other sector companies, whether in spirits or in wider beverages, often China is highlighted as a key area for the growing middle class. You didn't put it on your slide. Is there a reason behind that? Do you see as your potential growth expectation for China changed recently? How do you at...

No. So actually -- so China, of course, for us, remember, what is it on 90% or so of TBA is Baijiu. which were Baijiu and absolutely look at that, and we do see the opportunity. It's just by the numbers, the India opportunity is and you just -- that growing middle class is really special to highlight. And then look, what Alvaro has been doing, putting the Friday announcement aside in Latin America, we have certainly seen just great opportunity in that too. So it was more just about size and scope of numbers. We are certainly investing in China. We've got a lot of investments going into Baijiu as well as the Chinese -- the Chinese malt distillery, which is very exciting. I mean that's just -- it's an emerging area, we'll see how that goes, but very exciting.

Ann Gurkin with Davenport. I wanted to return back to LatAm and ask about the consumer and the down trading. Is it different in this economic challenge environment versus past environments. And is the competitor environment also rational as well? Or can you talk about the competitor behavior as well as [indiscernible].

Yes. So from a consumer perspective, I don't think it's that different. I think what we are seeing is consumer during the last 3 years, what we have been doing is recruiting consumers from premium beer and other locally produced spirits. That has been the journey during the last 3 years. The down trading that we are seeing right now is going consumers from scotch to other categories like vodka or Gin and in some cases, to bear again. But it's not that different versus what happened before. It's just that we are in so much different position right now for strength, that we -- but we are making sure that we are playing with the entire portfolio to make sure that those consumers that are down trading are coming back and staying within the Diageo brands. The company landscape, it's very active, especially on beer due to the fact that during the last 3 years, we've been recruiting consumers from beer, we are very active -- coming back to the entry coming back to invest. For international spirits perspective, we continue gaining share, as I mentioned, and continue to be very active because that has been the case during the last 3 years about us gaining share.

And then Debra, if I can return to the U.S., you put up the slide about Diageo U.S. distributor inventory levels within the range. But that data looked like it was through June of '23? Do you have any data that runs through maybe September? What does that inventory level look like in that graph?

Yes. We're still very much in the range. It's just -- this is -- these are all -- so actually, I mean we can look at inventory daily in North America. It's -- and it's because we're so concentrated, particularly in spirits, we're concentrated in a couple of key strategic distributors. So yes, we are absolutely within that with -- just not. Yes. Yes. I think unless we get that audited, we can't ever put things up on the slide. So and our external auditors look at that before we put that up in this line. I will add, because this comes back to how different our Latin America business is versus sort of other downturns. The LAC business now is much more have -- has much more premium scotch in the portfolio versus standard scotch. And that's a real shift versus other downturns. So -- so certainly, even downturning from sort of premium scotch can still land in our portfolio. We don't have to sort of chase that down. We've got now a scotch ladder actually in and LAC that you've built over the last 4 years.

Back to the sellout versus sell-in again, big components of your variable compensation, both bonus and LTIP are based around sales. So sell-in. Have you thought about whether there's a way of adjusting that to more reflect sell out and actually pay people for executing the culture.

Yes. I mean, look, on sellout, like I mean, Claudia can speak to this in North America. But certainly, in our incentives, we have individual bonus incentives as well. literally, when you talk to the teams, they will talk about depletions, like looking no other president is saying no. I mean like literally, that's what people talk about. So it really is about depletions and DNSP. So that kind of measure on the top line, that's a one Diageo measure, but the individual kind of regions and the individuals that work within our commercial organization are all about depletions. And in fact, if people end up with inventory that is over, like if it looks like you actually have to come like before, like the -- first of all, within the region, you're going to be standing up in front of the region management team and then it will even come up to the Audit Committee.

You want talk about some of that?

I mean, look, I think for the people who are actually doing the selling, their bonus structure is predominantly sell out. okay? The group bonus is a very small component of the frontline salesperson's incentive structures. At the total group level, the other thing that we do have is this -- what we call the IRC, the Remuneration Committee, Luis and I sit on it. And before we pay out any bonus, we do have a quality check where we look at whether the results have been achieved in a high-quality way. So stock in trade is a very large part of that. Margin progression is another part of it. So if someone is achieving an NSV number or a depletions number in a non-quality way, we use full discretion to pull back on those incentives. So it's not just a -- you -- it's not a mathematical calculation only. There is significant checks and balances that we have internally within the company to ensure that results are being delivered in a high-quality way.

Just -- our general managers are focused on one thing, and that is market share. We have a significant and the biggest bonus modifier for any country is the general manager being able to demonstrate that they've grown market share in the year and that is the delta on the bonus that they get for the entire team in that business, and that's a plus or minus. So I think that's a real important going to say...

That's even beyond depletions, but actually a sellout of course, to the consumer. So not all places we have good enough data to be able to fully do that. The depletions. But in other words, we are not -- this is not, and I will just repeat this, and we have many people on the senior management team that were here 10 years ago or -- it's even maybe more than that now. But of that kind of sell-in culture, that is not what it is today at all. So we try to measure as far down in that supply chain as we possibly can as we're putting together incentives for people that are in our commercial organization, so that there is no adverse incentive there.

Jeremy Fialko, HSBC. Just one question coming back to LatAm, again. A lot of us here look at many other kind of consumer staples companies across sort of food, household products, personal care, et cetera, et cetera. And I guess we came through this reporting season and pretty much all of the other companies that we looked at had reported actually pretty robust results from Latin America. I can go through the sort of double-digit growth from many, many other players with a good sort of volume and price balance. So what is it you feel is specific about your categories that have meant that the sort of spirit industry has just been so dramatically different to what all of these other parts of the kind of consumer staples arena?

I think it's the premium nature of spirits and what it's become, Jeremy. I think that's probably the main difference because we are gaining share. So we're gaining share compared to the other spirits. And that's because we do have kind of that price ladder of which we've got standard scotch, and we've got other things that people can trade down into but that is -- these are quite premium products, and it had really been premiumizing, which is why we also remember, have really great margins in Latin America, which isn't always the case. Sometimes in some of the other companies that we might be compared to.

Mitch Collett from Deutsche Bank. If I can ask another question on LAC, please. You said that you only realized October was weak very recently I guess what have you and you also said that November and December are very important months, so what you assume about November and December with the minus 20 you have pointed to for 1H.

So a couple of things. So we did know the consumer environment was weak. I mean that's why we talked about -- that's how we built the inventory to begin with that we were disappointed by on sort of the World Cup and what was coming after. We saw a weakening consumer environment. I think what Alvaro referred to, so in Brazil, specifically, I think we had and frankly identified that. I think the Mexico change was the one that changed quite dramatically from our end of year when we had talked about that. And of course, we were not aware of really having built up big inventory in stock in Mexico. So that was sitting at lower levels clearly. So that weakening environment, I think that's the big change. I don't know if there's anything you want to add I think. But we can't talk about going over forward.

What we are assuming is that we want to have the best execution during October and November and December and that is the best assumption that we have at this moment in time to help us with -- to solve, as I said, the second layer issue that we face.

If I just add on to that, Mitch. I mean one of the conscious decisions we have made here as we've come up with this very disappointing issue in Latin America is to keep the business still funded, to be able to carry the depletions out because the best thing that we can do is to ensure that we keep a very healthy category. We keep our brands really healthy. And if the consumption happens at the endpoint in these very big holiday occasions through Black Friday and Christmas. That's the best solve for any issue that we have in any market and not the least in Latin America at present. And so that's definitely something that we have kept funded, and that's what we're doing. That's our assumption is that these are good, strong plans as the team have built and we will keep the business funded to carry the consumption out. And we're seeing that come through when we -- Alvaro and team have weekly data that measures what's happening from a consumption perspective in the tracked channels, and we're definitely seeing that.

We'll take one final question for this Q&A segment. Go with John.

I am just curious, the cost of capital has increased, of course, for everyone over time. You talked a lot about the investments you're making. I'm wondering if there are investments you're not making or where the hurdle rate has increased and that's caused you to pull back in certain areas just in an environment of scarce resources for everyone.

I think we're always making choices. I mean, like I think that's -- there's -- as Debra said, there's opportunity for us to grow pretty much in every brand and category in pretty much every region. And so there's -- we're always being choiceful about which do we fund first and which to be fund next. And then to your point on the hurdle rate, as the hurdle rate goes up, I mean, what we expect to get from acquisitions or from any CapEx expenditure also go up. So we do update the hurdle rate regularly for all of our investment decision-making choices. Anything specific that you would add that we would want that we haven't done. I mean.

I mean, look, I still come back to you, this is a really critical time of the year for us. And we do -- we are very pleased with where we're -- the trajectory that we're on in this sort of 90% of the market. And so -- and Alvaro has talked a bit more than a bit about what all we are doing to try to overcome and get through this LAC issue as soon as we can and really make sure then that we can kind of clear that as we go forward. So thank you. And I think we are on.

Yes, we're on the break until 10:30.

You get a break. Very good. Thankyou. [Break]

Welcome back everyone. As I mentioned this morning, in this next session, my colleagues will explore the strategic priorities that I outlined earlier. They will give you a virtual trip around the world by showcasing some powerful examples and case studies of where we're putting our strategy into action. So back in June, you heard a lot about scotch globally, and we highlighted scotch in Latin America. So today, we thought we'd give you a chance to see another example, India, a key growth market where we see exciting opportunities for scotch. So I will start by introducing you to Hina, our Chief Executive of Diageo India, who unfortunately can't be with us today, but has prerecorded our first example of how we will continue to drive faster growth in our largest categories.

Hello, everyone. Sorry, I can't be in New York City in person, but you will have an opportunity to chat with three of my key team members this afternoon. As Debra said, we are going to be looking into our largest categories and showing you how we are going to get even more growth out of them in the future. So to start, I will give you some key facts about our largest categories globally. Our top four largest categories are scotch, beer, tequila and vodka. Together, they represent 62% of our total F '23 reported NSV, almost half of reported sales volume in equivalent units and contributed to F '23 organic sales growth by 98%. Scotch alone made up 1/4 of our F '23 NSV and Tequila overtook vodka in F '22. This big four have consistently represented more than 50% of the reported NSV over the last 5 years. These are categories made up of iconic brands, including Johnnie Walker, Guinness, Don Julio and Smirnoff. They are rooted in culture and delivering quality growth. In a moment, I'm going to discuss how we are growing the whiskey category in India, and Dayalan will show you how we are driving global growth in Guinness. India, my home country is one of the fastest-growing and most dynamic economies in the world. It has a large and young consumer base. There is a rising demand for premium products and the consumer occasions landscape is changing. The demographics in the region present a large opportunity. By 2030, 150 million Indian consumers will enter the legal purchasing age for alcohol, accounting for 25% of the global increase. India's middle class and affluent population is also growing rapidly, creating a strong demand for premium products and experiences. By 2030, India will have 700 million people in this segment. These consumers have higher disposable incomes and are looking for quality, variety and innovation in their choices of alcohol. The nature of TBA consumption occasions is also changing in India. In the last 5 years, the share of familiar occasions has declined, while the share of socializing occasions has increased from 52% to 66%. This emerging shift offers potential for expanding repertoire, increasing experimentation and opportunities for new experiences. In this context, India is the largest whiskey market by volume in the world. It has a deep-rooted whiskey culture with a long and rich history of appreciation for whiskey that embraces both domestically produced and imported whiskeys. Whiskey is the most valuable category in the TBA market in India, accounting for 52% of the retail sales value. In fact, India is one of the few countries in the world where whiskey is nearly twice the size of beer. Looking specifically at Scotch in India. Within whiskey, scotch accounts for 13% of the total whiskey value in the country. It is the fastest-growing and most profitable segment as consumers seek higher quality and more aspirational products. In the last 4 years, there has been massive premiumization in the market, with mid-price segments growing at 10%, primary scotches at 17% and imported scotches growing significantly faster at 32%, while lower price segments are declining at 2%. However, there is still huge headroom to grow as scotch penetration is still below 10%. So how did we begin to take advantage of this opportunity? Post-COVID, we took the lead and invested ahead of industry by focusing on our premium and luxury commercial business unit and stepping up on building new marketing capabilities in cultural integration. Our investments are paying off. We have doubled our scotch NSV over the last 2 years. As a result, our premium and luxury business contributing 31% of total net sales in F '23, up from 19% in F '19, of which scotch is 25% in F '23, up from 13% in F '19. We have recruited 10 million new consumers into scotch, almost double that of our nearest competitor and built a strong competitive position in scotch with close to 50% share in the segment, 1.4x our nearest competitor. We now have three scotch brands at over 1 million cases each contributing almost equally to Diageo's overall market share. Johnnie Walker is the most recalled strongest equity brand in imported scotches in India, with almost 2x salience and equity of its nearest competitor. Two other crown jewels in scotch, Black Dog and Black & White, targeting mixed gender consumption in shared occasions, broadening our footprint beyond scotch, I'd now like to introduce you to a local Indian single malt called Godawan. For those in New York, I hope you had the chance to try Godawan last night at dinner. India's young affluent have a new found pride in their Indian provenance alongside contributing towards a better sustainable world. Recognizing that these consumers are global native with an affinity for Indian artisanship and mindful luxury. We crafted Godawan, a luxury price artisanal Indian malt that is proudly Indian given its provenance in Rajasthan. Godawan has sustainability at its core, working to conserve the Great Indian Bustard bird species in the water stressed state of Rajasthan. I could not be prouder of how this product Godawan has had a really strong start in its first year. Its credibility is strong. Our distillery in ALwar is alliance of water stewardship, gold certified and each bottle we sell contributes to bird conservation. One of the most widely awarded Indian malts, it has won 21 international awards across liquid packaging, brand building and design. To mark the first year of Godawan, we launched a limited collector's edition of just 100 bottles, which was presold at $1,000 per bottle to private collectors and clients. Our final whiskey success leveraged our consumer insights capabilities to recruit consumers in new occasions. We saw that Bourbon had grown 24% in India in the last 3 years. And we identified an opportunity space in the highest priced segment in Indian whiskey, upper prestige. And so Royal Challenge American Pride was born. It is the first bourbon-based liquid in its segment, marketed with American style culture imagery that is very aspirational in India. CamperVANs, Barbecue, outdoors, American pop music, et cetera. It also pioneers a new packaging innovation, the Hipster Pocket pack, which contributes almost half of the volumes today because it's convenient, easy to try and is a great fit for the shared occasion. It has become the fastest-growing brand in the industry to hit over 350,000 cases in F '23 within a year of launch, adding an incremental over 2 points of market share in the segment according to our estimates. And 90% of those who tried it repeated their purchase. I'm truly delighted with our performance in India and how we have accelerated growth of whiskey in the region. I'd like to close the India story by sharing a video on Royal Challenge American Pride. Thank you. [Presentation]

Thank you, Hina, and good morning, everyone. I now have the honor and privilege to talk to you about one of our most iconic brands, Guinness. Guinness' unique magic is that it is a global brand with a local heartbeat. It has been loved by vibrant communities all around the world since 1759. And in F '23, Guinness delivered its strongest performance ever. We had strong growth in every region across the world. And on a value share basis, Guinness is the #1 beer brand in Ireland and in Nigeria and something that we are very proud about is that in GB within the on-trade and on a value share basis, it is the #1 beer brand over the last 12 months. Guinness has a loyal and growing consumer base. And it is growth is achieved by following simple and a clear strategy that is built on three growth drivers. The first is magnetic purposing culture. This is about telling authentic stories and taking actions that make Guinness relevant and attractive to both younger and more diverse consumers. Whilst also reminding them of the great taste and the quality of Guinness. The second growth driver is inviting experiences. We have a growing network of Guinness brand homes across the world. We have the Guinness Storehouse in Ireland. We have the Open Gate Brewery in Baltimore, the recently opened the taproom in Chicago. And in 2025, Guinness Old Brewers yard is set to open its doors in Covent Garden. We activated Guinness throughout the year around cultural events in the calendar to keep it top of mind. Saint Patrick's Day, of course. But we also activate Guinness around football in the U.S. rugby in Europe and we have soccer in Asia and Africa. The last growth driver is beautiful Guinness everywhere. This is about offering a range of products that meet the different consumer needs and ensuring that we are available and accessible in more places and spaces. Guinness never stands still. It is always pushing the boundaries in terms of innovation and this is why we have launched Guinness 0.0. Through consumer research, we have identified that moderation was an opportunity which Guinness innovation could unlock. We created Guinness 0.0 to tap into moderation while staying true to the Guinness heritage and a high-quality standard. We use data and consumer insights to identify the gap in the market for a nonalcoholic beer that tasted great and had a distinctive flavor. We invested in creating a liquid that met the high standards of Guinness and our consumers, and we were delighted when Esquire magazine named us the king of nonalcoholic beers in January this year. Guinness 0.0 is a breakout growth opportunity for our business. It has been broadened our recruitment potential by appealing to younger, more female and more ethnically diverse consumers. It has also opened consumption occasions and Guinness 0.0 is the fastest-growing non-alc brand within the off-trade globally. It has added 500,000 incremental consumers to the Guinness brand on a year-on-year basis, and it is also leading our positive drinking agenda, as demonstrated by our responsible drinking campaign for St. Patrick's Day. That's the biggest -- the single biggest day for Guinness consumption on an annual basis. Guinness 0.0 is a clear growth opportunity for our business. It is driving recruitment from a broader consumer demographic. For example, in the U.K. 29% of 0.0 drinkers are female when compared to 20% for Guinness Draught. In the U.S., 44% of Guinness 0.0 Drinks LPA34 when compared to 27% for Guinness and 1 that we are very excited about, as we embark on our global rollout is that 17% of Guinness 0.0 drinkers are Asian Americans when compared to 8% for Guinness Draught. So 0.0 is one of the industry's biggest innovations. In F '23 in the U.S., 0.0 had 3% contribution towards the Guinness brand but contributed circa 27% to the total Guinness growth. In Great Britain, this contribution was 13% and 0.0 is the fastest-growing nonalcoholic beer, and it has 11.5% share. Looking forward, we see a clear opportunity for us to go deeper and broader with 0.0. We believe our strong brand equity would enable us to grow Guinness 0.0 at scale in our stronghold markets and we believe we can go even broader than this by finding opportunities in new markets where we believe the liquid would resonate. So we have just seen the great liquid innovations on Guinness. I'm now going to share and talk to you about two exciting technical innovations. We know that consumers around the world want to enjoy Guinness draft no matter where they are. That's why we created Guinness MicroDraught and NITROSURGE. These are both revolutionary technological solutions that enable consumers and outlets to pour a perfect pint of Guinness directly from a can. NITROSURGE has launched and scaled in GB and Ireland, and we believe it has unlocked the next wave of transformational growth for the stout category. It is driving premiumization and penetration within the off-trade and in Ireland, it is also appealing to a younger consumer, where 40% of NITROSURGE consumers are LPA34. We also developed Guinness Micro MicroDraught to bring the magic of Guinness Draft to every corner of the world. The primary focus in the on-trade. This award-winning cutting-edge technology serves beautiful fresh Guinness Draft on tap in outlets around the world, no matter what their size is. So you should think of this as a keg in a can. So there's no outlet that is too small. We are confident that both Guinness and Guinness MicroDraught and NITROSURGE will continue to grow the South category whilst delighting our consumers around the world. So this closes out our first strategic priority. So from Godawan to Guinness, we are accelerating growth in our largest categories. I'm now going to hand over to Cristina, John and Alvaro. And they are going to talk to you about unleashing the power of our portfolio while expanding our footprint worldwide. Thank you.

Thanks, Dayalan. This session is all about how we are going to unleash the power of our portfolio and expand our footprint, Essentially, how do we think globally but act locally. We'll talk about how we leverage these incredible brands that have heritage, history and global equity and activate them with execution excellence and pace locally in more markets. We aim to have the right portfolio for the correct occasions in the right geographies across consumer groups from the newly turned LPA consumer through to the ultra high net worth individual. I will now show you how we are unleashing the power of our tequila portfolio and expanding our footprint globally. Then John will focus on the luxury opportunity in Asia and how we have expanded our portfolio to win. And then Alvaro will tell you the story of Smirnoff Spicy Tamarind dreamed up in Mexico and now expanding globally. So starting with our Diageo tequila portfolio expansion around the world, it's tequila time. We have a strong and diverse portfolio of industry-leading tequila brands, that are well positioned to capture the growing demand for this category around the world. Our tequila brands are not only premium, but they're also versatile and aspirational. Within our luxury portfolio, Don Julio is positioned as the authentic Mexican tequila brand, where Casamigos is positioned as an approachable lifestyle tequila. Our brands appeal to a wide range of consumers and occasions across cultures and markets. They are enjoyed by both males and females equally, an can be enjoyed in many different ways, from zipping to mixing, from casual to formal, from day to night. The breadth of our footprint gives us a competitive advantage. As the category grows and evolves, consumers want to experience our brands across different variants and across the press ladder. Our presence in Blanco, Reposado Anejo and Cristalino ensures that we are well positioned to participate. As our permanent results back in August this year, Debra talked about her desire to take Tequila to the four corners of the earth, doing for tequila what Johnnie Walker did for Scotch and we are excited about making this a reality. Tequila is transcending the U.S. and Mexico and breaking out into the rest of the world. Global tequila category is growing 3x faster versus international spirits in the last 5 years. It's expanding beyond the U.S.A. and Mexico. Over 60 countries grew 50% year-on-year. And as the category grows, Diageo continues to maintain its leadership, representing 1/4 of global tequila sales with sustained market gains. Don Julio is the #1 selling tequila brand globally as of 2022. And Casamigos is the fastest-growing tequila brand amongst the largest 30 brands growing at 70% in the past 5 years. To show you the reach and impact of our tequila portfolio, I will share you some examples of how we have been activating our range of tequilas globally. I will start by focusing on our recent launch in Southern Europe. Firstly, we identified a number of consumer insights that we believe would be a strong foundation to drive growth. People in Southern Europe are drinking less but better and super premium spirits are outgrowing total spirits. The Aperitivo occasion where consumers have a drink and a late snack before a meal is very popular in Southern Europe and one where we believe that tequila can be positioned to compete. Luxe tequila has doubled in size in Southern Europe over the last year, but some consumers still conceived tequila as a drink for low-quality shops. So we had to overcome that barrier with a new surf that would position our tequilas as a premium trendy option simplifying their choice and creating demand by really educating them on our brands. Tequila penetration in Europe is relatively low, but we see it as a great opportunity and one where we believe we have the right portfolio to disrupt, engage and win. We are confident that we can harness our global equity and recruit globally at pace. Leveraging of these insights, we identified the cocktail the Paloma as our key strategy to capture the opportunity. The paloma is a grateful based refreshing cocktail that is very visually appealing. The Paloma aligns with a local preference for long drinks. It also taps into the global trend of consumers seeking out new and innovative cocktails as evidenced by its rising popularity. It is the 13th best selling cocktail in the world, climbing 2 spots in the last year. For the on-trade, the Paloma offers a simple and adaptable surf that can be customized to different tastes and occasions. Casamigos and Don Julio are the ideal choices to lead this strategy. We have launched tequila in more than 15 countries across Europe, including five countries in Southern Europe. We plan to drive the Paloma at scale across our European markets in fiscal '24, with both Casamigos and Don Julio. And we have already seen encouraging results. Casamigos is the fastest-growing super premium plus tequila in Italy and our Paloma activations have generated high conversion rates and increase our share of tequila. In Spain, we saw a 60% conversion rate from trial to purchase. And tequila was one of the largest drivers of growth in Southern Europe in fiscal '23, contributed to 20% of the net sales growth. We use consumer insights to inform our strategic approach. We understand what motivates and delights our customers in different markets. As a result, we leverage the power of our tequila portfolio in a different way across Asia. We tapped into the demand for luxury products among Asian consumers and positioned Don Julio 1942 as our super premium tequila as a flagship. We position this variance as an icon of stylish celebrations. 1942 entered the most aspirational on-trade venues becoming the new luxury brand for high-energy occasions. Across many activations, local influencers and musicians created and shared engaging social content with wide reach. This translated into strong results. Tequila was the fastest-growing category in APAC last year. We also launched the new Don Julio 1942 experiential platform across airports to draft recruitment. You may have seen the Heathrow Terminal 5 activation this summer, which drove exceptional brand visibility and engagement to a wide audience. I will now play a short video to show you how we are activating tequila globally from the Panama cocktail at APres ski in the ALPS to Mediterranean beach clubs and from Don Julio 1942 in the luxury market of Southeast Asia to global travel outlets. Our brands are creating exceptional activations and experiences that engage consumers and drive brand awareness. I will then hand over to John, who will continue to demonstrate how we're using the power of our portfolio by taking you further into the world of luxury in Asia. [Presentation]

Thanks, Cristina. So to continue the theme of ultra-premium cool night life, trendsetters and luxury products, I'm going to take you over to Asia, specifically to Greater China and Vietnam. I want to talk to you about the luxury opportunity in APAC and demonstrate how the combination of our approach, along with deep consumer insights is driving recruitment and delivering quality sustainable growth. Asia is the largest and fastest-growing region for luxury consumption in the world, accounting for 38% of global luxury spend. Now within that, China is the largest and one of the most important luxury markets representing 17% of the market today and projected to reach 25% by 2030. In addition, while China is the largest TBA market in the world, international spirits only account for 3% of TBA. And hence, we see a very strong runway for growth for our luxury spirits in China. And beyond China, we see opportunities for Diageo to grow in the luxury segment across the entire APAC region. We have a deep and nuanced understanding of luxury consumer segments and their evolving preferences and behaviors. In 2022, we launched a study with a whopping 9,000 luxury alcohol shoppers across Greater China and Southeast Asia to segment the luxury alcohol market. Today, we understand more deeply who these consumers are, what matters to them, what they purchase and how they interact with brands. The luxury consumer is becoming younger, more diverse and more inclusive. It's shifting from older status cues of establishing wealth by displaying what you own, what assets you have to a more youthful, diverse and progressive cues, which places a higher value on experiences, connection that represent shared values. This creates new luxury, new opportunities rather for luxury brands to engage with consumers in a more meaningful and authentic way. We have used our insights to craft our approach on how to win in luxury across the region. We position our brands to win in culture, position them as beacons up desire create captivating experiences and aim to execute flawlessly at every touch point. We understand the consumer needs and preferences, and we are building our brands from the top. I would now like to bring some examples to life on our approach to driving recruitment, share gains and net sales growth. In Greater China, within Johnnie Walker, we have shifted our model to build a brand from the top through Johnnie Walker Blue Label. We believe this creates more aspiration for the brand, which drives equity benefits across all the labels in the portfolio, including Johnnie Walker Red and Black Label. Now Chinese New Year is a key opportunity for us to leverage this strategy. It's the biggest occasion for gifting and celebration in the spirits category, representing around 1/3 of annual category value in spirits. Our limited-edition Blue Label packs for Chinese New Year are highly sought-after, selling at 20% premium to Johnnie Walker Blue Label. On screen, the middle picture is from our latest innovation for the Year of the Dragon. It is a limited-edition pack created through our second collaboration with James Jean, the iconic Taiwanese-American artist and cultural pioneer, who is very connected in culture. This is part of a series that was created in China, but also distributed globally to the Chinese diaspora, generating over $40 million sales annually. More importantly, you can see how our approach of building Johnnie Walker from the top is successfully driving trial, NSV and market share across the trademark. Now let's look at Johnnie Walker beyond China and how this same approach has been implemented in the wider region. Southeast Asia is a fast-growing market with 20 million to 25 million new consumers entering the mid- to high-income range between 2022 and 2030. And within Southeast Asia, Vietnam is particularly exciting, with almost 100 million people and one of the fastest-growing number of high-net-worth individuals in the region. Again, we are building the trademark from the top. This visual is when we collaborated with the royal silverware craftsman in Vietnam to make 3 precious Johnnie Walker XR gifts, each retailing at USD 10,000 each. Our results in Vietnam are outstanding. We have more than doubled our total business market share in 3 years. And our Johnnie Walker luxury portfolio is at the heart of that success, growing 88%. And on top of that, we benefit from the trickle-down effect of equity, growing strongly and winning share in our premium core business, with the total Johnnie Walker trademark, including Black and Red Label up 57%. Moving beyond blends and into single malts. I'm delighted to say that Mortlach has taken Asia by storm. Now for those of you who don't know this brand, it is 200 years old but was only launched in Asia in 2018. Mortlach has a unique distillation process and a beautiful and bold liquid profile and is positioned right at the top end of our malts portfolio. Now we have used a tentpole strategy to position Mortlach as a beacon of desire. Using high-aged liquids, such as this Mortlach 30-year-old, which you can see on the screen, to drive aspiration, adopting an approach of available for the few, desired by the many. Mortlach 30-year-old has a retail recommended price -- a recommended retail price rather of USD 4,500 with nearly 2/3 of regional sales taking place in Greater China. And again, you can see the strong trial, NSV and market share results delivered across the entire Mortlach luxury portfolio within China. Now staying within single malts. Singleton is our #1 malt in Greater China and leads the market in equity scores like craftsmanship, a crucial metric for Chinese consumers. We believe it's critical to create captivating experiences to drive luxury recruitment. An example of this is with Singleton in China. We brought the brand to life with an exclusive money can't buy experience for key influencers, The Singleton Discovery Tour on The Great Wall of China, which then became compelling content that we amplified across our media ecosystem to reach a wider audience. The Singleton is our leading malt brand in Greater China. The brand is growing and premiumizing rapidly. In fiscal '20, only 10% of the brand was Singleton 15-year old and above. But thanks to a 47% growth CAGR, now Singleton 15-year old and above account for over 25% of the total trademark sales. Let me now bring that to life. [Presentation]

Luxury cool in action. Staying within Singleton, we are learning that in luxury, leveraging our deep understanding of consumers and occasions and delivering razor-sharp execution, we can unlock and drive transformational growth. The Singleton 13-year-old Golden Tresor in Taiwan is a great example of how we can drive premiumization. Now for context, Singleton is the #1 malt in Taiwan. Post-COVID , our consumer insights indicated that occasions had shifted from big group and business gatherings, which tend to be high energy in-outlet and kind of male-dominated to more lively, mixed-gender in-home occasions. Wine was making inroads in this new occasion against scotch. Leveraging this insight, we saw an opportunity to innovate and capture this growing segment with a unique offering, the Singleton 13-year-old Golden Tresor. This is a premium expression of our signature malt finished in Sauternes casks to give it a delicate wine-like finish. It appeals to both new and existing scotch drinkers and elevates the in-home occasion with its elegant packaging and presentation. This has been a very successful innovation, executed through great insight, allowing us to charge -- upcharge 40% more with just 1 additional year of ageing. Let me now play a short clip to bring this to life in a bit more detail. [Presentation]

Our approach to win in luxury is driving recruitment, penetration and share gains. We know this approach drives results, and we're looking to extend our reach in APAC beyond scotch and go further into exciting new categories like luxury tequila, which you heard from Cristina and also in super premium gin. I'm now going to hand over to Alvaro, who's going to take you to an entirely different world, the story of Smirnoff Spicy Tamarind. Thank you.

Thank you, John. So come join me for a very quick look at a wonderful colorful world of Smirnoff Spicy Tamarind and its global expansion. The Smirnoff Spicy Tamarind success story began with the creation of a cultural connection through a locally relevant flavor innovation and packaging in Mexico, utilizing our -- one of our core brands, Smirnoff. We developed an exceptional product, and once people tried it, they fell in love with the taste. And our job was [ putting that beautifully equipped ] on consumer hands. The introduction of this hot and unique flavor profile didn't go unnoticed, as other categories such as Burger King embraced this trend with openings like the Tamarindo King Burger. The outcomes were outstanding. We successfully recruited 5 million new consumers into the Smirnoff brand, effectively reversing the decline in the vodka category. Notably, many of these new consumers were previously non-spirit drinkers, with our data indicating that Spicy Tamarind primarily attracted beer drinkers, resulting in a 23% increase in the category. Furthermore, we established a strong commercial emotional connection with younger consumers, with the brand earning the title of the most loved brand among LPA 24 years old. But we quickly realized that there was a bigger opportunity for Spicy T, as we affectionately call it. Through data tapping into cultural momentum and consumer trends, we identified the global rise of Mexican culture, cuisine and interest in spicy foods. This enabled us to really define the size of the prize and consumer base and think beyond markets which have large Mexican populations. This was evident by the U.S. rollout of Spicy Tamarind. Although we initially started in states with a strong Mexican-American population, our hypothesis was confirmed, it is truly for anyone interested in spicy flavors. 75% of people in key market research identifying as Spicy Enthusiasts. In the U.S. today, in fact, over 41% of total Spicy T volume is coming from non-Hispanic consumers. As an example, in Michigan, a state where nearly 75% of the population identify as white non-Hispanic, we are seeing Smirnoff Spicy Tamarind increase both in share and distribution, proving that this is a variant not just for Hispanic consumers. It is really a multicultural offer, 33% of drinkers being white and 8% being African-American. And we have not stopped there. Enabled by the credibility of the known and trusted Smirnoff brand, which facilitates confidence in consumer cross-cultural exploration, Smirnoff Spicy T will be in 11 countries by the end of fiscal year '24 with further expansion planned for fiscal year '25. It has become the #1 fastest-growing flavored vodka in the U.S. So to summarize, we have demonstrated that whether it is in a beach bar in Greece, a nightclub in Shanghai or a Mexican house party, we are unleashing the power of our portfolio in incredible ways, and we are expanding our footprint both into new occasions and new geographies. Now for the next stop on our trip, I will be handing back over to Cristina, who is going to land us in Europe; and then Sally and Claudia, who are going to take us across the pond to the U.S.

Thanks, Alvaro. Our third strategic growth strategy is innovation to recruit into new occasions. We aim to understand and shape the future of how people across the world will socialize. We use data and technology to ensure that we have our finger on the pulse when it comes to consumer trends today, tomorrow and into the future. Our team of innovators constantly seek to push the boundaries and create new products, tastes, experiences, platforms, patents and business models that consumers will love and will create long-term sustainable growth for Diageo. We embrace a test-and-learn entrepreneurial mindset and aren't afraid to look beyond our own walls to build our expertise, because staying ahead of our consumers demands a radical approach to innovation and no small amount of bravery. To introduce you to our world of innovation, here's a short video. [Presentation]

As demonstrated by the video, we could talk all day about innovation, and we only have time for two case studies. So I will be talking to you now about the development and growth of our non-alc category and Sally will be bringing to life our ready-to-serve innovations and why they are so strategically important to us here in the U.S. Innovation is a strategic growth engine for Diageo. It already delivers scale and sustainable growth across markets and brands. We are a leader in global innovation and over-index in our share of TBA innovation. We are winning share in innovation. And over the last 10 years, we have launched the highest number of innovations on average per year. We have some of the most loved and traditional brands in the industry, and yet we constantly seek to innovate tomorrow's products to drive relevancy and excitement and evolve to meet the future needs of consumers. Our non-alc products are doing exactly that. We are leading and shaping the non-alc spirits category. From beer with Guinness 0.0, which Dayalan spoke about earlier to our spirits brands. The non-alc category is being driven by the growing trend of wellness. And whilst it's still a nascent category, it's growing fast. We believe the category has strong growth potential. It's margin accretive, and it supports our positive drinking ambitions. The non-alc category, spirits, is forecast to grow with a CAGR of 11% over the period 2022 to 2027. Acting on this trend and growth opportunity, we acquired Seedlip via Distill Ventures in 2016 and have created and launched Gordon's 0.0, Tanqueray 0.0 and just recently, Captain Morgan 0.0, our first non-alc dark spirit. We hold the leading market share position in the 3 largest non-alc markets globally: U.K., U.S.A. and Germany. In Spain and Italy, we hold 67% and 77%, respectively, and we are shaping the category. We have a real strength in our liquid expertise. Our liquids are not just moderating alternatives, they are premium drinks that deliver on taste and quality. The taste profile of our non-alc versions matches the taste profile of the trademark. For those of you in New York with us today, we have prepared a range of cocktails drawing from our 0.0 portfolio for you to enjoy at the showcase this afternoon. Our non-alc portfolio has enormous potential to grow across markets and occasions. 80% of Diageo's current non-alc sales comes from only 5 markets. We see a large opportunity for us to drive incremental share and drive recruitment in a broader range of occasions, particularly daytime occasions where consumers love the experience of a non-alc adult drink. Tanqueray 0.0 is a great example of this. a new moderation option that appeals to many 0.0 drinkers, offering them a more exciting choice than the current default 0.0 beer. In Spain, where Tanqueray 0.0 was first launched, 30% of our volume comes from beer; 7% to 10% comes from non-TBA. I will share you more on how we have achieved this in Spain and also talk you through our strategy in Italy, the home of the aperitivo occasion. The moderation trend is strong in Southern Europe. We identified that 50% of Italian consumers and 40% of Spanish consumers are looking for moderation. We also identified a perception amongst Gen Z consumers that beer was a softer and lighter drink and more socially acceptable to drink in the aperitivo occasion. Leveraging these insights, we tailored strategies for Spain and Italy, targeting the most attractive segments and occasions where we could win share and drive growth. In Spain, we focused on competing in beer-led occasions, as currently, non-alc beer products account for 13% of the beer market. We activated our brands around major sports events such as the World Cup and have recently partnered with Atlético de Madrid, one of the most popular football clubs in the country, to connect with fans and increase consumption in watching sports occasions, which has historically been beer territory. In Italy, we positioned Tanqueray 0.0 as the perfect choice for the aperitivo occasion, to recruit from aperitif, beer and wine. And the results speak for themselves. In Spain, Tanqueray 0.0 is the #1 TBA seller on Amazon and the most successful TBA innovation in a decade according to Nielsen. It accounts for 16% of trademark NSV and has boosted Tanqueray brand by 1.5 points of share since its launch. In Italy, Tanqueray 0.0 is the best-selling spirits innovation in the last year and is shaping the 0.0 gin category with 78% market share. it has also helped us consolidate Tanqueray as the #1 gin brand in the country, growing by 1.2 points of share since its launch. More impressively, around 80% in both countries are consumers new to the brand and new to gin. We're confident that we can replicate this success in other markets. We are not only growing our brands, but also tapping into new consumption occasions, be it daytime, aperitivo or any occasion where consumers are seeking an adult non-alc drink hence, recruiting new consumers. We aim to be a driving force in non-alcohol, setting standards in innovation, in product quality and category execution that the rest of the industry follows. Now we cross the Atlantic to our host market here, where Sally will show you how we are innovating to meet the needs of our consumers for convenience and choice.

Well, thanks, Cristina. And welcome to the U.S., everyone. I will talk to you about making it simple for more people to share better cocktails more often. Innovation that gets people into new occasions is an incremental growth opportunity in North America. Our brands will be your partner on the journey to discover your inner mixologist. Now ready-to-serve cocktails make it easy for anyone to offer beautiful, high-quality cocktails at home. And the team and I see a really nice platform here, an attractive space for Diageo to lead. The market potential is massive, bringing together existing ready-to-serve consumers and spirits cocktail drinkers means a potential pool of around 40 million consumers. That's almost 20% of the total LPA drinker population. Now importantly, the volume in ready-to-serve is incremental to core spirits, over-indexing with younger, female and more diverse consumers versus total spirits. In occasions where there are cocktail intimidation barriers like hosting a meal or a party for friends, ready-to-serve cocktails deliver bartender-quality serves in an easy and accessible way. Incremental occasions and consumers lead to incremental volume with 50% of ready-to-serve volume recruited from beer and wine. Now early data shows that we may have something special here, with the higher-priced tier of the category growing over 49% in the last year, and we anticipate that trend will continue. So here's how we're delivering on our ambition. Cocktail Collection will be a full line of ready-to-serve cocktails, expanding Diageo's footprint with some of the most popular and complex cocktails in the U.S. today. These outstanding cocktails were developed with bartenders, and they could not be easier to serve at home: open, pour, serve and let the hosting accolades roll in. Bulleit Old Fashioned and Manhattan are in the market today, and early feedback is extremely positive. Now more on that in a second. Espresso Martini, the Cosmo and the Negroni will bring Ketel One and Tanqueray into the mix just in time for holiday hosting. Diageo is moving decisively into this promising space. Now the Bulleit case study is a reason to believe. Launched last year, Bulleit Manhattan and Old Fashioned are fast gaining momentum and engagement with diverse younger consumers. And importantly, these ready-to-serve products recruit new users to the portfolio. So 75% of Bulleit ready-to-serve drinkers are incremental. And then 18% of those who tried Bulleit ready-to-serve then purchased Bulleit whiskey in the 6 months after trying ready to serve. So this is a great innovation that recruits consumers into new occasions and then inspires them to buy more by building relationships with our brands. There is a lot to like about this model, and I look forward to sharing more as we write the story of this incremental new platform. Well, we've taken you on a tour around the world, sharing 3 of our 4 key strategies. We've given you global examples of how we're driving to get even more growth out of our largest categories. We're using our global footprint, portfolio and consumer insights to make sure our brands get into new and exciting places and spaces. And we're innovating to stay ahead of preferences, occasions, pours and serves to ensure that we stay relevant to the consumers of today and tomorrow. Now before we dive into our final strategy, to raise the bar on execution, let's go into a Q&A session with all the speakers here in New York.

Okay. So remember, this is -- so this is number 2 of the Q&A. And once again, we will have an -- one specifically. So Sally will be back up again with Claudia and we'll have a very specific North America. But if we want to go ahead and open it up for questions.

Vivien Azer, TD Cowen. We heard a lot during the last segment around all the opportunities to premiumize the portfolio and engage a luxury consumer, which certainly sounds promising. But we've also heard the importance of establishing a more mainstream price point given economic and consumer volatility. So I was wondering if you could just help us understand kind of the balance of those aspirations, in particular as they relate to your 6% 2030 market share or target?

Yes. Thanks, Vivien. And I think -- what I would say about is we do think that kind of the breadth of the portfolio is very important because when we talk about the premiumization journey, that does look different sort of across different markets. And so I think it's probably just helpful to just sort of turn it over and to hear a couple of different perspectives from some different markets. I don't know if we start with you, John, and then I don't know, maybe you Dayalan.

Yes. So look, by and large, we're seeing lots of premiumization globally. There are some pockets where we're seeing some down-trading, right? China is one of those. But here's where we -- to Debra's point, the power of the portfolio is really important, right? So I think everyone understands the difficulties of the macroeconomic challenges in China right now. The consumer is very cautious. Despite that, I'm feeling quite good about the performance we're going to post in H1, and that's because we have quite a resilient Asia business. You saw that we grew 21% in the last quarter, and we're actually guiding to double-digit growth this quarter. So even within a dynamic where there is down trading, I think if you've got brands at the sweet spot, which I think #8 in SGF is and then into international spirits portfolio, again, sticking with China because it's a difficult market, right, at the moment. We are seeing consumers trading down, but we're seeing them maybe say in single ton instead of buying a 15-year-old. They might be buying a 13 or 12 and within Johnnie Walker, we're seeing Johnnie Walker Black Label doing particularly well. So I do think this is where the breadth of the portfolio is important. And so whilst there's a luxury opportunity in Asia, we're not losing sight of the fact that there is a role for premium core to play as a backbone to that.

I mean what I'd add is if I look at Africa, 81% of TBA is beer and a large part of that is mainstream beer. So if you look at premium beer, which is Guinness is growing faster than mainstream beer, but spirits is growing faster than beer and mainstream spirits is growing faster than premium old beer category end to end. So although it is what we call a mainstream spirit brand, it's still premiumizing within TBA in Africa. So I think it's premiumizing trends within our portfolio, it will still be a maintenance by the brand. So I think there's room for it across the portfolio.

If I may?

Go ahead. Yes absolutely.

I think, I think in order to protect this -- what is happening with the consumer and this down trading. We don't have to go to mainstream directly. And I think one of the examples that we have, for example, in Latin America is Johnnie Walker Blonde, which is an innovation that we launched in Latin America, which is a price point between Johnnie Walker Black and Johnnie Walker Red. And the intent of that is protect that down trading with -- in a way that is accretive to the trademark. So I think we don't have to go back to the preconception around to protect as we need to go to mainstream because the power of the portfolio and the trademark that we have.

Yes. That's a great example. Alvaro, because I think this was one we actually -- we had too much stuff, so we had to cut down the presentation. But actually, Blonde was going to be, I think, one of the great sort of innovations behind and ensuring that we don't take our precious sort of 12-year-old Johnnie Walker Black liquid and feel like we've got to price that down because that's the last thing that we want to do. So what I would say, Vivian, is just sort of -- we look at the breadth of our portfolio. Clearly, there is a long-term trend towards premiumization, and we're seeing that play out in different markets. We think it's important, though, to ensure that we've got enough balance on that price ladder so that we can follow the consumers wherever they go, and we don't have to do things like discount our aged liquid to try to keep them in the franchise.

James Edwardes Jones from RBC. The Smirnoff Spicy Tamarind, if I understood it right, the start off as a very much a local innovation and then explode it. Could you say a little bit about the mechanics of how that happens what the process was, the development process that made you realize it would work in lots of other geographies? And also whether there are any other brands or developments that show a similar sort of promise.

Yes. I think I'll headline and then Cristina, maybe I'll turn it over to you. I think what's great about that, and I think this is one opportunity where we're good, but we could even be better. And that is certainly, we've got one innovation team that absolutely we share insights. But this is one that, if I think about what we could do better is that we could actually get this out even faster because this story really, I think, could have unfolded even quicker. So we're tee-ing up is one of the places that we absolutely see as a success, but I think there is an opportunity for us to do this quicker. And then if you want to just talk about innovation and how the things we're doing.

We have -- I believe, as I mentioned earlier, we have an incredible stronghold with innovation is one of our core, I suppose, asset. We have a phenomenal team. You will be able to speak to some of them later that are truly really grounded around the world. So we can actually do both things. One is to dive into local insights, Smirnoff Spicy Tamarind came out of those local insights in Mexico. And at that time, how that works is you will have an innovation that is geared towards one market in particular, what we saw at that time, this is suitable for this market, Mexico. But very quickly, as Albert explained earlier, we saw there's more to it than just Tamarindo which is a particular flavor -- native of a particular region, it actually taps into the spicy food and spicy foods guess what is being popular, more popular in more places around the world. So we have a team that is set up to speak to each other and share those learnings and as Debra said, perhaps in that instance, because we thought about it as a local innovation, we took a bit longer than we could have -- having said that, though, we have mechanisms in place where we work with the model of lead market. We work with the lead market to prove one concept, one idea, test it in that place and then roll it out, scale it later. Sometimes we choose more than one. I think Johnnie Walker Blonde is one example where we choose 6 market tests concurrently because we felt the opportunity is there, and we want to be sure that it's prepared to scale. So we will operate in a -- whether it fits purpose for the trademark for the insights and for the lead market and rollout plans that we've got for those brands.

I think if I could just add one more thing. I mean one of the things that I have found is really successful in Diageo is the adoption that we have for our technology and data tools and so when it comes to like consumer insights, these tools are not just a U.S. kind of a thing. These tools have been adopted so broadly across all of the markets in Diageo and our people are so entrenched in it, that we have the ability to get global insights and global analytics around like the affinity for Spicy foods as an example at a global level to be able to draw these comparisons.

And I think some of the success as I think about what some of our more recent things, some of the things that John that you presented the Golden Tresor. So that's actually coming out of we've invested in a Shanghai innovation hub. So this is one of those things, as Cristina is talking about what's around the world. It's not just in our developed markets, but absolutely looking at these insights and what the possibilities are. And so that's something that I think is really already yielding. You got to see some of those today, great results.

Fintan Ryan here from Goodbody. I have 2 questions, please, around your strategy for the tequila globalization. So firstly, how should we think about the recruitment mix of consumers in the different regions? I appreciate North America, other recruitment premiumization came from brand spirits and vodka, but how does that mix change in terms of your thoughts around Asia and Europe? And then secondly, just in terms of the long-term strategy, given it's a category where you've had supply constraints historically, how would you prioritize like a 1942 shipment going to Asia versus Europe versus North America, and you're thinking about, I guess, category share and allocation of the scarce resources.

First of all, we don't have to worry about deciding whether we send it to one or the other. I think we're in a pretty good position from a supply perspective. So that's the first thing I'd say. We're going really big on tequila across the world. And the great thing is we're doing it in a synchronized fashion. So whether you turn up in shiny airport or Heathrow or you go to London or Ibiza or the Party Islands of Greece on the ski slopes in Japan, you're going to find 1942 there right now. So I'm really excited about that. It's kind of global Diageo at its best. We're quite early in the journey, Fintan, but I like the fact that we're going in 1942-centric in Asia, right? We're going in high, building equity from the top. Yes, we'll make the rest of Don Julio available, but 100% of our brand spend is 1942. We're -- I'm very encouraged by the traction that we're getting right now in high energy night clubs and the source of business anecdotally feels quite significantly incremental. So early days yet, but I'm excited about this could be a really strong pillar for us in addition to the scotch business we have in Asia.

And I think that it's also an important aspect to consider that it will develop differently across different geographies. Hence, our -- the point earlier around how we understand the data and the insight that we're getting. So -- which shows the example of Southern Europe because it visualizes how the category has been built around different occasions. And Debra talked about our focus on occasions earlier. This is a critical enabler to ensure that we tap into the growth opportunity in the right way for each geography. We have a wide portfolio. It's fantastic. The brands Don Julio and Casamigos are phenomenal. They have been built in culture in the U.S. and that is none elsewhere. I can tell you that the top bartenders of the world are very knowledgeable about these brands. They were really tapping into the scarcity when scarcity was the case, it is no longer the case, and they're delighted. So I can tell you that they're preparing these cocktails truly in the top bars around the world, and I'm really excited about the possibility.

And I think just building on that point about clarity on consumer occasions because we traditionally think about the maturity of the category and then the opportunity. And one of the things that we have learned with tequila brands is the brand transcends the category. And I think that's the beauty of Don Julio and Casamigos that we don't have to think traditionally in this way because it's so trendy and so hot, but it's more about the power of the 2 brands that we have more than thinking about the category per se.

And I'll add, even though, yes, even though it started in the U.S. There is -- I think we forget sometimes how young this brand is. And it has so much headroom from a brand awareness standpoint just in the U.S. The penetration of tequila in the U.S. is still 1/3 to 2/3 that of vodka whiskey. And Casamigos itself delivered 70%. The growth in fact over the last 4 years, it delivered more growth than any other spirit in the U.S.

Not just tequila?

Not just Diageo. And so now we've got full supply. We can innovate. So I think you're going to see a lot more growth from the U.S. as well.

Very good. Everyone wants to talk about tequila. Laurence.

Laurence Whyatt at Barclays. I'd like to continue again on tequila. I know as you have another question on China. When you talk about your Scotch portfolio, a lot of the cocktails that are made typically come from Johnnie Walker Red and Johnnie Walker Black, which retail at around sort of $20 to $40 a bottle. Yet in your main tequila brands are a bit of a premium to that, yet most of the growth driver is coming from the cocktail occasions. Given that consumers are a bit more financially constrained at the moment, why are you confident that consumers are happy to pay up for products that go into cocktails when they, I guess, historically wouldn't in the category like Scotch?

We've -- as I mentioned earlier, we have really understood the occasions, right? And so there's both cocktails and sipping in 1942 in particular. That's the way in which it goes. They tend to be launched, and we are really aiming that way in the high-end places. So I mentioned [indiscernible] in the [indiscernible], you should see that the Southern Europe location this summer. Equally, John spoke about Luxury in Asia. Those consumers are seeing that as an affordable Luxury. That's something that they can absolutely afford. I'm also sure that as the category develops, we will see further development as we have seen in the U.S. But frankly, we're in the earlier days of that.

I think the other thing is we're definitely seeing the consumer more kind of making choices. And one of the choices that they're clearly making is just to spend their time as well as their money on that socializing occasion, which I think is slightly different today than it was maybe a decade ago. I think we're definitely seeing more of that desire. When you go out, people want to have a really good time.

Can I just ask one on China, if that's possible. When we look at the growth rate of the Chinese business since the anticorruption campaign has typically been double digits. But of course, you mentioned that the luxury consumer is becoming younger, that younger demographic is set to shrink by almost 1/4 over the next decade. We're already seeing youth unemployment quadruple over the past decade as well documented issues in the real estate market. When you think forward over the next decade in China, do you think it's reasonable to continue at that same sort of double-digit growth rate?

So Laurence, here's how I think about it, right? So you just listed all the negative macros, which is true about China. But here's what we need to remind ourselves right? It's the biggest spirits market in the world. It's 3.5x the size of the U.S. and international spirits as an entire category is only 3% of that pipe. So you got 97% of spirits is huge, it's premiumizing, and we haven't even begun to make a move into a -- penetration of scotch in China is only 4%, right? So yes, it will be better if the economy was booming, but we actually don't need economy booming to go after that 97%. So I'm really excited about the ability to drive penetration, drive trial. I mentioned here last night. I'm really encouraged by the fact there's over 30 whiskey distilleries being built in China right now. That is going to cause a massive acceleration of penetration. And by the way, we're building a beautiful one as Debra said, opening in December. But I think driving penetration of brown spirits and whiskey, in particular, in China, I think the journey is only just beginning. So that's why I remain quite bullish on the [indiscernible].

And I think -- and I'll add to this. I think this is where being in baijiu business, I think, has really helped us understand kind of that China market much more so than what.

Absolutely. And that's right, Debra. I think by being the only Western company in baijiu and baijiu being so inextricably linked to Chinese culture and food in general, we have tremendous insight. And as I mentioned, I'm quite encouraged by how resilient our baijiu business has proven to be. And by the way, on our baijiu business, just another stat, we've only 4% share of super premium baijiu, right, in China. We have a long way to go within our baijiu business as well.

Olivier?

Olivier Nicolai from Goldman Sachs. A couple of questions for you about -- just talking about premiumization and pricing strategy in Latin America for scotch, I think it could be. Do you think you took too much pricing in recent years, whether it was on primary scotch or in terms -- to more premium end of the portfolio, partially when you compare versus TBA. So you mentioned beer or your other competitors in spirits. And just following up on the destocking comments from this morning on the region again. Do you have any idea of the mix within that excess inventories, if it's more on the primary scotch so if it's more on the very high end, and should we be worried about potentially an impact on margins?

Yes. Okay. So let me start with the first one. So the answer is no. I don't think we took too much pricing. And let me explain you why. Because I think we need to think about the scotch in the context of the baijiu and not just in the context of Latin America, yes. And Latin American business, our Scotch category was the largest one, but was really based on mainstream and standard. And the work that we have done during the last 3 years has been reshaping that category because we have done liquid gold that we need to protect, not just for the year that we are updating for the next 20 years that we are building in this business. And we understood that we have other brands with our current portfolio that can play that role about making sure that we keep recruiting. That doesn't say that we are not doing that with scotch. And actually, we have within the premiumization journey. And within the prices that we have been taking, we have been recruiting consumers from out of international spirits. And I think that it misconception about recruitment that we think that is just about pricing. And recruitment is about the power for the trademark, the right understanding of the consumer location and how you are activating the brands. So the second question about the mix of the stock. As I mentioned before, and the second layer is quite difficult to understand what is sitting there, yes? My feeling due to the premiumization journey that we have been taking, that should reflect the portfolio that we have right now. But that is just an anecdotical information because, as I mentioned before, we don't have that level of visibility of that second layer.

I mean, we said in the call on Friday, we will come back to you on Friday -- on -- sorry. Friday. We will come back to you at Results. Yes. We don't intend to do this every Friday. We'll come back to you at results with more accurate insights on exactly what we're dealing with in Latin America. We just don't want to put something out there now. This was live information. We put it out as we got it. The teams are doing a lot of work to understand exactly what it is, how much it is. We'll come back at Results.

Because you'll be able to know because you're going to see -- I mean you're seeing what's being ordered. So we'll be able to get a little more diagnostic, certainly, as we get through this high consumption time of the year.

Robert Ottenstein, Evercore. I want to dig in a little bit on the ready-to-serve opportunity. And I was wondering if you could kind of help us think through how you're positioning those products in the U.S. versus the High Noons, the White Claws, the Cutwaters, for instance. So in terms of pricing, placement, route to market, occasion, just trying to get a sense of how you're looking at the landscape.

Yes. I'll start and then, Sally, you can add to it. I mean -- so I would say this High Noon, Cutwater and some of that really plays at a very different sort of piece of that convenience occasion than what we're talking about here, which is why we're distinguishing it by calling it sort of ready-to-serve versus ready-to-drink because this really is more about it is that open for serve. So whereas really that High Noon occasion -- so it really is thinking about occasions is the way I would describe it. So that High Noon occasion, quite frankly, a lot of that is coming up from the beer and the malternatives, things that are in a can, we'll call it. So it is single-serve, it is in very different places and kind of what you're doing than what this sort of ready-to-serve specifically is attacking. That being said, we do think that the -- there is a premiumization journey that's going on, right? If you think back, I mean, gosh, 3 years ago, when I was sitting in North America, it was all about seltzers, right? And that was frankly, even cheaper than even where that category is today. So you're seeing FMBs within beer certainly have a lot more heat than what you're seeing on seltzers. You're seeing then, of course, spirit-based cocktails even more so than FMB. So you really do see this consumer premiumization journey. And that's really where on the ready-to-serve -- like for years, you've had -- what is it, those Jose Cuervo kind of margarita mixes and sort of that type of like ready-to-pour things that have been out there. We've had Captain Morgan, but once again, that's a very different kind of occasion, kind of -- really kind of based on a party occasion than what we're talking about here. And then I don't know, Sally, if you want to add too because I know you've been out in market to see how people are merchandising this.

Absolutely. I mean to your point right now, consumers are trialing these heavily promoted undifferentiated seltzers, and we're not going to chase that share. We're going to build our brands, not just borrow from our brands. And so what we've done is really focused on that segment actually of convenience of ready-to-drink that is growing. If you look at the numbers, it is the premium, the higher price tier of this segment that's growing. It's growing 49%. And so what we've done is really elevated this new ready-to-serve market by creating -- and by the way, has anyone tasted what you got in your bag last night because you've got a couple. You got the espresso martini. You might have had too much during dinner. But please try it. So you have a ready to serve espresso martini in your gift bag from last night. And it is spectacular in terms of the liquid. We've done some taste tests here versus homemade, and we can't tell the difference. We've also got Tanqueray train with a Negroni. We've got Ketel One with a Cosmo along with the espresso martini. One month in, I had a chance to do a bit of a jet tour across the country, taking a look at our programs coming to life. And we had beautiful displays of ready-to-serve that we're just very elevated and really stood out in the market.

Yes. I mean, look, I think at the -- at the end of the day, for this, when you think about what happened during COVID, people -- there really was this inner mixologist thing that happened and people built out their bars and all of this. Now as people are kind of coming out of that cycle, we developed the taste for cocktails, but whether you're going to have the bidders at home or I'm going to have the -- like you kind of want it all, but you may not have them all, the pieces and parts that you need to really be able to have the cocktails. So I look at this and go, this is a natural space, an occasion that people are going to go to because you don't have the time or maybe you don't feel like you have the expertise to make that old fashioned -- the way a really great bartender makes it that, of course, Bulleit's delivering on that. And now to have Ketel One, always a brand that's known for cocktails and bartenders love it, and so to have that in the espresso martini, which is such a popular cocktail, we really feel like this is sort of taking it into those convenient cocktail occasions that really things like the High Noon and seltzers are just playing in a different area.

And just one more thing to reinforce is the incremental consumers that are coming in. We're getting more multicultural. We're getting females coming into ready-to-serve. And the most interesting part is that when they try it, there's a portion that then for the first time buy the spirit and buying Bulleit Whiskey, which is -- that's critical.

I mean that's a really good point, too, about building our brands on this. We've -- as we look at convenience in total, we keep saying we're going after the premium space. We're going after places that we can recruit into our brands and really that's where we want to play. That's where we feel like it's our sweet spot. That's our competitive advantage and our reason to succeed.

I think -- and, Debra, if I may. As Sally said, please try them because the one distinguishing factor is the liquid is spectacular. We have real, real, real assets in our R&D teams as they have developed fantastic liquids and in their lives, the key to their success.

Sorry, just a -- who's distributing it and where is it placed, like dealing in stores? Or is it with spirits or in somewhere else?

With spirits. Although, I think -- look, this is going to be different in different places because you're seeing more and more in this space, but I think most of the liquor stores are actually carving out like a ready-to-serve. Sometimes you'll still see it in with the brand, but I think still, it's...

It's different.

Yes. So it is different store to store, which is why getting it on the floor is so critical. So that's great to hear.

Yes.

I think at this point, we'll move to the next session.

Very good. So we have the next session. We're out of time? We will be back to answer more Q&A. Thanks. So before the Q&A, we covered 3 of our strategies, which will underpin our growth. The fourth strategy is raising the bar on execution. And I want to reemphasize how important this strategy is going to be for us going forward. This is how we will take our strategy to action. So as I've mentioned before, we will do this in our end-to-end operations by working to drive unprecedented productivity across every consumer touch point, from how we understand consumers, how we create demand and how consumers experience our brands on the shelf and on menus. This is how we will make our scale show up in the marketplace. This strategy applies across the globe to all of our regions, but today, we want to show you how it applies to our largest region, North America, where we already have a fantastic portfolio of strong brands. This region, our largest region, is 41% larger by value than it was pre-COVID and we have increased investment in this market consistently over the past several years. But there is still plenty of room to grow, given we still only have 7.5% market share of U.S. TBA. So we want to continue to raise the bar on execution, go from strong to stronger. And so now I invite Sally and Claudia to discuss the U.S. market as an example of how we will continue to raise the bar on execution.

Well, thank you, Debra. I think I'll start with the facts that brought me here to the world's leading international spirits company. As you know, the U.S. is one of the largest spirits markets in the world, and we believe Diageo is positioned better than all of our peers. Debra mentioned the growth in recent years, but it's the growth ahead where I see such strong potential and possibilities. Positive demographics, premiumization trends and consumer preference for spirits over other TBA categories present such a strong tailwind for growth. Diageo has the scale, the breadth of portfolio and the depth of talent and capabilities to lead this dynamic market. Our international spirits business is twice as big as the nearest competitor. We have a portfolio of brands that spans consumers, occasions and categories. And we have the expertise that allows us to meet people where they are, from amateur to aficionado in our categories. This attractive and profitable market is evolving rapidly with ever-changing consumer preferences. And as Debra said, we have outperformed the market through the last 4 years. So going forward, this is how we'll go from strong to stronger. First, we'll win in whiskey. This is the most dynamic category and is fast growing. We are focusing on our goal of winning in whiskey with Crown Royal, Bulleit and our scotch portfolio of Johnnie Walker, Buchanan's and our single malts. We are currently leading the category in market share, but we know there is so much more opportunity out here. Second, we will continue to broaden and expand our leading tequila portfolio. And then third, we'll innovate to drive recruitment into new occasions. And I'll cover some of these examples showcasing this plan further. And then Claudia will discuss how we'll execute to win smartly and competitively; how we'll leverage data to drive greater agility, greater efficiency and effectiveness in our media activities; and build on our route-to-market strength to shape a next-generation operating model. But first, let me introduce you to the jewel in the crown of our whiskey portfolio, Crown Jewel (sic) [ Crown Royal ]. [Presentation]

Okay. So Crown Royal is our largest whiskey in this strong portfolio. And we must expand Crown's leadership, and we have a plan. We're raising the bar in execution in 3 ways. Consumers have told us that they don't know enough about the brand. So we're investing in a marketing campaign that showcases what makes Crown Royal distinct. It brings to life the smoothness and versatility of this quality liquid across occasions and also showcases our iconic purple bag. Now the first TV ad just aired last Monday. We're also broadening the footprint of this powerful trademark by continuing to innovate to meet the changing needs and preferences of our consumers, just as you saw in the video. And then to ensure excellence in execution, we are implementing a hyper-localized approach to drive growth. We're using proprietary data and insights to access ZIP code by ZIP code to raise the bar of execution at the point of purchase. We're confident that these 3 actions will help us grow this billion-dollar brand, to broaden its appeal to more people and more occasions. Now moving on to tequila. Again, I know that the team has talked a lot in the past about tequila. And Cristina shared what we're doing to grow tequila globally. And now I'd like to tell you a little bit more about our exciting new initiatives around tequila in the U.S. Tequila saw annual growth of just under 20% from 2017 to 2022. And it's projected to be the largest value category within international spirits. And as Cristina mentioned, it's going to deliver over 60% of incremental growth for core spirits over the next 5 years. But again, household penetration still remains lower than other categories. We are the #1 tequila player in the U.S., which positions us well for future growth. And as the category matures, consumers are exploring and expanding the repertoires. So this is leading to growth in the category across a broader range of variants, price points and new consumption occasions. So we'll be at the forefront of driving growth across these opportunities. Our breadth of variance in Don Julio and Casamigos include Blanco, Reposado, Añejo and Cristalino, and they provide options for consumers and occasions when they want to explore and demonstrate their knowledge. And we're also actively expanding our participation across the price ladder. First with DeLeón and more recently with Astral and 21 Seeds, growing our options in super premium tequila to access even more occasions. We're also innovating in formats such as Astral ready-to-serve margarita, which is launching early next year. And we're playing in more serves and occasions. For example, the 21 Seeds spicy jalapeño and cucumber with soda makes an easy-to-prepare skinny margarita, which I can tell you is simply delicious. Now our mission is clear: more consumers, more occasions, more serves. And I have confidence that there is so much more to come on the North America tequila growth story at Diageo. So I just told you how we have innovated in tequila. And I want to give you a couple more examples how we are expanding at pace to capture growth opportunities including how we're listening and learning and offering relevant options for multicultural consumers and how we're expanding into incremental occasions with our large trademarks. So first, let me start with one of our biggest innovations last year, Buchanan's Pineapple. It was born from an insight we discovered through social listening. Hispanic consumers were mixing Buchanan's DeLuxe with pineapple juice and they were coining it the Buchanita. Now building on this, we created a liquid that captured this trend. Buchanan's Pineapple is now the #1 core spirits innovation in the last year. And importantly, it has driven Buchanan's trademark share growth. It's driving new recruitment to both the trademark and the category. And in fact, initial consumer data shows that 80% of these consumers are new to buying Buchanan's within the last year and 50% of these consumers had not purchased scotch in the past year. So the next example I'll share with you is just hitting shelves now. And this is an extension of our Baileys treating strategy. It's built around the 5 delicious Cs, chocolate, coffee, ice cream, cake and of course, cocktails. So we knew that there was an overlap between chocolate consumption and Baileys with 98% of U.S. consumers liking chocolate. Now leveraging this insight and proven platform, the team developed and launched Baileys Chocolate to deliver a new option in this indulgent occasion. And we're seeing promising signs of success. This will be Baileys' largest innovation launch to date and it's already gained 13 basis points of share. So we're proud of our ability to identify new opportunities within key occasions and innovate at scale and with speed. Diageo has 6 of the top 10 core spirits innovations in the last 12 months. And importantly, we keep asking what's next. Now let me hand it over to Claudia to walk us through how we are raising the bar on execution from media to route to market.

Thank you very much, Sally, and hello, everyone. I'd like to now talk to you about how we leverage our data and technology capabilities to reach consumers with relevant messages at the right time and in the right location, so that they're ultimately much more likely to purchase -- to consider purchasing our brands. For that, we bring together multiple pieces of data and AI technology to develop a distinctive and customized media bidding algorithm to reach consumers with. Let me give you an example, and I hope some of you here in New York had an opportunity to see this last evening in the showcase. When analyzing ZIP code and neighborhood data of our brands, we learned that 2 of our whiskey brands have very different footprints in the key cities and even ZIP codes within the same state. What you can see here on the screen are the consumer heat maps for Crown Royal and Bulleit in the state of Texas. The darker the color, the higher the demand for the brands. You can clearly see how different they are with very distinct hotspots in the state of Texas. These insights enabled us to pinpoint Crown Royal and Bulleit whiskey consumers in Texas with far greater accuracy, enabling us to make increasingly targeted media decisions. We actioned this across thousands of ZIP codes in the U.S., personalizing messages to consumers. And we did this simultaneously at massive scale. Without our digital capabilities, we would have had to hire about 730 people to deliver this. But what's more important, this approach is driving strong results. Targeting our media to the areas where it matters the most, led to a 30% increase in effectiveness of our investment. We're also raising the bar to get the right brands in the right outlets, always perfectly executed. This has been a priority for Diageo for many, many years. We've pioneered in fact, many aspects of the U.S. route to market, which has delivered strong results and informed insights as we shape the future of our route to market here. Let me first give you a few examples. It was Diageo who first established dedicated selling divisions with strategic distributor partners, creating a competitive advantage, which has helped us grow this business over the past 2 decades. It was also Diageo who created the first advanced analytics team in the industry, utilizing digital image recognition software. This was called Edge, and we've -- you will have heard us talk about this in prior investment engagements. This allows us to gain insight into execution in the independent channel and enables targeting the right outlets and pack sizes for our brands based on consumer demographics. We've also learned that specialist selling and activation organizations drive real impact on brand execution and share performance. Back in 2020, when many suppliers pulled back from the on-premise, we leaned in. We invested in specialist resources who partner with bar owners and operators to grow and evolve their business to changing consumer interests. They also provide invaluable consumer insights that strengthen our on-premise programming. And this investment has made a significant difference, with Diageo growing 200 basis points of on-premise shares since 2019. And in the accounts covered by our specialist teams, we grew share by 400 basis points. Now as Debra said, with our business 41% bigger today by value than pre-COVID and our growth ambition here in the U.S., we're also clear that now is the time to shape the next chapter of our route to market and operating model in North America. I'm excited to share with you that we're moving forward at pace with this work, which will mark a true step change in our competitive advantage. We've put in place a dedicated resource here in Diageo and our distributor partners have as well so that we shape and implement this transformative approach quickly and effectively. For obvious reasons -- for obvious competitive reasons, I will not cover the specifics of the plan, but I can share with you the end results we're working to achieve with this transformation. First, to help us elevate our category leadership with our distributor partners and retailers. Second, to be able to utilize our vast array of data and move insight to action, to invest for growth in key geographies and consumer segments. Third, with this, we expect to deliver unmatched execution and activation in stores, bars and in on-premise. And finally and most importantly, to enable greater local agility and insight generation. I'm confident that with this transformation, we can raise the bar on execution and our presence in stores and bars to be fitting of our position as the largest U.S. spirit supplier and leader across the key categories that Sally spoke about earlier. And with that, Sally, I'm going to hand it back to you to close it out.

Okay. Well, in North America, we are fully focused on raising the bar on execution to set us up for continued success in this next chapter of growth. This is a nonnegotiable. To summarize, we'll plan to do this by winning in whiskey, which will be led by Crown Royal; broadening our footprint for tequila's future growth; uncovering new opportunities across diverse occasions for our brands; and innovating with excellence in growth occasions, recruiting the next generation of consumers with particular focus on multicultural consumers and emerging trends basis. We will be increasingly efficient and effective in our media, as Claudia shared, increasing mental visibility and physical availability, building on our pioneering U.S. route to market, which will mark a step change in our competitive advantage. So with that, let's open it up for questions.

You've been so disciplined and held off on your North American questions. So now, the North American Q&A will be great. Trevor?

Great. Trevor Stirling from Diageo -- sorry, Bernstein.

Welcome. Everybody wants to be in Diageo now.

That was 20 years ago.

Do you want to join us?

No, I used to be, long time ago. If I look at North America, you've got 300 bps of extra A&P ratio compared to F'19. It's clearly driven an awful lot of growth. But if I look at the very short term, it appears you're losing share. Casamigos has decelerated dramatically. And if you look at the public data, it might even be in decline at the moment. Is that gap all done to the deceleration of Casamigos and what can you do to revive Casamigos? And if you can't revive it, what can you do to fill the gap?

Might be helpful for us to just kind of break down what's going on with the share. And Claudia and I can maybe do this together. So if you look at U.S. share, 60% of it is driven by tequila, Canadian whiskey and vodka. And there's a few key things that are happening and plans to address it. And that will kind of walk through what is really going on. So first -- do you want to start with whiskey?

Yes. I think if you look at Crown Royal, as Sally mentioned, it has been a big growth driver for us throughout the last 5 years. We've recruited new consumers with flavors into the category. We've innovated successfully into new occasions with brands like Crown Apple that is hugely popular with multicultural consumers in the shot occasion. And what we've seen through the course of the pandemic that due to some of the supply and glass and material shortages, we have lost some facings on shelves and some visibility in store. So with our focus on route to market, our focus on execution, but also a really exciting innovation pipeline that we have for the second half that Sally mentioned, that include new flavor offerings, which we know will attract new multicultural consumers, but also the innovation in ultra-premium price tiers that will continue to halo onto the entire brand, we know we have a really, really strong plan. We've made progress, Trevor, in the most recent periods. Actually our declines on Deluxe and Apple have really stabilized. Peach, we're lapping the introduction of some sizes that we introduced last year. Salted Caramel, a limited time offer here for the holidays, we're really excited about, and it's driving share growth for us. And we're confident that Blackberry in the second half will continue to take us forward. To link that back to your point on A&P investment, that is one of the absolute investment priorities. Sally mentioned we have a new campaign that went live last week and also our hyper-local approach, really making sure, leveraging the data that I shared, we understand the hotspots. We invest in those hotspots. All that is investment priority for us. So I think that's the biggest priority from a whiskey standpoint.

If I may, I'll just jump in, too. Maybe jump in with one fact that sometimes it's easy to forget that Crown Royal is actually bigger. Just that brand is bigger than the entire gin category in the U.S. So a small change makes a big difference. $2.4 billion in RSV. So I just wanted to add that fact.

And then Trevor, I'll come to your Casamigos point because, as Sally said, right, that's the second most important driver for us, certainly of our share performance over the last few years. First, I would just -- a couple of facts and, Sally, you touched on it earlier with Casamigos. Casamigos grew 70% CAGR over the last few years. It grew 127 basis points of core spirits. That is bigger than any other core spirits that we have seen. Yet the brand, and I know our Chief Marketing Officer is in the background, the unaided awareness of Casamigos compared to leading brands in this category is small. So we see an opportunity to raise that awareness. And now as we come out of the supply disruptions that we've had over the past few years, we actually can make those investments and feel confident that they will connect with more consumers in more occasions. So how do we do that? We now have broadened our size offerings. So larger sizes on Casamigos, smaller sizes on Casamigos, which, by the way, in this period of consumer uncertainty is a really good way to win in the occasions for larger gatherings. Consumers enjoy a larger format because it creates a great value for them. But also when consumers are making choices in terms of how much money to spend, some of the smaller sizes give us access to that -- to an incremental opportunity as well. And for the first time since we've acquired Casamigos, we're now able to innovate. So a couple of months ago, we've introduced the first innovation with Cristalino and the response has been very, very good from the trade. It gets us back into also the on-premise with an exciting offering. And the combination of all of those plans, Trevor, one, another investment priority for us, to come back to your point on spend, but also gives us confidence that we're going to win in tequila and we're going to take advantage of the headroom that we have.

Correct me if I'm wrong, but I think this is the first holiday season we actually have Casamigos in all sizes.

In full distribution and all sizes.

Yes.

That's correct.

And direct innovation.

That's correct.

With the innovation. So exciting. I mean I flagged some of these, if you remember at the end of fiscal '23, we said Crown. We also -- innovation, really critical. Innovation for us on spirits, that's the second half. So I think a lot more to come on that. I don't know if you want to talk about some of the innovation that we can talk about, I guess, the stuff that showing out there.

Sure. Sure. And I'll close out maybe the third piece of what makes up 60% of the share because that really kind of deconstructs what is going on with share in the U.S. The third is vodka. And the good news is on Ketel One, we are actually growing share. The share losses are coming from Cîroc. And what we're finding is that as consumers are expanding their repertoire, they are moving to tequila, to whiskey. And the other thing that's happened to this fall is we haven't had, as we have in years past, an innovation, right, a fall innovation. And so the team has been quickly working and is launching Cîroc Lemonada which is very, very cool because it's entering a new daypart. It's entering a daytime occasion. So those are just kind of the 3 key drivers of the share loss and what we're doing about it. So I hope that helps.

Robert?

Robert Ottenstein, Evercore ISI. And maybe the answer to my question is everything you're doing, right? But the question is, you're clearly adding what appears to be a tremendous amount of complexity into the system, right, with line extensions and innovation. So how do the distributors deal with that? How do the retailers deal with that? How do you make sure that the main kind of hero brands or the core brands don't lose shelf space, right, the ones that turn the most, and how do you also balance this with the supply chain so that you can keep efficiency with all this complexity that's coming in.

Yes. Let me take part of that, and then I'll turn it to you, Claudia. I mean the one thing to remember on Crown historically, and as we've launched innovation, like these aren't flavors the way you think about like sort of vodka flavors. These really have -- this is another one of those places where occasions matter here. So it really is incremental consumers that are coming in to Crown. Part of the reason the brand is so big and has such a broad consumer base is because these flavors have played in a very different way. So Crown Deluxe versus the Crown Apple where Crown Apple is more of the shot occasion and that Crown Peach has played in -- tea is so hot right now. So you think about Crown Peach and what you're able to mix Crown Peach with. And that's why even things like -- I remember a couple of years ago when we were short on salted caramel for the holidays really hit us, because it is such a very specific -- people look forward to it. I'm not going to say it's like a pumpkin spice latte or something, but it was definitely a for the holidays, people look forward to their salted caramel, and it was quite an incremental purchase. So these flavors aren't always -- it is really about we look hard at sort of the occasion. Cîroc is one that certainly always has been driven off of innovation. And we're always just very careful about how we manage that and over time have also slimmed that. So things come out as well as things go in. But I mean, Claudia, you're with the distributors all the time.

Yes. I think spending -- Debra, your points into your question around how do we communicate those priorities to distributors and how are we evolving, we have, as I mentioned earlier, we have dedicated selling divisions in over half of our markets and over half of our business. What does that mean? Dedicated selling divisions are sales representatives that work for our distributor partners, but they only sell Diageo and in many markets also Moët Hennessy products. So that, by nature, prioritizes them on the set of brands that we represent and that Moët Hennessy represents. Now part of what I'm excited about in the route-to-market journey that we're embarking upon, and we've been working with our distributors on this for the past few months, is to really bring our data and their data together to say where do we see the biggest opportunities for the key growth categories locally, down to the ZIP code level. And that's where we will jointly invest, Robert, in service to create even more capacity to then unlock the opportunity for growth, but also make sure that as you say, we've raised the bar on execution so that at outlet level we bring that expertise and help our retail partners merchandise the category, set it to standard and ultimately grow business for them.

I'd just add on that, Robert, on the -- from the supply side of things, we have built a tremendous amount of capability over the last several years to really get a whole lot more disciplined about like one in one out in some cases, how do we rationalize the SKU portfolio to ensure that as things are being added in, we are also, at the same time, making sure that things that are not turning quite as fast are being removed. The supply agility program will also help, I mean, because it will help to bring supply closer to the consumer. So these are all parts of the same holistic strategy of being able to grow the business in a very efficient and effective manner.

Yes, really, I mean, end-to-end, because the one thing when you think about COVID is just the amount of disruption that had within our supply chain and really being able to deliver all the great insights we had to a very local level. We kind of have all the pieces and parts now fully functioning, in good shape to really be able to string and do this, and that's exactly what Claudia is focused in working on.

Robert [indiscernible]. Robert?

Thanks. So I don't think it's a stretch to say that Diageo's stock has rarely outperformed when you guys are losing share in the U.S. So we're all pretty focused on this. Are you guys willing to kind of set expectations for when you think you'll get to share stability in the U.S. market? And then I don't know if there's any comments on that other 40% of the portfolio, things like Captain Morgan rum, other categories that maybe you want to make a comment on, but you think that will go back to share stability as well.

Yes, you can go ahead.

I think at the -- I'll address the second part of your question first, and then we'll get to the first part of it. I think -- look, at the end of the day, it is one consumer base that we're talking about here. As tequila has grown as an example, tequila has source from every other part of TBA. It's not consumers drinking tequila on top of whatever else they were drinking. So our focus is to be able to grow share of total beverage alcohol at the country -- at the regional and the country level. Because there'll always be times when something is more popular and growing and something is less popular and growing. Mainstream rum is not hot, right? And so the beauty of the Diageo portfolio is that we have the full range of products available to us. And so whatever is where the consumer interest is, we can focus our resources against that part of the portfolio to really grow it. So I wouldn't be that focused on what's happening to Captain Morgan's share. I think the important question is what's happening to Diageo's share of total beverage alcohol and that's where I would keep the focus. In terms of putting a specific timeline on getting back to share growth, these things take a bit of time. I mean the innovations coming in the second half, we have to do it the right way. What we don't want to do is to go get nonquality share in the short term. And so part of our investment strategy and our innovation strategy is very much about that sustainable share growth. So when you lose innovation for a period of time and you lose those end caps and those display opportunities and pacings, it takes time to get it back, and we would rather get it back the right way than put a timeline against it, chase it, spend a lot of money and then lose it again.

Yes. But I would say overall, on a TBA basis, we are seeing more, I would say, share stabilization versus share losses. So that curve is -- and clearly, the plans that they outlined for the second half, we are seeing some green shoots.

And I think maybe just to also underscore, to your point, it is about sustainable quality share growth. John made the point right in the U.S. as well, our local teams have that as a qualifier for what they're focused on and the sustainability piece is really important. What I will also say is the reported share only covers certain channels. So what's also core to our sell-out culture is that we win in all the channels, whether they're measured or not. The example I used earlier, on-premise, we do get an on-premise [ REIT for NAFTA ] data but we also get on-premise information through our distributors. And so the teams that are focused on those channels, they too are very much focused on beating the competition where they operate, whether it shows up in share or not, we want to win where the consumer is.

Okay. So many. Heidi?

I just wanted to follow up on this question because you have really strong brands, really great capabilities, a leader in digital insight innovation and all of that. Can you just explain a bit more how you got into this position where you have been losing market share in U.S. spirits?

And so -- I mean we've been gaining market share actually for the past several years.

I guess I'm talking about, whatever, 12 months, 6 months.

Yes. So last year, we held share of TBA. And I think right now, we're tracking minus 20, I think, on -- and so I mean, look, over shorter periods of time, certainly, we've talked about some of the issues with some of the product shortages that we had on things like Crown. Frankly, our tequila portfolio, we haven't always had steady supply. And so these things, as you're going through this, you do lose the ability at retail, in many cases, to be able to do much merchandising or that type of thing. And that is the thing that, as we've come back into full supply, really putting our full muscle in all of that. I mean it wasn't that long ago. It was, I don't know, 18 months ago that we were still quite short on things because of the glass shortages, we were quite short of supply on several big brands. And so certainly, that has hurt us. The other thing that -- Claudia, you like to point out is we are looking at this next phase of our route to market is we've -- we're now 41% bigger and we're still roughly the same size and same organization as we were...

As we were in 2015.

Yes. So that's the excitement of what we're building as we look forward. It's not so much fixing things, but it's more about looking to the future and thinking about what we want this business to be and really designing the organization with partnership, with our distributor partners and really thinking about that next decade of growth. So it's very exciting. But I would say, look, we look at these as short-term challenges. These are all brands and great brand health. They're big brands -- and so we're just excited about the next phase.

At this point, it's time for lunch. So this concludes this Q&A session. Be back here at 1:30, please.

We still have one more Q&A session. [Break]

So actually, by popular demand, we're actually adding a little bit more on to the North America Q&A. So showing our agility here. So if I can just get at Claudia and Sally live in the back. And I think we probably have -- what do you think about 15 minutes that we can do if we want to take a few more questions because we kind of had to cut it off there a bit. Very good. Vivien?

Thank you for the extra time on the U.S., Debra and team. So as I kind of think about the commentary around the stabilization in TBA, certainly, that must contemplate the fact that the beer trends in the U.S. are deteriorating. So that's helpful from a TBA perspective, not necessarily from a core spirits perspective. So as I think about the commentary from Friday around a gradual sequential improvement in the U.S. or North America more broadly into the first half of fiscal '24. I'm just curious how you guys are thinking about November and December because some of the scanner data outside of spirit showed a material degradation in trend in October specifically given the resumption, we think, of student loan repayments. So how much of a win do you really need in November and December to show that improvement?

So I think -- I mean, I'll start by just -- look, it is a critical time of the year, and we are actually being quite encouraged on sentiment for the holidays. So that is exactly what we are planning for. So we -- so with that, I would say, we also certainly are looking at trends, but I think October, you're feeling good about. It's already in the bag.

And Vivien, I would say, it's the consumer sentiment also by occasion. So one of the things we look at very carefully is the sentiment as it relates to the on-premise, for example, we've been winning consistent share in that channel. And the sentiment towards the on-premise is positive. Our monitor would suggest 15% more intent to go out. Now there's no perfect data, but we were on the road. We met with a lot of national account on-premise customers, so we can look at bookings for November and December and so when you look at private holiday events, it seems to be encouraging what accounts are telling us in terms of their bookings. And then obviously, it's our job to make sure that we have menu placements, we have programs and staff trainings in place. So that's one element. And then I think, Debra, to your point, we are now in the season of the most important entertaining holidays between, obviously, Diwali here in New York was the first time a holiday, and it's becoming a big consumption holiday as well. We have Thanksgiving, we've Hanukkah, we have Christmas, we've New Year's. And so we're making sure that we look brilliant at the point of purchase. Look, from a consumer standpoint, I hear what you're saying. Student loans and things have been on people's minds. But that also means, I think they're really looking forward to spending time with friends and family in the coming 2 months. And so it's all about showing up brilliantly at [indiscernible] point of purchase. Being available as a gift, that's another lever. We're really leaning into. We are in a [Technical Difficulty]...

Yes, I mean, I will add, though, I mean we would not have reiterated sort of the sequential improvement unless we felt very good about it. So yes.

A couple of questions on the U.S. again for me. Chris Pitcher from Redburn Atlantic, sorry. You mentioned your A&P ratio gone from 15% to 20%, but market share hasn't stabilized. So is 20% enough? And then secondly, if we look at the second half performance of last year, actually, Johnnie Walker was quite a big drag. And you've not really talked about scotch in the U.S. You've talked about all the other ones, but it was a bright point for a bit, and it's gone negative. How's Johnnie Walker doing?

Yes. I'll let you start with Johnnie Walker and then I'll take...

Look, a lot of what happened with Johnnie Walker was what it was lapping. So it was more of an NSV drive than a business problem itself. And what it was lapping was the refilling of shortages in fiscal '22. So with all of the port congestion and how hard it was to get supply in the very long lead times, fiscal '22 was a pretty poor year on a number of our brands. And so it was the lap of that -- sorry, it was '21 that was a bad year. '22 was the refill, '23 was the lap of the refill. So that was the issue on Johnnie Walker.

From a share perspective, we're gaining share, significant share of scotch, scotch grows a little bit smaller than whiskey, but our trends are, in particular, on Johnnie Walker Black, which has been the heartbeat of all of our efforts, is continuing to see really good momentum, and we expect that to continue over the holiday season. So from a share perspective, I feel great.

And I would say on the 20% reinvestment rate. I mean, look, we don't really target a specific rate. I mean the region is margin accretive for us. And so we do tend to -- if we need to spend there, this is we are inclined to spend. But we do look at every dollar that we spend every event. We've got catalysts, which I think we talked a lot to you guys in the past about some of the tools that we have to measure ROI in our marketing dollars. And actually, when you tour the occasions area this afternoon, it's got our marketers from around the world. And they will absolutely verify for you that they have to look at every event before they get the next dollar. And so we regularly look at that. But if we need more money in North America, we try to get it to them. I would say in the past, this has been a place where we have steadily sort of improved investment as our portfolio has expanded and as we're seeing the opportunities and occasions.

Jeremy Fialko, HSBC. So a couple of questions on the 2 areas you talked about where there was some share loss. So first of all, if you talk about Crown Royal and some of the shelf space losses, what visibility do you have in terms of getting that shelf space back in terms of some of the resets when those are happening and kind of what the retailers have committed to you in terms of actually you getting those spaces back, which you lost. And then secondly, on the Cristalino, Casamigos, again, what sort of like distributor commitments have you got from those? And what was the sort of incrementality to the brand in terms of reversing some of the trends that you're seeing. Just some more detail on both of those points would be very helpful.

So I'll start with the latter one on Cristalino. Without getting into specific distributor numbers, what it is providing us is giving us access to different serves the Casamigos family. So we were actually out and about. And one of the features that the team is really working towards is a Martini or also a Negroni serve, which actually the liquids, is fantastic, makes a fantastic cocktail. And we just got some of the commitments from National accounts on-premise over the holidays. I've even shared that with you, Debra, which, Chris, is giving us access to additional features and additional menu placements. So we're really excited about that. And we've seen the success of Cristalino with Don Julio and to this day, still for Casamigos, it's a fraction. You can tell the story of just the success of Don Julio 70. So it's the very beginning. It's been in the marketplace for a couple of months, but we're really encouraged by the success that we've seen so far. And as I said earlier, we're now also adding smaller sizes. It is a $60 recommended selling price [ 375 ] is a $30 price point. So we're excited about what that can deliver in terms of incremental occasions.

Perfect. And then the other question was visibility on how you have visibility into what's going on.

Yes. And I think this is where tools like Trax and Edge are really important because the sales consultants in our distributors are using those tools to basically take photographs of shelf sets. And we have now repositories of those shelf sets over time. So we know where we have suffered the most in terms of visibility, and that's where the sales consultants go back and have conversations, especially also with the new news around the packaging, which, Sally, you mentioned the new news about our media campaign and we're going to regain them back. To give you an exact time line is, to be honest, really hard because it is individual accounts. To your point, it's national accounts as they reset, but that's the journey we're on. And as I said, on Deluxe and Apple, in particular, we've really stabilized our trends.

And we can prioritize people. You saw the map of Texas that we put up. We prioritize sort of where it matters the most to go back and do what we need to do. So it's actually very cool data.

Olivier Nicolai, Goldman Sachs. Just a couple of questions. First of all, on the U.S., you mentioned I think TBA was -- share was 7.5% earlier today. RTD is obviously growing very fast. Now what's your ambition in the category? And do you think you could get your fair share in that segment? Could this be dilutive in the meantime until you get there? That's kind of the long first question, sorry for that. Secondly, on the midterm guidance. I just wanted to understand, under which scenario could you really get to 7% organic sales growth. And then you showed us this morning, I think it was a top 3 contributor by category. You mentioned some disposals that you've done previously as well. Do you think you still have more brands to dispose which could effectively boost growth rate of the company?

So if you can hold, we'll come back to you first on the medium-term guidance session as we go through that. And then TBA, and so as you think about RTDs within TBA, so how we measure that and look at that, is that is taking it sort of, I'll call it, anything that is not in -- not beer that's in a can, right? So you think about the Seltzers, the FMBs, all of that, if you roll all of that together, actually, that universe has stayed because you really are mostly seeing consumers sort of come up that curve. And so within that TBA world, I actually think, for one, we're already a player, right, because we do have a good-sized FMB business. We've got a little pocket, I would say, within Seltzer kind of agave, Lone River, I'm saying the wrong word for it, Ranch Water. Thank you. And so that piece, we have a small piece there, and then we have a small piece of the spirit. So actually, when you roll that up, we should be able to get our fair share. And I think that is one of the key things as we're looking at our innovation plans and what we're doing. But there's no reason to not be able to get our share of that because that's in a broader TBA universe and we absolutely look at that. And I think we can talk about some of the FMB stuff because that -- so we do have some things that we're launching on the FMB side, do you want to talk about that?

Yes. And it's interesting to think that. It was Diageo that kind of launched this with Smirnoff Ice all those years ago. And it's still doing incredibly well. So the team is launching a Smirnoff Smashed, which is actually delicious. They're also launching a Captain Morgan Sliced. So both I'm looking at Rodney, did I get that right? Okay. So those are coming out in the second half. So that will absolutely continue to grow our share.

Yes, in the FMB space. So much wider, of course, distribution and availability on that within RTDs.

I can hit the question on disposals. We're always looking, Olivier. I mean, you've heard us talk about this over the last several years that we have very active portfolio managers, and we are equally active on the acquisition side, but also on the disposal side. Most recently, we finally completed the disposal of Windsor, the whiskey business in Korea, I mean, John can stop beaming about that. Yes, but we're always looking at our portfolio to see if there are parts of the portfolio that just do not fit within our construct right now. So yes.

Any other questions? Brett?

I'd love to ask a question on RTDs from a different perspective. It would seem to me that they're easier to convert those consumers or occasions into your bottled portfolio than it may have been historically. So how do you go about doing that? And is that a true assumption?

Yes. I mean, look, one of the things -- and I think sort of even prior to me is if I were standing up here, we have always thought that this ultimately would be a very good thing for spirits because, to your point, especially in a country like the U.S., if you forget just sort of how big sort of -- even though it isn't growing, but in that mainstream beer place where there's a lot of occasions there, and so that really -- when you think about how -- when you turn sort of '21 and you're coming in to the category, mainstream beer and sort of that used to be where people came in now we're seeing numbers where it's much more people coming in, in these kind of things other than beer, and it certainly does help that come into spirits. And so that's why ultimately, over the long run, we think this is going to be very good, and we think about it, and that's why we think about which brands and we really do try to pinpoint, I keep coming back to this, but occasions are really important for us on those occasions of which we know we can convert people into our brands. And we see it -- Sally mentioned this morning on the ready to serve, our bullet old fashioned in Manhattan, how that's actually reflecting back on within a certain amount of time. People are actually coming into the bullet franchise that weren't there before and buying the bottle of bullet. So we -- that is a good assumption, and we actually do see evidence of that and think that's a very good trend for the long run.

And Debra, maybe if I can maybe another example is actually Ketel Espresso Martini because you asked about how do we bring people in. If you look at how we activate Espresso Martini, we actually activate Espresso Martini, yes, through our ready to serve for those moments where you're really busy, you have a big party and you don't want to relegate somebody at the party to make cocktails all night, buy that Espresso Martini made with Ketel One. We equally co-display, for example, Ketel One, Vodka and Mr. Black in stores. And so for the consumer who has a party who wants to create that moment and create a great cocktail bar, it's available for you as well. But it's using the same platform of the most popular cocktails and bringing consumers and telling them about the fantastic quality that is Ketel One. And if you look at the trends of Ketel One in the U.S. right now, we're gaining not only share of Vodka, we're getting to gaining share of spirits overall with Ketel One, which is really encouraging. So it's really a surround sound to your point, and it is bringing in recruiting consumers into Ketel One Vodka, which is the ultimate goal.

All right. I think we're -- Thank you.

That was our bonus Q&A. So in the final section of our presentation, we will talk in more detail about the fundamentals that allow us to pay quality growth with robust financial performance. So before I hand it over to Lavanya, I want to talk about the intent behind our updated medium-term guidance. As shared throughout the first part of my presentation, all of us at Diageo have huge confidence in the attractiveness of our industry and category. We also believe in the solid business we have built over the years, the consistent investment we have made in it, and we have the talent, tools and capabilities to drive sustainable growth. Moving forward, we expect to deliver organic net sales growth between 5% and 7%. This is ahead of what we were growing pre-COVID, and is consistent with our medium-term guidance provided 2 years ago. Lavanya will take you through the detailed building blocks, but our confidence in this guidance is fundamentally underpinned by 3 things. First, our participation in the attractive segment of international spirits, which is growing ahead of TBA sourcing from Beer and Wine occasions. Second, our advantaged portfolio and footprint, which enables us to grow ahead of spirits. And third, the investments that we will continue to make to grow share. So given our share and growth ambition, we will continue to invest behind our brands. And I'm proud that we have stayed disciplined with our investments over the past few years regardless of the operating environment. It's paid off as we have shown you and Lavanya will also discuss in more detail. We see no reason to deviate from this successful model. We firmly believe that maintaining the capability to remain invested in the current economic uncertainty and global market volatility is essential. As we expand our portfolio footprint, reach more consumers and gain more occasions, this ensures that we have resilient brands in the near, medium and long term. It keeps us competitive in the market to ensure we can continue to outperform this attractive industry. To be clear, the change in our operating profit guidance is not a change in ambition or intent, but is meant to reflect a realistic and transparent view of the projected macro environment that we expect to be operating in. As inflation moderates, and productivity from our supply agility program flows through, we expect operating profit to grow ahead of organic net sales growth. Lavanya will cover this in further detail. Another important element of our medium-term guidance is how we continue to think strategically about our ambitious ESG agenda, Spirit of Progress. We continually review our approach to ESG to ensure we focus on the issues that are most material to our business and prioritize actions that strengthen our performance, whether delivering efficiencies, strengthening our brands, or driving employee engagement. The world in ESG is changing fast, and the needs of our stakeholders are evolving. We're nearing the halfway point of our Spirit of Progress plan. So I've kicked off a review of what we've learned so far and how we continue to ensure our near-term priorities fully deliver for performance and productivity. This review will consider our commitments in 3 areas. Those where we will maintain our current programs and commitments, where we will accelerate actions given changing stakeholder needs, and areas where we will need to focus our efforts to ensure we are prioritizing and pulling forward the actions that deliver growth and efficiency gains. In particular, as we work to decarbonize our value chain, we and our industry bodies continue to advocate to governments to put in place the essential infrastructure and incentives required in both direct operations and supply chains. No company or sector can deliver full decarbonization alone. And we and governments will need to forge new partnerships and a supportive policy environment to deliver net zero. So as part of this, we will also explore options to rationalize how we measure progress and streamline our external reporting, simplifying disclosures where possible to benefit investors and other stakeholders. We will update you on the results of this review in due course. So with that, I am happy to invite our CFO, Lavanya, to present the financial foundations of our performance, our growth algorithm.

Thank you, Debra. In the next few minutes, I will cover how our growth algorithm supports Diageo's virtuous cycle of sustainable growth. We drive sustainable growth and profitability through volume, price and mix improvements. Our culture of everyday efficiency helps us deliver productivity, and we return that back into the business through bold reinvestment. This enables us to further accelerate our top line growth and share gains and positions us well to achieve our TBA share ambition while driving shareholder value. I will now walk you through a breakdown of our performance in the past 6 years and why this gives us confidence in our medium-term guidance. So let me start with top line growth. Since fiscal '17, we have outperformed our peer group with strong top line growth. Prior to fiscal '20, top line growth was consistently in the mid-single digits. While fiscal '20 and the first half of fiscal '21 were significantly impacted by the pandemic, our business proved resilient. We recovered strongly in fiscal '21 and '22 when we delivered 2 years of double-digit net sales growth well ahead of pre-COVID levels. In fiscal '23, we grew top line at 6.5% at the top end of our medium-term guidance of 5% to 7% as growth normalized in line with our expectations. Top line growth from fiscal '17 to '23 has been driven by consistent positive growth in both volume, price and mix. Diageo's price mix growth, which saw a strong acceleration during the past 2 years, sits in the upper quartile of our CPG peer group. Volume growth, on the other hand, has been steady during this time with the CAGR in the 2% to 2.5% range during the pre-pandemic years and during the last 4 years. We have invested significantly in technology and analytic tools to support revenue growth management and have built deep data sets, which allow us to get the balance right between price, mix and volume growth. In addition to growing the top line, we've also expanded operating margin including over the past 2 years when we faced significant inflation. In fiscal '22 and '23, mid- to high single-digit price increases and stepped up productivity savings in fiscal '23 more than offset the absolute cost inflation impact on our gross margin. Volume growth provides us with margin leverage across the portfolio and improving mix tends to benefit our margin structure. Our culture of everyday efficiency has allowed us to deliver an annual run rate of about $500 million in cost savings each year dating back to fiscal '17. And we see opportunities to continue to accelerate this productivity. So we have delivered this operating margin expansion while consistently upweighting our A&P investment in brand building to drive long-term sustained growth of our brands. A&P is crucial to strengthening our brand equity and building resilience of our business for the long term. Our sustained and upweighted marketing investment is also a key differentiator of our performance versus our peer group. In fiscal '23, we spent $3.7 billion on marketing, nearly a 60% increase from fiscal '17. Our reinvestment ratio has also increased by nearly 300 basis points over this time period. You see on this chart, that the investment has been in North America and across Europe and APAC. And this targeted A&P investment in our regions is paying off. We have gained considerable market share in all the regions where we have upweighted A&P investment. One key insight that we have is that this A&P investment needs to be sustained over several years on a consistent basis to deliver the right outcomes. We have also spent our A&P more efficiently, growing the impact of our investment by increasing ROI. We've done this through building and utilizing powerful analytical tools and developing our marketing effectiveness capabilities and by focusing more of our A&P on media. We started to invest in the suite of tools and capabilities back in fiscal '17. These tools have been continuously enhanced and the number of markets in which they are utilized continues to grow. Catalyst is now in most markets. Demand radar covers around 90% of both our NSV and A&P investment and Edge 365 covers around 70% of our NSV. They enable us to use data and technology to ensure that we make the best investment choices at a market and at a brand level. One of our tools is a marketing mix model that analyzes how to optimize our allocation and investment across our portfolio of brands. Another tool, Sensor helps us to make smart decisions on digital media mix for specific campaigns. These tools and capabilities have enabled us to significantly increase the ROI of our A&P spend while increasing the reinvestment rate behind our brands. And as I discussed in the previous slide, this is working. The proof is clearly in the sustained gains we have seen in market share over time. Our commitment to overhead efficiency has also supported our strong operating profit delivery. Since fiscal '19, the rate of increase of Diageo's overheads has been the lowest out of our CPG peer group and puts our overall overhead spend as a percentage of sales in the lowest quartile in the group. Over the past 4 years, our staff cost grew at half the rate of organic NSV growth and our indirect costs held broadly in line with top line growth. Since fiscal '19, our head count has only increased by 6%, while our organic net sales are 35% bigger on a constant basis. In these years, we have made investments in critical categories such as tequila, where we have added roughly 1,500 full-time employees and in key capabilities, such as digital and luxury. We have, at the same time, improved the efficiency and effectiveness of our people, supported by the investments that we have made in data and technology. And as you saw in Debra's presentation earlier in the day, our people are more engaged than ever before. This has delivered a strong contribution to operating margin over time. And with that supported our ability to invest in the business. Clearly, our profitable growth algorithm underpins our strong past performance, and we believe it will continue to do so in the future. It starts with top line growth. Going forward, we believe we can deliver organic net sales growth in the range of 5% to 7%. As Debra discussed earlier, International Spirits has been growing ahead of TBA, recruiting and gaining share from Beer and Wine occasions. Looking ahead, we expect International Spirits to grow at 5% RSV CAGR, ahead of TBA at 4% per year. And our portfolio is advantaged, and the footprint that we have is placed to allow us to grow faster than that. Our growth algorithm also anticipates that we will continue to invest behind our brands to grow share and grow ahead of the category. I will now discuss the building blocks of volume, price and mix. Let's first cover volume. As I showed earlier, Diageo has grown volume at a 2% CAGR since fiscal '17, and we expect this to continue. While volume growth may be muted in some parts of the world with more consumers under pressure, with the breadth of our footprint, we have several opportunities to double down. One particular attractive opportunity is, India, which in fiscal '23, grew volumes by 5.5%. As I referenced earlier, in the recent 2 years, we have grown price at mid- to high single digits as inflation peaked. Going forward, we expect price increases to normalize to 1 to 2 points of growth in line with historic pre-COVID levels. And lastly, premiumization. Debra showed you how in both developed and emerging markets, the Premium Plus segment of our business continues to outpace the growth of Standard and Value Tiers. We expect the continued trend of premiumization to drive an additional 2 to 3 percentage points of growth in the medium term. Premiumization comes from consumers drinking better, from category mix and brand mix. Scotch has grown at an 8% CAGR for the past 4 years. And in fiscal '23, scotch malts grew at 16%, which was double the rate of growth of primary scotches. Even in the last few months from the start of this fiscal in the U.S., Super Premium Plus is driving all of the category growth, growing 2.5%, while Premium and below is declining 2%. In the U.S., this has been a consistent trend except during the GFC when there were 3 quarters without premiumization. Through our strong execution and consistent investment in our brands and core capabilities, we believe we can further outperform the market and grow share enabling us to deliver our top line guidance of 5% to 7%. Now this growth is enabled by reinvesting productivity savings. We see the opportunity to accelerate productivity over the coming 3 years and aim to deliver $2 billion of savings from fiscal '25 to fiscal '27. This is a significant step-up in our commitment. Recall that our historic productivity savings run rate has been about $500 million a year. So we intend to deliver this productivity across COGS, marketing spend and overheads. COGS has historically been the biggest driver of our savings and will be enhanced through our supply agility program, which I will cover a little later. Marketing and overhead sufficiencies are expected to continue to fuel our ability to reinvest in the business. I shared earlier how we optimize marketing efficiency through improved ROI. We also go after waste in every aspect of marketing spend from agency spend to being more choiceful in how we use point-of-sale material, reusing it and gaining efficiencies on media. On overheads, we will continue to deliver productivity, including through the investments that we are making in SAP 4 HANA, which is expected to step change our processes and drive efficiency and savings. We're also delivering cost savings from the work that we do on sustainability. For example, when we improve the energy efficiency of our operations, when we reduce the water usage of our operations, when we remove carton boxes from products, we are delivering COGS savings. And with investments like our supply agility program, we're now making a step change to take productivity to an even greater level. Our investment in the supply agility program aims to increase the resilience of our supply operation while reducing our carbon footprint, increasing efficiency and reducing costs as well as increasing cash flow. This 5-year program was announced at the end of fiscal '22, and we plan to invest up to $650 million to strengthen our supply chain network and make it fit for the future. Productivity savings from the supply agility program are expected to step up from fiscal '25 and accelerate in the following years. And in line with our growth algorithm, we deploy the additional productivity to drive sustainable long-term growth of the business. Earlier today, you heard Debra discuss our strategy to raise the bar on execution. And my colleagues have shared with you examples of how we are activating at pace against this. Sally and Claudia shared with you our plans to shape the next chapter of our route-to-market and operating model in the U.S. With our distributor partners, we will invest behind this initiative. This is expected to further strengthen the competitive advantage we have in our largest market, and provide us with the confidence that we can further accelerate growth. We anticipate up-weighting A&P investments in the coming years to our business and we will, as always, take a disciplined and data-based approach to our marketing investment. Our focus on this upweighting will be on brands, categories and geographies where we expect the best ROI. As you saw through the day today, this will include Guinness, our business in India, our tequila portfolio in North America and around the world, Scotch, of course, North America whiskey, our Western Europe business, Baileys, the non-alc portfolio and a fantastic innovations. And last night, those who were here in person would have experienced some of the approaches we are taking to drive growth through progressive applications of data and technology. Now on to our long-term investments. We run this company for the long term like true owners. Overall, maturing stock levels have increased close to 50% since fiscal '17. Maturing inventory now stands at over $7 billion and it's the liquid gold, which provides us our strongest moat. This increased significantly over the past 3 years, driven by the strong growth of whiskey and the explosive growth of tequila. So while the rate of growth in our maturing stocks will moderate in the coming years, we will continue to invest in across aged liquid categories, including scotch, U.S. whiskey, and Reposado and Anejo tequilas. We will also continue to invest behind capacity increases and our supply agility program. We have previously said that we expect capital expenditure in fiscal '24 to be in the range of $1.3 billion to $1.5 billion. We expect this level of CapEx spend to continue in the coming years before declining again to historic levels as a percentage of net sales from fiscal '27. And that brings us to our capital allocation strategy, where we use a very consistent and disciplined approach. Our first priority on capital allocation is investing in the organic growth of our business. Second, we invest in acquiring strategic brands that strengthen our exposure to fast-growing categories. More on that in a minute. Third, we have a progressive dividend policy with a dividend cover target of between 1.8 to 2.2x. Fourth, where we have excess cash, we return it to shareholders. We manage all of this within a target leverage ratio of between 2.5 to 3x net debt to EBITDA. We ended our last financial year with a leverage ratio of 2.6x towards the lower end of our range. Bold and accretive M&A will continue to be an integral part of our capital allocation strategy. As Debra highlighted this morning, we have actively shaped our portfolio towards more premium brands in faster-growing categories over recent years. Importantly, we have also disposed of $1.6 billion worth of brands that did not fit within our portfolio and mostly played in slow growing segments. The net impact has materially contributed to the shift of our portfolio towards premium-plus price tiers. Coming full circle, our long-term growth algorithm and disciplined approach to capital allocation allows us to create value for you, our shareholders. Aside from fiscal '20 and '21, when the business was impacted by the once in a generation pandemic, our ROIC has increased by 250 basis points since fiscal '17. We make capital allocation decisions for the long-term. Increased investment in maturing stock, CapEx and acquisitions in fiscal '23 reduced our ROIC in the year. However, we believe that this will contribute to increasing ROIC over the long term. Now on to dividends and share buybacks. The progressive dividend policy, I previously mentioned, has delivered consistent year-on-year dividend growth for over 20 years, including in fiscal '20 when COVID significantly impacted the business. We expect to remain progressive dividend payers in the medium term. And we have returned GBP 9.3 billion of capital back to shareholders since fiscal '18 and continue to add to this with the current program to return up to $1 billion further to shareholders by the end of fiscal '24 -- $1 billion further by the end of fiscal '24. Our approach on buybacks will be determined annually in line with our capital allocation strategy while remaining broadly within our leverage ratio. Our disciplined approach to capital allocation will remain unchanged. Before I summarize our medium-term guidance. Let me start with our fiscal '24 outlook which we put out last Friday. I am disappointed that we are no longer expecting organic net sales in half one fiscal '24 to grow faster than half 2 fiscal '23. And we are now expecting operating margin to decline versus the previous year. I think I need to read because this thing is not working. Let me start again with this chart, okay. I am disappointed that we are no longer expecting organic net sales in half one fiscal '24 to grow faster than half 2 fiscal '23. and we're now expecting organic operating profits to decline for the half. In half 2 fiscal '24, we expect to see gradual improvement in NSV and operating profit growth compared to half 1 fiscal '24. But this does not detract from the confidence we have in our long-term growth algorithm. In the medium term, we expect organic net sales to grow within a range of 5% to 7%. As we have mentioned before, our confidence in this guidance is underpinned by our participation in the attractive segment of International Spirits, our advantaged portfolio and footprint, which enables us to grow ahead of spirits, and the investments we will continue to make to grow share. With only a 4.7% value share of global TBA, we have significant headroom for continued growth. On to operating profit growth. In the near term, while inflation has moderated, it is persistent. And as I mentioned previously, price contribution to the top line is expected to moderate faster than inflation back to 1 to 2 percentage points. We expect this to be different from the past 2 years where we have covered the absolute impact of inflation with pricing. In this environment, we will continue to accelerate productivity savings and benefit from operating leverage, premiumization and revenue growth management. We expect organic operating profit to grow broadly in line with the top line as we choose to continue to step up A&P investments to support our brands. As I covered earlier, we generate strong returns on these investments. We have the tools and the capabilities to continue to invest with confidence. And as we have demonstrated in the last 3 years, our investments are translating to share growth. Over time, we expect operating margin growth to increase as inflation abates and the benefits of the supply agility program flow through. So in closing, here are the key takeaways. We have delivered consistent, high-quality, strong performance. We are committed to doing business the right way. I'm really excited about Diageo's future because TBA is an attractive industry. And within that, spirits are an even more attractive segment. We have an advantaged portfolio of fantastic brands. We have an unrivaled geographic footprint. With only a 4.7 share of TBA, we have a long runway for growth. And finally, with our growth algorithm and our capital allocation strategy, we are confident in our ability to deliver long-term sustainable shareholder value. So thank you very much. And now let's open the floor to Q&A. Debra?

Very good. You got within the last 2 slides.

I know.

These have been terrific presentations. Just want to kind of circle back to some of the discussion we had in the beginning and tie it together here a little bit. And that is -- we've been getting a lot of questions from investors on this is given the fact that cost of capital is elevated everywhere in the world pretty much. The macro issues are pressing and increasing globally. And it's kind of hard -- I mean we don't know your distributor, our route-to-market in every single country in the world, obviously. But it's kind of hard to believe or put it the other way, we would like to have, how do we have confidence that you don't have significant inventory in the supply chain, hidden out of view in other important markets around the world.

And then, look, I mean, if it's helpful at all, maybe we just circle around to the President, so that they can talk a little bit about this. That might be...

That may be the best way to do it. I mean, look, I'll just kick off like North America, I mean it's a 3-tier structure. We have full visibility to what we sell to our distributors. We have full visibility to the depletions that they have, the big distributors, the depletions by account. And we have this on a monthly basis in terms of the depletion data, real-time data on distributor inventory levels, and we have been very explicit in sharing that with you all as well. So it's a fundamentally different market structure in North America. And then in Europe...

I was going to say -- I would also add in North America, of course, tools like Edge and some of this. Remember, this covers 300,000 outlets. We've got a dedicated division within the distributor that are out there in outlets as well. So hard to hide inventory in North America, even below the distributor level. And then I don't know, John, do you just want to talk a little bit about APAC?

Yes. So if you just break down APAC, let's take the mature markets, Australia, Korea, Japan, they've all got very established retailers. So we've got very good EPOS data, point-of-sale data, so feel very good about that. If you go into our biggest market, greater China buys your business, we work with exclusive distributors. So they only carry our stocks. We've got excellent visibility on that. And by the way, you don't grow 21% in the last quarter, unless you're in a good stock position and then you move into Southeast Asia, which does have some similarities to Latin America, it's -- but I'm very comfortable how we finish the fiscal and we've got good visibility, which we also check through third party as well to those markets. And then in India, just quite briefly, 50% of our distribution is with the government-owned distributors, again, excellent visibility. So on balance, I mean, it varies by region, but feeling that we've got -- I'm feeling good about where we are right now.

And India is fundamentally different for this business than any other CPG business. The total number of outlets in India is less than the total number of outlets in Greater London. So the visibility is fundamentally different. Daya, you want to go to Africa, maybe?

Yes. So if I look at the African business, 65% of our portfolio is beer. And if you think about the beer businesses, average 30-day shelf life, so the beer business has a low shelf life, but also majority of the portfolio is in, what we call, RGBs, returnable glass bottles. So you've got to ship out, you got to wait until your consumed bottles come back, then you reproduce and ship out again. So that part of the portfolio is very, very well managed. So you know exactly where the stock is. Our biggest [indiscernible] market in South Africa. And if you look at the South African business, it is a big formalized trade channel where you've got big retailers, and it's day 1, day 3 shipping. So we know exactly what stock is in the trade. So from Africa perspective, I feel comfortable. We know exactly, and we've got our hands around the inventory.

And maybe I'll finish with your -- Yes. So again, majority of your business is big modern retailers, the Tesco, Carrefour kind of thing. We do have some wholesalers in Europe and actually we look at their orders on an everyday basis. And that's been the practice in Europe for a very, very long time. So it is a very well-controlled channel. So I think we've pretty much gone around the world.

Laurence with Barclays. You talked about taking brands global, particularly tequila. But I guess, Guinness is one of the brands that actually has a relatively few countries that is sold in U.K., Ireland, Africa, I mean, is in other places as well. But obviously, beer has massive markets elsewhere. You've got Brazil, Mexico, much of Southeast Asia, where some of your competitors have big positions. Is there potential to take Guinness to more places?

Yes. I mean -- so actually, Guinness is actually sold, I want to say, 130 countries that Guinness is available looking at the beer board. The deal is that we actually operate in a lot of countries through other parties. So we are not holding. It's actually one of the beautiful pieces of our Guinness business is the fact we really run it in a very asset-light and efficient model. So we're not having to -- we've got quite a different model than sort of the beer companies of which you're building big breweries and you're having to invest in a lot of big infrastructure to make that work. So and in fact, you would have just seen some divestitures of assets that we did in Africa as an example. So we take a look at these to say, if there's somebody else who can do it better than us, we've got models for that. So actually, we do have Guinness out there. I will say, we are seeing opportunities, though, yet for Guinness. John, you've got one in APAC that you're looking at. So we are looking at Guinness as well. And I think the exciting thing, as I'm looking at like 0, 0, I think we're only in maybe, is it 5 countries right now, I think. So -- and quite honestly, that just so delivers versus kind of core Guinness. So we're looking at that, but we do actually operate in many more countries than what it would first appear, but it's just going through, in many cases, some of the other -- some of our beer competitors actually.

Could I ask one about guidance. So in terms of you've got the sort of medium-term guidance with limited margin expansion over the next -- over the medium term. Going into next year, we're sort of assuming that some of the issues you've had in LAC, you're going to start to lap and so potentially to the operational leverage that you'll lose, you should get back next year. And some of your competitors in tequila have talked about the benefits of the agave price. Presumably, you would be getting some of those as well. Some of your competitors have quantified that as well, as well all of the COGS deflation that's coming into the market right now and again, well documented by some of your peers. With that sort of environment, it seems like a huge amount of A&P to put back into the business to be able to get a flat margin. Why are you just not being very conservative here?

I mean, look, I think it's a mixed bag. There is definitely -- we do recognize that and we do expect that agave prices will continue to come down over time. Having said that, look, we have more of our portfolio is an aged liquid. So it's just going to take us a little longer for that to show up in the P&L, right? In terms of inflation, just a couple of things that I do want to call out. Look, the world is a complex place. There is -- we are definitely seeing some moderation in inflation. But then there are some key commodities, which are more relevant for us than they perhaps are for others, where we are continuing to see inflation persist. And so I mean I kind of look at like U.K. gas, and we've looked out -- we have like this is publicly available data, right, looking at forward data for '24 and '25. '25 is like GBP 1.32 per ton versus today's price of GBP 1.15. So the forward still indicate continued inflation. Aluminum is another place. Today, aluminum is to turn about GBP 2,500 or so per tonne, next year forecast to go to GBP 2,650. This is where the forwards are. U.S. gas, again, it continues to be inflationary, $3.23 per MBtu now going up to $3.7 next year. U.S. resins is the other place where we are continuing to see inflation. So there are definitely pockets where we are continuing to see inflation persist. It's coming down in some places, but continuing to persist in other places. So I just take a more balanced view of what's happening to inflation in total here across the next -- at least as far as we can see, right, the next 2 years of forwards, it is going to be still inflationary in quite a few pockets.

I do think though that -- if I could just reiterate again, it's not a change in the ambition. We want to grow, and we also want to expand margins. So clearly, if inflation is better than what we're predicting, that is -- that's what we're looking to do. So it's not a change of -- we're going to spend this...

No matter what.

Like it is certainly not that. And we're also -- we aren't going to take some kind of big holiday from it either. That's not what we're saying. So that's why I think the intent is important here, but it really is, as we're looking at it, we do want to make sure that what we're doing is protecting the long-term growth and not making short-term decisions to make cuts as this inflation volatility flows through because we -- when you think about how we've gotten there through these high single-digit pricing actions, this is not the environment you're going to be able to get that through in the short run. So that -- hopefully, that helps clarify.

It's Simon Hales with Citi again. Can I just come back to the capital allocation policy? Lavanya, you talked about sticking with 2.5 to 3x sort of leverage range. I think after last Friday's sort of warning, I think we're probably looking to finish the year probably at the upper end of that range with the $1 billion buyback sort of continuing to be executed. I mean, how comfortable are you to be at that upper end of that range going forward? How do we think about future sort of buybacks into 2025 and beyond? Do you -- are you happy to stay up there? Would you prefer to see the ratio head back towards the lower end of that guidance range before you think about further cash returns?

We have a very strong balance sheet and we have excellent credit rating. We're able to access debt at very reasonable rates compared to the market environment that we're in. Our intent is to stay within the range. We ended last year at the lower end of the range, right? And a lot of this also depends on what are the opportunities. Our capital allocation is actually incredibly clear, right? We invest in the business. We've given pretty good guidance of what we intend to invest in the business on both CapEx and maturing stock. On M&A, that's the place where it really differs year-to-year. If there is a great opportunity available, as I said in my presentation, we will be bold about making these M&A decisions equally to a question that came up earlier, we're active portfolio managers, and we will look at disposals as well, and there's a continuous list of those that we are also always looking at. We will pay dividends. And we've been a progressive dividend payer, and we intend to be -- to continue there. And then share buybacks, I think we'll make that decision each year based on what's happening with the rest of the -- with the capital allocation choices requirements that we have.

Fintan Ryan here from Goodbody. Maybe just to follow-on from Laurence's question earlier. Given that you're saying that you're still seeing aggregate inflation into next year, we've seen significant pricing being taken by ourselves in the overall TBA industry over the last 2 to 3 years. But you're saying pricing midterm is going to just be 1% to 2%. If inflation is still running ahead of that, why are you, say, pricing below the inflationary basket, if anything, could this mean that your guidance is conservative? Should the overall inflationary backdrop stay quite persistent?

So I think there's a number of things that we have to help us offset that type of inflation. So remember also the productivity agenda as well, which absolutely helps us, and particularly on a marginal basis, absolutely helps us and so the goal absolutely is still to be from -- on an absolute basis to be able to offset that inflation. It's just a matter of offsetting that inflation and doing the reinvestments that we need to make. So that's where it sort of comes in, it's to think that you're going to be able to price above that inflation to be able to drive additional -- and we have some great productivity programs coming through, but some of these bigger programs take time to get the full benefits of those. So -- but there's a number of pieces in there, but absolutely, we would still look to through pricing, productivity, we also get leverage on volume growth and that type of thing to make sure that we can do that.

Cedric Lecasble, Stifel. I have follow-ups on the midterm, what's midterm and what's long term? And actually, you gave some sense of where CapEx would go. You gave some sense of productivity programs kicking in and accelerating. So you have a view that maybe 2, 3 years from now, you'll have some positives coming in and helping profitability. So my first question is on A&P. You raised A&P everywhere over the last years. But the A&P investments in relation to sales is quite different from a region to another. So how should we think about that? How should we model it? Do you think North America is a benchmark for the other regions in 5, 10 years? Or do you think there are some specific reasons to believe that one region deserves less A&P than North America. And so last -- the second question, sorry, for this long intro, is about -- so kind of midterm guidance, should we understand [indiscernible] '25, '27 and that long term comes in '27, '28 because of all you explained before.

Yes. So I think we've said before -- I'll take the A&P and then you can take kind of medium-term, long-term question. So on A&P, we don't target a specific rate. And in some cases, if you think about sort of alcohol around the world, like we do have certain markets that are dark markets, as an example, where you can't do as much. So it's not necessarily like-for-like. This is what I tell the region -- all the region presidents are looking now to see if she is going to give me money. But in all seriousness, there is real differences, and we do take a very rigorous approach on looking at the return for that. So I wouldn't say from a model standpoint, taking a 20% and sort of straight lining it may not sort of be the right way to look at it. Trying to think what I would suggest for you on a model, I don't know, we'd have to follow up, somebody has to follow up with you on that, I think, on what we would suggest you model in, but...

Look, I mean, it's also not at the regional level. I mean it is market by market, right, because the opportunities with the consumer is definitely market by market. And a lot of it is going to depend on where the consumer is at in different markets at different points in time. I mean during COVID, I mean there were certain markets where the consumer wasn't going out, there wasn't -- I mean there was just no interest from the consumer and so we pulled back A&P investment in those places and then where the consumer was much more active, we invested more in those places. So some of this is also going to depend on where the consumer sentiment is in different markets at different points in time.

I think you did call out. I think we did call out a couple of places that we're clearly going to invest in Lavanya's piece on Western Europe. So that was actually a region that we did call out -- trying to be helpful from a script standpoint.

Medium-term guidance and the timing within that. I mean, look, it's -- in some ways, it's hard to put a date around it, and I do mean to be helpful, right? And I'm not trying to be unhelpful here. But as Debra said, if inflation comes down faster, we'll get to the long term sooner here, right? Because the part that's within our control and which was in my presentation is, when do we expect the savings from a supply agility program to come through? And on that, we know that we're going to start seeing more effect from fiscal '25 and it really accelerates from fiscal '27 onwards because that's within our control. We're executing this, we know we will get this done. But on the macro perspective, from an inflation perspective, I think that's a bit of unknown. And so I don't think it makes sense for me to be committing to a date when that will happen.

Sarah Simon from Morgan Stanley. Can we just stay on the medium term. You obviously reiterated your guidance for 5% to 7% top line and margin improvement at the full year and then kind of implicitly at the AGM trading segment. So I'm just wondering what's changed in the meantime? Is it that you think that to achieve the 5% to 7%, you have to spend more on marketing? Or is it that the supply chain agility program is yielding savings, which are more back-end weighted because obviously, we get the short-term stuff, but the midterm, I don't think I really understand why you're more cautious about the ability to drive margin because inflation has been an issue for ages. It was there at the full year, and it was there at the AGM. So that -- it seems to me it can't be that.

Yes. So I think -- so, look, there -- and unfortunately, the thing in Latin America sort of has muddled our message here. So I do get the issue. So clearly, in the near term and the change in the Friday announcement is -- was around sort of what is happening in Latin America. And so that is a very distinct issue sort of in and of itself. So how we're thinking about and what's hurting our margins in this sort of near run is really about that and not about sort of how we're thinking about medium term. So hopefully, that clarifies some of this. Look, I think the medium-term guidance that we reiterated. As I said, we don't -- there is not a change in sort of ambition of wanting to get there. I think as we have really started to look in detail what we needed to do to get to the 5% to 7%. And really, I mean, the goal is to get to the top end of that. As you get to the top end of 5% to 7%, the margin flows through. So as we started to look at what that spending was going to be and the consistency of the spend, that was very important in order to really look at 5% to 7%. And so then you start to take a look at the macro and some of the pieces on inflation, of which that has persisted and there's been things -- as example, I mean, the energy example is probably the best one. October 7 changed things in Europe from some of the energy things that we were reading. So there's just a lot of volatility out there on sort of some of the things that we're reading through. So I would say getting -- we now have much more foresight into what -- where we want to spend to be able to drive the 5% to 7%. And then you've got the macro uncertainty as Lavanya said, we know what we can do on productivity. And so this is just where the timing and phasing and lining that up really made us go back to reassess sort of that operating profit commitment and to make this determination of kind of the medium term to long term. I don't know if I explained that well or whether you want to -- okay, very good.

You mentioned in the growth formula, the 1% to 2% price is kind of back to what the business used to do. Curious what's happened to the elasticity. I mean in some consumer-oriented industries, people have a really good beat on the elasticity and how it's changed. And you just went through a period where you were pricing at a very different level. And I wonder, given what we're seeing about inflation, how much is the elasticity kind of informing the fact that we want to get the price increases back down maybe even below inflation?

Well, I think, look, one thing to remember, during sort of the COVID super cycle and sort of all of that, it really -- the volumes have remained really steady, really from TBA standpoint, to the industry. And then when you get to our volumes, it's been pretty steady. It really has been in this price mix as people really are mixing up. But when consumers are under pressure, this is really when it's not just our industry, but the basket that matters. And so what we see are sort of people making kind of smart shopping choices, and this is where to think you're going to be able to push through high single-digit pricing is just really not realistic. So that's kind of the pricing environment. Of course, we always -- we're always looking at our big brands and where we have leadership and where we have really precious liquid, we are always doing some bit of looking at pricing. We don't -- we're not just pricing to cover inflation, like we think about pricing more strategically on where we want brands on the price ladder and as such. So it really is a consumer back look and so that's what informs sort of this thinking of -- we're going to go back more to a -- this is part of the normalizing of, I would say, the industry and that 1% to 2% is a pretty good assumption.

I mean we had excellent data. That's the one thing that we have built over the last several years going back to like 2017 when we started to invest in revenue growth management tools and capabilities. And so I talked a little bit about these data sets that we have. And the thing about this is that the more data you collect, the more the better the whole data set gets because you're able to make better -- you get better insights through that. So that's one thing I'd say. The second thing I'd say is that in this business, especially on the aged liquids part of the business, it's critically important for us to get the mix between volume, price and mix, right, okay? Because we're disgorging barrels to fill more -- to fill them in, right? And so if you go through a period of no volume growth, you just -- the model just doesn't work, right? And so we take special care on this business to make sure that we have the right balance between volume growth, between price and mix and it all needs to come together because again, somebody has put in liquid for us to take out 12, 15 years to ago. And they didn't know about the pandemic, they didn't know about the super cycle, and they don't know if a recession was -- will be on the cards here either. And so we've got to -- we have to manage this in a very different way than just categories that do not have this aged phenomena.

One last question, Celine.

Yes, Celine Pannuti from JPMorgan. Yes, that was a follow-up on that equation. So you said that 2% to 3% is your mix. And I think the math probably was that [indiscernible] the last 7 years was probably around 2% to 3%. Now you presented that -- I presume a lot of that mix benefit came from North America, where we've seen how premium and super premium did develop quite well for you in the portfolio over the past year. So I just want to understand why there would be as much mix benefit, if I think it comes from emerging market that could be a bit of a headwind or you were mentioning down trading in Asia, in Latin America. So just trying to understand the visibility that you have on that mix driver.

Actually, mix has been a contribution across all regions. And North America was -- has not actually been the highest driver of mix benefit for us. There has been a mixed benefit that we've gotten in North America with primarily the shift, the category shift. So the shift into tequila has given us a mix benefit in North America. But equally, I mean, like if I look at Europe last year, price/mix in Europe was 11 points. And again, a lot of this was coming from premiumization and consumers trading up within Europe.

Yes, remember, in Europe, actually, our business is actually quite standard. So it's not -- if you think about Europe, looking like the U.S., it actually doesn't. It's quite a standard price portfolio. So actually Europe has had quite a bit of a mix up, but it's at sort of a different place than even sort of where the U.S. is.

And APAC has had significant mix benefit as well. India has had huge mix benefit. Hina talked about it in her section. I mean, with scotch has been growing at like 30-plus percent versus the lower segments, which are declining 2%. So we've actually seen that premiumization is a global phenomenon. Dayalan talked about it a little while ago about how people are trading up from mainstream beer to premium beer to mainstream spirits to premium spirits. We're seeing this across the board.

Okay. So this ends the webcast. Thank you for joining us.