Diageo plc (DGE) Earnings Call Transcript & Summary

Good afternoon, everyone. My name is Mitch Collett from Deutsche Bank's Consumer Staples research team in London, and I am delighted to be joined on stage by Nik Jhangiani, the CFO of Diageo. Nik, it's only been a couple of weeks since we saw each other in Dublin. I'm aware that at that event, you had your very first pint of Guinness. I guess the first question, I'd like to know the answer to is how was that pint of Guinness?

Actually, it was pretty amazing, and I wasn't quite sure how I was going to feel about it, and it was funny because my son kept telling me, do not try our first Guinness in front of the investors. You have terrible ways of controlling your facial expressions. That's not a criticism, but so just be careful. So the night before they took me up to the bar and I actually poured my own Guinness. It's quite a procedure, it's 6 steps. So it's quite exciting. I actually did quite well. I'm going to say something I'm not supposed to say. So is this -- being I shouldn't say that. I'm not just saying it already. No, not -- okay, it's being webcast. I won't say it. But if anybody wants to know what happened, I will tell you separately. But I tried my first Guinness and I tried side-by-side the Guinness 0.0, and I swore to you if someone wasn't standing by me, telling me what I should be kind of looking for in terms of the difference in the taste? I would not have known. So good experience. Having said that, I'm still pretty much in love with this brand. So -- well, I just add it to my repertoire. Let's put it that way.

It's a great product. So hopefully, the first of many. So you're roughly 9 months into the role still a relative newcomer to Diageo. What are your reflections on Diageo as a business? What has impressed you? And what do you think needs more work?

Yes. It's been 9 months. It's been a long 9 months. I've been on the road a lot, which has been really positive because I've literally outside of getting into Latin America physically as in into some of the larger markets there. I had a chance to meet the whole team in Miami. So I have been pretty much everywhere from South Africa to Nairobi to Nigeria to Shanghai to Singapore, I'll stop naming them. But yes, I've traveled a lot. But you know why? It was really important was to get a really good sense of our people, but also get a chance to meet our customers, right, and get a sense of what they like, what was challenging, what would they see in terms of market trends, et cetera. So it's been amazing. But what clearly was evident was we truly have some of the world's best brands, right? We are leaders across multiple categories, if not most of the categories in which we play within the Spirit space. We have been -- I've been blown away by the level of our marketing. And I think our supply chain capabilities are fantastic as well, right? And it's quite concentrated when you think about that. So very solid there. But ultimately, it's all fueled by 3,000 very passionate people who really believe in the business, really believe in the brands and want to grow, right? It's been a challenging time for the last couple of years, I think, coming out from what happened in November '23 with the profit warning and then obviously, just kind of the macro situation, the slowdown and the destocking, et cetera, so incredibly passionate people who want to win. So a lot to kind of rebuild in terms of that confidence internally, but what we can deliver externally as well. On the flip side, I think there's lots of opportunities, right? And I say that with a perspective of, while I think we're really solid on the brand side, I think we haven't necessarily been as solidly synced up when I think about brand and physical availability and commercial execution, right? And I see that being even more important in a space where it is quite crowded when you think about TBA and if you even think about the Spirits world, right? And whether it's walking into a bar and seeing the back bar display and if you're looking for something, it's hard to find. When you go on to a menu, and it's not just going to be 1 category or 1 product or 1 brand that's listed or called out, right? When you go into a shopping aisle of a liquor store or a retailer, it's a very crowded space, right? I mean, in terms of the number of brands. And actually, what's actually grown even within categories of brands is flavor proliferation, right? Vodka being a clear example of that. So I think it becomes even that much more important around how good are we at execution at the point of sale where you're truly able to link up physical and mental availability. So I think there's a lot of opportunity there. Clearly, I think we have opportunities when you think about metrics in terms of how we are focused and measured. And I think, obviously, continuing to look and lead the way from a growth angle, given how large we are in terms of within the industry, particularly in North America, and a big part of that, I think, is also how we think about RGM and pricing and mix that continues to be relevant when you link it back to consumer occasions, choices, channel structure, your pack price architecture, et cetera. So there's a lot more in that space, I think that we can do.

Understood. So 2 weeks ago, you launched Accelerate where you're targeting $500 million of cost savings. And that the event in Dublin gave some context around the 4 buckets of savings as you see them. So perhaps let's dig into each of those. So the first one is A&P. Where do you see the biggest opportunities to make your A&P more efficient? What makes you confident you can do that without harming your brands? And to what extent does digital and AI play into that opportunity?

Yes. So I would actually take the 2 buckets together because I think there's A&P spend and there's also trade investment. And then I'm going to link them up a little bit, so you get a sense, right? So I think let's start with the most simple one around A&P spend. And I'm just going to give you that first bucket piece in terms of the split, rough numbers, but roughly about 40% of our spend of that bucket of circa 3.6 billion is in what you would call media scale and reach. So what are you really doing whether it's through print, digital, social, TV, et cetera, in terms of back to that mental availability piece, right? So good dollars there, and I'll come back to how I think we can do that differently, okay? Then you've got linked to that is very much about circa 20%, which is your development cost or you're nonworking as you might call it, right? So that's everything from your creators to your media buying through content generation et cetera. And so that's about 20%, all right? So I think when you look at those 2 holistically, first, I think there's a big opportunity to bring down that nonworking. And this is where I think AI, to your point, comes in and better digital tools because all of our media buying today is so disparate and so fragmented. And there's no reason why it should be that way, particularly in a world where we've got great tools and you've got an ability to even narrow down the number of agencies that you work with even absent tools, right? The second piece is there's a lot of duplication of costs because in what has been quite a decentralized model within Diageo, even their global brand teams. There's almost been an ability for local teams to content to create and actually use some of what their local content creation is versus what is the global brand even though they might be sticking to brand parameters, right, of what are the intrinsics of the extrinsics you want to talk about, but they're driving duplication. Why? Because they've been allowed, right? So in some ways, I almost say, well, if we change the way we work in terms of that development, where there's co-creation between the local brands, local companies or local markets and the global routines. And it doesn't have to be in every area or category. So gin, for instance, where we know the U.K. is very big in gin. We know, for instance -- Spain is very big in gin. We know there are certain countries in Latin America, they're very big in gins. So if they are content co-creating you avoid that duplication of costs, and then you get the benefit around the fact that, that content that has been created gets better where in and where out, right? Because you're running it more through a larger number of markets. So your returns on that are a lot better as well, right? So I think both in terms of nonworking through tools, content creation, co-creation, the virtual studio that we've created that allows you to actually take something and do it with AI within seconds. Where you actually don't even need to bring another agency in when you're thinking about what's going to be relevant for GB versus what's going to be relevant for Spain, for instance, right? And how you can customize that within seconds, right? I was with the CEO of WPP a week ago, and he was in our office having drinks with us and he was showing me literally on his screen 2 ads that were running side by side, right? One that it costs tens of millions to build and create and one that have been created by AI, okay? I actually got it wrong in terms of which one is which. So it just tells you the power of what's available out there that allows us to think about that development cost. But the media scale and reach piece, I don't think we've been very good at how we're allocating that spend back to a full cohesion across the line when you're looking at that mental and physical availability but sufficiency of spend behind the brand and also returns both on a short-term and a long-term metrics. So I think you've got to look at it holistically, right? And I don't think we've been very good about doing that. So I think there's been a lot of money put and some of it is great, but there's an opportunity to really rework that. And then you've got your commercial A&P piece, which is really about your commercial execution, right, and what you're doing, point-of-sale material, for instance, what you're offering in terms of promo activity. But that also links to your gross to net, which is your trade investment and both of those have been outpacing our top line growth. Well, that's not acceptable for me, right? So I think there's a big opportunity in terms of how we look at rationalizing that spend. in a more effective way to drive more pay for performance as well, right? But that's a multiyear journey. That doesn't happen overnight, right? So I think when I look at those 2 buckets in combination, that clearly is an opportunity for us to go after, right? And actually, to your point, not compromise our brand equities and actually invest better dollars with better returns around growth.

And if we can dig in, I know you covered trade spend optimization there, but is there -- how do you think about managing trade spend such that it doesn't impact affordability given that affordability is clearly something that consumers are very focused on now?

Yes. But I think the challenge in your question is you're thinking that I'm going to cut trade spend. I'm actually talking about optimizing my trade spend and linking it to more pay-for-performance. So I don't want to take it away from my customer, but I want to link it to what is consumer facing. And what is ultimately reaching them as opposed to funny money that they just get to deduct and keep in their buckets, right? That's the difference. So it's not necessarily about reduction, it's about optimization. With optimization, that could be better allocation and some reduction as well. But there's duplication of trade spend both in trade investment and commercial A&P as well. And within commercial A&P, the other piece that we're not doing very well is how well we actually do our POS for. And clearly, that's an opportunity to. So I don't see us in any way risking our brand equities. In fact, I see us being over-indexed on investing around brand development, around brand equities, particularly where growth is.

Understood. And then maybe the next 2 parts, we'll try and do those together. So overheads is part of it. But I've always thought Diageo is actually a very efficient business. So interested to know how you can take money out or make cost savings on overhead. And then also supply chain because you had the supply chain agility program, which I think is still running. Are these savings incremental to that? Or is it all sort of woven in together.

So I'm not going to get into what's incremental or what. Because I'm drawing a line in terms of what was in the past. I can't really talk about that, and I'm talking about what we can do for the future. I think to your point around overheads, you are absolutely right. Actually, when you look at it on the element of how our overheads are and how they have been as a part of revenue, actually, we run pretty lean. My challenge back would be, I don't think we necessarily have invested in the right places. And in some places, again, we've got excess and fat in duplication. What do I mean with that? With the fact that we have a very decentralized model, we build a lot and invest a lot in terms of capability tools, very much at a local level, right? We don't leverage our scale, right? We haven't truly defined clear operating principles because I think Diageo, particularly in the last 5, 6 years, has grown tremendously, right? And we haven't really defined what is the role of a country or a market, a region and group. What needs to stay very close to in the market is consumer and customer. You don't want to lose that relevance. You have to have that localness, right? But that doesn't mean that everything needs to be tailored and done differently, right? And I think that's where we need to leverage our scale and how we build capabilities and look at our business end to end. And for me, it's not so much around savings there, it's about reallocation and how do we invest smarter. One of the areas, for instance, that I talked about was I don't think we have best-in-class commercial execution. Where in a crowded space, you probably need that even more. I don't think we've been structured as we think about marrying up a consumer choice framework with our brand portfolio strategy with our market growth framework with how we need to think about outlet occasion segmentation, right? And a lot of that last piece and bringing that all together also the rubber hits the road when you have really good feet on the street, so to speak, right? The feet on the street that are not in their order taking and/or merchandising, feet on the street that are actually helping the customer upsell and drive their margins and ultimately drive our distributor and our margin as a result of, right? But only if it's linked to clear occasion channel app price architecture, RGM is another area where I think we need to build capabilities at the central level and have some element of that local. So I think that's the operating model piece that might mean back to that point that I made earlier or when we talked about this, was some of that might need to be reinvested in different areas to build capabilities that we don't have as strong today.

Okay. So you've talked about how the operating model is changing and how that's all been done as part of Accelerate, I guess can you talk about how you are ensuring that employees are engaged and behind the Accelerate initiative because it sounds like quite a big change in your approach?

Yes. Listen, I've been I've been actually very positively surprised by the level of engagement, both from when I've been out in markets. But also, as I've talked with the senior leadership group, we've had the opportunity to do to large meetings with them. These are 130-odd top leaders, then also with the exec and then with the Board as well. And I think bringing clarity and structure and being very clear on the deliverables and the outcomes and the metrics and the incentives or link up. So it's not doing one without bringing it all together. I think we've got incredibly passionate people, as I said, we are excited about the brands and what we can do. It's not great that they feel pretty beat up in terms of what's happened in the last couple of years. And what that's meant in terms of performance, but what that's also meant in terms of share price, right, for at least that large top cohort. But we've got metrics all the way down that are important for everybody as well. And I find an incredible amount of energy from the organization around what is Accelerate, because it's not Accelerate being seen as a cost savings and a cost-cutting program. it's accelerated to allow us to invest where there's growth and actually bring more structure and rigor, but also in some ways, simplicity to how we think about our business, right? So to date, but more to come as we continue to go down that journey.

Okay. So another aspect of Accelerate is the commitment to sustainably deliver at least $3 billion of free cash flow from next year yes. And maybe we can talk about some of the components there. So CapEx, first up. I know there's some projects still in flight. You've also said there is going to be a glide path down. I think the level last year was close to 7%. I remember when the Azure had a CapEx to sales of closer to 4%. Can you give a bit more context on how you manage that glide path down? And what is the sustainable level longer term?

Yes. So I think probably for the last four years, there's been an elevated level of spend. And quite honestly, it's been even higher than the 7%, okay? And in absolute dollar terms, you're talking about circa $1.3 billion to $1.5 billion a year, all right? So it's been quite significant. Now keep in mind, that was very much on the back of a new growth algorithm that was put out which the narrative got all consumed by just one element of that, which was the top line, which was the 5% to 7%. And I think keeping aside the external narrative internally, that's what was being driven for. So clearly, if you're driving for that, well, all your choices in terms of investments to be able to support that level of growth, go into capacity, go into maturing liquid, go into tools that you're creating so that you can hopefully be able to recognize and capitalize on that growth, all that kind of stuff, right? Now we are where we are, right? And what I'm trying to make sure that we're doing is it doesn't make sense to stop things that are midstream that are 60%, 70% kind of there. And we need to continue and then we need to look at how do we effectively really look at that asset base and sweat that asset base a lot more as we go forward, right? And that's where the supply chain piece comes in. Because for me, it's not so much just about procurement savings, et cetera, it's really about how much more are we going to be looking at efficiency of use of that asset base as we look forward, right? So clearly, as I look at CapEx beyond '26, I do think there's a glide path. I've said in the short term, in the shorter to midterm, we should see that coming down more towards the 5% to 6%, right? I think we also have to keep in mind within that is there. And I think in some ways, you have to pull out the beer piece separate to that. because you were with us and some of you in the room might have been with us in Dublin. The Guinness growth is very, very attractive and continues to be something that we feel we have not leveraged as much. Part of it has been linked to capacity, right? I wish we could rewind the clock and have pulled back on some of the whisky and the tequila and the Chinese whiskey and India, a single mall type of lay down of capacity and put more into Guinness. But hey, listen, hindsight is a great thing. But I think we just have to separate that out in terms of how we want to look at that growth profile as well of the beer business. So I think if we look at that 5% to 6% and then over time, for me, it's also about not just that percentage because I can be misleading. So what do I see as a good absolute level of spend. And we'll come back with more color around that in terms of absolute dollars because I think this is a business that also needs to focus on absolute dollars on so many different levels, whether it's on free cash flow, whether it's on operating profit and a and gross margin in dollars as opposed percentages, which sometimes can be very misleading. So I think there's a lot more for us to do on CapEx as we look forward. I think maturing liquid is another area that I'm really looking at with a different lens in terms of both scenario planning in terms of growth, but not just growth within whiskey, growth as we look at categories, even crossover today. versus they probably didn't as much in the past. But it's a complicated process. That's because you're laying down liquid for what's going to be consumed at a minimum 7 to 10 years from now. But it's not just about the quantum of liquid any given year. It's also the flavor profile of each of those liquids that you need for your blends, et cetera. So a couple of things changing there, moving away from this historic bias of that was the growth, and that's what's going to come back. It is a different world, particularly when you think about cross-category growth. And then also a bit of a risk-averse mindset around I always need to have enough liquid, because I never want to be out of stock. And I definitely never want to be out of stock. I want to be on shelf, right? But I also think that we can manage that by being more dynamic in terms of how we look around managing that throttle around laying down liquid. But ultimately, our free cash flow is going to be growing also from top line growth, operating leverage and driving that piece. That's critically important as well, right? So we've got to put it all together. And like I said, the 3 billion of floor on which we feel very confident that we can continue to grow by using all of those multiple leads.

Okay. Last question on Accelerate and then I promise I'll let you move on something else. So the last point is that you have targeted 2.5x to 3x net debt to EBITDA by 2028?

No later than.

No later than 2028. Apologies. You said that within that divestments might play a role, and I think you used the word substantial. I appreciate you're not going to tell me what you're selling today. But what does substantial look like? And what are you solving for? What are you looking for in the assets that you would look to potentially sell?

Yes. So first, what I'm solving for is really stepping back and looking at our strategy and making sure that every one of the assets that we have is rightfully a part of our strategy as we look forward, right? So that's the first piece. The second piece is, alongside that, how capital intensive are some of those businesses? And how much of a drain are there as we look at what I want to continue to focus on delivering in terms of fee cash flow. But most importantly, I would say it also links back to what kind of valuations can I receive and particularly where some of those assets, again, not get into details might be quite interesting for a number of different buyers, right? And actually belong better in line with their strategies than mine, right? So I don't see this being driven in any way by a unilateral focus to delever, although I think clearly, that supports our deleveraging targets. And hence, both from a valuation perspective and a time line perspective, have not, in any way, strapped ourselves in because we need to do what's right for realizing maximized value, but because those are not in line with our longer-term strategy.

Okay. Thank you. Let's move on to the U.S. And there's obviously a lot of debate about whether the softer U.S Spirits market growth is a function of cyclicality or normalization or structural factors, including things like GLP-1. What are your thoughts? What are my thoughts.

So I think today, the way I see it today, right? Is, I think, largely the weakness is being driven by the macroeconomic environment and the challenges on the consumer wallet as well as the fact that you do have this whole destocking cycle in some ways from what was out there in the past, and there's a lot of noise and how that keeps moving. I do believe largely keeping aside tariffs and what's been happening from a tariff perspective in terms of some of the stocking into the U.S., which I think we called out very clearly with our third quarter results. I do believe other than that, largely that seems to be behind us. But again, I say largely, right? We'll continue to monitor and track that. To your question around the structural versus cyclical elements, I think it's probably the biggest point in my mind that probably keeps me awake at night, right? Why? Because keeping aside macro I don't think there's enough data to categorically one way or another, say, these are not having impacts, okay? I mean I'm going to try to break down what are the 3 biggest ones. And what I think is kind of an underlying theme across at least 2 of them, or broadly speaking, a bigger theme that we need to be conscious of. So you look at cannabis, and I think, hopefully, a number of us in this room who have been in the U.S. and cannabis has been around for a long time in a number of states from the data that we have to date. And again, I say this is something that we need to monitor. To date, we continue to see that, that is not having much of an impact on Spirits consumption in particular. And in fact, most of the occasions where people are consuming, whether it's edibles, chewable, smokable, in some instances, drinkables and I'm going to come back to that. There's a lot of co-consumption with Spirits as well or with alcohol, right? So it's not like you consume one or the other, and that's it, there's co-consumption. But it's one that we need to keep tracking. Where I think there is a lot of potential noise. Rightfully so is this THC hemp-derived beverages that are meant to be at a certain level that clearly are not just even crossing those levels, but crossing state borders and getting into ways of distribution that kind of was not what the farm bill was intended for, right? So it's an area we need to watch because either it's going to get more regulated, right? And if it does, is that something we want to play in and/or something is going to have to give that. But it's one that we need to watch. GLPs to your question. again, from the data that we have seen, and there's probably about 12 million, I'm talking about people who've been on it, but maybe even the number is higher. But people who have been on it or have been in and out, et cetera. Again, to date, we're not seeing a significant impact in terms of their reduction of Spirits. And I'm going to distinguish TBA and Spirits because I do think we're not seen on Spirits, that could be something different on their side of things. For people who are drinking larger quantities of a carbonated or nitrogenated product, that probably has some impact on gut from what we're hearing, right? But again, some of that is anecdotal as opposed to true data. I always joke, and I'm sure several of us in this room have friends who are on it. And I always joke and say, well, if you're going to be on GLP-1, so you're going to be losing some weight and looking good. You probably want to go out and show yourself off and you probably want to be want to consume because that's what you tend to do, right? Now how you consume what you consume might be different. And I think that's where we're going to continue to stay with that trend because I don't think it's going away, right? And I think it's about truly realizing if there are impacts, how do we tailor our offering and our portfolio. And I'll come back and talk about that because that's the broader theme to meet that up. And then I think the third piece is really a Gen-Z is drinking less, right? Again, it's one that we need to track and watch. It's probably going to be the largest cohort of LPA population. If you look at the next 5 years, it's coming in. to the legal drinking age. They are definitely drinking better, not more, is what we see, and they're definitely coming into Spirits earlier than the millennials of the same age cohort that these guys are, right? So clearly, there's some favorability, but the drinking they're definitely drinking less. What does that all kind of play out when you think about GLPs, in particular, maybe cannabis? And then obviously, this whole drink less or not drinking is what does it mean in terms of moderation? Because if that is a continuing trend, and it's actually only picking up steam, how do we look at that? And we've been doing some research, which is, again, early days, and we're doing it across 21 months, but we've got some early indications from both the U.S. and GB. And there's almost 10 things that people are looking at when we've interviewed them, right? Now again, take all of this with a bit of pinch you salt when you do traditional research, because everybody is going to go to you and say, oh, I haven't drunk for 3 months. I'm drinking less and I'm -- or I floss every day and they haven't floss for a year type of thing. So it -- but it's good data points for us to think about, right? So at one end of the spectrum, we hear people say, well, I'm actually just not substituting. Now what they're doing with their lives, I don't know, but I don't want to be hanging out with them, but they're just not substituting with anything, right? So they're drinking tap water, they're drinking milk, I don't know, right? Then there's an element of those that say, well, if I'm drinking thing, I want something that has functional benefits. So I want something that's good for me too. And that's a space that we need to think about. Then you've got people who are just saying, well, I'm consuming hot beverages, drinking soft drinks or drinking premium soft drinks. So in some ways, there are ways that we might be able to play, particularly when I think about functional right, elements. But then when you look at what they're drinking if they are drinking and staying in the alcohol space. There's 5 things there, too, that are happening. One, RTDs okay? So they're looking at that as a way of controlling either their ABV and/or ABV and calories because there's very clear transparent guidelines in terms of what that is. So there's RTDs. There's smaller formats that people are going to because, again, it's a way of portion control, so to speak. There is a whole focus around this, I'm making better, not more. So how do you continue to play into that premiumization piece when people are going out I'd rather drink one, but really good stuff. And there is 2 other pieces which are quite interesting. One is people are drinking 0.0, so, nonalcoholic, right? And then the last one, which was quite interesting for me is we want lower ABV products. Now is that lower ABV products in RTEs, it is low ABV actual Spirits bottles, et cetera. That's a space where I think we need to think about because in my mind, I was thinking, well you can make your own low ABV, just for half a peg as opposed to a full peg instead of a double, you have a single. But I think if it comes back to control and being mindful on your consumption, well, then you know what you're consuming when you have low ABV as well. So I think that's where we need to be focused. When we think about moderation across how it might play across all of these vectors, right? And how do we think about addressing that, particularly in those 5 or 6 spaces where we have a right to be able to play and win.

Okay. I'm conscious we're getting short on time. But earlier, you mentioned focusing on dollars. And I think I've heard you say in the past, perhaps as an organization you've been a little bit too focused on percentage profitability versus absolute dollar. Can you talk about what that ultimately means when you think about operating leverage going forward? And to what extent is that reflected in incentivization? Or is that perhaps something you're going to look to change?

So on the latter, yes, absolutely, we are having discussions with the RemCo. but I think as a Board we'll make the right decisions and come up with what do we see as the right metrics because I'm a firm believer around, do you have the right metrics and you are measuring those to deliver those, you need to incentivize them as well as simple as that. So there's no 2 ways about it. And that works time and time again. So we've got to be focused on the right metrics. I think it comes back to your question around have we had some of those right metrics and has there been an overfocus on margin percentage. And for all you analysts, including you, Mitch, who loves to do your models, right? I'm not going to make your life easy. It's about dollar profit, right? And it's not about just being able to put into a spreadsheet how much is my margin percentage going to grow. And how does that -- what does that really mean, right? So -- but on a serious note, I think the challenge has really been it's potentially driven wrong behaviors or some wrong choices in terms of where we want to play or not play, because of margin percentage even though absolute dollars and value pools are quite attractive, and we should be playing there. RTD is a perfect example of that. Where I actually look back and I've come in from the Coca-Cola system where we've gone into RTDs, but why have we gone into RTDs or why did they go into RTDs? Well, because it was margin accretive. And it was a very similar business and a route to market and all that kind of stuff. But in some ways, you left that space open, right? So did beer companies come in, right? Well, why? I mean when you think about Diageo and actually Smirnoff Ice and the fact that even with an inconsistent and unclear strategy around continuing to invest and grow there, it still stayed live. It's a great product, right? And we have a huge opportunity when you go back to this element around the fact that it's a recruitment tool. If people are drinking less and drinking better, there's either the premium Spirits, but if they're also looking at ABV and convenience, right, back to this point around moderation, RTDs play a very important role there. If you marry it up with the right brands for yourself, you actually build brand equity because they're coming into Spirits earlier. So I think there's elements of what we need to do to change that mindset and actually play in value pools outside of just RTD, and I can give you several examples, but I know it's 34 seconds. But there's examples to where we've not made the right choices, which are going to change going forward.

Okay. Thank you. I'll try and squeeze one last question in. We've going to talk about India. It's been the great hope for the category globally for a number of years, but now we're nearing a free trade agreement. How do you think about the role India plays for the group going forward?

Incredible. Well, listen, I think India has played a great role for the company so far, right? But I think when you think about the fact that it is one of the largest whiskey markets. And it's not just about the local brands, but really are some of the IMFLs and the more premium opportunities as well. That reduction clearly is something we'd want to pass on, which would stimulate volume and top line growth, right? And it's a category in which I think the team has done an incredible job building out our presence with both local and foreign brands. And they've actually expanded both the repertoire and the drinking occasions and the drinkers who are coming into that space. So super excited about that.

Great. That's a perfect place to leave it, Nik. As always, it's been an absolute pleasure. Thank you very much.

Thank you.