Diageo plc (DGE) Earnings Call Transcript & Summary

Good afternoon, and welcome to Diageo. I'm Sonia Ghobriel, Head of Investor Relations, and I'm delighted to be here with you today. Thank you, everyone, for joining us in person and obviously, we're delighted that we have a number of you online as well. I'm joined today by the executive team and senior leaders, and we're looking forward through the course of the afternoon to take you through our strategy update. Firstly, I'd like to remind everyone online and those in the hall today, that the discussions today may contain certain forward-looking statements, which may refer to, estimates, plans or expectations. Please refer to today's release for more details, including factors that could lead actual results to materially differ from those forward-looking statements. With that, I'd like to hand over to our CEO, to Dave Lewis.

Good afternoon, everyone, and thank you very much for being here. On behalf of the Diageo executive, I'd like to extend a very warm welcome. We're delighted you're here, but it's our responsibility, first and foremost, to make sure you're safe this afternoon. This is not a building that you know. There are no alarms. There are no anything planned. So if you hear a signal, it means that something is happening and you will need to evacuate the building. In every room, you're going to be in as we move you around the place, there will be someone there with a high visit if this were to happen, please follow them out of the building. You know not to use the list the escape stairs on either end of the building, with the escort you out of the building if there were to be, but it's very important to where you're with us, we make sure that you're always safe, okay? This team, you know in to a large extent, 2 new people that I want to call out. Natalie Bickford, Natalie, where are you? There you go. Natale joined us from Sanofi's Chief People Officer recently. And this gentleman here hasn't officially joined us. But Sujay, where are you, there we go. Sujay is joining us from Procter & Gamble on the 15th of August, and we'll be the President in our Asia Pacific region. So this is the Diegao exec.I'm not going to ask either of those guys to speak to you this afternoon. We'll let them get better in a little bit more before we do. But you are going to hear from most of the other people in the course of this afternoon. What are we going to share with you? We're going to share with you a plan that has 2 very clear focus. A focus on spirits, including RTDs, we see that as one market. We see it as a very robust category, and we think we can grow share in that growing category. And we're going to continue the double-digit growth that we have on Guinness today, and we'll share with you the plans we have to continue that growth and indeed gain more share. The plan we'll share with you, we'll talk about how we retain -- very much retain the premiumization capability we have that has created so much value historically, but we are going to broaden and be a little bit more active with our portfolio and allow us to serve more consumers on more occasions as we become more active in category strategies as opposed to just brand-led.strategies. You're going to see some of those this afternoon. We're really clear that we have a turnaround to execute in North America, but we need to do that whilst we continue to accelerate the growth elsewhere in the world. And I think very importantly for investors, the way that we're going about this turnaround for Diageo doesn't require us to reset the profit in order to support the plan. You've heard me talk about the need for us to develop a more agile, more competitive operating framework. We've been working hard on that. It's also significantly more cost-effective than where we are today. And we're investing $1.2 billion of restructuring, $1.1 billion of that in the operating framework work and another $100 million in the supply chain. We've charged $752 million of that in F '26. Cash goes out in '27 and the balance will be spent and committed in '27. That investment saves us $1 billion, right? About $850 million of that comes from the operating framework work and $150 million comes from the supply chain. And the intention is that I'm going to invest that back into advancing some innovation, selectively improving our competitiveness and indeed protecting the underlying profitability I talked about. I will come back to talk about what I mean by investing in competitiveness because it seems that everybody thinks that's just price. It's not just price. In fact, it's actually quite a lot of not price activity. You'll see it particularly in the North American plan that John will share with you, but I'm sure we can debate that later. This plan, including the restructuring charge, generates $8 billion of cash over that 3-year period. And with the sale of EABL and the conclusion of the RCB deal, we anticipate the leverage will drop into the middle of the range in; 27. And if we weren't to change anything, this is obviously a hypothetical that would allow us to be down at [ 2 ], i.e., below our current guidance by '29. That's whilst we increased the CapEx to $1.25 billion a year for 3 years. and we'll share with you how we're going to spend that. We retain our capital allocation priorities. And as we lower leverage, the Board can then explore whether to change the dividend policy or indeed to think about share buybacks. The other thing we'd like to be really clear with you about is the plan that we're sharing with you today is an organic turnaround, very aware of lots of speculation, lots of things that people write in the marketplace. Being clear, we're not buying, we're not selling. This is an organic turnaround and we're basically, we have what we need to turn the business around. Finally, I'll share with you right at the end how we simplified the incentive programs inside Diageo to align it to that investment case. So that's what you're going to see from me and the team this afternoon. I think the summary of it is we built a plan we believe in. We're really clear we've got an awful lot of work to do, but we're very confident as we do that work that we can return this business to a very strong, very consistent creator of shareholder value. So how are we going to share that plan with you? This is the agenda. It starts with me. I'm afraid you've got me for a little while. I'm going to tell you what we've been doing over the last 6 months. particularly as it relates to strategy and particularly as it relates to the operating framework behind that restructuring plan. But then the rest of the day, this is not a -- I remember somebody telling me about previous Diageo Capital Markets Day. This is not a marketing show and tell. In fact, you're going to see very little in terms of pure marketing is real from us today. We've tried to construct the agenda through the lens of the investment thesis to try and address the questions that you ask us and other commentators comment on. So we'll start with the market opportunity and Hina, our strategy lead, we'll share with you our thinking on how we see this market evolving and the assumptions that we're making about each of the regions over the next 3 years. And then we'll also move to how we think we can win. And that really is the category strategy. So Christina will share with you a couple. And we'll share with you a couple because we've only got time to share with you a couple, and we'll share with you a couple, which is with enough detail so you understand what we're doing, but not enough detail that we give anything competitively away. So just be aware, we'll always try and walk that line that we don't give too much away, but whiskey to key the RTDs. Then you're going to get a different sort of Guinness presentation. And Guinness has got massive amount of marketing she could share with you. That's not what she's going to share with you. We're going to share with you the investment plan on Guinness and how it is we're going to drive capacity against that growth agenda. We'll then take all of that work and then we'll go to 2 regions. John been in North America 3 months. He's going to share with you quite candidly what he stand and what we need to do. It's fair to say our North American business has been underperforming for quite a while. The growth of tequila, covered up some of that. We now need to face into some of the realities. And John will share with you exactly what we're thinking, what we're doing and how we're going to phase ourselves as we turn around the North American business. I've asked Alvaro to share with you where we are in Latin America because actually of all of the regions in Diageo, the one that's most advanced down the category lens that's most a reflection of where we're going for the group in total is actually in Latin America. So some really good and very clear examples of the direction of travel in what it is Alvaro has been leading for in Latin America. You will then -- the other question you've asked of me many times is the deployment of capital. inside Diageo, and -- will take you through how is not only are we going to deploy that $1.25 billion of CapEx, I'll also talk to you about working capital, mature inventory, and we'll also finish by touching on how that supports customer service. We'll let Nick bring that all together in terms of the financial algorithm, and I'll pop back up right at the end to give you one slide on the incentive program and how we're changing that. We'll then have the opportunity for Q&As in this room. And then we're going to go downstairs. We got an innovation showcase for you for half an hour by which stage it will be transformed up here, and we'll invite you back up here for a drink all the time able to answer any and all of your questions. Big thing for me, my team is we've got to be bang on time because we've got people on the webcast and we need to make sure that we hit. If there is any time in the sessions, we'll take questions but only up to the limit of the time. Otherwise, we'll do it at the end of the day. Okay? Cool. We've been busy. We have been busy. It's been a busy 6 months. We shared some of this with you before. We started from a very objective review through the lens of multiple stakeholders how we were performing. From a market point of view, from a competitive point of view, a very extensive piece of work. We then, as an exec team, looked at 5 strategic alternatives to how we would develop Diageo going forward. evaluated all of them and I made one clear recommendation, and that's the recommendation we're going to share with you today. We then worked a lot on what does that mean in terms of a competitive operating framework. And we started some active market testing. As we were thinking about the different strategies, we actually started testing some things, and I've asked Christina to give you a little update on how some of those testing has worked because we've been testing our own strategy as we develop it to see whether it's as effective as we would want it to be. That allowed us in April, and you've got 2 or 3 of our Board members, the Chair, Susan has said and Karen, who are here today, and you can ask them. We took the recommendation to the Board in April. They bought into the proposal, including the operating framework I've talked to you about. And actually from that, we appointed the leadership team. So I know people today are talking about announcements going forward. The thing I want to land with you is we're quite a long way down the track in terms of the changes that we're talking about. So the leadership team, i.e., below the exit was appointed in May. Those -- that team of 90 came together in [ 20 and 21 in Edinburgh ]. and we shared with them all the work that we have done, all the case for change, all the analysis we've done so to recruit them to what it was we're doing together. And then together, we designed the last bit of the operating framework and through June all of the operating framework was cascaded through the organization, including the budget guidelines that we've given. And so by the first of July, important date for us, we not only had to reset the strategy, we had targets. We had the operating framework live, okay? So where we are today, September 1, particularly in the go-to-market organizations, we're about 90% of the way implemented. Now all businesses you cover will have their own frameworks for this. I'm going to articulate it through this line. You'll see this chart a lot in Diageo going forward. How do we organize purpose, strategy behavior how do we operate as a complete entity and the culture that comes as a result of all of that. So I'm going to do this very quickly. It's something that's very dear to my heart as a person leading a business the purpose and the way we set the magnetic north of the organization is massively important to me and very important in terms of how I build the right culture. Some of investors love to have that conversation with me. Some -- not so much, okay? So I'm going to go for the not so much. And if you want to talk to me about it afterwards, I would love to. This is the purpose of Diageo as I articulated a number of years ago. It served the business really very well. But there was quite a lot of commentary as we did this. We consulted with a huge amount of people as we did this inside the business. And there was a feeling that this has served its purpose, but it actually wasn't a fair reflection of who we were. And actually now was perhaps the time to move on. And actually, in terms of every day, everywhere, is that where we want to be in terms of responsible going forward. And while celebration is important in our category, it's only 40% of the occasions that people actually engage with our category and therefore, will be somehow limiting ourselves. So the other thing I should say to you is I don't -- we don't want to -- as a team, we don't want a purpose that becomes a strap line for the business. We want the purpose that articulates why this business exists and something that allows everybody that works here can see how it is they make a contribution to that. Here is the new purpose for Diageo, crafting, iconic drinks, chosen for life's moments. In a good purpose, every word needs to mean something. The element of craft, if you're new to this industry, one of the things you appreciate massively just about everywhere is how much care and craft and skill there is. If I go with you and to Scotland and walk all of the capabilities in that it's quite mind-blowing where the craft exists inside Diageo. And if you look at the history of how some of our brands were created craft is very strong in our business. This idea of iconic drinks, right, very important through the lens of consumers is the drinks chosen. Yes, i.e., to be asked for by name in a bar but also to be chosen as a partner in customer and all other stakeholders places. For life, not just for celebration, yes, some little moments of joy, but there are other times when people want to enjoy our category. And the moments that matter. Again, I'm not going to -- it's really important to us. It's important that you know about it. If you want to talk to me any more about it, grabbing the bar later. Strategically, where do we get to? Look, TBA, is really quite misleading for us. You come to this market a fresh the fact that we think about all of our targets through the lens of TBA, not appropriate not appropriate. The 2 categories we're in, full-price total spirits, not international spirits or premium spirits, total spirits, full price ladder, including RTDs, right? That's market #1 for Diageo going forward. premium beer with Guinness market #2, right? When you get to the analysis of why things are changing in here, it's very different across TBA. TBA doesn't help us. So we're going to be really focused on winning in those 2 places. And it's going to be nonnegotiable across our business that we need to rebuild the capability in the on-trade, right? It's patchy post COVID around the world about recovering that -- we don't want to leave that to local market decision-making. We're going to drive it through all of our operations. saw this from me before. I talked about in terms of differentiating competencies. How do we win? Well, relevant brands, you know a lot about brands, but relevant brands means across a price point, not just one part of a price point in competitive category strategies. We've given you some examples. You're going to see some more. But a key enabler of this strategy is the ability to do that. The second is that we engage with our customers and our channels in a way that, actually, quite frankly, we haven't done before as Diageo. So in how we go to market, how we partner going to market a really key capability that we need to build. And you'll speak to you later, but the need for us to fully integrate our supply chain end-to-end. Now that might seem obvious to some of you, but if I'm candid, where we started from, really quite a big disconnect between the supply side of the organization and the demand side of the organization a lot of duplication, a lot of waste, a lot of inefficiency. So we need to build these 3 capabilities to be world-class inside Diageo. The final thing need to share with you is how do we design deliberately to extract the benefits, the leverage that comes from our scale, right? We have big for sure. We have very complicated. Every country is different. Every process is different. I talked about that in the results. If you want to get operational leverage, we need to design for it. So the operating framework is designed in a way that allows us to simplify and scale. As you know, complexity fails, simplicity scales. We've got a design for that, and you'll see that in the model, I'm going to share with you in a second. So what have we done? From the first of July, there are 23 country or country cluster organizations, go-to-market organizations responsible for the sales and marketing of our brands in those geographies. Every single one of them has this organization design, right? first of January this year, every single organization has their own bespoke design, right? I don't think there's anything particularly unusual about any of those titles in Diageo, we use commercial for old people like me, that's sales, right? What is this organization responsible for? Market share performance in those 2 categories I talked to you about and the on-trade reach and capability in their geography. How are they, look, how are we looking for the outcome, the sales growth, the operating profit dollars and the free cash flow, 23 go-to-market organizations. 5 regions, right? Our 5 regions: North America, LAC, EMEA, Africa becomes part of the European group again, India, we break out and APAC is everything in Asia, ex India. Those are the 5 regions going forward. You see here, each region is exactly the same composition, exactly the same roles in each region. Most of them self-evident, the one you should focus on is the one that says Transformation Director. Each regional business President has one person responsible for driving that consolidation, simplification back office that's going to be such a part of how we build this operating framework going forward, okay? So these guys are resource allocation, capability development and making sure we get that organization leverage that I talked about earlier. Then, we get to the exec. You know this structure. We've got 5 regional President on Chief Marketing Officer, so on and so forth. Importantly, all of the global business services, including digital and technology as one organization reports into Nico right? Now I've got one really hard on the eye chart, but it's as simple as I could make it to make the point. So forgive me before I show it. Exec level, regional level, local level. If you think about the capabilities and how we get leverage, if I'm talking about sales and commercial, I've got one vertical, likewise marketing, likewise supply chain, finance people and transmission. This is where the transformation office comes, people Global Counsel, CFO. Again, you probably don't need all of this detail. But the most important thing is we've designed it in such a way that the alignment is clear. The responsibility is aligned. The measures are all aligned and the forums are aligned. I give you a tiny little out but Friday afternoon, Christina and I sat down with the 4 heads of categories, I'll show you in a second, and the 5 regional marketing. So with 10 people in the room, we were able to lay out the brand innovation plan for all regions for the next 3 years over 3 hours. We've never been able to do that in Diageo because up until now, it's been country by country and at Smokers board of 1,200 innovation projects is an outcome of the way that we organize ourselves because everybody is pitching for their own individual project. So I'll give you this in a little bit more detail. This is the [ Agile ] marketing under Christina. There are 4 categories. Those are there at the top. There are 5 regions down the right-hand side. That's the contribution to sales. Interestingly for me, if I have a problem, I don't know, whiskey in Latin America, there are 2 people I need to speak to. And as I say, if I put those 4 people together with those 5 people and Christina of up 10 people to run the marketing for Diageo. We've designed it in a way which allows us to have a real direct accountability, responsibility, but also leverage. We've created 1 Chief Supply Chain Officer, end-to-end, Yuan. In the past, we had different things in different regions. Local supply chain directors local now is all about customer service. It's not about running the supply chain. That's where an -- he has complete responsibility across the world. Anybody who covers other FMCG players would see that a number of a while ago. but he basically has 5 regional heads that matrix works for all of the functions with 5 people representing each of the regions, he can deliver the globe. Likewise, for Nick, 5 finance directors, 1 big global business services, FP&A and control and the finance expertise. Massive simplification, massive reduction, taking out the duplication. People in Diageo told us, we were very, very, very duplicative, very slow no clear accountability. Actually, when you walk through this with all the people involved in designing it, it's really clear who's responsible for what. Now this is the bit you might be interested in. So look, that's that organization. And I put the numbers on there because otherwise, you'll get the proportions, and I know you're all big things. So the total overheads budget we -- gave ourselves for the destination of this organization is 10.5% of sales. That would put us in the top 25% of all businesses that operate in this space. If I told you today that it's way north of 14%, it gives you some idea of the change. If you look at where we deploy the exec level rounds up to [ 2 ] of that. The real teams, excluding the presence because they sit in my global budget, [ 0.2 ], the majority stays in go-to-market and the majority, the other is global functions, including marketing. So a really clear accountability framework, really clear budget framework. I said to you before, we're nearly complete, particularly in the go-to-market. I think that whilst that was a destination that we wanted to get to in 2 years' time, I think the regional presidents decided that they would want to go all in one. So what you see here is the green these changes in go-to-market are complete. They're done, they're behind us. What you see in Europe is the consultation process, a legally binding consultation process, it takes a certain time, we have to go through that. It means no problem we'll do it just means that Europe will be slightly later.for us to be able to give the certainty that we want to do to our people. But I suppose the thing I wanted to point to is whilst this is not something we're announcing we're going to do, this is something that actually quite a lot of it, particularly in the country level is already behind us. Now some of the things to Nick's area, in terms of global business that will take quite some time. There's some tech enablement, there's all that sort of stuff, so that will take a different time. But the go-to-market ones done and we're focused and everybody started the year in a clear way. Final thing I've got to share with you and it comes to behavior. So if you go back to my chart in terms of the triangle, I'm sure my dear your colleagues won't mind me saying this because we had this conversation. If you look on the left hand side in January, we had different programs in our business, which talked about purpose, ambition, strategy, enablers, outcomes. We had 4 values. We had 3 leadership in areas with all the things you can read here. Again, lots of feedback from our colleagues that this has got requite complicated. It wasn't clear enough, so on and so forth. Going forward, what we've agreed with everybody you've just seen what I said about the purpose. You've seen what I said about the regeneration articulate that all to bring all of that live, we're going to focus on 3 things, 3 behaviors in the organization. One team, competitiveness and decisiveness. I could talk at length, you should ask me and the exec as you engage with them over the next while. I think the biggest single one here is team. What this operating framework needs to make it work is we have to behave as a team. Diageo historically has been more fragmented, deduce, use your language, silos, some people do, doesn't really matter. But the exec has to work as a team. I said on my first day in Diageo that I believe that business is a team sport, the exec team need to be truly a team. If I told you that in January, my exec team only physically met twice a year, you'd be surprised, right? Because we added also diffuse. This comes back together being one team is massively important, and the people that have to demonstrate that most is myself and the executive team in order to demonstrate a completely different set of behaviors going forward. But that's -- we don't get the leverage unless we start specializing and relying on other people to deliver. So you don't have a on solution to every problem and that duplication I talked about for. A lot of change in 6 months in sort of 23 minutes or so. But that's to bring you up to speed. That's what we've done in terms of an articulation of purpose, strategy, operating framework and the behaviors that are going to bring it alive. We now need to get on and do it. As I said at the start, we've got a lot of work to do. We got a lot of work to do, but we're comping about what we are able to deliver. So that's it for me. I'm now going to pass you over to Hannah, who will take you through how are thinking about it. So that's the background. Now it's the investment thesis. We'll start with the market opportunity, 2 sections, Hannah first then Christina and then we get into some breakouts.

Good afternoon, everybody. I am going to spend time today on 3 things. First, what are the factors that drive market Second, how do we think they're going to evolve? And third, what does that then mean for our market growth expectations regionally and globally. But to get us started, I just want to set the context of where we are today. If you look back over 15 years, and I'm conscious many people have studied this industry for a long time, 3 distinct cycles. We have a long-standing premiumization cycle there was COVID acceleration and most recently, a consumer reset that's been largely affordability driven. Despite recent pressure, especially in the U.S. Spirits, including RTD, has been in long-term growth. Through this period and especially most recently, RTDs has been a really significant growth contributor which you can actually see quite clearly by the divergence of the 2 spirits lines on the chart. Premium beer also in long-term growth. I'm going to spend most of the time today on spirits, including RTD, given that's the majority of our business. The question for us isn't -- is this market going to grow? We're confident the market is going to grow. Question much more is what's driving it and making sure we take that understanding to inform our strategy and inform our plans. For us, there are 3 fundamental drivers of market growth, demographics, wallets and behaviors, demographics, put most simply, how many people and who are they? Just to point of nomenclature, you'll see through the slides, either LPA, LDA, it's legal purchasing age legal drinking age. If populations grow, it expands the LPA consumer base. As people age, they drink differently. We track both on a market-by-market basis. Wallets, how much money do people have? Alcohol ultimately is a discretionary category. So if you see affordability pressure, you see people getting squeezed, you see discretionary spend come down, alcohol is impacted. On the other side of this, though, in markets where there's economic growth, emerging middle class. Category participation broadens. We see premiumization, we see tailwinds. Again, we track both on a market-by-market basis. We use publicly available macro data, but we'll also get custom pools to really get under cohort dynamics, especially age and income. On the behavioral side, we study all sorts of different things. The 3 primary things we're looking at, the evolving attitudes to socializing and alcohols role within that growth of GLP-1s and the right of convenience. We use a range of studies, but we do here have proprietary research, especially against the attitude to socializing. We filled 17 markets twice a year and some of the information from that I'll share with you today. Let's start with demographics. Without question, demographics are a tailwind. Information on the left panel here is looking by region at go-forward population growth expectations. I draw your attention a moment to the U.S. number at the top. This is forward-looking at 0.5%. This year, forecast to be 0.6%. Interestingly, as recently as 2024, it was 1.2%. That drop is primarily due to net migration. In fact, historically, immigration has been at least a 50 basis point tailwind in the U.S. So if immigration policy were to be in a different place in the U.S., we would expect that population growth number to be different. The other thing I'd say, looking at left panel, it's not just is the population growing? Are they engaging with our category. Spirits penetration at top across leading markets remains at or above pre-COVID levels. So people are engaged in the category. What we then look at is well, how are people spending, how are they spending on spirits, how does that change by age. We look at the average and then we look at the age brackets relative to that. And you can see this green corridor here, whereas the elevated spend against spirits ranging from 35 through to 74. Interestingly, if you looked at this for just the whole of alcohol, you'd see it more condensed. That green corridor stops at 64. So we're quite confident from a spirits perspective, as populations do age, we do have that little bit more protection. Second, there is a lot of conversation at the lower end of the spectrum, and I'm going to talk about GenZ in a moment. But interestingly, higher age cohorts, whether you look at a percentage of their spend out of their total expenditure, or if you look at the dollars they're spending, they are spending more on spirits more on alcohol than they used to. So there's increasing spend per age cohort at the high end. We then said, okay, let's make sure we're tracking how the population is going to shift relative to that elevated spend corridor over time. What we show on the right is the middle 50% of the population of the LPA population. It's the interquartile range for those who like statistics. The dark box is where we are today. The dashed box is where the population will move to by 2029. Punchline being not much actually, not much shift, this moves quite slowly. But if you look where the populations are relative to where they're heading, we feel pretty good about where we're sitting as populations age. Let's, however, talk for a moment about Gen Z. The first thing actually I want to call out is in the lead of the slide. we look at LPA plus Gen Z. And I bring that up because it is important when we're doing the analysis to make sure we cut the right age cohorts, especially in the U.S., quite a lot of data sources will have an under 25 age bracket. And if you just pile that in of itself, it will lead to some technical term on key math in terms of what you're getting out from the results. So we really do make sure we hone in on the LPA plus consumers. If we do that, a few things. Firstly, penetration, again, how are Gen Z engaging with our category relative to general population, whether it's spirits or RTD, we see Gen Z penetration is higher than general population across a range of markets. We also look at how are they spending what percentage of their total expenditure goes on alcohol compared with other age brackets. U.S. example answer very consistently. We see this in other markets as well. They're not spending once you account for income and expenditure differently than other cohorts. And how are they actually consuming, to look at this, we blend intensity and frequency data. We've looked at 2026, so recent data back to 2023 to compare what's actually been happening. You see in most markets, it has been increasing, so claim consumption is up. The interesting example here, obviously, is Australia. For those familiar with Australia, high inflationary environment, excise is linked to inflation. And actually, there's a pretty recent excise hike. It's hurting everybody but gene disproportionately. What we also look at is claims moderation and actually Gen Z are also claiming to moderate less than other cohorts, especially in the U.S. So switching gears from demographics into wallets. Without question, the most acute pressure but very definitely more of a developed market phenomena than emerging. So let's talk about the developed markets. What we're seeing, if you look at income versus inflation, quite simply, it hasn't kept pace. For the last 4 years, we've seen income growth lagging inflation growth across markets like U.K., U.S. and Australia. We've also looked at this by cohort. So really dug in to understand what's happening. As many know, low income have been struggling for a while across these markets. They're in monthly deficit. Their incomes don't match what they actually have to pay on regular expenditure. Higher income, a bit more protected but still protecting experiences perhaps within that discretionary spend. What's really interesting is in the middle bucket, the middle income consumers. About 12 months ago, those consumers in both the U.S. and GB would have been in surplus. They would have had slightly more money per month coming in, going out. That has flipped in the past 12 months. This is a consumer group that's now very stretched increasingly using debt to protect lifestyle, but they are feeling squeezed. Back in Q1, we actually spent some time out with consumers across a range of markets. And it was really telling in those conversations, hearing the trade-offs people are making about holidays, about socializing trips with friends, even about how they're prioritizing different house improvements versus what they might have done in the past. But what was also really interesting is they were trying to protect their engagement with alcohol. People were looking for happy hours to make trips to the pub more affordable. They were really looking at small formats, which you'll hear us talk about today, but that was really notable how people are trying to stay in the brands they love, but they were looking for lower smaller format. And interestingly, when they were looking at RTDs, which many were they were comparing to the price in the pub. And relative to a price in the pub or a bar, that RTD was very affordable. How have things changed since Q1? So I'm going to take you to the right side of the page. Q2 versus Q1, we have some data here about the net intent to spend. How is that changing? Now clearly, not helped by the situation I ran. This is a U.S. example, but the intent to spend on gasoline way up. But essentials, whichever one you picked, you would see this picture. It's still becoming more and more of the wallet, more and more squeeze. Discretionary, getting squeezed more and more and alcohol is within that bracket. On the flip side, as I said, emerging markets, different story. Income is outpacing inflation, solid amount of discretionary spend. And again, when we did interfere with those consumers, it felt like a very, very different world. So if that's where we are. I'm sure the question is, okay, developed markets, especially U.S., when is this going to get better? So I sadly don't have a crystal ball, but knowing that within the U.S., it's spirits x RTDs, that's really the segment that's been challenged. We dug in back through 25 years of data to figure out what patterns could we see? What was it that had greatest correlation across different factors. And what we actually found is if you look at that U.S. spirits volume year-on-year changes in that U.S. spirits volume, it's quite highly correlated with consumer sentiment. We had about a 40 -- 0.4 r squared. If you look at real value year-on-year growth, so really then you're getting volume, but you're also capturing price mix. We're capturing mix, stripping out inflation, even higher as we -- so there is a linkage historically for sure, has been a linkage between sentiment and what's been driving growth of volume and mix in the U.S. Now Timing, of course, is then the uncertain question about, well, when is this going to come back? Macros need to come back for sure. But as you -- many of you know, there is also currently a dislocation in the U.S. between macros and sentiment. There's other factors, geopolitical, domestic policy and frankly, the fact that consumers just don't like inflation, that's all compounding. But we would expect a historic correlation does hold true that as these consumer sentiment pieces come back, we would start to see more volume and value growth come back into the U.S. We're not sitting around waiting for it. John will talk to you more about how we're planning to compete going forward. but this is a relationship we've seen, all three. Okay. You got to switch gears to behaviors. While the numbers do vary by market, we are definitely seeing consumers telling us they are claiming to drink class. A couple of things I'd call out though. One, that isn't necessarily new news that has been happening for a while. And second, what consumers tell us isn't always what they do. So this is one of those places actually where the proprietary research we have is very helpful to get underneath a little bit more of what has been going on. The middle panel is when we've asked consumers, okay, so why are you moderating? What is it that's causing the behavior? And without question, health and wellness-related concerns are an issue as an issue across all the markets where we talk to the consumer. But interestingly, financial considerations also come up lots as well. In the U.S., 26% for consumers are citing financial considerations. In GB and Australia, it's as high as 34%. The other thing for the U.S. is probably worth dwelling on a moment. Many of you may well know, have seen some of the GAP studies they actually ask a resting questions back for decades. So if you ever spare moment worth a look, But the one we track a lot is around perception to alcohol. And there's a question in there about whether you think it's good for you, the same for you, bad for you. That hit an inflection point in 2015, start started to go, people thinking it's worse. Between 2015 and 2021, spirits per caps went up, RTD per caps went up. So even though consumers may have been feeling of receiving alcohol as being worse for them, there was still a significant growth in the industry. The other thing we use our research for is to understand what are people's generation strategies. And interestingly, people aren't disengaging with the category. They are using things within our category, our brands to actually still go out and socialize. It might be 0-0, it might lower ABB, I talked about smaller formats, RTDs. These are all things that consumers are looking to as ways to moderate if they do want to drink less. Clearly, as an industry leader, we have an opportunity to lead, shape and provide that choice for consumers. Let's talk for a moment on GLP-1s because that's a question we get a lot and rightly so. Firstly, adoption. You're probably tracking this as much as we are, but data is much better in the U.S. We know around 10% to 12% today -- driven. Expectation is that goes up somewhere to 20% to 25% by 2029. Europe, Rest of World, the data is a little bit harder to come by. But we would assume per the U.S. that it will grow over the course of the plan period. Perhaps more important than adoption, though is behavior. What are we seeing? So to get underneath this, we use numerator data, which is purchased panel data, it's 100,000 households. The data we have here is across 4 waves from January '25 through to a '26. And what does that minus 2 mean? That minus 2 represents the difference between people who were on GLP-1s and people who weren't. People on GLP-1 spent 2% less spirits than the people who weren't on GLP-1, right? That corresponds to the 4 on beer, the 5 on 1. But I think to understand this one, it's also hopeful to take an edge case. So human me for a moment, but assume 100% of the population went on to GLP-1 in the U.S. tomorrow. That would mean, all those people spent 2% less than they do today. But that is a onetime level effect doesn't compound. Realistically, one number I'm definitely confident today is it will not be 100% of people in the U.S. on GLP-1 tomorrow. In fact, it's already 10%. And over the plan period, it's potentially an incremental 15% rate of adoption goes from 10% to 25%. If the impact stays around that minus 2%, that is a manageable headwind. Now of course, we monitor this very closely, but there are some more qualitative factors from all the research out there that also gives us confidence that we think it may well stay as a fairly muted impact for spirits. First, people are still socializing. At least 50% of people on GLP-1s still go to the pub or a bar at least once a week. People are protecting special occasions, and we know Spirit's over-indexes and special occasions. People also tend to be pulling out the more habitual bolden snacking, eating and drinking. That's not where our brands and categories play. And I think interestingly, just from a psyche point of view, people are sometimes creating occasions to go out. They want to showcase their progress. So there is still a socializing environment. And when they do go out, Unsurprisingly, perhaps they're looking for lower calorie, they're looking for lower volume, especially if they're having some other side effects that people report and RTDs actually also do very well because people are looking for control. So speaking of RTDs, I spend a moment on convenience. What we've seen, this is actually looking back 10 years in the U.S. at occasions. Won't be a surprise to anybody. This growth of the third space. We talk about it a lot, but it has actually gone up 3x in the U.S. in terms of number of occasions. And that means alcohol is not necessarily the center of the occasion the same way as it would have been if you've gone to the pub. But it doesn't mean people don't want to drink. They just need a format that's accessible, which is RTDs. Unsurprisingly, therefore, we're seeing RTD per capita growth significantly across many regions. And RTD as a share of total spirits remains pretty low. And even in markets like the U.S. where it is more penetrated, we all know that's a segment that's still growing strongly. So we think convenience will be a persistent tailwind and both the volume and the price mix. So stepping back across the trends, demographics, tailwind. Wallets, we do think significant near-term pressure in developed markets, emerging markets, it's actually a tailwind. And behaviors while there are some challenges, we also see significant opportunity. What I'm going to do now is switch gears and say, okay, what does that mean for what we're expecting market? And I want to be really clear, market, not Diageo, market growth to be by region over the next 3 years. So let's start with North America. Without question, North America will remain a challenging region through the next 3 years. Over the plan period, we are -- I did not miss anything. And just sit it to India. If someone could pull it back. Okay. Three-year growth -- value growth for the U.S., we're expecting to be minus 2 to 0. While there is some behavioral pressure, affordability is predominant pressure. As we talked about, we see correlation with consumer confidence and volume and value. If the consumer confidence piece picked back up, we would expect to see a coat come through faster. Equally, if the comeback in confidence is also associated or there is a simultaneous change in immigration policy to the data I shared earlier, we'd expect that to be an additional tailwind. And especially given we also know the Hispanic community in the U.S. right now not socializing as much as they were. Irrexpective sentiment and population, we expect RTD to be a significant tailwind in driving both volume and price mix. We're expecting the market in North America to remain soft and challenged in fiscal '27 and there'll be slow and gradual improvement from there. John will share shortly how we're going to play in that market. EMEA, actually a tale of 3 EMEAs. It nets out to a plus 2% to 4% on value growth. GB, we expect to follow much more of a U.S. trajectory, although that come back is much more hard dollars in wallet than it is sentiment, developed Europe per caps have been soft for over a decade, actually. So it's much more of a price mix driven story anyway. As affordability comes back, we would expect to see getting back to flat or slightly positive growth in developed Europe. The growth story here is emerging EMEA, so both the Middle East and Africa, where there's population growth, economic development and emerging middle class. APAC, the market. We are expecting a return to modest growth over the plan period. The wildcard here is really China. China, excluding Chinese white spirits, all these numbers here, excluding [ chase ] white spirits, has actually been down double digit in the last 2 years. So that's going to take some time to recover. But the rest of the region remains pretty resilient. And even Australia, where, as I said earlier, inflation and economic isn't necessarily great immigration remains very positive. Black, very strong growth opportunity. We're forecasting the market at 4% to 6% and always some consumer wallet volatility at Black, but we see very strong fundamentals: population growth, economic development driving category participation, strong engagement in spirits, strong tailwind and RTD. The growth, however, will be largely price mix. There's a huge amount of local spirit penetration in South America. So whether it's [ Kaseta ] in Brazil, [ AgwaDiente ] in Colombia, local rums, et cetera, we're expecting trade out of local spirits, hence, volume itself is flat, price mix driving the growth. India, another very strong growth story from a market perspective, again, a plus 4% to 6% over the plan period, very similar reasons around economic development and population growth. And also, of course, a very strong and buoyant windy market, which will hopefully be further supported by the tariff reduction. If I pull all that together, regionally, what we're seeing is still a bit of divergence. North America will be a drag as well China within APAC, but strong emerging market growth. I'm going to spend just a moment on premium beer because that is our reference market for Guinness. However, as we've talked to you guys a lot about, we play pretty uniquely in Guinness, so we haven't built proprietary models to take forecast industry. We're taking IWSR and using that to inform what we think there's some range by region, but overall, globally, a value of plus 1 to plus 3. But clearly, with Guinness, we'd expect to outbeat that significantly. So if I pull it all back to where we started, we see strong growth across the portfolio where we compete. As we just said, premium beer, we're expecting to be plus 1% to 3% over the plan period for the market. Spirits, including RTDs, also plus 1% to 3%. Consumers continue to engage with our category across markets, we continue to expect and see growth. We plan to beat it. I'm going to pass to Cristina, who's going to tell you how we're going to do exactly that.

Thank you, Hannah. And good afternoon, everybody, and to those of you on the online as well. I'm going to now introduce you to how we see our category strategies, which is essentially all about how we will win. There's a number of aspects of how we approach category strategy that makes it a very different approach to doing this work. But before I do that, I want to share with you briefly the part of the category studies that is not changing, and that is the value of premiumization, which you know has been present in our work for many years has been a source of value creation, and it will continue to be a source of value creation. For those of you in London, you will have the opportunity to see some of these products later on in our innovation showcase. But here are some examples of the work that we have done over the past few months. You will see a lot of it in whiskey, some of it in tequila more and more so and also in other categories. So from just the Johnnie Walker, the Vault Couture, as an example, or work that we did with Olivier Rustan to the special Portland Prism, which went in auction for $0.5 million.to Don Julio [ Dela Cerna ], this one you will see later on, which essentially is a product that comes from the last harvest of Don Julio -- led himself. So this is my interest to say the pitot is not changing. Premiumization will continue as a value creator, now doubt. Now what is new in regards to our category strategies. The work that we have done, and you will see how this comes to life, specifically in whiskey to [ Kilaas ] later on in our breakouts has 4 aspects that are specific and different from how we've done things in the past. The first is our consumer and competitive lens, which is a real -- the real ability to map for each one of our categories through the lens of not only pricing but other drivers of choice that we have been able to identify through our data that really determine how each category is packed. Again, you will see examples later on how this comes to life. But essentially, this allows us to segment the category. It allows us to determine what white spaces we have. It allows us to see how we raise and how we place ourselves vis-a-vis a competitive landscape. The second piece is a clear portfolio architecture with defined roles and price positioning. So for each one of our trademarks in a given category, you will see how this plays out. and the category itself, you can see how it lays out. Again, I'll give you some examples in a minute. The third point, very important and actually very new is we are including RTDs as part of the trademark strategy. And so you will see an end-to-end approach to this trademark and to the category. And what we are then looking at is how do we serve consumers across different occasions, across different price points to satisfy the needs of that particular consumer. The fourth point is indeed this all links back to the market, and each one of the markets will have that particular category strategy in practice. In source with the data points that are particular to that location. Let me give you an example of how this translates. This is specific to a test that we run in the Middle East and specifically around our whiskey portfolio. And let me give you a little bit of context. The Middle East has for a long time for a while, at least being a very premium focused environment with very premium consumers. And certainly, our approach to whiskey in the Middle East has been addressing that opportunity. And you see that graphic on top of this chart. What we realized is by doing the work that I just referenced earlier by mapping the consumer landscape by mapping the competitive context that there were a number of consumers and occasions that were being underserved. And in particular, an opportunity for a value risks, which hadn't been activated in that manner in the past. So we took action and an intervention across brands, including black and white, Black 69 and JMB, which allowed us to create a wider spread of pricing opportunities and different brand choices for various consumer groups that actually in the Middle East had some knowledge of these brands in different stages on perhaps some of their home countries. By doing this, we are allowed for those brands to actually grow. And also, it gave us opportunity to fill in some white spaces with innovation, including Johnnie Walker Red Soul or the launch of Black Ruby or indeed, the launch of Bullion. So the real leverage of our whiskey portfolio more broadly, occupying more consumer spaces or coupon more price points. And that test resulted in a fiscal '26 impact that you see there.which was positive. We then took these learnings and tested actually in more places. I just want to say that these were very surgical interventions. I hope it came clear from my chart before, but really looking, as I said, to the mapping of the category to the price points that were being occupied or unoccupied.to the white spaces that we could identify. And just to give you a sense of dimensions. In total, EMEA, this number of tests that we run on interventions worth of 80 in total. In Latin America, this number of interventions were 20 in total. As you can imagine, running these interventions in H2 produce different set of results, some stronger, some less. The aggregate of those interventions deliver an increase in volume in both instances, both EMEA and Latin America of the magnitude that you see the plus 26 volume in EMEA, plus 25 in lack. And the total aggregate gross profit dollar actually was superior to that period the year before. Net-net, the contribution to the total region was positive in both instances. So this is something that I hope it will become more clear. When you see more details on our risky strategy later on, our tequila strategy later on and also the. And I'm going to pause here, and I have to say for the webcast that we're going to pause the recording. You will, however, are asking you not to switch off and stay on the link there's going to be account down because that will tell us we're going to go into the breakouts. And we've got -- that counter is going to tell us when to come back for the Guinness session. So with that, I think I've got to hand over to Sony.

Hello, everybody, and to those rejoining on our webcast, you're all very welcome to this session. I'm delighted to talk to you about Guinness this afternoon. It's a brand that's very dear to my heart. It's harsh my DNA as a Dubliner. But actually, my father also had a pull right at the gate of the St. James's Gate Rory in Dublin. I'm going to talk you through the progress that we've been making on Guinness. Why we believe that the brand is one of the most attractive growth opportunities within beer and how we are positioning Guinness to deliver a long runway of growth and further success. Starting first off with the market and with our performance. Guinness plays within the premium beer segment. It's $135 market -- billion dollar market, I should say, and the fastest-growing premium beer segment for the past 3 years. And within that, Guinness has significantly outperformed. We have delivered 13% NSV CAGR well ahead of premium beer growth of 5%. GB grew 22% CAGR, whilst both Ireland and North America grew in high single digits. Across the board, we've delivered near universal share gains, strengthening our position within premium beer globally. And this growth is also extremely high quality growth. Guinness generates more than 60% of gross margin and delivers ROIC of 30%, which is roughly twice. Diageo Group. Looking ahead, we're continuing to see very attractive fundamental growth for premium beer with Guinness extremely well positioned to continue taking share within that segment. So why are we excited by the opportunity ahead? Well, today, our top 3 markets, GB, Ireland and the U.S. represent 2/3 of NSV. But even in those core markets, we are significantly underpenetrated. At 13% penetration in GB, only 5% in the U.S., and that compares to 24% in Ireland. So that shows there is considerable headroom for growth in terms of attracting both new consumers and increasing our penetration within their growing occasions. And these 3 markets will, therefore, continue to drive the majority of Guinness growth up to F '30. However, although we're sold in over 150 countries around the world, outside of GB and Ireland, where we have those market-leading positions, we are very small in many of the premium beer markets in the world. And in many markets as well, we're actually not represented at all. For example, even in the U.S., Guinness is only #12 within premium beer. So significant headroom for us to grow further within those markets. So to capture the global opportunity efficiently and effectively forgiveness, we operate 3 distinct route-to-market models, which I'm going to walk through in turn. And the benefit of this is these 3 models give us a lot of flexibility because rather than a one-size-fits-all approach, we can select the structure that maximizes growth, maximizes profitability, capital efficiency and speed to market in each geography. And this operating flexibility is a major competitive advantage for Guinness and an important enabler of our global expansion plans. So let's talk first about the direct-to-market model. which includes most of our large strategic markets like GB, Ireland and the U.S. And here, we directly control distribution, our customer relationships and our commercial execution. And we will continue to invest behind those markets, particularly in expanding our route-to-market capabilities in both GB and North America with increased sales resource to expand both auto coverage and call frequency. In GB, growth will also be driven by continued growth of Guinness Draft, expansion of Guinness Zero and further innovation, and that will also be the case in Ireland. In North America, further growth will come through adding around 150,000 new accounts. both on and off trade by F '30. The second model is our third-party distribution, and this approach is particularly relevant for Continental Europe, where we can leverage the reach and the local expertise of strategic partners. It provides broad geographic coverage and improves our ability to execute. In Europe, we are simplifying our partner network, working with fewer, stronger distributors, which is enabling us to improve our pricing, our customer service and our commercial activation. Within Europe, France and Germany are particularly exciting opportunities given their scale of the large premium beer markets that they represent. And this model is already delivering results. We have achieved double-digit growth while significantly increasing distribution, including more than 25% growth in our on-trade presence. Going forward, we intend to continue to increase our outlet reach to 100,000 outlets by F '31, strengthening our execution and building Guinness into a much larger premium beer player across Europe. And finally, our third model, where we operate via third parties through licensed local production with royalty payments. And this is particularly valuable where Guinness is underserved and where local partners offer faster and more cost-effective expansion. These trusted partners grew Guinness under license using Guinness Foreign extract and adhering to our exacting quality standards. And the key advantage here is really scalability because without requiring additional significant CapEx, we can leverage the partner's manufacturing capabilities and their extensive distribution networks. And while profit per hectoliter is obviously lower than in our direct-to-market model, the trade-off is significantly broader geographical reach and very attractive returns with very modest capital requirements. And importantly, this model is also proven. In Australia, since moving to our new partnership with Lion, we have seen strong double-digit growth and increased distribution. And in Nigeria, since our transition to our new brewing partnership, Guinness has significantly improved its financial performance, its return to profitability, its growing share and expanding distribution. And taken together, these examples really show how this licensing model can unlock growth efficiently whilst creating value for both Guinness and our partners. So when we bring those 3 operating models together, we're really creating a powerful platform for global growth in terms of both the breadth of the markets covered, but also the strength in existing markets. And our ambition is for Guinness to become a top 10 premium beer brand in the U.S. and to further strengthen our position in key European markets. Now beyond that, we obviously also see further exciting opportunities to expand in growing premium beer markets such as India and Brazil. Of course, that growth is only possible if we have the supply capacity. In recent years, we have expanded capacity to meet growing demand, and we will continue to do so in support of these bold growth ambitions. Between F '26 and F '29, Guinness production capacity will have increased by more than 50%. We opened the new Littleconnell brewery in April 2026, which added circa 25% more capacity for both Guinness Draf and for Guinness Zero. A second phase of Littleconnell expansion is planned for F '28, and that includes further focus on non-alc production capability. Beyond those already planned investments, we remain confident in our ability to be able to expand further in a modular way in line with those demand requirements. Between F '26 and F '30, we will invest just under $1 billion in CapEx. Around $670 million of that will be directed towards supply infrastructure, including the Littleconnell brewery expansion, packaging capabilities and additional zero processing capability. The remaining investment supports in-market equipment such as taps and kegs with that beer to go through as well as brand growth initiatives such as investments in our brand homes and other strategic projects. Given Guinness' growth potential, its profitability and its very high ROIC, we believe this is a highly attractive deployment of capital. Now Guinness has also a strong track record of successful innovation. And our approach when it comes to innovation is very simple. We want to bring Guinness to more people in more places, in more of their occasions. And Guinness Zero is a great example. The brand has already established strong momentum in core markets and is contributing materially to Guinness growth, especially in GB. This year, we added over 1,000 Guinness Zero outlets in Ireland. We've added 3,500 micrograft points for Guinness Zero in GB and North America still remains largely untapped. So as this production capacity increases, we're going to extend distribution across more outlets, more channels and more markets. At the same time, our Future Serve program has really expanded the way that consumers can enjoy the craft and ritual of the distinctive Guinness experience. Guinness Nitrosurge brings the iconic Guinness surge and settle right into the hands of consumers no matter where they are. It has achieved impressive penetration in Ireland, already almost 1 in 4 households have a Guinness Nitrosurge. Micrograft is very interesting because it unlocks on-trade distribution for those outlets with a Keg and draft traditional setup may not be practical or appropriate, and it helps those customers serve a perfect pint of Guinness to their customers. It has also been a big part of supporting the Guinness 0.0 rollout as about 1/3 of the volume from Microdraft is actually Guinness Zero. So all of those innovations together really strengthen the Guinness brand whilst increasing accessibility in more consumption occasions. But we're not going to stop there. And today, I'm delighted to share the next stage of this journey with us. Building on other successful Guinness innovations, we're excited to introduce this, the next step in our Future Serve program, Guinness Nitrosurge Tap. It's going to launch in 2027, and it is built on the same ultrasonic technology as Nitrosurge, but it takes the experience much further. The device attaches to a 4.75 Guinness a liter Guinness keg, which really allows consumers to pour and serve perfectly fresh Graft Guinness in their homes with their friends. Consumers will enjoy the complete iconic Surge and settle ritual with this innovation. Initially, we're going to launch Guinness Nitrosurge Tap in Great Britain, in Ireland and the U.S. And in other markets, our priority remains extending distribution of Guinness Zero, extending distribution of Nitrosurge and extending, of course, Micrograft. And this represents really, I suppose, another example of how Guinness' innovation is staying true to everything that makes the Guinness brand and products so distinctive and magical for our consumers but also continuing to drive incremental occasions as well. So in summary, Guinness combines an attractive category position. It's got strong momentum. It's got substantial global headroom. We're going to service this through our flexible route-to-market model with disciplined investment and supported by a strong innovation pipeline. And this gives us confidence that Guinness can continue to deliver sustainable, profitable growth and create significant value over the years ahead. Thanks for your time today. Next, I would like to introduce John O'Keeffe, who will present our North America business. John?

Thanks, [indiscernible]. Okay. Let's talk about North America then. As many of you know, the North American market has been difficult. And within that, our performance has been deteriorating with us losing share declines across around 65% of our business. I'm about -- actually, before I get to talk about my first 100 days, I just do want to call out that Canada within that has been quite robust with strong top line growth, good share growth. So really, I'm going to just focus this presentation on the U.S. So look, I've been about 100 days in a role. I've carried out a deep diagnostic on the business and already begun to make some interventions to course correct and to make this business more competitive. The drivers of underperformance range from long-term declines in some of our core brands to overexposure to premium, underexposure to RTD and small formats and an operating model that was quite -- that is quite cumbersome. So I'm going to unpack each one of these drivers during the course of my presentation. Let me, first of all, though, start with the first issue, which is a number of brands. I'm going to talk about 3 in particular, that have been in long-term decline. Let's talk about Crown Royal. It's our second biggest brand in the U.S., okay, but the strong growth of flavors has masked the underlying growth in this business. Crown Royal Deluxe is losing heartland consumers. Those heartland consumers are in very specific states. About 12 states in the U.S. account for 70% of the Deluxe decline. Our #1 strategic priority on Crown Deluxe is to stop the hemorrhaging and to hold on to those loyal consumers. So how are we going to do that? First of all, we're going to introduce a unified cohesive trademark campaign, which we just launched in June called [ Bring It ]. What I like about this campaign is it allows to activate 2 important platforms for those heartland consumers. NFL football, where we sponsor 18 NFL teams so we can activate locally, put drinks in hands; and secondly, country music lifestyle. This visual on the left, [ Realtree ] is a hunting lifestyle brand. You may not be okay with it. Our LTO sold $25 million. So it's that kind of heartland activation that I think is going to be strategically important for us moving forward. When I look at the packaging, I think we can improve a lot. On the one hand, I like the premium glass iconic bottle that we have. On the other hand, we've cheapened it by adding a plastic cap to it. We will be rectifying that. We have the inconsistent use of the purple iconic box on shelf, which reduces our on-shelf impact. And we will further reduce that on-shelf impact by introducing a range of flavors with different colors. We need to implement a more cohesive brand identity dialing up the iconic Deluxe purple. Now there is a role for flavors. It does bring in new consumers, but we need to be more disciplined in how we do that. And I'm particularly interested in the role for flavors and innovation and what it can do to support our core Deluxe brand in holding on to those heartland consumers. And of course, putting Deluxe and flavors into much higher quality, especially higher quality small formats than what we've been doing thus far. The second brand, which has been in long-term decline is Smirnoff. It's been losing share for 8 years. Let's start with fixing the proposition. This is what we put out in the last 5 years. inconsistency of campaign, chopping and changing it a lot. You cannot build brand distinctivity when you're that inconsistent. We are urgently working on a new cohesive trademark campaign that will start to rebuild the distinctivity of this brand the way we've done in other markets. Critically, we're going to start managing Smirnoff as a single trademark, both Smirnoff core and Smirnoff Ice together. That's particularly important in the U.S. where we have historically been running them in 2 different divisions run by 2 different leaders, which is no longer the case. And I'll come back and talk about the operating model in a little while. Now as I've traveled around the U.S. in the last 3 months, I've been struck by how poor on shelf we look with Smirnoff. There's a number of packaging missteps that we've taken, which I'm currently undoing. We're going to move from recycled PET, which is cloudy and opaque, hard to see through to virgin PET. Purity after all is at the heart of this proposition. We're going to have both virgin PET and glass on shelves together. After all, different consumers require different packaging for different occasions. And finally, we're going to add back the handle on our biggest SKU, the 175, which frankly, without it, it is too heavy to lift, not portable and difficult to pour. In addition, we've had an array of flavors, 24 flavors. It's too complex for our customer. It's too complex for our supply chain. And frankly, it's too complex for our consumer. We're going to have to deploy a more disciplined approach to how we use flavors within Smirnoff. I've also inherited a capacity constraint on small formats. I've approved a $20 million investment in CapEx, which has gone live, which means that not just for Smirnoff, but in fact, for a number of our brands, including Crown, we will now have unlimited ability to go after our small format opportunity starting from the second half of this fiscal and closing out those distribution gaps. The third brand, which has been in long-term decline is Captain Morgan. For the better part of a decade, we have been losing consumers. In fact, I feel we've lost a generation. Our legal drinking age 29 is half of what that was in F '13. I feel strongly we need to go back to the core DNA of what this brand is about. In its heyday in the U.S., Captain Morgan was about the Instigator of good times, party high energy. We are going to be bringing the Captain back. Starting with things like this 40-foot ship that we roll in on match day into various urban areas, getting drinks on hand, starting the party. We're going to bring the Captain back on our core point of sale, even on our label, where we've lost the color and vibrancy and vitality of this brand, we are making changes. And we're going back to simple serves. The #1 serve for any rum drink in the U.S. is cola. We have that territory. We're going to regain it. Now we also need to crack RTDs. The latest innovation we have is Smirnoff Slice coladas. On the one hand, I like the fact that we're getting into coladas, which is an authentic rum offering. But when you look at this packaging, I feel it doesn't pay enough rent to Captain Morgan. It doesn't amplify. In fact, you might be hard-pressed to actually identify it is from Captain Morgan. So there's something in how we brought the mixes together that we need to significantly improve going forward, and we have started on that already. So 3 brands in long-term decline that require some fundamental fixes, and we're on the case. Now let me talk to you about a different kind of brand, Don Julio. It's a fantastic brand that grew 40% in F '25, okay? I recognize we're now in decline and losing share. I feel it's critical to regain and expand our quality and craft credentials. Questions have been asked in the U.S. specifically about the quality of Don Julio, and we've been at pains to answer it. We've spoken and we've engaged in advocacy programs with tens of thousands of bar staff, thousands of influencers and 124 million consumers in the last 12 months. And I'm encouraged now that the consumer sentiment towards Don Julio is now at the levels it was 18 months ago. Now the other thing we need to do with Don Julio is keep it really culturally true. Don Julio is the #1 talked about spirit brand in the U.S., not tequila brand, spirit brand. And we need to continue to work hard at keeping its cultural cache, whether that's things like the FIFA 1942 pack, $35 million sold out within 2 weeks through to Lunar New Year packaging, which Stephanie would have shown you upstairs earlier, all the way through to 1942 being toasted at big celebratory moments like the Oscars, working hard to keep its cultural credentials is an utmost priority. It's good to see that on the back of FIFA, we've gone back into share growth in the last 7 to 8 weeks in those markets where we've activated. Now we've seen the whole industry move towards small formats. We have a fantastic distinctive set of small packaging for Don Julio. It's also really important we lean into this opportunity because Don Julio is the most multicultural brand that we have in the U.S. and that cohort of consumers right now is under particular economic stress. And so this is a way to allow those consumers access what is a very aspirational brand. And again, closing out those distribution opportunities is top of mind, top of focus. Now let's talk about the other tequila brand in our portfolio, which really is in different shape because it's been on the slide for longer. And I would argue a lot of that is self-inflicted as we took multiple price increases after COVID. What I've been encouraged by really is this interesting combination of a competitive value proposition combined with awareness building. What FIFA has demonstrated to me is that when you activate at scale, you get out of the lockbox, you get on the floor, you get close to consumers at the right price point, it can be resonant. In fact, that FIFA activation has turned around a 3-year share decline to winning share of total spirits for the last 7 to 8 weeks. I'm not declaring success in Casamigos, but this is an encouraging formula for us to pursue. I'm also encouraged about the traction we're getting with Casamigos margaritas in the cocktail collection, which is growing high double-digit growth. In addition to Casamigos margaritas in the 200 ml can, which when launched was in the top 20 [ Orchly ] spirit launches that year. Now unfortunately, we had some packaging issues with that can with a liner. It leaked. We've had to withdraw it from the market, right thing to do. We're fixing it. We're getting it back out there before the year-end. My bigger point, though, is that Casamigos, great taste in Casamigos, margaritas, whether it's in ready-to-serve or ready-to-drink, put a bartender quality in the right packaging format is very resonant with our consumers and getting traction. Now let's talk and move beyond the portfolio and talk about our go-to-model organization. I mentioned that I found it cumbersome when I moved there. So we're fixing that. Here are the fixes we're doing. We're moving from 2 divisions, spirits and beer to moving to a single -- under a single commercial leader where we have those reporting in, supported by a single set of support functions and one set of key accounts. That is going to improve our agility immensely. Secondly, we're moving from organizing our spirits divisions by regulatory market, open controlled franchise states to organizing it by geography at state level, where we're going to have state-level decision rights, allowing us to be much more customer-focused and agile. We're going to move from having spirits and beer not having any synergy to spirits and beer being sold by the one team to our national key accounts, okay? So we're going to have 4 spirits divisions, 1 business division reporting into one commercial leader supported by one set of support functions and national key accounts, more agile, more efficient, more nimble. And then we're going to go from dedicated resource in our distributors that have been very focused on driving distribution to reorganizing our distributor, rewiring them and reincentivizing them to not just drive distribution, but to also drive point of sale. And all of that is going to be supported by a significant change in the leadership teams across North America and in the capabilities that I feel we need to go forward. Let's talk about growth. We have a number of brands growing. [ Rona ] mentioned Guinness. In its 14th consecutive quarter of share growth in North America, growing since 2023. Guinness Draft is the #1 tap handle in New York, #1 tap handle in Boston. We are still chasing a lot of growth. And as [ Bonnie ] said, we haven't really gone after the Guinness Zero opportunity yet, and now we're getting after that in earnest. Ketel One, a phenomenal brand. I really like the growth drivers that we have, the Made-to-cocktail platfOrmiston, the fact that we use a lot of brand ambassadors in the on-premise through to the espresso Martini machines that we've deployed widely across the U.S. We can lean more into that. And we're beginning to get a little bit of traction with Johnnie Walker, right, growing both the top line and share. So leaning into those areas of growth will also be a priority. Let's talk about RTDs. I'll be the first to admit that we're underexposed on the RTD category. It wasn't a priority in the past. It is now. Smirnoff White is almost a $0.5 billion brand in the U.S., growing share and the top line 6%. I spoke about the cocktail collection through the prism of Casamigos margaritas. But it's not just for Casamigos, we also have Kettle One and Bullet and so forth. That's an interesting collection for us that's beginning to scale and get traction. And of course, I've talked about Casamigos margarita in a can. I feel there's a blueprint beginning to emerge on how we can play a bigger game in ready-to-drink and ready-to-serve in North America. So how is all that going to come together? So in F '27, my focus is on stemming share loss, becoming more competitive. We deliver that. We anticipate and these are our assumptions. This is my assumptions, by the way, that we'll deliver mid-single-digit NSV decline. In F '28, as we address some of those fundamental issues, we're going to move to holding share and deliver within that context, low single digit and then F '29, start winning share. Within spirits, we're going to restore competitiveness to some of those fundamental fixes I just talked about in some of those brands have a long-term decline as well as get growth back in those more recently declining spirit brands as well as leaning into where we have momentum. RTD, we've got good growth, good momentum. We need to scale it. And finally, we need to lean in on that momentum we have in Guinness. But my focus is on the next 12 months on making the interventions across the portfolio, making the interventions across the brand and the operating model and making interventions across the leadership team, all in service of getting this business more competitive again. Thank you. And with that, I'm going to hand to Alvaro. Thank you.

Thank you, John. Hi, everybody. So let's go into Latin America and the Caribbean. So I wanted to leave you with 4 key messages. First, the price. Latin America is a dynamic RTD and spirits market, and we lead the categories that are growing. Second, the proof. The category strategies that Cristina and her team outlined during today, we have been already executing that across many markets in Latin America. We have rebuilt our portfolio. And as a consequence of that, we are growing volume and value together, and we have expanded operating profit dollars faster than NSV. Third, the runway. We have over $10 billion of locally produced spirits in Latin America, an opportunity that historically, we haven't tapped into it, but we are doing it now, and we are continuing making progress on that. And last one, and this is one of the most important takeaways that I really want you to take is the system, our operating model. We have been building and investing in capabilities across the region to build a more resilient business, a business that can perform when we have tailwinds, but also a business that can perform in economic downturns where the consumer is under pressure. So let's get into the market and the price and our performance. This is a $25 billion market. We hold 22% of market share. We have almost 3x the market share of our next competitor across the region, and we continue outperforming the market. We've been really focused during the last couple of years on bringing back volume as part of our top line growth equation, and we are making progress on that as well. The market was down in volume and spirits 1%, we were up 3%. And spirits and RTD combined the market was up 2%, and we were up 8%. Now moving into our performance of fiscal year '26. We were up 3% in volume, 7.7% in top line and almost operating profit growing almost twice the rate of our top line number. That performance did not come from everywhere. It mainly come from 3 categories. But before getting into the specific numbers here, one of the most important decisions that we have been taking across Latin America is to be really focused on fewer priorities, but to invest to drive the scale and the impact that we need. 90% of our marketing spend in Latin America is behind 5 trademarks: Johnnie Walker, Buchanan's, [ Alpark ], Don Julio and Smirnoff and [ Tanker ] in Brazil. That concentration is really helping us to drive share gains across the core categories at once instead of trying to defend everywhere. Whiskey is our #1 category. We are the #1 player. We are gaining share. And in a few seconds, I'm going to tell you what are we doing in whiskey as a category. Vodka, growing 19%, gaining 269 bps of market share, and this is a [indiscernible] RTD. And now this is the fastest gaining share category that we have in our portfolio. And tequila, growing, but we are #2. We are not satisfied. And this has been one of the strategic tension points that we have been dealing actually during the last 3 years. And I will come back to it to let you know what are we doing about it. So let's start with whiskey, our heartland. Whiskey is by far the largest category in Latin America, over $6 billion in retail sales value. Julie during the breakout show the category strategy. So I'm going to tell you what are we doing and how we are executing that across Latin America. We rebuilt the entire portfolio across mainly 3 price tiers. Below $10 to drive accessibility with formats and with 2 strategic value plays, White Horse and Black & White, which is really helping us to drive recruitment into the category. Between $10 and $20 with real intentional focus behind Johnnie Walker Red label, this is the segment of the market in which the majority of the volume sits. So Johnnie Walker Red Label and format with all par are really helping us to really capture and to really recruit more consumers into this price tier. And then between $20 and $80, which is the core part of our portfolio, Johnnie Walker Black, Buchanan's and our super premium variants across the region, which the most relevant ones are Johnnie Walker Gold Label and Buchanan's 80. So 3 priority trademarks to very strategic value plays. And here is an example of what the price and pack architecture has returned to us. And this is very important for me to take you through. This is not just about pricing repositioning. This is having the right brand at the right format with the right price in the right channel. So this is beyond just repositioning pricing. And you can see here the results. Volume up 28%, NSB up 21% and gross profit dollars up 18%. So in whiskey, we have rebuilt our leadership. Now let's talk about vodka, including RTDs. This is one of the most exciting categories right now in the region. First, RTDs. In RTDs, right now, we are focusing on driving the scale. We have now -- we are now in Latin America, the #1 player in RTD and Smirnoff Ice is the #1 brand and the fastest-growing brand across the region. Second, we've been focusing in creating iconic drinks to really recruit consumers from locally to spirits. And Brazil is a great example of that with [indiscernible]. Potentially many of you are familiar with that serve. But that is one of the most popular serves in Brazil. What it's doing is really disrupting [ Casa ]. [ Casa ] is king. So in the on-trade, it's really helping us to recruit consumers at a scale just by driving that serve consistently across the market. Third, flavors. And flavors, we've been very intentional to design products to disrupt, again, this local consumption occasions. And this is the example of Smirnoff [indiscernible] in Colombia, which is really, really doing that. 60% of buyers of Smirnoff [indiscernible] in Colombia are new to [ vodcasta ] category and 40% of them are switching from [indiscernible]. And finally, with innovation, we are very excited about this project, which is Smirnoff Ultra, again, with the intent of recruit from out of [ vodcasta ] category. It's a smoother version of Smirnoff, lower ABB with a splash of coconut water, thinking about not just the liquid, thinking about the smirf and how that surf and that drink will continue recruiting from that massive value pool, which is cane in Brazil. So the summary on vodka is this is not vodka gaining share of vodka. This is Smirnoff really tapping into local consumer consumption occasions, especially in Colombia and in Brazil. And now tequila. As I said at the beginning, this has been one of the biggest pension points, but we are making progress. The main issue with tequila -- sorry, I'm not doing anything. Can we go back to tequila, please? Okay. In tequila, we were clearly over-indexed to super premium. Don Julio as a trademark in Mexico used to be mainly one variant, which was Don Julio 70 or Don Julio 70, which played just in the super premium segment of the market. And we were overexposed, especially in a category that was in decline and where the consumer was under pressure. 51% of the total volume of the market sits below the $30 price tier, and we were not playing there. And actually, that was one of the few pockets of growth of spirits in Mexico. So what we did? We did 3 moves. We repositioned Don Julio 70 to be more competitive with [ Mayer Tel ], which is the leader of the premium segment. Second, we repositioned Don Julio Blanco to be the most aspirational variant and the entry premium price point in the market. And third, we launched format, specifically 2 formats, 375 ml on Don Julio 70, Don Julio 70 and Don Julio Blanco to play in the $25 price tier and in the $15 price tier. So with that, now we are maximizing the power of Don Julio as a trademark, but also we are competing across all price tiers in the category. So what has been the outcome of that of the results? It's early stages, but it's promising. Since December, every single month, we have been outperforming the market. And the market share moved from 13% in July 2025 to 17% in May 2026. So we are making progress. The job is not done yet in tequila, Mexico, but we will continue delivering the strategy, executing the strategy to make sure that we are playing and recruiting consumers into the brand. Now let's move into the system, which is the operating framework. The slide that you are seeing here is an example of Brazil, but we are running the same system, the same operating framework across all markets in Latin America. We've been focusing in building and investing behind 3 core capabilities: RGM, revenue growth management, IBP, integrated business planning and commercial excellence. On RGM, as I said at the beginning, it's a holistic approach in how we are going to meet the consumer where the consumer is, which is well beyond just pricing reposition. On IBP, with integrated business planning, we are having a better pulse of the real consumption demand of the market, which is helping us to be more -- to have better predictability to be more agile in how we are reacting to how the consumer is behaving and changing and more importantly, to have one commercial end-to-end system, marketing, sales and supply working as one single unit. Now I'm going to -- let me pause on stock in trade. And you can see the results of the different capabilities that we are delivering in the market. On stock in trade, we've been expanding our stock trade monitoring. You can see the example in Brazil moving from 67% to 83%. We have removed $20 million of stock in trade in Tier 1 customers. And as a consequence of that, we have moved from 70 days to 50 days of days of coverage. In Latin America, just to give you an example of what is happening in Latin America, our coverage right now is 91%. We have removed around $130 million over the last 2 years on stocking rate in Tier 1 customers, and we have moved from 105 days to 75 days of days of coverage. The capabilities that we are building plus the robustness of our control environment is giving us the confidence that we will continue sustaining this in the future. And going back to commercial -- to the commercial excellence. On-trade has been a key priority area for us. And as Dave said at the beginning, it's a priority for the company, it's a priority for Latin America. We have improved our outlet segmentation. We have more feet on the street. We have now prioritized 40,000 outlets. And you can see the KPIs and the improvement there, more than 13% of sell-out growth and 3x the rate of sale versus the outlets that we are not covering. As a consequence of that, we are improving our service, 94% of [indiscernible], but more importantly, what the real feedback is what the customers are saying. In the Advantage survey, Brazil moved from the 20th place to 11th place in 1 year. Great progress, still a lot of room for improvement. This is, for me, what really gives me the confidence around how we are going to continue shaping the future of the region. And as you can see, the results are not a consequence of a good year, the output on a consistent system across the region. And now what is the future? What is the runway? And what we are excited about? We will continue -- there are 3 things that are not a forecast. One, the first one, we will continue scaling the category strategies to the rest of the markets in Latin America. Second, RTDs, exciting market, $3.5 billion, growing at 24%, and we have the #1 brand. And third, which is one of the most exciting ones, as I said at the beginning, locally produced spirits. [ Casa ] in Brazil, [ Aguardiente ] in Colombia, Rome across the region. And this is not a promise. It's happening right now. As I said at the beginning, [ Auardienteino Smarines ] is recruiting consumers from [indiscernible] in Colombia. The [ Caperscaerve ] is recruiting from [ Caixasa ] in Brazil and black and white and all parts are recruiting Rome consumers. So the strategy is in action. That is what we are doing in Latin America. We are moving from being an international leaders player to be the most competitive player in total spirits and whiskey. And with that, I will hand over to Ewan. Thank you.

Thank you, Alvaro. Okay. Good afternoon, everyone. Capital deployment. So I'm going to share with you over just 5 slides how we are looking at improving capital deployment alongside customer service to drive improved returns and deliver a much more competitive Diageo. Every drop of liquid we distill, every barrel we choose to fill, every pallet that we make and move around the world has to work harder for returns on the capital, our capital, your capital invested in this business. It's an investment portfolio and needs to be managed accordingly. I'm going to unpack for you across how we are resizing and reshaping our operational footprint and the returns that will come with that. Our capital deployment, where is that CapEx going and what returns are we expecting? Our working capital, I will talk about full working capital, so finished goods and our days inventory. But I will also highlight, in particular, something you're all interested in, which is a large amount of capital that's already invested in our distilled spirits and maturing liquids. And then I'll finish with customer service and give you an update from Dave's comments at the half year where we sit and what work we've still got to do. Okay? First up, as demand and the market has changed and our growth assumptions have changed, we have to take the difficult decisions around about our operational footprint. And those decisions are based on the right asset utilization, structurally getting the cost right for the future, improving the resilience of our business and improving customer service. They are the principles that lie behind that decision. We've had to take some of those difficult decisions that put us into $300 million of cost of cost, including some of the impairment charges that you heard Dave and Nik talk about earlier today. That's involved impairing 3 of 34 sites in Scotland around our Scotch distilling footprint, 1 of 3 tequila sites and 2 of 5 North American distilling sites. Alongside that, we've been running over the last few years. You've heard about the supply agility program that became part of Accelerate. And as you look at the delivery in that, this is in our spirits packaging network in the center of the presentation. We've been against those principles I outlined, optimizing that for the future. So quite significant changes in North America, moving from 7 to 3 sites, including the new site that was built in Alabama. Europe, the sale of the Santa Victoria site, but consolidating into highly utilized, high-performing assets with a lot of supply chain agility in Scotland. And then in India, a pretty remarkable scale of transformation, which did include, in this occasion, some third-party partner sites, but moving from 100 to 35 sites, and that is all delivered and in place. Only 8 of those 35 are Diageo owned. The rest of our partners that we work with across India to deliver our service to customer. Having done all of that, that delivers the returns on the savings where about $135 million is already in the recurring savings as we close F '26. And as you'll hear from Nik later as part of the overall savings delivery, there's $150 million that will come through over the 3-year plan period. And there's more that actually comes through against that because we've been impacting our distilled and the working capital on our balance sheet that will flow off the balance sheet as the liquid hits the P&L in the future. Okay. Disciplined, dynamic and returns-based capital deployment on CapEx. That's the approach that we continue to take and we are strengthening as part of the strategy and the operating framework. You've heard already from Dave and Nik around it being at $1.25 billion. Broadly, half of it will be supporting growth. Of the $3.75 billion that goes in over the next 3 years of invested capital, just under $1 billion of that is invested in Guinness and the rest is supporting growth. Some highlights that I called out were particularly around about -- you heard in the breakout with [ Mark Sands ], unless you were online, that we are investing very selectively in RTD. We have good capacity and strong networks and route to markets, but there are some selective investments, particularly in GB market in Europe, where we'll strengthen that. And in North America, you heard from John about the importance of that investment in small formats that's already underway, and that cash will go through this year as we bring that capability online. Also, as you'll hear, as I talk in a further slide around maturing inventory, as we've been looking at our inventories and the amount of liquid that we will choose to still distill, we're reducing our barrel versus the prior 3-year period. We're reducing it by more than 50% in the forward 3-year cycle. So a significant intervention that looks at what the rightsizing is as we move through. And then very selective capabilities around about our cost reduction and the capabilities to make us a more competitive organization. They need to come through. They're actually increasing in the digital space as the SAP S/4HANA costs come down. We're making sure that we are selectively returns-based, driving the right prioritization of those investments in the business in line with the deliverable of the 3-year plan. Working capital efficiency. As it stands today, we have moved from 110 DIO. We've moved it to 90. We've got a little bit of sat in today that Nik explained earlier today where we had the SAP/4HANA inventory to manage through the period of downtime in production during July. And we also had some Middle East protection that was in, but the underlying is at 90 days. The move from 110 to 90 days essentially is moving us from just over 3 turns to 4 of our inventory in the year. So making that capital work much harder for us in terms of how we're delivering that. That is coming from the investments that we've been making in advanced supply and demand planning, the IBP process, so the integrated business planning process and ensuring that we are using machine learning, artificial intelligence, having the right data feeds that are combining with market intelligence to make the choices and decisions for our business. And when we make choices to put in place that working capital, it has to make sure that it's delivering strongly. And when I come to the customer service slide, you'll see how that's not necessarily been the case because of the maturity of some of our processes and capabilities and competency in the organization and how we're fixing that. I will say that already the go-to-market organization has significantly shifted the culture in the company and the approach to moving things. We still -- as John has said and as Alvaro said, we've still got a long way to go. But already, those signs are coming through strongly that people understand in the business that when we take decisions around shareholder capital and we invest it to get the returns, we have to make sure that, that is done with very clear disciplined building blocks that we have then belief will come through, and we don't generate the slow and obsolete type goods that we're driving here almost double-digit DIO, right? That is an opportunity. We're confident in the work that we're doing around the portfolio segmentation, the rationalization and focus of that portfolio and the systems and the people capabilities that we'll take that to 85 days. Each day is worth about $20 million. And we have an ambition to take that below $80, but we need to prove that we can do that, and we need to bring that through. So I look forward to talking to you in the future on how we move that through. But go-to-market is strengthening that point of accountability and making sure the decisions are much more integrated with the customer at the center of it. So when I started around about working capital returns, customer service, they come together to make us have better returns and a more competitive business. Now I said earlier, I commented around the mindset and how we think about this. This has already deployed shareholder capital, $8.5 billion of maturing stock. It's a sizable competitive advantage if it is deployed correctly. Now it's already deployed. It doesn't mean that we can't make the returns even better than the choices we've already made. So one of the areas I wanted to highlight was something I am very proud of. It's already delivered results. It was recognized with the Gartner power of the profession across all industries and sectors this year in 2026, which was our Scotch intelligence platform that is very quickly now elevating and extending into being our spirits intelligence platform. What that has already done in F '26 is give us $100 million in our P&L of further NSV. How has it done that? We've been able to take our allocated scotches, which tend to be some of our single malts and some of our deeper aged, so the higher gross profit dollar parts of our portfolio. And as that's allocated out at the start of the year, we need to make sure we're remaining dynamic in that year to the changing market conditions, the impact of our activations in the markets and is it selling through and stopping it being at risk of sitting in a warehouse after it's been bottled and tying up capital. So pre-bottling, the allocation is done dynamically with decision engines and artificial intelligence within that platform. It looks at what's happening in rate of sale in every market in the world, looks at pricing and it automatically recommends decisions through to then change the allocations and it's an online trading marketplace between the markets where they can move inventory away because they can't sell it and someone else can take it. That's given us [ GBP 100 million ] of additional sales in F '26, and we'll continue to scale and give benefit. The second thing that the Scotch or now the Spirits Intelligence platform does is -- it looks at and it's built with the relevant digital twin information, and it will get better and better and better. But we're now confident to see that as we take decisions on how we put liquid into Barrel and into our warehousing network in Scotland, it now understands the angel share and the losses and how that changes in different parts of a warehouse individually from tall to bottom or in different locations and geographies. So it directs our highest value, highest return inventories to the right locations to minimize the losses. That is happening automatically with decisions and artificial intelligence and learning. There's still humans in the loop. We will get more and more confident for them to start to move out of it, but it's a lot of capital. So we need to make sure we make really great decisions. And as I said, we'll take that across tequila and North American whiskeys and be able to then take and harvest those benefits, which are on shorter time cycles. The second piece is we've clearly been taking some decisions on the assets that we will have. But the utilization of those assets, we've had to accept that some of them will be running at lower utilizations. That is the capital discipline that we need to make sure that we're taking the business, even though some of those decisions are hard, okay? We're here to protect capital and sometimes that means that the assets have to be adjusted. Moving forward, you can see in the central chart, the shape of the capital that we've had historically. So this is -- if you think of net fill, as we empty out of that maturing inventory for bottling, how much are we choosing to kind of reduce the inventory or how much are we choosing to put in. You'll see that in F '25, we were putting significant incremental in. There's been a big correction in F '26, but the sustainable approach, as you see -- this is an estimate because bottling changes and then you've got to stay dynamic with how you distill through the year, and we're doing that much more frequently. We estimate around $700 million will go in over the 3-year pilot period into the right areas for returns. We scaled back production and distillation. That's been done across, in particular, I'd call out scotch, North American whiskeys and tequila. We're at the minimum requirements for future blend in support of growth. And given the competitive advantage that we have in that, we want to make sure that for great brands like Johnnie Walker, Don Julio, Crown, [indiscernible] that we have the liquids available to deliver the quality of liquids and the quantities for future growth but a very disciplined approach, and we adjust and look at that on a very frequent basis. Tequila monthly, Scotch biannually and North American whiskeys quarterly. Okay? You have to make sure you look at the whole value stream and how we do that, but that's driven and those decisions are taken at CEO, CFO and supply level on a regular basis and now centralized globally. I'll finish on bringing it together under customer service. It is clear, Dave was very honest and transparent that the business has not been running in an end-to-end fashion with its strategy and its operating model to look at how we deliver best for our customer. We've been focused on that over the last 6 months. We've been able to make some improvements around integrated business planning, simplifying and standardizing KPIs globally, bringing more visibility to the improvement plans and where the challenges are to drive quick improvements. But we've got some more systemic things to be able to fix that will take us a bit longer. So whilst there's some green shoots, it's not good enough, and it has to get a lot better. By doing that, we will improve our working capital, and we'll be able to drive the competitiveness of the business. But I would call out, in particular, forecast bias. As a business globally, we were running at 10%, and it was 10% biased to oversight. So essentially, we're putting in place inventory for a much more ambitious plan than the realities. And we're carrying the working capital inefficiencies, whether it be in slow obsolete or potentially written off goods or it be the cost of the warehousing, the efficiency of that warehousing and the transport networks. We need to get a lot leaner, and we need to deliver the value and the returns from getting a lot leaner. We've made quite a dramatic improvement, needs to be sustained and needs to be underpinned to make sure that, that can be delivered and in particular, through the integrated business planning process and the execution. Alvaro did talk to some of the major improvements that came through in Latin America and the Caribbean. They are further ahead. They've been working on it quite with a lot of discipline, a lot of sponsorship from Alvaro and the team to make sure as an end-to-end business, everybody is focused on it. They've had the earlier investments when it comes to the advanced supply and demand planning tools. They've upweighted their capabilities and the seniority of some of the people taking the decisions, particularly in demand planning and the discipline to ensure you've got the activations and the building blocks that will deliver from the working capital that gets put in place. But if I look at how they left this fiscal year, they're up at 98% on time, 97% in full. So very strong performance. The forecast accuracy is one of the best that we've got globally. It's over 70% and its forecast bias has improved from pretty high double digit to low single digit across Latin America. So the big focus has been, as Alvaro said, Brazil, Colombia, Mexico, but the culture is there across that region, and we need to learn from that and take those learnings very quickly across the rest of Diageo, and that's where we're focused. A couple of grounding in some of the realities in big markets in terms of the improvement we still got to drive. If you take forecast bias in North America, it was 6%, again, biased to then underselling against it in H1, 7% in Q3. John has gone in very quickly make sure that the discipline is there in terms of the decision-making and ensuring that we can then quickly correct to something that's much more realistic to the demand that's coming through and therefore, the working capital and the returns can sit from a capital deployment against that. In GB, the example is more around execution. The biggest example on that Pareto chart of where the biggest loss on on-time in full in Q4 was on fulfillment execution, our order to cash process, our customer operations and our supply chain execution when it comes to case pick running of the transport network. There are significant areas of improvement, and that will drive the returns and the working capital improvement as well. So not somewhere to be proud, not somewhere to be satisfied, but very clear on where the improvements can come and the operating model is again driving the early shift in the business and now we need to kick on and deliver against that. So as I started, essentially, every barrel, every drop, every case that gets made to then move around the world has to have discipline, has to have returns on capital and has to be dynamically reviewed so that adjusts to what's happening and what's playing out in front of us with the market. That's me. Thank you. I'll hand over to Nik.

Thank you, Ewan. Okay. So a lot to digest there over the last several hours. And what I'm going to try and do is bring this together in terms of how we look at the next 3 years in terms of our financials and what that means in terms of an investment case and investment thesis as you all can look at Diageo from an angle of being a more competitive but more focused on returns and value creation for our shareholders. So if you start at the top line, and we all know growth is critically important, right? But it's critically important that we're focused on sustainable growth and profitable growth. So when we're looking at it from an angle of what are the building blocks, you've heard from John, right, talking about North America. It has been challenged, but there's clearly some strong interventions around how do we build for a more competitive offering in that market as well as a simplified go-to-market structure. The focus of the plan is to start stemming the share loss, get to holding share and then growing share, right? So clearly, as John highlighted, we are looking at a mid-single-digit decline to a low single-digit decline and then getting to a flat performance in North America over the 3 years. That's what this algorithm starts with in terms of that first big market for us, North America. When we look at the rest of the world, clearly, we are seeing 3% to 5% growth on a sustainable level across those markets, all right? This is also about continuing to gain share in those markets, all right, across the board. So you've seen some examples of that. Alvaro brought that to life in terms of how we're looking at both volume and value share. Very importantly, too, keep in mind that particularly in India, supported by what we're seeing as good tailwinds from a demographic perspective as well as the FDA as well as Latin America, these are volume-led plans as well. And I think that's very important for you to keep in mind. Well, what does that mean then for the group as a whole? We're looking at circa flat to growing 1.5%, growing 2.5%. So if you really look at it from an angle of where will we be when we exit '29, we're looking at an exit '29 of about 2.5% to 3% top line growth, but that is with North America flat. And keep that in mind, and you go back to some of the stuff that Hannah talked about, clearly, if we see consumer confidence come back, and there is that correlation that she talked about that we have seen historically. And if that historic bias plays out into the future as well, there could be some incremental improvements there. But at least for now, this is what we see as the top line growth algorithm. So let me now start walking down through the P&L because I want to make sure you'll get grounded in each one of the lines through. Gross profit, all right? I think there's a couple of myths that have been out there in terms of the fact that gross margin percentages are going to decline. Let me come back to that. Very importantly, we are focused on growing gross profit dollars, all right? In fact, gross margin percentage obsession, you'll have heard me talk about, has created a lot of issues for us in the past. That's not to say it's not an important metric. But again, it's always an outcome. It's a mathematical calculation. We want to grow our gross profit dollars, all right? Why is there a belief that with RTDs and playing a broader portfolio, we are going to drop our gross profit dollars? No, we're going to grow our gross profit dollars, all right? That is very clear in our plan. Why do we also feel the gross margin percentage at 60% plus can be maintained and growing going forward as we look at this post the 3-year period is there is volume growth that is coming through in this plan. That volume growth supports fixed cost recovery, all right? So clearly, that supports margin percentage and gross profit dollars. You have got a very strong focus as you think about an improving mix, both from a category perspective as well as a country mix perspective as North America continues to recover, right? And remember, we are playing the full spectrum. So that doesn't mean it's an either/or strategy, it's an and strategy, all right? And the third element is the productivity savings that Ewan talked about that will also support that. So we believe gross profit dollars growing and most importantly, maintaining that 60-plus percent gross profit margin is what we have for the next 3 years. All right. As we look further down, and let's go to the next big line, which is A&P. Do we have the right levels of investment or more importantly, a question around have we cut too deep? So let me first start with the second element. We have not cut too deep. We've talked a lot about the fact that there was a lot of nonworking dollars that was duplication, waste that we've been able to pull out through the Accelerate program and a strong focus across the business around eliminating that. That's been about $300 million that we've been able to take out from the business. And that's not to say there isn't more to go for as we continue to think about the opportunities in that space. We have also reprioritized investments for where we see the growth. We have been returns focused. We have pulled back on investments where I've talked about the fact that it was actually losing money for us and losing money for our customers. Clearly, not a good use of cash or capital or investments. So clearly, having done all that, we feel the level that we're at is very much a sustainable level of dollar spend. I'm talking about roughly in this ballpark, right? So it's not about an absolute dollar staying at 3.2 or 3.1 or 3. Ballpark, we're in the right area. What does that mean? You guys love to model an outcome or an output of that is a circa 16%, right? We are not driving for a 16% or 17% or a 15%, all right? We're talking about the dollars that we spend and how well does that generate returns, sufficiency through the line, both above the line and below the line, end-to-end is the way we're looking at it. All right. Overheads or SG&A. And I'm going to break this out a little bit over here just to make sure that it is grounded and clear. We are talking, as Dave highlighted, getting to an overhead as a percentage of our revenue of about 10.5%, putting us in that top quartile group of companies. What have we done? Well, Dave talked about the fact that we've made significant progress already to be able to implement that and move at speed. There will be some areas that will take a little longer, particularly as we look at the GBS piece, but these will start coming through as well. That's about $1 billion of savings that we're going to have, $850 million of that is in what we are calling overheads, both in COGS and in SG&A, all right? So there's an element of overhead that sits in COGS as well. That's about $850 million in total. And we've got another productivity element that Ewan talked about of another $150 million. So in total, you're looking at $1 billion for an overall cost of about $1.2 billion. And I'm going to come back to that when I talk about cash. We have already taken a big chunk of that. About 70% of that has gone through our P&L in 2026 that we talked about this morning at that circa $752 million of a charge on restructuring. But this will really help as well as we look at the next line of our P&L, which is what does that mean in terms of operating profit. So for us, when we're looking at operating profit, again, operating profit dollars will grow. Top line growth we talked about, but most importantly, gross profit dollars improving. You've got the investment that we need in A&P, and you've got significant savings coming out of your SG&A line, right? That supports operating profit dollars growth at a mid-single-digit range over that 3-year period on a CAGR basis. There will be slight ups and downs, and I'll talk about why that is. If you looked at that previous slide, just remind yourself that we talked about that savings coming through. About 40% of that will come through in 2027. Another 55% of that will come through in 2028. And all right? So you've got the bulk of that coming through in the next 2 years to really support that operating profit growth of circa mid-single digit. Well, again, mathematically, that means our operating margin percentage will expand, all right? So again, the fact that people talk about the fact that our margins need to suffer our margins do not need to suffer, all right, both at the gross profit level, but more importantly, growing operating profit margin, but critically dollar growth. Free cash flow. So let me just ground everybody again here in terms of what we're talking about. 2026 was a great year. We had a strong focus on cash. We were able to deliver GBP 3.2 billion. Two things I would call out to make sure that we're grounded on the right number as we look at this on a recurring basis going forward. All the numbers that I've talked to you about so far on the basis as if the EABL divestiture has happened as of July 1, okay? So when you look at this on a go-forward basis, Keep in mind, there's about GBP 300 million of free cash flow that is delivered from the ABL business, right? So that automatically brings that GBP 3.2 billion number down to GBP 2.9 billion. We did have a one-off tax benefit in terms of historic refunds that we received in 2026, which obviously will not recur. So your baseline is at GBP 2.8 billion when you exclude EABL and that historic item. When you look at 20 clearly, 2027 is going to be impacted by the cash cost of the restructuring program of about GBP 850 million, right? And then when you look forward, you're going to see that number grow. So I've seen some notes come out already that talk about, oh, cash is coming down by GBP 2 billion. And keep in mind, GBP 900 million of that is just that rebasing when you take out EABL, right? That's just a like-for-like. And then you do have an GBP 850 million restructuring charge, but let's step back and look at this from a payback perspective. We're delivering about GBP 1 billion in savings, right, for an GBP 850 million cash charge I don't think that's a bad use of capital in terms of a payback and return, right, to make this business more competitive, more agile as we look forward. You've heard John talk about being disciplined and dynamic around our CapEx returns focused. And you have already seen that in 2026 where we brought our CapEx down to circa just under GBP 1.2 billion, right? We have the ability to do that. A lot of our investments that we're looking at going forward is very much around capacity, capability building, right, cost reduction programs there is a regulatory maintenance piece, et cetera, that's in there as well, but that's all well funded in that GBP 1.25 billion that we've put into the model for the next 3 years, and we're working towards that target. So what does that mean when you pull it all together in terms of a growth algorithm? Well, you're looking at low single-digit organic net sales growth. I talked about that, flat 1.5%, 2.5% in so a CAGR of somewhere around that 1.5% with that assumption around North America, mid-single-digit operating profit growth. I walked you through that. We would expect EPS growth to be ahead of operating profit growth on an FX-neutral basis for translation and that cumulative free cash flow that I explained of circa GBP 8 billion but you've got that like-for-like piece as well as the impact built in for the GBP 850 million of restructuring cost. We've had a very disciplined and clear capital allocation focus. I think we've actually just not stuck to it as we should have. So I don't think it's really a change in how we think about it outside of the fact that I think when we're thinking about investment for growth, we're very much returns focused, right? So if you think about that first bucket, what we talked about what we need to do for A&P, we've talked about what we need to do for CapEx. We've talked about what we need to do for maturing liquid, right? That maturing liquid piece, you've seen come through in terms of what we've done in terms of a correction of that baseline, but more importantly, a process is a lot more dynamic and flexible as we think about what we're laying down for the future, all right? And Ewan talked about that, whether it's monthly, quarterly, or biannual cadences with which we're looking at it, all right? So a lot more dynamic in terms of what we're doing. So clearly, we've got a plan that is well funded from a perspective of investment that we want to make in the business. We want to return cash to shareholders. There's a value creation opportunity here as we continue to look at that, and I'll come back to that in a moment. And I think it would have been -- or if I didn't have that last box on the chart because you all would automatically assume that we are trying to not talk about it, but let me be very clear. This is an organic turnaround story. This is not about us going out to do any acquisitions, all right? So it's really the first 2 boxes that we're talking about. The first box is fully funded. What does that mean in terms of that second box? Well, they've talked about this in the opening, right? The fact that we've been able to, with strong free cash flow generation and a rebasing of our dividend policy, be able to bring down our leverage from 3.4x at the end of to 3.1x at the end of '26, all right? More importantly, as we know the disposal proceeds are going to come in for the 2 transactions that we have announced, about 0.25 turn from the ABL transaction, about 0.1 turn benefit from the RCB transaction, right? That, along with the free cash flow delivery will help us get to the midpoint of our target range. This is about a year earlier than what we had even communicated to you all last year, right? So strong progress in that area. More importantly, absent any actions, which, as Dave said, that's a nice problem for our Board members to have as we look forward, right, we can actually get down to 2x by the end of all right? I don't expect it would be there. Why? Because quite honestly, we don't want to have an inefficient capital structure either, right? We do believe the 2.5x to 3x net debt to adjusted EBITDA is the right target leverage but it is 1 that we will review annually and make sure is it fit for purpose as we continue to look at the macro environment. But for today, with that we clearly have a lot more financial flexibility to make the right choices and allow the Board to make the right choices to think about how do we return excess cash to shareholders, i.e., do we increase our dividend payout. Do we do share buybacks? And I don't think it's a binary or decision. Again, it could be a combination. So it could be an end decision as well. But more to come on that. I'm sure you're going to want to build things into your model. Don't ask us more about it. When we get to that point, we will be able to share with you in a very nice way how we will think about that. But the whole focus around cash returns to shareholders and a capital allocation policy that's clear and disciplined is very much intact. 2027 guidance. Well, no surprise from some of the stuff that you've seen that I've highlighted. So we are guiding for broadly flat organic net sales growth supported by low to mid-single-digit operating profit growth and free cash flow of GBP 2 billion after the cash charge for the restructuring. We expect the leverage, as I said, to be set at the midpoint of our stated range of 2.5 to 3x. So with that, I'm going to leave you with 3 things, right? 2027, profit growth and operating profit dollars growth in that low to mid-single digit. Number two, we do not need a long-term margin reset. Hopefully, I've been able to demonstrate that to you from both a gross and a growing over the 3-year operating profit perspective, dollars and margin. And three, we're going to have a lot more flexibility when you think about the leverage coming down at a much faster pace to us to allow us to do the right things for our shareholders as we look forward. So with that, Dave, I'm going to hand over back to you.

Thank you. The last little bit, really, and we're running at shed of time after all that focus on being timely. We're on time, which is good. Look, the final thing I said this morning was the simplification and the alignment of incentives. And what you see on this 1 chart is how we were in fiscal '26, both at the leadership and the broader team level from an annual and a long-term perspective and what it is, we're moving to in terms of '27. Now from a rem policy point of view, Susan is out consulting at the minute. Our new strategy for Nick and I will be voted on in November. But notwithstanding whatever might happen in that space, this is what we're doing for the teams inside Diageo. So at the leadership level, I've already told you, NSV operating profit and those individual objectives. And if you're a business group president, your first individual objective is the delivery of your region as part of that total. Longer-term incentives, cumulative cash flow, EPS and return on invested capital it. Importantly, elsewhere in our business, we're putting the accountability and the alignment where the activity is. So if you're sitting in our go-to-market organization, you will get your bonus based on how you deliver your part of the organization and not be linked to what's going on somewhere else in the business that you can have no impact on whatsoever. Look, I think at the leadership level, you'll see the massive simplification that the Board are trying to drive for the long-term key performance indicators. We haven't really changed our REN policy for I think it's 12 years. So there's quite a simplification involved in the long-term incentive. But hopefully, you see on the right-hand side a simplification and alignment to what it is we talked about as the investment thesis for Diageo. Okay. Now in the old model, when you were to communications, you had that thing, which is at the start, you tell them what you're going to tell them, then you tell them, and then you come back and you tell them what you told them. Anybody else had that training? Cool. So just to recap, what did we say at the start and I hope you 2 strategic battlegrounds, spirits, including RTD and Guinness. We see growth in both, and we see an ability to win share in both. A number of you have said to me before, do you think you can win in RTDs. Hopefully, you now realize that we're #2. We're growing strong double digits, and there's actually, we're in the growing -- fastest-growing part of the market, and we're committed to do it. We've got to do more. but you understand why we see RTDs very much part of the spirit occasion, and that's a big change for us. Reassurance for that premiumization is still very much part of it. You will see some more when you go down to the innovation center, but we are going to think about how we activate a broader portfolio. We have a unique portfolio as Diageo, and we want to use it much more proactively than perhaps we have done in the past. And the way that we do that is we bring those category strategies that category lens on top of those brilliant brands in order to manage the portfolio much more proactively. John was very open with you. We wanted to be very -- I said at the start, we're going to be very transparent. We have some challenges in North America, some of them are longstanding. Some of them are more recent. We know what we want to do. It's going to take some time. We've got a very committed team there. We've made some very big interventions. North America is a big market, making changes take some time, but we're not shy about recognizing where we start from. And as we lean in and do that, and support John in the turnaround, we continue to accelerate growth in the rest of the world. Nik said it again, we're not looking for a profit reset as we walk through that turnaround, right? Given what we've done across the business both this year, but going forward, we're going to invest GBP1.2 billion, as you've heard in that restructuring program. The details you've seen and Nick has just talked about, but that saves us GBP 1 billion. And that GBP 1 billion allows us to invest in the innovation, some of which you've seen, some of which you'll see downstairs, but also to invest in competitiveness. And again, that's not about price. There's some tweaking of prices of that category strategy, but really in the scheme of things compared to what some people wrote, we're talking about tiny things. But the investment in competitiveness is small packs, better packaging on Smirnoff, addressing some of the issues that John talked about, that's investing in the competitiveness, the mix on Crown Royal, putting the quality back into the packaging is investing in competitiveness. So when I say that, I'm not talking just about price, okay? So please understand that. But we also allow us, let's be clear, to protect the underlying profitability. Cash generation, leverage Nik has been super clear on we'll invest GBP 1.5 billion, GBP 1.25 billion of CapEx over those periods and you've now seen the breakdown of where we're going to spend it, big expansion on Guinness. If you looked at it historically, you see what's going to happen over the next while, we really are going to open the supply chain on Guinness. Capital allocation, unchanged. As Nik says, we hope to give our board a problem going forward of how best to think about returning funds to shareholders, but we've got to deliver it first. The focus is on organic, right? Trying not -- we don't want to be part of the speculation that's out there. This turnaround is based on us rolling our sleeves up and doing the best job we can possibly do with the business and the assets that we've got. And we simplified the incentive schemes, as I've told you, and it aligns completely to what drives Barbie in the business case. Okay? Lot to do. We've done a lot already, I think. There's a lot to do. If you haven't tested it out already, do so in the breakouts. As a team, we're confident we have a plan that we can deliver. We're confident that, that delivers value for our shareholders. And it puts the Agile back in the place we all want it to be, be a long-term compounder of value for our shareholders. But we've got some work to do, but that's okay. All right. That's it, right? We're now to the Q&A part of the session. Because we can't get everybody up here. What we thought we would do is Nik and I will up here, we'll sort of steward your questions, but I'm going to -- where it's appropriate, I'm going to ask 1 of my exec colleagues to give you an answer if they are a better place than Nik or I. what I suggest we do is we run for the half hour that we said we were going to. And if we're running out of steam at that point, we'll call it and we'll go downstairs and then come back on an a drink. But if we've got a little bit more time if we need it in terms of questions. Is that okay? Right. Let me put this down before the hands go. Nik, would you like a seat?

Sure. I'll grab one.

There you go.

I'll grab the other one.

Yes, could you -- because actually, with the lights, it's really hard to see who is who. So go for it.

We don't want to see who's coming from.

Go for it.

It's Simon Hales here from Citi. So 2 questions. Firstly, you talked a lot about simplification. Then at the same time, you're talking about sort of expanding the price in artificial costs move RPE with a sizes. So there's more complexity coming in for that side of the organization or as [indiscernible] what are you doing to help your customers manage that transition because it's obviously not operating a other players are also looking at tastes more content. How do you win? And actually you get the brokers there [indiscernible]?

And Ewan I'm going to probably ask you to augment what I'm about to say. Simon, ordinarily, I might directionally agree with you. In this case, it's not the case. If you look at the complexity we have today in terms of SKUs and you look at the complexity we have today in terms of innovation, it's a loss. It's colossal, right? So 1,200 innovation projects in Diageo in a year is collateral, right? So actually, I told you about the session we had with the market is. The project size is going up as we call that portfolio, the SKUs are going down as we simplify. So actually getting bigger, more impactful innovation, whilst it is, yes, in that portfolio or is in RTs overall, we're taking a massive amount of complexity out of the Diageo as we make these changes. But it's very important that we've got a strategy that allows us to make those decisions against it. But you -- sorry, Ewan, you wouldn't believe the complexity in the organization today in the things that you've just mentioned. So I'm really very confident we're going to be a much simpler business as we go through this change with better innovation and better productivity by project and by SKU. But mate, do you want to add to that?

Yes, sure. I mean I think the vision is 1 of the best examples so what we spend that time to across the polite when it comes to innovation. But we're always chasing where we haven't necessarily got the capacity to be part of the value chain that you're trying to solve and establish it just [indiscernible] effort was it kind of a problem solving. But something supply the relationship with time meeting these are also [indiscernible]. This kind of approach which goes more into the simplification of the operating model from the language to the accountabilities to the integration on an end-to-end basis is such a big simplification. I've been in the organization for 30 years. It is a massive kind of time together of how the business makes decisions.

Mic's on.

In a sense, I believe deeply what that's going to do is essentially make sure that our resources are more focused on saying as you develop an innovation, you are setting up with confidence from its inception and the accountability is through the business through the delivery to customer, not that you develop things and then it gets thrown over to supply to solve how you scale it. and deal with all that complexity of scaling it on time for the customer. So this is 1 example that can be kind of played across even the business planning that we spoke about, where essentially, you're planning for many things that are never going to be a reality. And therefore, I think having a much more streamlined portfolio to then play across the price ladder. It just means that you're much more confident than the decisions that you take will play through in the reality of the activation of our value chain. So it's just a couple of examples.

And Simon, I'll just add on the piece that Ewan was talking about and particularly from a customer perspective, I think we also are getting much better in terms of our offering that's occasion-based into the outlet and a brand pack architecture that works as well, right? And you heard Alvaro talk about that in terms of how important that is as well. So in fact, we're bringing for simplification to them too in terms of what's relevant and what's going to move, right, with the broader offering that we have on packs, formats that is occasion-led and channel specific. Okay. How do you want us to do? What's the best way? Yes. Why don't you -- there you go.

Celine Pannuti, JPMorgan. My question on the U.S. First of all, you expect the market to reaccelerate from minus 3% to flattish. What's driving that? And I think 1 of your competitors was talking about the market and my slide, so I don't know if you could help us reconcile those numbers. Can you talk about -- when you think about the growth of your performance and closing the gap in market share, how we should think about price/mix versus volume? And then lastly, I think SG&A to sales in the U.S. is or 7%, if I am right, your overheads. How do we think about organic EBIT in the U.S. if you are going to be negative flat until we're getting to [indiscernible]?

Why don't you take the last one, and then we'll ask Anna to come back on it.

So on that last one, if you look at algorithm of circa mid-single-digit growth on the operating profit. That is assuming with what we have already put into place that John has moved on the operating framework. A lot of those savings will come through in 2027. But again, remember, top line growth down mid-single digit. So our assumption here. Again, I'm not giving you broad direction, but assumption here for North America underlying that mid-single-digit operating profit CAGR is low single-digit down for the next 2 years and then getting to a flat to slightly positive in year 3 on operating profit for North America, okay? So we're not expecting that there's suddenly going to be great profit growth coming out of that because we've got to invest for that capability that simplification and that competitiveness.

Indeed. Anna do you want to come back on the -- can we put the mic on, please? on that?

Yes. So I think from the consumer perspective, we were quite clear in North America. There is a significant affordability pressure that is the major headwind right now. That, therefore, is a discretionary income challenge especially seeing that in the middle income where they have the deficits. So as macros return, as consumer sentiment returns, we'd expect discretionary income to handbag and we would see that higher spend on alcohol. So that series of bets that needs to come through along with, as I said earlier, population changes, the immigration piece changed, we see additional tailwind as well.

And the number you referred to of that 5% that you said competitors, that's really more on the U.S. spirit side. Remember the number that Anna's put in for North America is total. So it also factors in what you're looking at in terms of beer Canada, et cetera.

Sorry, it's Mitchell Collett from Deutsche. Nik, in your slides on marketing, I think you showed that most of the reduction in marketing in fiscal '26 came from that nonworking money. And then the guidance you gave in terms of organic sales growth, looks, I guess, quite prudent. I'm sure there was a point where you thought about whether the best creator of value would have been to reinvest those savings potentially to try and get the top line growing a bit quicker a bit sooner. So I guess I'd be really interested in your perspectives on how you came up with the right sort of level is about 16%, and that's the sort of glide path to growth. And then Dave, I think you probably won't want to answer this, but I think at 1 point, you talked about there being 5 strategic alternatives. I'd be really interested to know what the other 4 were or what the 5 were, but if you can't say I understand.

I'm sure you would, but we won't be sharing those with you. So I just wanted to demonstrate the completeness of the exercise that we challenged ourselves in a number of different ways, shared them with the Board, but we make the decision, that's what we're sharing with you now. Can I start on the 1 you suffer Nik and then he can come back financially, which is, look, the critical thing is, let's look at our history. Let's look at the history of Diageo. We stepped it up from 16 to 18 in '21 to '25 roughly. We got no growth for it, right? The reason why Nik is emphasizing, I think, so much that the 16 is an outcome is the way we're doing it now is we're taking the strategy, we're taking the brands, we're taking the innovation to use a term the jobs to be done and then saying actually how much money do we need to extract the growth from the innovation that we've got available in this year, that year and the other. And the outcome to that is 16. The idea that suddenly without the right assets, without the right innovation that we're at the right time that I could just take 16, turn it to 18 and accelerate the top line more quickly, too simplistic. Way too simplistic. So we now need to be much more surgical to use the word about the investment that we make in different parts of the portfolio to get the return that we want. It's evolving as a methodology for us. It's all quite new, but the outcome of that is the 16 that Nik was talking about, feels about right for the next 3 years, and we would actually destroy value if we were just spending more money on things that we know wouldn't return.

Yes. I mean the only thing I would add to that is, again, keep in mind, if you think about what you saw from an angle of what Christina laid out and what you hear heart in terms of the category strategies, right? We are talking about a more harmonized and standardized approach. So if you also think about the spend that was there, keeping aside the nonworking element of the duplication and the waste that we had. There is an opportunity from scale and harmonization as you think about spirits and RTDs across those categories as well. So I think you have to look at it from an angle that says back to the point. Do we have the right assets and are we investing behind those assets with the returns focus. And clearly, if there's better returns and we can put some more in, we'll find the money, right? We're not going to not put the money in. But I think for now, we believe we have that.

Andrea from Bank of America. So 2 for me, please. An important lever stepping up your commercial execution in the U.S. is about reenergizing sort of the relationship with your distributors, and you referred to that in the presentation. So can you talk a bit more about some of the changes you're doing also how you're going to incentivize them differently to focus more on rate of sale. And when are these changes actually taking place? And then a question on the balance sheet for Nik, please. you're maintaining the balance sheet target 2.5 to 3x. I mean this has been the target for many years at Diageo, particularly at times before COVID when top line was growing mid-single digit, Diageo is targeting 5 to 7 growth. So what's the thought process in thinking that is still the right target in a more difficult environment? And historically, when you've been towards the mid of that range, that's when that would have triggered buybacks. Is that the way to think about it?

John, do you want to -- I can say some of -- go for it.

So look, in turn to our go to market. So I would say we're very advanced in terms of our conversations. Look, the big thing is, when I went to the U.S., I found that we have exclusive dedicated sales force, which I really like within our distributors and the distributor side of the house. But they were pretty much focused on point to distribution. And so the conversation we've been having with our distributors is how do we take that dedicated resource and put them to work harder on not just getting distribution, but actually getting velocity and redo sale driving. Whether that's in how we merchandise, how we do shelves how we actually drive the package into people's hands. And of course, incentives play a big part of that. I won't get into specifics because you can appreciate that. And I think that's a really important shift for our distributors. And I think it mimics what we're doing with our own internal model as well. That shift to distribution plus rate of sale velocity is going to be a really key unlock for us.