Pernod Ricard SA ($RI)

Hello, everyone. Thank you for joining today's Q&A session with Conor McQuaid, CEO of Pernod Ricard North America. I hope we've had the opportunity to see the video update we released earlier today that described the progress Conor has made in the nearly 2.5 years of his leadership in North America is now being comes third opportunity to update us all on his progress. Please note that during this call, Conor will not provide any forecast, outlook or guidance. Our most recent group guidance was updated and shared by Helen in our Q3 sales update in April. As usual, in order to give as many people as possible the opportunity to pose questions to Conor, please, no more than 2 questions at a time. So operator, please now if you could explain the mechanism to ask questions, and then we'll hand over directly to Conor. Thank you.

[Operator Instructions] First question is from Laurence at Barclays.

A couple from me, please. In your prepared remarks, you mentioned that screwball was having a few issues from the route-to-market changes in the U.S. But just wondering if any of your other brands struggled in any way as a result of the route to market changes because I think in the past few quarters, you mentioned that you've been underperforming the U.S. market. I just wanted to understand if the route market changes have anything to do with that? And then secondly, on your ready-to-drink strategy, a lot of the growth in ready-to-drink has often been in new-to-world brands. But your innovation in the space is largely line extensions with your existing brands. I'm just wondering if you could talk us through the strategy behind your innovations in the ready-to-drink space.

Laurence, and thank you for joining us. And hello to everybody on the call from bright and sunny New York. I'll take the 2 questions in sequence. Ready to drink -- sorry, beg your part and screw bold first from a route-to-market perspective. As we went through the transition on acquisition a number of years ago, we had some challenges in the relative stock loading that went into trade and also the timing of those changes meant that some of the promotional windows that we would normally have been able to access on a portfolio basis weren't available to screw be I think we got off to a very challenged start at the outset. We also had some supply challenges around the 100 ml can, which is core to the proposition on screwball insofar as it's a great trial mechanic. And obviously, we were 1 of the innovators in bringing that format to market. So I think we've largely addressed those issues now. We have the 100 ml back in distribution, and I think that's a positive contributor to the improving momentum that we're seeing on scrub. And largely, we're seeking to double down on the strategy being very clear that it's a short brand and plays in that short space and really making sure that we get on menu for those impulse moments around shot which take place clearly in the U.S. on an ongoing basis. So very happy with where we are in terms of the strategy clarity and what we're trying to bring to bear from a market execution perspective. The small sizes play a key role in that proposition. And we've got some exciting innovation coming down the line, including the launch of the American Classic peanut butter and jelly in a can and small-size format hitting the market as well as some even more exciting innovation that we will trial in California, Southern California and New Jersey come September. So as I say, a lot of work done to inflect positively inflect the performance screwball despite the challenging start that we experienced. From an RTD perspective, I think you're right in saying that New to World has been a key driver of RTDs, but I think it's also very important that we look at various swim lanes play out in the RTD opportunity. Clearly, you've got mall-based or flavored malt beverages as they referred to. You've got wine-based RTDs and indeed, you've got spirit-based RTDs and it's in spirit-based RTDs that we're seeing the dynamic growth and the propositions that seek to access that market and those opportunities come through 3 swim lanes as we're describing it, there's the light and refreshing. There's bar quality in a can, and there's playful. And really, what we're saying to ourselves is, is new to world, the entry -- or is it the clarity of proposition that we bring to bear? And you look at a brand like Malibu, for example, the #1 brand in the U.S. associated with summer our #1 household penetration brand and indeed, a brand that has all the refreshment cues and daytime, summertime drinking occasion opportunity to execute against. So it's about as challenging ourselves to bring the right proposition to market that can access that moment. Doesn't to my mind, necessarily need to be new to world. Indeed, our strategy opportunity in service of our power brands, that's the 60%, 70% of the portfolio. that is made up of those 6 power brands. And we're really trying to hone and refine our entry points so that we have the most competitive chance to win -- we're seeing great momentum on our most recent collaboration and innovation, which is Malibu and Dold. Do being the #1 brand associated with pineapple juice and again, the multiplier effect of those 2 brands working together in support of a relevant proposition seems to be resonating as we head into the critical summer period. So again, a lot of work done in refining the strategy, and I referenced in the video as well, the positive momentum we're experiencing on the launch of Malibu Pink. Malibu in is clearly hitting the mark and clearly going after a key consumer opportunity that the brand has all right to win within. And recruitment is the overarching theme of the strategy. So making sure that all we do is in service of the recruitment of the next generation of Malibu consumers. And I think we're much sharper and clearer in the role that RTDs play in that. So in summary, I'm saying New to World is not the only entry point, consumer-relevant propositions and we believe we have brands in the portfolio that can meet that need.

My first question was much more about your other brands rather than scrub. I really want to understand if you've had any issues on any other brand outside of Scrub following the route-to-market changes.

I think that's a very live and active question. As we reset our route to market as we came to the end of our contract period, as of last year, and we updated everybody in terms of the changes that we made and the philosophy that we brought to bear in those changes, which was very much driven by a fittest athlete by state. So looking at it on a state-by-state basis, very forensically going across each state and determining who is our best partner to win in that state. And they were the changes that we made some 12 months ago and obviously transitioned towards -- in the interim, outside of our control, there has been quite a degree of change within the distributors tier. And we've seen, obviously, the consolidation of various states, the departure of Orin DC to a meaningful degree, which was a number to wholesale partner that we have been working with. So we've had to, again, forensically go back across our footprint and make changes as appropriate. In that context, I'm very comfortable that we've done and made the right choices. And as I say, I think the team have worked very hard and diligently to go about that exercise with real clarity. And we're in the transition mode on those 11 states that are in that second wave of change. And fundamental in those changes is Texas, 1 of our largest markets, and we've transitioned from RNDC into Southern as of the first of May. I would characterize that as a transition that's gone particularly well. I think, again, to do the hard work of the team and the support of Southern as a partner. We're off to a good start. Our fill rates are north of 80%. And the transition has been exemplary, I think, in the way that we've managed it. Some of the other markets will transition as of the first of July, notably in those is Maryland, which is currently with RNDC and were moved to the new res organization subject to the conclusion of those contract negotiations. And as I say, we're working across each of those states that are in transition to make sure that we're doing so in a very structured and supportive manner. And as I say, I think the work that's been done by the team is giving us confidence that we're doing so without major disruption to the route to market or indeed, the availability of our products in the brand or in the state in question. I do see that answers your question, Lars.

Next question is from Richard Withagen, Kepler/

Two questions from me as well, please. First of all, there's been a structural destocking in your U.S. business for a few years now, and the industry inventory to sales ratio also remains elevated I mean, should sell in and sell out be more aligned in fiscal 2027? And then why would that be the case? And then the second question I have, there is, I mean, obviously, a lot of focus on the top line performance and rightly so, I guess. But how do you make sure this profitable growth? What are some of the points of focus for this Connor?

Richard, good questions. Destocking, clearly contextualized and I think we need to take a step back collectively and look at the challenge that we faced into some 12 months ago. So again, to recall, a lot of the noise in the system and a lot of the speculation and uncertainty indeed around the level of tariffs that will be applied to our sector at 1 point in time, we've spoken to in terms of 200%. Now we took that into account clearly in ensuring that we had an elevated level of stock state side to mitigate the challenge and the risk that, that poses to the business. So we did start the year with elevated stock levels, and I think that was well flagged. We have seen some industry adjustments through the course of H1, and we are lapping those elevated comparison basis as we head into H2. So that's reflected in the figures, where you see the sellout broadly at minus 7%, and they sell in at about minus 14. So adjustments are being made in the context, as I've just described, of some of the distributor changes and indeed some of the pipeline fill effect on the impressive innovation funnel that we've put to market. So we're not really at liberty at this point in time to talk about how next year or the full year of next year will play out. But clearly, we are diligently working across each of the states, each of the distributors ensuring that our stock levels are appropriate to mitigate any challenges and risks, but it's been bumpy over the last 12 months. And I would hope for a more stabilized view as we go forward. On your second question in terms of top line and the profitable growth and how the shape of the P&L plays out against the challenges that we face into. Clearly, resource allocation is critical in that regard key line item is A&P and the dedication of those resources to the brands of greatest opportunity that can positively inflect our performance we're helped and aided greatly by the early adoption from a matrix perspective, which is our AI A&P process, which allows us to diligently review investments made touch points chosen and return on investment that we get from those investments. And that hones and sharpens year-on-year through the support of the AI tool that we're using to make more informed choices as we go forward, and again, really refine how that A&P is being deployed, drive for efficiencies there in and challenge ourselves very much in the context of working versus nonworking. So how many dollars are in the eyes or in front of the eyes of the consumer versus those that are in more back-office focused activities. So we're really trying to pull that down so that we get as much of that investment working hard in this field and in front of consumers. So a lot of good work being there being done in that regard. Are Matrix adoption and our use there of the recommendations through that tool is north of 70%. So in other words, what it's telling us to do is being reflected in the decisions that we make to the level of 70%. And then we have opportunity, and this is intended within the tool that you can override and maybe strike for some new ideas, new initiatives that aren't in the historical numbers. And therefore, it's not ever a case that you strike for 100% adoption of what the tool will tell you to do. But as I say, really good use thereof and the marketing team have really embraced it as very informative as to how they make those relevant resource choices from an A&P perspective. And then from an SG&A, looking at the organization and again, trying to ensure that what changes have happened externally be that the wholesaler changes that we are making, the dedication that we have negotiated within the wholesale tier is reflected in our own teams and ensuring that there's no duplication in roles, responsibilities and indeed accountability make sure that we really are very studiously and very disciplinedly looking at our organization and our SG&A costs that are pressed up against the opportunity and making adjustments accordingly. And again, I have to commend the team, the agility that they've shown and the way that they've addressed or worked with us to address those changes that we would wish to make to ensure that we're agile and responsive to the external context as we see -- so as I say, very disciplined approach to AMP, very disciplined approach to SG&A? And then largely within the broad parameters of what's in our control is the SG&A -- or sorry, the discipline that's been brought to bear in the business. And again, I'm very impressed with the work team have done in using new tools, new insights and embedding that understanding into those choiceful decisions that we're making around promotional intensity, promotional frequency. And indeed, state-level SKU level discussions and conversations that we are being having against the competitive context. So I can reassure you, genuinely, there's a lot of really good work being done and it's something that's to the forefront of our mind in the context of the current market that we need to use the resources available to us in the most appropriate way possible.

Next question is from Sanjit UBS.

A couple of questions from me, please. Can you touch upon the the pricing environment in the industry, it feels like it's been deteriorating in the last few quarters. And against that backdrop, how competitive do you think the portfolio is versus your competitive set at the moment? And are there any further interventions you foresee over the next 12 to 18 months. Clearly, it's a dynamic marketplace at the moment. And then just coming back to your point on resource allocation and marketing spend. I think in the first half, marketing spend in the Americas region for Pernod down 23%. And something like 250 basis points as tent sales. So do you feel you've got the the resources there to be able to keep closing that gap versus the market? Or does there need to be incremental investment on the marketing side?

Thanks, Sanjit. In relation to pricing, clearly, and I say this with all transparency, we sit every Friday morning at the executive team level and sit with the RGM team and go across the detail and the understanding. There's a work plan that is looked at. We looked at the external environment. We looked at any changes within the competitive context moves being made with that cadence of once a week. So that's a mandatory no choice, 1 most -- all of the team must be there, including our commercial leadership, our finance leadership and our marketing leadership. So that to say that we are studiously studying this and acting in real time, I think, is reflected in that cadence and the approach that we're taking. -- the tools, as I say, have really given us greater understanding, opportunity to make database decisions as we see those changes. Now in the context of the market, clearly, you've got a lag in some of those decisions that you take and their ability to show up on shelf. And that's not uniform state by state, different states can move in different ways at different times. So we're looking to O&D. We're looking to the promotional calendar and the promotional investments that we'll make and the bets and the choices that we will place against that available resource. So in the marketplace. What we're seeing at the moment is a migration towards premium in certain categories more so than others. So, for example, tequila, for example, you've seen super premium, maybe somewhat more under pressure and dynamism in that premium space around that $25 price point and brands that can hit that price point and work in tequila in that category at that price point seem to be hitting the sweet spot of where the consumer is at the moment. But it's not a uniform view across categories. So there's different dynamics at play across Vodka and whiskey and some of the other major categories that we're operating within. So pricing is something that we will continue to stay hugely focused upon and really challenge ourselves to be as sharp in the choices that we make and the decisions that we take to respond in real time to what we see externally. From an A&P resources perspective, we're holding to a view that 18% as a ratio A&P to net sales in the U.S. is an appropriate level. And within that, while it has reduced in the quantum, I'd point to the earlier conversation and discussion I gave in terms of the use of those resources is getting better all the time and the concentration of those on fewer brands. So north of 70% of those available resources are going against the Power 6 and really being very diligent about how they are being spent in support of the strategies that we are putting in place. So the resource, as I have and as we work towards the 18% is being worked harder and indeed, opportunities as they present themselves are always something that we can have a discussion with our colleagues in Paris ran. So we have the out-of-cycle opportunity last year, for example, on the MLS opportunity for Jameson to become the official whiskey of major lead soccer here in the U.S., and that was a conversation that we were able to take to Paris and get support therein. So it's fluid and dynamic at market level, it's fluid and dynamic at group level. And as I say, we're working to make sure that we've got the available resources to address the opportunities as we see them.

Next question is from Trevor Stirling, Bernstein.

Two questions from my side, please. The first 1 is there's a lot on your plate Conor just looking at the presentation that the number of things, the number of levers you're pulling at the moment is quite remarkable. But if you had to pick out 3 or 4 of the critical ones in terms of closing that gap, to the market. What would you highlight. As to the second question, I appreciate you can't comment at all on the Brown record discussions. But during that period when it was public that the discussions were going on, how did you manage the morale of your organization? And indeed, to your distributor partners because it must have been quite unsettling for them?

For the question, Trevor. And let me take the first 1 if I can, in terms of the 3 levers. I think as I referred to in the presentation, when we sat or when I set off on the journey here in the U.S., I call out 3 areas of focus in terms of the sharper portfolio focus, excellence in execution and recognizing that I needed to bring the team, the people in the organization and deal our relationships with the wholesalers on that journey with me. And they still hold true to this day. They are still the focus areas that we challenge ourselves against knowing that they're not once and done, it's ongoing muscles that we must flex and we must continue to pump action if that's an analogy I can use on each of those 3 levers. So build that muscle ensure that the sharpness on portfolio, that excellence in execution and that the structure and the people are coming on the journey with us. In closing the gap to market, we brought it from where we were 6 points of the market rate some number of years ago down to a 2-point gap to market. And I think that's reflective of all the good work that's being done. The challenge we now face into is how do we get from to meeting the market that's the focus and the energy that the team are bringing to the FY '27 plans. In that clarity of what we're asking of our distributor partners to do. And I think this is a big step forward in where we've come from. We had 150 of the senior leadership across the wholesale tier with us last week New York, and we were able to call out very explicitly the 3 bold actions on each of the brands and challenging ourselves to make it as simple and executable as possible. Our asks potentially in the past have been somewhat complicated, and we weren't really as sharp as I would have hoped us to be. So the teams and the partners that we're working with across the wholesale here know what we want to do, know where we find the opportunities and know what we need to go after. Specifically what has been commendable and what was remarked upon by the wholesalers was the innovation funnel. And that we've brought to bear across the brands with a particular focus on the power and the need for they to be strategic in nature to fall within the brand architecture of each of those brands. So not short-term LTO spike to the brand architecture that they fall within what we would wish to sustainably invest behind over the long term. And we've had some really good positive launches on some of those innovations. I mean, Glenlivet Jamaica ask, which was the holiday season last year will be repeated this year with, again, with the different proposition, but again, hitting that elevated price point to 12 and really, and I mentioned this in the video, Malibu Pink has come out of the gate really strongly and really started to show where we had an issue and it was clear that Malibu was a drag on the portfolio performance, really understanding what was driving that. What we needed to pivot towards and we've hedged an occasion, we fit a flavor, and we fit in execution of that particular innovation, which gives us strong positivity towards the summer period. So we're faster in our response to what's going on in the marketplace, and we're pulling the appropriate levers from a brand perspective that I would genuinely hope set us up for success as we set out to try and close the gap to market. From a brand form and morale perspective, the conversations that were being had and the respectful decision that was taken not to go forward together with our colleagues in Paris was something that we were fully aware of -- and what I sought to do during that period was just be as open and transparent with the team here. Clearly, there was open questions within our own organization and indeed within the wholesaler tier. There was many things that were going on that we couldn't speak to, but we did try to give the team reassurance that in the eventuality that there was news and information to impart that they would hear it directly from us. So that was all in service of trying to ensure that they stay focused on what we need to do and the job at hand and not to get too far ahead of ourselves and not to think about what might happen further down the line, but stay focused on the day job and the work that needed to be done. And yes, it was obviously a cause of much conversations with our distributor partners. But again, trying to make sure that people didn't run ahead of while the discussions took place and didn't get ahead, start thinking about the possibilities and the opportunities or the challenges that might face into us if it was to go ahead. So it was really trying to make sure that everybody was focused on the day job while this played out as it did?

Next question is from Olivier Nicolai Goldman Sachs.

Two questions, please. You highlighted that Tanowill now work with 10 wholesalers the U.S. Can you elaborate a little bit on the operational and financial disruption that you had following the switch from RNDC? And when do you expect the full benefit of this new route to market to flow through to the patient. And secondly, I was just wondering if you have commented or if you're able to comment at all on the tariff reversal and if you could expect any -- what you could expect in terms of refunds.

Olivier. So on the wholesalers, we can take a step back if we would to the process that we went through some some in the power process that we went through some 12 months ago. The Fiesta lease philosophy, who is best by state, but also looking at the portfolio, in terms of how can we bring simplification and prioritization to what we wish to get done. And that very much fundamentally shifted our focus towards saying the main and the predominance within the main line of the power of 6 needed to be given fierce in the focus. So mainline and choices of who are our mainline distributor by market were the first entry point. Secondly, we looked at where there are opportunities in TD, where there capabilities in RTD that would be better serviced by somebody who had that muscle and Ras came to the fore in that regard as a beer distributor at that time that was solely focused on building that capability all that goes with that in terms of frequency of delivery, C-store coverage, merchandising capability at scale. So we moved quite a number of the states, I think, overall, it was 7 markets moved to the RAS network, which is about 54% of the spirit-based or TD market coverage. That was a very deliberate choice to be and in working with somebody who had that RTD discipline built from what they understood and what they were so experts in doing from a beer perspective. So big markets moved to an RTD network. And that's going through that transition phase as we learn how to work together and as we build out that muscle. And then the third leg of that thought process was to say, that we had gems within our portfolio, by definition, great brands that had opportunities, but we're just too far down the priority list. and weren't really getting their right to step out and be incubated to scale in the manner in which we hoped. So therefore, we picked a set of different distributors largely different by state to put the GEM portfolio into play. So for example, here in New York, we moved it to Empire brands within that portfolio, as I say, real gems such as Plymouth, such as the spot range in Irish whiskey such as powers such as Goslings room. And that allows us to have those conversations and get to know a new set of distributors. So very -- 3 very intentional choices across the 3 portfolio priorities that we've got. PAUSE -- and ultimately, new relationships opened up with distributors that we haven't traditionally worked with. in that transition and the transition that happened last year and indeed, the transition that's happening as we speak. The financial disruption is relatively minor. As I say, I think I've been super impressed with just the ability for us to plug into those systems, knowing that we had a preexisting relationship with Southern, for example, when we moved Texas to Southern meant that a lot of the disciplines that were already in play across the other states just simply incorporated taxes within how we operate. So the cadence of engagement, the engagement of the teams towards the priority and the clarity of the portfolio strategy has been relatively seamless, I'd have to say. And Texas has been a challenging market for us. It was probably about 20% of our Nielsen drag is coming from taxes alone. So we're very optimistic to the new relationship that started with the team. We have a kickoff meeting with the new team in place that has been recruited at speed. And we'll set forth as I say, with that new FY '27 plan working together with them. So really encouraged by the speed of the transition and the relative seamless nature thereof. What it does provide, if you think forward is now the 5 footprint states of the U.S. that are about 40% of the total opportunity are now with Southern. So how we work together while it has improved over the last 12 months, it can be even turbocharged now that we've got those 5 big states with 1 wholesaler and that we can work in the same disciplined manner as Paul, my commercial leader has brought to bear on that relationship. So a monthly cadence of meetings identifying core opportunities and indeed, challenges that the team was face into. I think if anything, we're getting even closer and more collaborative and more aligned in terms of how we're trying to get to market. And this is now facilitated even to a greater degree than maybe what's happening before. By the change of Texas and the 5 footprint states now all been under Southern. From a tariff perspective, clearly, the process is in play as we speak in terms of recouping some of that impact and the tariff impact that has hit the business over the last 12 months. And we're starting to see the first payments or repayments of those tariff monies starting to flow through. So the process seems to be working well. And obviously, we're across trying to recruit the monies that we previously had paid on the tariff basis.

Next question is from Chris Patra.

Yes, a couple of questions, please. One, following up on the distribution changes and then 1 on brands. In terms of the scale of the shift, could you just give us numbers, sort of what percentage of your revenue is actually in transition currently. And in this process, have you been able to get better terms, which should help your reported sales performance? And then within that, now that you're more coordinated with Southern, how would you describe the technological backdrop between you and the wholesalers. Is it still quite a manual process? Is it highly automated? Are there more efficiencies to be taken there? And then on your other brands, just you didn't say anything about Martell, Chivas or Seagram's, which are reasonable size in your portfolio. I was wondering if you could give us a quick update on those.

Thanks, Chris. So in terms of distribution, it was 11 states that transitioned in the most changes that we made, the biggest of which obviously was Texas. And we went with Texas, Louisiana and Oklahoma with Southern Maryland to -- from RNDC into what will presumably be the new PAUSE the new RA structure. And then the Dakotas and Indiana, we moved into Johnson Brothers. So it was 11 states in total, the biggest of which clearly was Texas. Beyond that, I wouldn't want to comment further in terms of what those represent for our business just from a commercial sensitivity perspective. From a tech backbone, PAUSE I think genuinely, there is -- it's not a manual process. It's a highly automated process. We were plugged into the southern system, for example, from all the other states. So the addition of Texas into the disciplined processes and the investment that Southern has made in a technological backbone that is in net service of PAUSE of how they work with their partners is particularly impressive and their digital capabilities are somewhat in tune and in line with the work that we've been doing together on initiatives such as DSTR, which is our sales tool where we direct the sales team to the next best action based on data by outlet, looking at the competitive context. So as I say, we were very well plugged in and using a lot of the synergies that were already in play across other states. And the opportunity now, obviously, is to apply that to Texas in the same manner. So good tech backbone and good solid integration between the teams and using the tools that are available to them. When we talk to Martel Sevagram in their portfolio strategy, as we've outlined, there's 2 distinctions in that list of those 3 brands. Martell and Shibasare in what we call targeted elevate. What that seeks to do is not try to take on the national opportunity but seeks to go after where we see the greatest opportunity for cognac and for blended scotch whiskey. And pick out those states where we believe we've got the opportunity to be targeted and focused in bringing the brand strategy to bear. So that's very specific. PAUSE -- for Martell, it's very specific for service. Seagrams is somewhat differentiated and that's in our execute intent. So very much a commercial focus. We don't invest any meaningful amount of A&P into Seagram's Gin. So we're just executing that commercially. So it doesn't play a strategic role going forward. So targeted elevate, focused state prioritization and investment appropriately and then an execute strategy against Seagrams.

Next question is from Andrea Pistacchi, Bank of America.

I had 1 question, please, or a couple on Jameson, which has been a key driver of your improved performance relative to the market. And you referred to price adjustment you made a couple of years ago, you put more resources behind the on-trade, the MLS sponsorship -- what are the next steps to further improve James from here besides really getting the distributors behind it? And then sort of connected or on James and more broadly, you were talking earlier about the pricing environment. I mean, we see what's going on in tequila, but how do you see the pricing environment more broadly in whiskey to space Jameson is competing in.

Thank you, Andrea. Yes. No, as you say, the pricing adjustments that we took some 2 years ago flowed through now to a clarity in terms of the shelf price and the competitive context in which we continue, as I mentioned previously, to monitor on an ongoing basis. So the prices have been reset -- now we're down at the level of looking at promotional frequency debt frequency by state in those key selling periods and really sharpening and honing our approach therein. I think again, to take a step back, what you need to be mindful of too is the relative life stage of the Jamieson brand across states. So we take markets such as New York and California, which were at the forefront of the Jameson growth back in the day that has and asks us to do things differently, given the relative scale of Jameson in California, 1 of the top 1, top whiskey and certainly 1 of the top 2 spirit brands in the California market. So that has different challenges attended with it versus a market such as Texas, where we are under-indexed versus our competitive set and our fair share. And that's more in that growth phase. And again, we own the strategy and play a different playbook in Texas that we do versus California and New York. So in terms of what we're doing going forward, and you talked to really showing up in culture in that bond and Connect moment that goes with sports culture around the MS really being sure and clear that we have the right portfolio strategy, meeting those right price points. So the trade-up opportunity at a 20% premium that Triple, Triple is bringing to bear. And indeed, that occasional gifting opportunity and special moments and the Black Barrel plays into about 34% to 39% price point. So having the portfolio architecture that allows us to flex towards those different price points is hugely important. And as we go forward, as we look into next year, there's 2 things I would call out. One is a very clear recruitment strategy, where we under-index in certain 2 specific target markets against Hispanics and African Americans. They are to where Jameson hasn't really recruited at the levels that we would aspire to. So a deliberate focus on getting a relevant playbook in place so that we can recruit against those 2 opportunities? And then in terms of both innovation and small sizes, we do still see upside opportunities. So we will bring in Jameson distiller's batch which is a $50 price point proposition, which will launch in September in advance of the key holiday period, and that would bookend the Jamieson portfolio in the $25 to $50 range with the 4 relevant propositions they're in. And small sizes is something that we under-index in and it's a highly dynamic part of the market. So 3.75 and below. Across Triple, Triple and across Jameson Original, will be focused for the O&D period. And indeed, smaller sizes being in canned format in the 100 ml size is something that we will also put into play as we seek again without recruitment intent to get people to sample to taste a great flavor and the approachability that Jameson represents. So a key driver on indexed opportunities from a targeted consumer perspective and making sure that the portfolio both in breadth, price points and in relative sizes has been fully exploited to the extent going forward. We still believe genuinely that there's huge headroom for Jameson in this marketplace, and there's not more that we can do fully exploit what we have, which is a key brand in an occasion bonding Connect, fan culture and all that goes with that, that really plays to the strength of the brand and the accessibility of the flavor. And from a pricing perspective, just come back on that point, as I say, I think we're super clear in terms of the strategy that we're putting in play in support of that..

And if I can just follow up on more broadly on the sort of smaller pack sizes. From a profitability point of view, how do sort of smaller packs smaller, smaller bottles, smaller pounds compared to the the standard side. I mean, obviously, there's in a higher price per unit of liquid, but with more complex in terms of supply chain? And is your supply chain set up to be able to at speed it up to and offer different pack sizes.

It's a profitable market and on a percentage basis or whatever, it's not margin dilutive in those smaller sizes. So we adapt with agility to make sure that we're bringing the right price point to the pack size as appropriate. I would draw a distinction between what would be traditionally normal pack sizes that would be within the range. So 375 200, 100 ml is new, but 50 metal is obviously traditionally and has been part of the price pack architecture that we've put. We have stepped up and are clearly making sure that the supply chain is making sizes available. And then the call out as we had with the wholesalers, the other last week when they were in New York double down on the distribution opportunities that they now represent. So again, I'm confident that we've got the supply chain flexibility and agility to meet that opportunity with the 100 mL can being new -- that's something that we're going to have to go forward with now with a clear focus to make sure that as the opportunities. And as we see the responsiveness of the market to the launch of those new 100 how that plays out and making sure that the supply chain stays in lockstep with those progress or the progress that we make in that regard. So again, I think the team are clear on the opportunity are clear that this is a focus for us as we head into '27 and that we need to work very closely with our supply chain colleagues to make sure that we don't miss any opportunities out there as we get the 100 ml through the system. And as we double down and closing the under-indexation opportunities that we see where the traditional or small sizes can play.

Last question is from Celine Pannuti, JPMorgan.

My first question is on the U.S. market. You said it was down 5% year-to-date. Have you on the ground seen or discussed with your wholesalers any impact of higher gas prices on consumer propensity to go out, spend on alcohol, either on the on-trade or potentially on the off-trade. And when you are talking about pricing affordability. Do you see any rise in promotion in order to do the consumer in the current context? And the second question on RTDs. Can you remind us how big is RTDs sales for your business. You said it was still growing. What do you expect the RTD category growth to be? And can you talk about the profitability. So first of all, can you talk about your ambition in terms of how big it should be in your business, the profitability profile -- and as you see a competitive set of brands that are mainly on Spirit brands. How do you think you can step up and seeing that branded spirit branded RTDs are more relevant to consumer.

Thank you, Celine. And a great question on the consumer. I think that again, as I mentioned in the video, there's a lot of challenging contextual data points that would say the consumer in the U.S. still feels apprehensive to their financial future. We see their positivity at an all-time low in terms of how measured by Michigan. The University of Michigan tracker, I think, is at a historical low in terms of consumer sentiment. And again, in disposable income and all other metrics that you look at, the gas price, the disposable income is under pressure and that while it squeeze is something that we clearly need to be mindful of. So as we go forward, clearly, as I highlighted in the video, I think we're clear on where those consumer insights lead us to put clear actions in place. And the price pack architecture is 1 clear response to that. In terms of how we show up from a promotion perspective, again, with the diligence that we've now got and the data-led insights that we're working to, those choiceful decisions are being taken. And we're looking clearly how we sit relative to the competitive set to make sure that we've got that focus to all the plans that we are putting in place. This is a temporary pressure. I think 1 of the salient comments I keep coming back to is never underestimate the strength of the U.S. consumer. And when times are good, they like nothing more than to spend to celebrate to socialize, but clearly contextually in the moment that we're in. Temporary pressure remains there, but we remain confident to the future and all the fundamentals that would give us that confidence going forward. From an RTD perspective, it's currently 2% of our net sales the profitability profile has a difference to bottle spirit. So on gross margin basis wherever it's probably about 30% versus the average across the category, across the broader portfolio level of about 70%. So it has different dynamics at play within, and I think I described them earlier on in terms of what it asks of you as a supplier to put your focus towards is a different playbook with different challenges. Speed of innovation is clearly one, consumer relevance in the proposition. Clarity, are you playing in that lighting refreshing space? Are you playing in that power quality and account space? Or are you playing in the playful poor space? So as I say, as we look to build out the portfolio that we wish to put forward to the market. It's been very choiceful and disciplined how do we do that. And again, making sure that you're clear on who your competitor is because, again, there is differences depending on the alcohol basin question, is it mold? Is it wine or is it spirit gives you access to different channels and different opportunities, different coverage challenges in terms of C-store availability is an opportunity in certain states, if it's in a wine format or in a mall format. So we're very clear that we want to play in the spirit space for the core portfolio that we're working through at the moment. And that, as I said, is in service of those power brands. So a focus on absolute focus on Malibu opportunistically going after for Jameson and indeed, where screwball can play in that relevant format as we go forward. So a lot of work done to get us to here and a lot more that we would wish to do going forward. I think your final question around -- again, that sort of view on frequency and intensity and how we're showing up in the on-premise. I point you to the most recent CGA data that we're looking at in February, which shows that from an on-premise perspective, we have inflected our performance are now growing ahead of the category in the on-premise. So all the good work that's been done and the focus to the on-premise is clearly there. Frequency and intensity is it the base that obviously has gone on -- we look at it over a longer term and then obviously use different data sources. So we would see frequency somewhat in decline over the long term, but intensity going up. And intuitively, that feels right, people going out less in terms of the number of occasions that they're consuming alcohol, but when they choicefully do so, maybe really spoiling themselves in those occasions to have that extra cocktail or have those extra drinks in those occasions. If you come lower and narrow in on a sort of last year basis, get a different perspective. And again, things would need to be choiceful as to how you're looking at this through the longer-term lens or whether you're just going in on a short-term basis. And obviously, the data source that is used to underpin that. So we really see that as I suppose support of the belief that spirits clearly continue to be relevant to the consumer choices that will be made in the U.S. but there are other questions that you need to challenge yourself and need to challenge our teams against is how we're showing up how relevant are the propositions, how clear of the strategies that we're putting in place to access that highly dynamic situation as we're working towards.

So on that final question, thank you very much, Conor, for taking the time. today from closing the gap to market to answer those questions. And thank you all for joining us today for that Q&A session with Conor McQuaid, CEO of Pernod Ricard North America.

Thanks, everybody. Have a good day. is now over. You may disconnect your telephones.