Rémy Cointreau SA (RCO) Earnings Call Transcript & Summary

Hello, and welcome to the Rémy Cointreau 2021 Full Year Results Conference Call. My name is Val, and I will be your coordinator for today's event. Please note, this conference is being recorded. [Operator Instructions] I will now hand you over to your host, Mr. Marc Hériard Dubreuil, Chairman, to begin today's conference. Thank you.

Good morning to you all. We are here to review the result of last year of our group, the Rémy Cointreau Group. I'm going to make a small introduction; then our CEO, Éric Vallat, will review with you the operation; and then, our Chief Financial Officer, Luca Marotta, as he did many times in the past, will make the financial review for you. Then Éric Vallat will come back to give you the outlook now after the beginning of the year. We have just released this morning the results. I hope you had time to review them. They are very good results. We did very well. Our growth was significant compared to last year. And even we could say, we could even have had better results. But this is not what is important. What is important is the context in which we were last year. And I will mention 2 topics on that introduction. The first topic, of course, is the financial performance. The -- you must put yourself in the position in which we were at the beginning of last fiscal year. As for many companies around the world, we were really living difficult times. We even had to close all our operation worldwide for nearly 3 weeks. And when we started again, it was very complicated. It was very, very complicated for our operations. It was becoming more and more difficult for our customers, which were disappearing one after the other, and we didn't know for how long. The situation, of course, was difficult in the -- on the production side. But the most difficult situation was nearly -- was really on the logistics side. The supply chain was extremely difficult during the year. What we had to realize is that we had to change the ways we were doing things. And the important thing of last year is that we worked out the change, we have been able to adapt ourselves to the new environment and our group became stronger after that crisis. And this is the important point. As I said, the context was very challenging, but we have been able to be very agile and to adapt ourselves to many, many extremely different conditions. So those very strong results we are having today confirm once more the strength of our Rémy Cointreau brands. And I say brands because it's not only Rémy Martin cognac. Last year, you remember, Éric Vallat launched the 10-year plan. Now I can say it's a 9-year plan because we are fully on the track to achieve that 10-year plan. So on those results, you can see we -- that we have made solid progress toward that long-term strategic objective. Very important for us, our gross margin has reached the all-time highs. This is the better -- best performance we ever had, which is, of course, in line with our long-term plan. And our current operating profit, in spite of all the difficulties I mentioned, went back to historic levels. In one phrase, I can summary what happened. The new paradigm, post COVID, confirms our long-term strategy. So this was my first topic. Now for the second topic. For us, long-term sustainability is as important as good financial results. This is really the dedication of our group to provide as much as we can that sustainability for all the stakeholders, which are around us. You know very well, I hope, that the 3 words, which summarize our group. There's 3 words on which we give our signature are terroir, people and time. On those 3 fields, we have made and have -- are making and will make strong progress. If I speak of terroir, you know that our objective is to be 100% sustainable everywhere in agriculture. This is already done in cognac. But the news of this year is that we have made strong progress in our Liqueur & Spirit division, led by Cointreau, St-Rémy, Mount Gay, Bruichladdich distilleries and even also for our newcomer, Telmont Champagne. Concerning people, there was a lot to do. We try as much as possible to help all those with whom we are working. So we launched quite a large series of solidarity actions, again, the pandemic because the priority was given to health for all stakeholders. And concerning our employees, we protected all salaries around the world without any government support. As I said, our clients, our customers were in very, very distressing situation very often. So we try to help them and especially the on-trade communities, which suffered a lot this year with financial donations and proper communication. Concerning time, the journey has started already many years ago. We went on this year. You will see when you see our reports that we had a lot of initiatives. So it would take too much time to review them all. We only give you 2 examples. We are discontinuing gift box in many of our brands and for our 2 main distilleries, which are Angers and Cognac, starting from April 1 this year while switching to biogas. So more sustainable, because this is our commitment and we will go on for the years to come towards trying to help to sustain the planet.

Thank you, Marc. So good morning, everyone. Very pleased to e-meet you again, even though I hope we can remove the E soon. I have the feeling it's coming soon. I'm very pleased now to take you through the -- as Marc said, the operational and the business outputs of last year. And I will start just by telling you about the trends emerging from COVID. It's too early to draw final conclusions, but we can highlight some trends emerging from the pandemic, which we believe are structural because they preexisted COVID and they accelerated with COVID. The first trend is the up-trading trend. Of course, people had less to spend on travel. Of course, government subsidies, particularly in the U.S., have helped. Of course, buying in the off-trade is cheaper than buying in the on-trade, which is boosting volumes. But the trend of drinking less but better preexisted COVID. It has accelerated, and it will keep strengthening with people paying more attention to what they drink. Also, a lot more clients had more time last year to be educated on high-end brands. These brands have gained in familiarity. Plus we tried digital tasting sessions, and they prove to work. They will help us increase the reach of people we educate. We are well positioned to take advantage of this trend with our portfolio of exceptional brands, which is displaying a value per case, which is 2x higher than market average. The second trend is the rise of at-home consumption as -- and including mixology at home. It will slow down with the reopening of on-trade, but it will remain way more than pre-COVID. We are well positioned as well here, again, with our Liqueurs & Spirits portfolio and more particularly with Cointreau, which was in the original recipe of the Margarita and which is present in more than 400 cocktails. The third trend that you can see on the screen is the acceleration of e-commerce. I don't think I need to elaborate here. Just to say maybe that in the U.S., it is more than an acceleration. COVID has kicked off e-commerce, and all the stakeholders are now investing full spend behind it, which is clearly unleashing its potential up to the U.S. becoming probably the #1 e-comm market for wine and spirits in '21 above China. Here, again, we are in a good position. Being smaller than big players, e-comm is an even bigger opportunity for us as our coverage of the Tier 3 and Tier 4 areas worldwide is less than that of our competitors who have more commercial people in the field. E-comm is B2C and B2B, indeed. It gives us the opportunity to target qualitative accounts in remote cities in China, for instance. This is probably why we were a pioneer in China, where it now accounts for more than 20% of our business. The last trend I would like to highlight here is the heightened environmental and social consciousness. Here as well, I don't think I need to elaborate. But terroir are the heart of what we do. And transmission of our vineyards, of our know-how to the next generation in the best conditions possible has always been an obsession for us in the past to 350 years. So here, again, I believe we are, by culture, it's our G&A, well positioned. Moving to the next slide. As I said last year, our ambition remains to become the leader of exceptional spirits. And as explained, entering a mature phase of the value strategy, we removed the above $50 sales target for a more inclusive approach. Retail price remains key, but we look at gross margin also beyond retail price as a way to create even more value. This strategy translated into 4 priorities that were shared last year, and we believe that these priorities are spot on as they embrace the consumer trends I just referred to, as showed here on the slide. This gives me an opportunity to update you quickly on these priorities as they are key for us to deliver our long-term vision. And as we made material progress despite the pandemic. These priorities are numbered in the following slides, but the numbers do not reflect any kind of hierarchy among the priorities. Four priorities is not a lot, but this is on purpose as each priority is equally important and instrumental to the plan. So we need to make sure we allocate enough resources. Moving to the next slide. Priority #1, increase value per case, or put in a nicer way, generating more value than volume. As I said, we want to keep a focus on retail price through price increases, but also through product mix management. We managed to leverage our trading trends with a positive price/mix effect of 5.5% in 2021, particularly thanks to the continued very positive growth of CLUB, 1738 and Bruichladdich whiskies, to name them. But, and this is the second part of the slide, we also look beyond retail price now, as I explained, with a clear focus on gross margin, which gained 1.3 points, thanks to the investment behind our accretive brands. A good example here is Cointreau, which enjoyed a stellar growth in the U.S., where we overinvested to fuel growth and where the gross margin is the highest while retail price is not the highest in our portfolio. The second priority is enhancing portfolio management. What have we done since we last shared the strategy in June 2020? First, we have assigned clear roles to each brand, and we have split them into 3 groups with a clear set of priorities for each. This is how we will grow our portfolio beyond cognac. Second, we implemented a new global markets organization with the appointment of Laurent Venot as CEO, Global Markets. His mission with his team is, among others, to work on implementing this portfolio vision in the field. And third, we launched a commercial excellence project, which is instrumental. Here, we are talking about a transformation project. Over the past 6 years, we invested on upstream topics, terroir, beer products. This was key to claim for exceptional spirits. If the product is not great, there's not much we can do. Now time has come to invest on downstream activities as well, notably on commercial capabilities. We appointed at the beginning of the year, of the [indiscernible] year, a senior executive to pilot the project. She joined in January this year, and we are making good progress now, as showed with the time line you can see at the bottom of the chart. It's now a project, which is live and which is going to deliver in the coming months. Moving to the next slide and the next priority, implementing a client-centric model. With retail, we have a fantastic weapon to implement a real client-centric model and to replicate whatever is relevant for the other brands. We are very ambitious for the brand as we target to know and to dialogue directly with 80% of our end clients by 2030. This makes sense for 3 reasons. One, buying a decanter of EUR 3,000 is like buying a watch of EUR 25,000. This deserves a level of service unique in the industry, which can only happen with a tailor-made approach, addressing clients' needs and specific aspiration. Second reason why it makes sense, the unit price allows for investing on a client-centric model. And the third one is, as we all know, it takes generation to craft the liquid for [indiscernible]. So we know the volumes we have in hand, and creating value will come also, thanks to a more integrated value chain. The more we sell direct, the more gross margin we secure. A classic for a luxury brand, but a disruptive statement in our industry. This is why I like to say that our price is unique and is what makes us as a group so special. So as I just explained, Louis XIII is the spearhead of our client strategy, but the game changer is also at group level, clearly, e-commerce. Our 20% target of sales generated with e-commerce in 2030 was ambitious pre-COVID, I believe, and we can maybe debate this later. But I believe that we should do more since we've gained years with the pandemic. Moving to the next slide and the last priority, achieve responsible growth. Well, this is not a new priority, as I said and as Marc said as well, transmission and caring for the future of our terroir has been a priority for generations at Rémy Cointreau. So we are not starting from scratch at all. But we believe more in doing things than in communicating on this matter, even though the numerous recognitions and awards we get, and it's more than the 3 which are listed in the slides here actually, are self-explanatory. Now we are not there yet, and there's a lot to do. It is our duty to accelerate, leveraging a new paradigm. Why a new paradigm? Because 55% of consumers report sustainability is very important to them when choosing a brand now. They were only 33% pre-COVID. We should take advantage of the tailwinds to accelerate. And we are indeed now that everyone in the organization is and feels committed. I want to list a few examples. I'm not going to elaborate on the 64% that Marc already told about. But just so you know, we are talking here of 15,000 hectares in total if you include all our products and indirect sourcing. Today, 45% also of our managers are women, and we obtained good scores on 2 indicators, gender pay gap and pay rise gap. But there's still a lot to do on diversity, of course, and we made it a priority for the coming years. We have also removed the gift box, as Marc said, in the U.S. and almost worldwide for VSOP, for instance. And it's interesting to see that VSOP is growing the fastest. So the clientele is ready now for such kind of move. And by the way, it is an accretive move in terms of gross margin. So it's a very interesting way of combining gross margin as well as sustainability. And to conclude this slide, it's interesting to note that our net margin, including CO2 costs, would be 14.2% versus 14.7%. It's showing a very limited impact, showing that our CO2 cost is limited today. Moving to the next slide, just to say that I am done with the strategy and the 4 transversal priority. Just a quick update before we move to the high-level results of last year. Just to say that if we have a look at where we stand versus the 10-year plan, as Marc said, after 1 year, the good news is that we are well on track, even ahead our internal road map, which should give us the opportunity to invest even more this year on our brands to grow them in the future. The investment of today is the growth of tomorrow. And one last slide with the global overall picture. As you've seen from the press release, our full year results, we are very strong, proving our resilience in the context of the pandemic. Back in April, you saw our sales numbers. We talked about a 1.8% organic growth. Business bounced back strongly in the second half with a 20.9% organic growth. In terms of profitability, the current operating profit stood at EUR 236 million, up 12.8% on an organic basis, representing 23.4% margin. As mentioned by Marc, this is close to our highest ever level, 23.5% in '18-'19. This performance reflects an increase of the gross margin, which has been partly invested in A&P to fuel the future growth of our brands and an excellent control of our overhead costs. In other words, we have evolved our cost structure towards more activation and less fixed costs. The net income stood at EUR 144.5 million, up 30.2% on an organic basis. And the free cash flow came at EUR 123 million, up EUR 107 million. Luca will elaborate here. Finally, the net financial debt stood at EUR 314.3 million, representing a very healthy A ratio of 1.3%, down from 1.9% a year ago. Let us now switch to the business review in a few slides. I'm going to go quick on these slides because they were shared by Luca, if not in the same format, but in -- back in April. Cognac, which represented 73% of our sales, grew 3.7% organically in the full year with a plus 27% in H2. Liqueurs & Spirits, which contributed to 24% of our sales, recorded a decline of 3.2%, but a 7.2% increase in H2. And lastly, Partner Brands, which account for only 3% of the group now, the sales were down 1.5% in the full year. Moving to the next slide. You can see our sales by region, which shows an outstanding growth in the U.S. and a strong recovery in China in H2. Americas was the growth engine with a remarkable 18.6% increase, boosted by a 38.7% rebound in H2. Asia Pacific was down minus 4.5% during the full year, despite a plus 20% rebound in the second half. Focusing on Greater China, the growth was 17%, minus 7% on H1, but plus 39% on H2. Lastly, EMEA displayed minus 21.7% decline, impacted by on-trade closure in many markets as well as a weak travel retail, obviously. But while still down, H2 sales recorded a sequential improvement at minus 11.5%. Moving to Slide 18. I'm not going to elaborate on the figures here. You can have a look. Just to say that at the end of March 21, Rémy Martin volume market share is up 1.6% according to BNIC. And if you look at superior quality, so VSOP and above, our market share actually grew 4% to 28%, thanks to VSOP, CLUB and 1738. So a very good year in absolute value, but relatively speaking as well. Moving to Slide 19. These are figures you know already. I'm not going to elaborate either. Just giving me the opportunity to highlight again the acceleration on the second semester for our cognacs, which appears on the left part of the slide. Moving to Slide 20. Let's focus on our operational performance for the Cognac division. This is an important slide. I'm going to spend a bit more time on this one. Current operating margin increased by 2.9 points to 30.1% over the full year. This breaks down into an organic increase of 2 points, positive currency effects of 0.9 and an almost neutral scope effect linked to the consolidation of Brillet since April. This organic improvement reflects a stable gross margin -- sorry, sorry, we also got a stable gross margin, which is made of, first, an adverse mix. Our growth was driven by VSOP, 1738 and CLUB, while the top end was under pressure for a large part of the year because of the closure of on-trade. And we've seen them bouncing back with the progressive reopening of on-trade now. And to a smaller pricing effect, you may recall that during the March lockdown, we decided to postpone our usual price increase from April to October 2020 for ethical reasons so that the price increase was effective only for half a year last year. And an increase of our A&P that you can see here by EUR 12.9 million, so material in particularly -- in particular, in the U.S. and in China, to continue to grow the awareness of our brands and to fuel their future growth. This was possible, thanks to the increase and the better sales than expected. And thanks also to a very good control of our costs, distribution and structure costs. Thanks to cost-cutting measures that we put in place during the pandemic, some of which will last beyond COVID. Salary and hiring freeze, this would not necessarily last. No traveling expenses and temporary cuts in distribution cost and in the on-trade, among others. But meanwhile, we have accelerated investment on our strategic priorities, as I said. In other words, our cost structure has evolved towards more activation and support to the business. Let us now switch to the Slide 21. I already talked about retails. So just to say quickly, we are very proud to have opened a pop-up boutique in Plaza 66 in Shanghai. I worked for 20 years in luxury and in fashion, and I can tell you that with presence in SKP in Beijing and one in Plaza 66 in Shanghai, we are clearly making a strong statement for the brand in the 2 most prestigious malls in China and in Asia. As a reminder, we have boutiques in China, in Singapore, in the U.K. and in the U.S. We now have 6 boutiques in total for retails. And of course, we have our private client directors who proved to secure a very resilient business with a lot of -- while a lot of on-trade accounts were closed worldwide. A word on Rémy Martin. The growth of our sales has allowed us to invest even more than budgeted to increase the awareness and the relevance of the brand in the U.S. The relevance is important as well. We launched the next iteration of our Team Up for Excellence campaign, featuring Rémy Martin 1738 and the Legendary music artist, Usher. Team Up for Excellence, the film. And we have up two a 6-minute feed with a very specific distribution brings to life the history of the harmony between 2 cultures of excellence in the U.S. music and cognac. The film celebrates the harmonious blending of 2 cultures of timeless excellence, again, music and cognac. It highlights the cultural connection between cognac and American artists since 1917, back to the first World War in France, and how the 2 have been influencing each other ever since. We are going to echo this campaign as well with 100 years anniversary of the sidecar coming soon as well. Just to say that we've moved from maybe more very important product-centric communication on time for excellence to a very engaging compelling campaign that is clearly addressing the heart of our clientele. Moving to the next slide. We also launched La Maison Rémy Martin something like 5 years ago. This year, we brought cognac to Guangzhou, and we celebrated Fine Champagne. As you know, our relationship to terroir is very specific, and we source only from the 2 most sought-after [ crew ] of the region, Petite and Grande Champagne. I launched the Maison Rémy Martin 5 years ago, and I was impressed by what it has become. And if you move to the next slide, this is not clearly a film from Hollywood. It's made by our team. But it's first time we saw such a queuing to enter La Maison Rémy martin. This was very exciting for us as, at that time, we were confined. And it was great to see such influence in China when we launched it. And not only when we launched it, by the way, but every single day. Now moving to the Liqueurs & Spirits division. I'm not going to elaborate either on the figures here, just like I did not for cognac. But moving to the next slide. Americas, as you can see, enjoy mid to high single-digit sales growth. U.S. enjoyed excellent performance supported by booming at-home mixology. Canada showed a good resilience, and LatAm was strongly impacted by lockdown measures and weak tourism. In EMEA, we enjoyed a double-digit sales decline, enjoyed is maybe not the appropriate word, sequentially improving in H2. Most markets were impacted by on-trade closures and travel retail. And -- but we also saw and witnessed the very strong resilience of the U.K., Benelux and, to a lesser extent, Russia. In APAC, we saw a slight sales decline despite very strong recovery in H2. Greater China was a bit penalized by a slow cocktail bar recovery. But Southeast Asia witnessed a solid performance, driven by Australia and New Zealand. Lastly, Travel Retail, obviously, has been very weak, affected by the collapse in tourism everywhere in the world. Moving to Slide 27. So the last one I'm going to spend some more a bit time on before I give the mic to Luca in a few slides. Let's focus on Liqueurs & Spirits' current operating profit. We've been able to protect our margin at 13.3%. This performance reflects an organic improvement of 0.8 points, offset by some negative effects in currency minus 1.1% and the scope, minus 0.8%, with the consolidation of Belle de Brillet since May '20 and of Telmont since October '20. This good organic performance was driven by the combination of a strong improvement of the gross margin, plus 2.3 points, led by a very positive mix on the back of the outstanding performance of Cointreau in the U.S., which I referred to, which is strongly margin accretive and behind which we strongly invest. And a continued increase of our A&P, 0.6 points, the investments versus last year, plus 0.6. We have notably reinforced our marketing investments behind Cointreau to leverage the booming at-home mixology trends while preparing the on-trade reopening. In parallel, we slightly reduced our distribution and structure costs. Now moving to Slide 28. Well, the stellar growth of Cointreau enabled us to invest even more behind the brand to increase awareness. We displayed an ad for the first time ever in the group during Super Bowl. The audience has been amazing, and Cointreau had ranked #8 overall and #1 among wine spirits brands. We're very proud, of course, and it gave us the opportunity as well to show our support to the on-trade. We have been very active on e-commerce as well, where all our brands increased sales. It's interesting to note that Cointreau even achieved the #2 position among the liquor brands in 2020 on Drizly, which is an amazing improvement versus the year before in the context of growing Drizly sales. It's a great achievement we are very proud of as well. Moving to my next slide, just a picture on the whiskies. That also did great. And they grew over 40% in 2021, and it was very interesting beyond the strong growth in the U.S. to witness the acceleration in China more particularly. And this image, by the way, gives you a feel of the beautiful Bruichladdich boutique that we opened in Xiamen, and that is doing very well. I am done. And I give you the mic, Luca, for more in-depth financial outlook.

Thank you, Éric. Good morning, everyone. So now let's move on detailed analysis of the financial statement, and let's begin with the classical income statement, a simplified one. As already mentioned, organic sales were up plus 1.8%. And on that basis, gross profit increased by 2.9% in organic terms, implying a 0.8 point organic improvement in gross margin, reaching an all-time high. This very good performance was driven by the combination of some effect. First of all, a positive volume effect, led by strong recovery in the H2 in our key markets, U.S. and China, on top of that and positive in terms of gross margin, mix price effect, mostly driven by a favorable brands mix benefit. This reflects faster growth from the Cognac business and Cointreau, which are gross margin accretive compared to the weighted average of the group. The positive price/mix effect was, the other side, mitigated by a smaller compared to the usual EBIT of the group, pure pricing effect. We have to recall that pricing benefits only took place in H2, while they impacted the full 12 months in the previous fiscal year and was done for ethical reason. Sales and marketing expenses were down 0.7% in organic terms, reflecting some clear cuts in H1, in particular in the on-trade channel in the context of the pandemic. But within this big, huge aggregate total, we have to say something about A&P, the advertising and promotion expenses that grew around 7% year-on-year. In accordance with our long-term plan, we have decided to partly reinvest the gross margin gains in advertising investment to fuel the huge rebound in H2. And A&P grew in the H2, plus 27% and continue to grow our brands, our [ news ] and desirability. Around 50%, 5-0, of that in terms of weight was dedicated to digital media spend to engage new generation, new type of clients. In contrast, distribution costs declined around minus 10% organically as we put in place several cost control measure, including very selective hiring, massive cut in travel and expenses interim expenses and consultancy fees. Administrative expenses as an aggregate declined by 5% on an organic basis. Again, thanks to cost control measure implemented, as you remember, since the very beginning of the crisis. Overall, we reached our EUR 20 million target savings in OpEx that we guided 1 year ago, while we finally decided to overspend in A&P to fuel the rebound. Looking forward, we still expect around EUR 10 million OpEx saving of this EUR 20 million to remain structured for the future. All in all, the current operating profit came in at EUR 236.1 million, up 12.8% on organic basis, better than guided, better than expected. And by 9.7% on a reported basis, i.e., after taking into account negative currency effect, minus EUR 4.8 million; and negative scope effect, minus EUR 1.7 million. Now let's move to the analysis of the group's current operating margin. So another way to analyze our performance. It was up on a reported basis 2.4 percentage points to reach 23.4% over the full year compared to 21%. Close to our all-time high reached in '18, '19, it was 23.5%. So once again, also in terms of operating profit, reaching a very, very important score. But these breakdowns into an organic increase, almost -- which is almost the same, 230 basis points, a positive currency effect of 0.3 point and a slight negative scope effect linked to the consolidation of Brillet since May and Telmont since October 2020. The organic improvement of the current operating margin, 230 basis points, so it's quite important, basically reflect the increase of the gross margin as well as a strong control in our distribution and structure cost ratio during the pandemic, partly reinvested, as Éric said, in more A&P activities. In more details, gross margin was up plus 0.8 points as a result of positive volume growth and a favorable mix price. The A&P ratio increased by 0.9 points as A&P spend was up plus 7 as said, while sales were up organically only plus 1.8%. So mathematic makes an increase for the weight. The acceleration in A&P was particularly focused in our key market, U.S. and China, and mostly supported the relevance of our main major brands, including the new Rémy Martin campaign in the U.S., the communication around the Chinese New Year and the Cointreau advertising during the Super Bowl and other important and unique [indiscernible] initiatives. The ratio of distribution structure costs decreased sharply, 240 basis points, reflecting a strong control of our cost during pandemic and the implementation of new ways of working that also will last for the future. Now let's take a look at the remaining part of the income statement. Other nonrecurring operating expenses were not meaningful at negative EUR 0.2 million, while finance costs improved strongly, very strongly, to reach EUR 14.6 million in 2021, down from EUR 28 million last year. I'll come back later on this very specific point during the presentation. The reported tax rate decrease to reach 35.1% in 2021 to be compared to 36.3% last year. The drop in tax rates in certain countries, such as France and the U.S., was partially offset by deterioration of the geographical mix, i.e., the weakness of Travel Retail business and Asia Pacific in the first half, which both tends to enjoy lower tax rate than the rest of the world. But excluding nonrecurring elements and items, the effective tax rate for the 2021 was 33.5% to be compared to 33.9% last year, so minus 40 basis points. At this point in time, given the uncertain global tax environment, we think it is reasonable to expect the recurring tax rate to remain stable. So between 33.5% and 34% for '21, '22. Net profit from discontinued operation was nil in the full year 2021, while we recorded EUR 6.4 million net profit gain last year on the disposal of our Czech and Slovakian distribution subsidiary. And as a net result, net profit came in at EUR 144.5 million, up 27.5% year-on-year on a reported basis. But excluding some nonrecurring items, quite marginal. Net profit came in at EUR 148.2 million, up 19.4% on a reported basis. The net margin stood at a very strong level at 14.7%, up 2.6 point of percentage on a reported basis, second-highest score ever at group level. Simple spreadsheet with the nonrecurring items disclosure. The reconciliation this year is quite simple. Mainly, this year integrators, EUR 3.5 million of deferred tax asset reduction linked to the decrease of the legal tax rate in France, switching from 32.02% in 2021 to 28.41% in '21, '22. So now let's take an analysis of the most important analysis and spreadsheet in my opinion on our presentation, financially speaking, which is the cash flow generation and net debt. As Éric Vallat already mentioned, free cash flow generation improved very sharply from EUR 15.7 million of inflow last year to EUR 123 million this year. This strong performance reflects many different specific elements. First of all, EUR 20 million increase of the EBITDA on the back of the operating profit progression. Second, a significant reduction of the total working capital outflow that need to be split between different components. First of all, the working cap outflow related to eaux-de-vie and spirits in aging process amounted to EUR 58.7 million this year to be compared to EUR 118.9 million last year. This is the consequence of the very strong momentum that we experienced in H2, leading to a very low level of inventories at year-end. And this, despite the fact that we had the same level of purchases in cognac eaux-de-vie as last year to prepare feed and secure the future. Second, the other working capital items out of eaux-de-vie and spirit aging process. Inflows were flat year-on-year if you compare 2021 and '19/'20. And this reflects a positive cash variation of receivable linked to a lower level of sales this year at the end of the fiscal year, and that despite a strong sharp reduction of factoring, only EUR 55 million this year to be compared to EUR 98 million last year as balance sheet items. And on top, we enjoyed an increase in payables, more or less EUR 50 million, mostly in A&P and strategic OpEx that were expanded and accounted in the Q4 to fuel the rebound. So costs in profit and loss. No cash out. Third element, a tight grip, as you can see on capital expenditure investment as we decided to postpone some project funding, and sometimes we were obliged also for sanitary reasons to postpone some of them. But -- and lastly, a decrease of EUR 13.3 million of the tax outflow reflecting last year fall in profit. So all that element explain the positive variation on free cash flow. In parallel, other cash flow items improved substantially versus last year. We recorded an inflow of EUR 13.6 million for the year versus an outflow of EUR 123.3 million last year. This was largely driven by the dividend payment this year in 2021, 80% of our shareholders opted for a dividend payment in share while last year, '19/'20, 100% of the dividend were paid in cash and was also an exceptional dividend. And another nonrecurring or quite a little bit extraordinary element in terms of global cash flow in 2021, proceeds from the net between asset acquisition and disposal increased from EUR 11.7 million to EUR 29.9 million, EUR 30 million, reflecting essentially 66 -- EUR 68.6 million proceeds coming from the Passoä disposal, so the cash in, partially offset by the cash out linked to the acquisition of Brillet and Telmont. So all in all, a very positive situation, but we had to acknowledge and to say and to prepare what I said because this cash flow generation of this year reflects a perfect alignment of stars with some element that next year will clearly reverse. As a result, at the end of March 2021, our net financial debt stood at EUR 314.3 million, down from EUR 450.9 million last year in March 2020, leading to a sharp decrease of the A ratio to 1.33 in March to be compared to 1.86 1 year ago. As promised, a few comments on the net financial expenses, which were a charge of, globally speaking, EUR 14.6 million this year, down EUR 13.4 million as a variance compared last year at EUR 28 million. What's happened? First line, gross debt servicing costs was slightly low, showing a continued optimization of our cost of debt now at the lowest level ever reaching 1.01 in terms of cost of debt used. Net currency losses also improved to EUR 0.4 million loss this year to be compared to EUR 4.7 million loss last year. As you know, this is a volatile noncash items related to the hedging of group non-euro debts and future flows. But the main driver of the financial charges improvement and net result improvement as well was in the other financial expenses were, as already said during our [ RT ] result, we experienced a strong reduction this year amounted to EUR 2.2 million versus EUR 10.6 million expenses last year. As mentioned, the EUR 8.4 million reduction reflects a change in contractual terms with our wind growers since the start of the financial year. So less financial, other financial expenses. Now a very important chart for 2021 and to prepare the future and to adjust your estimation. Let's talk about currency conversion and hedges in terms of rates, impact on sales, impact on bottom line. And let's start with this year, 2021. The group reported in 2021 a negative translation conversion and also translation impact of, respectively, EUR 36.3 million on sales, slightly better than guided since November and January, and EUR 4.8 million on operating profit as well slightly better. This mainly reflects a deterioration of the average euro-dollar translation rate over the period, which, as you can see, came out at USD 1.17 per year compared to USD 1.11. Meanwhile, our average hedge rate, because we are very cautious policy, and we take in advance 18, 24 months in advance position of coverage of hedging, was slightly up at around USD 1.17 per euro in 2021 to be compared to EUR 1.16. So now looking at our forecast for the full year '21, '22, which is also important for you. Assuming an average euro-U.S. dollar budget rate and hedge rate at the same level at $1.20, knowing that today at spot rate was slightly higher than that, we anticipate consider our flows for the '21, '22, a negative impact in sales between EUR 20 million, EUR 25 million, which most of the effect, which is a translation conversion rate in the H1. So overall, between EUR 20 million, EUR 25 million, of which the biggest part between 2022 and the first semester. On the opposite side, on operating profit, we have a decrease between EUR 16 million and EUR 20 million on operating profit on a yearly basis. But on the opposite side, most of the negative impact should be recorded in H2, while we expect a limited loss between EUR 4 million and EUR 6 million in H1. So I repeat, EUR 20 million, EUR 25 million sales yearly level, EUR 16 million to EUR 20 million loss on COP on yearly level with a reversed opposite phasing between sales, sharp decline in the H1 and not so big in the second part of the year and in the operating profit. So a limited loss in the first part of the year and more important, the second part because of the game of the average hedge rate by month and by semester. As the evolution of the euro-U.S. dollar, which is very important for our coverage, not the only currency, but it's very, very important, remains very volatile, we will share with you an update on top and bottom line every quarter as usual. As a reminder, the sensitivity and which is very important because you have really to understand what we are writing and seeing here is the following: $0.01 increase in the U.S. dollar versus euro equal to EUR 5 million to EUR 6 million gain in sales and around EUR 4 million gain on operating COP, all things alike. So here, you have a decrease of EUR 0.03 and then there are other currency. At this stage, we already covered 75% of our expected flows for our net U.S. dollar exposure for '21, '22, of which around 60%, 6-0, of option. So we are quite flexible. But 75% of the needs are covered. After this long technical but important element to try to focus our assets globally on the published consequence on the next year, which is not the way we manage the company. We manage the company on organic views. Let's talk the overview on the balance sheet with total assets and liabilities of EUR 2.78 billion, roughly stable compared to last year. On the asset side, the global inventory increased, this is very important, by EUR 129 million to reach EUR 1.49 billion, EUR 1.5 billion due to purchases of young eaux-de-vie. Inventories account for 54% of total assets, up 5 points versus last year, which is a very -- an all-time high. Of this EUR 1.5 billion, around EUR 1.3 billion is Cognac. So more than 80%. This is the treasure of our future and the basis of our valorization. On the liability side, the shareholder equity is up EUR 145 million, reaching another historical level, the biggest ever for the group, mainly driven by the strong progression of the net income as well as the dividend payment, as said, which was mailing share. So net gearing, the group's net debt-to-equity ratio decreased over the period from 32% to 20%. Thanks to a lower net debt, but also was a little bit of alignment starts on the global cash flow and higher equity. A word on return on employed capital. Our ratio came in at 17.1% in 2021, up 0.6 points on a reported basis and up 150 basis points in organic terms. This was driven by a 0.2 point increase in the ROCE of the group brands and the swing, negative 1 in Partner Brands, ROCE being -- switching from 21.9% to minus 49.6%. The organic improvement was driven by the strong performance of our operating profit, the numerator, up 12.8%, while employed capital on an organic basis grew but a lower pace, 3.3%. Our recent acquisition, Belle de Brillet, Telmont, largely explain the difference between the reported and the organic improvement. Looking a little bit more deeply inside the performance by division. Cognac's ROCE rose by 1.1 point, 110 base point to reach 19.7% on a reported basis and up 130 base point on organic terms. Clearly, the strong organic operating profit growth division, plus 11.3% more than offset the 3.8% organic increase in employed capital. And good concern, Liqueurs & Spirit division, ROCE declined 3.7 points to reach 13%, but was broadly flat in organic terms as operating profit and employed capital both grew by about 3% in organic terms. Clearly, the delta, the difference between report and organic ROCE for this division, Liqueurs & Spirits, can be explained by unfavorable currency effect and the acquisition of the period. And this slide is looking at the employed capital more closely. The overall amount increased by EUR 71.2 million, mainly splitting between an organic increase of EUR 43 million, EUR 42.8 million and EUR 30.1 million increase from Brillet and Telmont acquisition, and a slightly negative currency impact was minus EUR 1.8 million. On the organic side, the 3.3%, as you can see, year-on-year increase in employed capital reflects the further increase in aging inventories and, to a lower extent, in production and storage capacities, partially offset by a reduction in other working capital items, receivable and payables, as already explained. Now let's move to the yearly dividends. Given our strong annual result and the solidity, the robustness, the shareholder global position in terms of shareholder equity and our confidence for the coming year, an ordinary dividend of EUR 1.85 per share in cash, will be put to a shareholder vote in the General Assembly on 22nd of July 2021, representing an increase of 85% versus last year and plus 12.1% compared to '18, '19 for the ordinary dividend. In terms of ordinary dividend, EUR 1.85 per share is another all-time high in terms of group level and group indicators. For your technical information, shares will, trade ex dividend on September 29, and this will be made payable starting from October 1. Overall, total dividend equates to a payout of 63% of the recurring EPS and a yield of 1.3% of the -- if you compare the dividend to the average share price over the financial year, this average was EUR 138.43. And in addition to the dividend, the Board of Directors of Rémy Cointreau decided yesterday, June 2, to authorize the company to launch a share buyback program, pushed on to Resolution 19 and 20. In this context, an investment service provider will be instructed very soon to purchase up to a maximum of 1 million share of Rémy Cointreau for the next 6 months. This share buyback program is intended to facilitate the following transaction in decreasing order of priority. First, to decrease the share capital by canceling treasury share. Second, to meet the obligation arising from free share incentive program for employees and corporate officers of the company and/or its affiliates. Third, to meet obligation arising from security giving access to the share capital. Thank you all for your attention to this a little bit long technical and financial point, and I will now hand it over to Éric Vallat for the '21/'22 outlook.

Thank you, Luca. I'm going to be quick here to allow time for questions. Plus I think the slide I am going to share is quite explicit. Just to reiterate, first, as was stressed several times, our strong confidence in our ability to continue to gain shares in the exceptional spirit market. As we said also, we believe in 2021 to be a strong year of growth, but also a year of 2 halves, with H1 benefiting from favorable basis of comparison and also the reopening of on-trade in many markets, which is generating some sell-in inflow. And also the restocking effects. As you know, last year, we ended with rather low stocks. The second half of the year will compare to higher comps, obviously, and will also reflect a normalizing trend of consumption. Third point, being ahead of our 2030 financial objectives. And given the favorable environment and our strong confidence in our ability to develop the top line, to deliver the top line, the group has decided to revise up its '21, '22 strategic investment to fuel the rebound and to fuel our brand's awareness and desirability. This is probably the weakness of some of our brands. Once you try them, you are engaged. The question is to have more people trying our brands as well. So it's all about awareness and desirability. And we can afford to invest more behind them, and this would be the growth of tomorrow by strategic investment, we mean A&Ps, but not only. We mean also investments behind e-commerce, investments behind commercial excellence and investments behind sustainability. The expected good growth of COP in absolute value should be also tempered by the currency effect, which we expect between EUR 16 million and EUR 20 million and by a small scope effect of EUR 2 million though, following the acquisition of Brillet and of Telmont. And there we are. There's one more slide actually. Thank you, Luca, for reminding me, just -- I shared it already. Again, the last very important message, which was also in the introduction speech of Marc is that we confirm clearly our 2030 objectives. The fact of being able to allocate more means behind our brands today, comforts us even more in our ability to grow our brands in the long term and to achieve the targets that we shared already last year in June and that you have again here listed on the slide. This is the last slide, and we are now open to questions. So feel free.

[Operator Instructions] And the first question comes from the line of Mitch Collett from Deutsche Bank.

I have two questions, please. Firstly, can you perhaps comment on the level of organic operating profit growth you think is reasonable for F '22? I think current consensus is the 22% organic operating profit growth. And then my second question is on the components of the EBIT margin. So you've obviously flagged that you need increased investment. How should we think about margins in F '22? And the components behind that, clearly, for gross margin, you've got several very positive drivers with price increases and favorable channel mix dynamics. But you've also obviously got the increase in investments. So can you comment on EBIT margins and the components behind EBIT margins though?

Good morning. Thank you for your question. So starting from the first one. We expect '21, '22 as a strong year, top line and operating profit as well. But in a strong year, when you accelerate top line, bottom line at the same speed, the result in terms of margin is not a growth, it's more muted. So you have to understand globally that if you consider the long-term journey of 10 years, switching for 23.5% and reaching 33% will not be, as I always said, a straight line journey. This year, profit, very strong result and a top line, which is more modest than we could have been because of the pandemic. The accretive impact was very, very strong, 240 basis point on reported basis. So you have to consider 2021 and '22 in terms of profitability compared to the top line as a combination of 2 year. Given the fact that we are ahead in 2021, given the fact that the new paradigm has been stalled and given the fact that we have pricing power and positive and that increased top line, the profit of debt to -- for a year to increase, thanks, and this is your second question, to a growth of the gross margin, which would be very strong once again, very, very strong. We will come to have another all-time high in gross margin next year to increase our footprint in A&P and strategic OpEx to be able to feed the future journey. So I repeat, strong growth of top line, strong growth on the bottom line, mid-teens in terms of organic terms and increase the gross margin, very strong one, far better than this year, will be another all-time high, strong increase in A&P, entering a new step game in terms of A&P to increase our strategic OpEx while we will continue to control the running OpEx. And as a result, a muted operating COP margin because we have to look at that on a 2-year basis. On top, last but not least, '21, '22 will be a year of 2 halves because top line acceleration to also the replenishment and the restocking and the strategic mastering we have done in terms of inventory in the end of the year, reflecting acceleration Q1 and Q2. And expenses will follow, but as a result, top line and bottom line will grow much faster in the H1 and will be more moderate in the H2 with a consequence in terms also of the operating profit in absolute value. As a COP margin, '21, '22 will be, organically speaking, a muted year while the absolute value will grow net sales and bottom line strongly and quite in a symmetric way. On top to analyze what is the publish, you have to add the negative ForEx at the negative scope. But here, on a 2-year basis, there will be an increase, which is quite substantial and more than in line with the 10-year journey. We are preparing the future. We are stepping up. Without that, '22/'23, '23/'24 could be more difficult. We have to profit of the strong expansion top line to increase our footprint, change gear and switch from the fourth to fifth accelerate and speed up. I hope to have been very clear on that.

Okay. The next question comes from the line of Laurence Whyatt from Barclays.

Three for me, if that's okay. You mentioned in your statement that you've got confidence in the consumption trends in the U.S., and you believe they are structural. I suppose we're still quite early in the recovery of the pandemic, and we were just wondering what's the reason why you can say that these trends are structural at this stage? Secondly, there's been a number of U.S. states that have opened the on-trade relatively fully. Just wondering what impact that has had on the off-trade consumption and any data you can share with us from those states in particular? And then finally, one for Luca. Historically, Rémy has given cash back to shareholders largely through dividends and special dividends. And today, you've moved towards doing a share buyback. I was just wondering what the reasons behind that work?

Okay. I'll take the first 2 ones. Thank you for the questions, by the way. And I start by the second one to then illustrate with the rest of the questions. You were asking us about on-trade progressive recovery, do we already get some insights and what is the potential impact also on off-trade. So on-trade is indeed recovering in the U.S. It's now really a fact, and it does have an impact on off-trade. Now what we see is clearly that the new normal is off-trade being much stronger than what it was before. First, we do not anticipate 100% recovery of on-trade before, maybe 1 or 2 years. There might be 20% to 30% of on-trade accounts that will not reopen immediately. There have been bankruptcies, unfortunately, and the landscape has changed. But second, the off-trade consumption remains very high and much higher than pre-COVID even though we see on-trade reopening. And in the states where on-trade has clearly reopened, we see off-trade resisting very well. You should take a brand like Cointreau, which is very interesting because it's very on-trade. It's the most on-trade brand in our portfolio, 55% of the business pre-COVID. You see Cointreau decreasing week after week between 15% to 20% in off-trade. This is what the Nielsen figures give us. But it's still 3-digit percent higher than pre-COVID. So we are quite confident, and this leads to the answer to your first question that the off-trade consumption being more than pre-COVID is a long-lasting trend. Why is that? First, we believe that people have discovered the pleasure and the beauty of welcoming at home, having events at home probably more than in the past. And we believe that this is going to last in many countries where it was not at all a habit. And this consumption at home on top of that is clearly more driven than it was towards mixology as well. Mixology was probably seen as complicated. The family IT has grown with COVID where people have more time to be educated, more time to spend on mixology. So this is the first point. The second trend is up-trading trend. And as I said, this is a trend that was preexisting COVID, drinking less but better is, clearly, we believe, a very in-depth trend that is going to last. And that is even reinforced and accelerated with COVID where people care more about the quality of what they drink and about their health. And this is why we strongly believe in our value strategy, of course. Up-trading will last. Of course, there have been some temporary push to the up-trading with the subsidies I mentioned and I referred 2, for instance, but it's also linked to very strong insights that we believe are long lasting. And don't forget that, thanks to COVID, I don't like to put it this way, but with COVID, we have managed to grow the familiarity of our brands as well, of the up-trading brands, of the brands of the up-trade and Cognac is the perfect up-trade in the spirits because we discovered the beauty of digital training, for instance, which we never did before. When you train and when you do tasting sessions, they were done for 20, 30, 40 people. Now we can enlarge the people -- the number of people we train on our brands, and we can gain in familiarity. Same with the growth of e-commerce, which is clearly a long-lasting one as well. I would even say that e-commerce was not a topic before COVID. It has now become a priority for all stakeholders. This, by itself, is going to make e-commerce a long-lasting trend because everybody is investing behind it. And e-commerce is a fantastic opportunity for the high-end brands because the visibility is equal to the volume brands. While if you go to the physical stores, of course, we are present in less stores. So it increases our relative visibility. And this also is going to keep the trend up. The last trend is the trend towards, as we said, CSR concern. I don't think I need to elaborate here, but clearly, COVID has accelerated a trend, which was also pre-existing COVID. And we see it ourselves. Again, myself, I was not 100% self-assured when we decided to remove the gift box of VSOP last year. But in fact, it's a very fast-growing SKU, the year we removed the box. I don't think this could have happened 5 years ago. And I think it's opening opportunities in the coming years for the planet, of course, but also for us, if you look at our gross margin, for instance.

So concerning -- regarding your third question, dividend versus share buyback. So let me say that dividend of the year is in historical high, because the dividend for the Rémy Cointreau Group is before all something that need to last. So we're talking more about the ordinary dividend. Last year was decreased to EUR 1. Historical was between -- the highest at EUR 1.65. This year, there is an increase of EUR 0.20 per share to reach a payout, which is more than 60%. So it's built inside a continuity and increase, so giving a liquid and cash return to shareholders. In terms of share buyback, historically, since it was named in July 2013, this is the fourth one. So we have done before in end of 2013, August 2017 and August 2018. And always between 1%, 2%, 2.5%. So it is not something very new technically. What is new that now it is not a defensive act, it is an act of confidence. We believe in our future. We think there's a great deal for all the shareholders to buy our share now that our A ratio is underestimate because 20% is not strong enough with the cost of debt to 1.01 in weighted -- in terms of weighted average cost of capital of the company, our AVA needs to increase because we have to increase a bit the leverage. And this opportunity, apart from increasing the organic capabilities, strategical DV and strategic CapEx for the consumers group, this is a strong one. At the price of today, the share, we do not think that we are overvalued. We think that there is a large amount of increase of our share. So we believe we can improve the return to our global shareholder, buying our shares at EUR 117. Yes, yes. We believe firmly that it is not the end, but it can be higher. The low A ratio, as explained, so the balance sheet is very, very sound. As we said, this 1 million share, if you consider the amount today, the estimate impact, everything equal. So next year, it's an increase of 0.4 of the A ratio. So still remains quite low, very low, I can say. In terms of the 3 reasons, the most important -- the first 2 that I highlighted, the first one, cancellation -- buying and cancellation share to increase also the earnings per share. Clearly, there will be EUR 0.06, EUR 0.07, EUR 0.08 accretive impact on an all-year basis because then, when you start something, you have to consider there's a product inquiries for the number of share, but this is something which is accretive for everybody and it is giving back value to all shareholders. Last but not least, we have also to buy share to fuel our long-term incentive plan programs for the key managers and key employees of the group because this long-term journey, 10-year, needs also to be considered something in which we are measured for. So Éric and myself or executive member are also measured about the organization of this plan. And there's a tangible impact in the long-term incentive plan, and we prepare to have the share to face that because we are very confident to be able to deliver that in following not a straight-line journey, but achieving the target we promised. Once again, we firmly believe it's a good deal.

Just a follow-up on a few of the things you said particularly in relation to the first question with the focus on increasing gross margin. The focus on consumers caring a lot more about the health -- their health and what they drink and your focus on ESG metrics. Is there a place in the Rémy Cointreau portfolio for a nonalcoholic spirits? We would assume that some of the gross margins that your competitors achieve on those products are fairly high. Would that be something you would consider?

No, at least not yet. The way we look at drinking less, but better and less alcohol is really, for us, drinking less but better. Less volumes, better quality. We are not looking for volumes as such, and we don't look at replacing, let's say, volume by non-alcohol volumes. Plus, we believe that this -- for our existing brands, for instance, would not make sense. So we're not looking at it, but low ABV is clearly an area that we're looking at, especially for some of our brands. No alcohol is not a topic today.

[Operator Instructions] So the next question comes from the line of Trevor Stirling from Bernstein.

Two questions from my side. So first one, returning to the U.S. Curious, you've had an exceptional increase in the Cognac category and above all for the Rémy Martin brand in the U.S. Going forward from here, should -- is the right way to think about it, I think, we've had that gain and now we grow from a new base? Or is there more gain to come? And I suppose that links into -- you mentioned that off-trade Nielsen, down about 15%, 20% for Cointreau, but curious the benefit from the on-trade reopening. Should we think about net positive over the next few months because of underlying demand. I guess, with both Cointreau and from Rémy Martin. And the second question then, and I think true about supply. Again, we've had a massive increase in demand in the U.S. It's supply there to keep that going forward. And do we need more pricing in order to manage supply to make -- protect those inventories?

Thank you. I could reply in 2 hours. I'll try to make it short. It's good questions indeed. On the number one question in the U.S., I'll -- so yes, you can expect -- so there is sell-out and there is sell-in. You can expect a positive net positive growth. When it comes to sell-out, we believe that the new normal still allows for growth, probably in the low single digits when I'm talking depletions here, low single-digit growth overall. And we believe that with our positioning, we can achieve more than this low single-digit growth in the coming years. Don't forget that the Cognac category only grew from 5% to 6% of the total volumes in the U.S. compared to 12% for tequila, for instance. So there is still room for growth, definitely, and the growth will come also with the means we put behind our brands as well. We have never invested that much in the U.S. behind the awareness and the desirability of our brands. So we are confident in our ability to keep growing the brand in the U.S. for sure. Same applies clearly to Cointreau, especially with the growth of mixology and at-home consumption. Don't forget also, we have some opportunities with the reopening of on-trade. 1738, for instance, pre-COVID, was only 10% on trade. And its awareness has grown, and we are heavily investing behind it, which will open opportunities also in on-trade for 1738. In other words, we are quite confident in the prospects in the U.S., whether it's a short term or medium term. And if you look at sell-in, we are even more confident if you look at short term. We ended the year at very low stock levels. The comparables of last year are very small. So we believe -- we strongly believe in a very strong sell-in in the first 6 months, catching up also. As to your second question, which is about pricing and management of the supply, if my understanding is correct, particularly relevant for the U.S. indeed, as a question. First, we are happy not to rely on VS volumes today, clearly. And as we said, over the past 6 or 7 years, I recall, when I was the head of the House of Rémy Martin, I kept repeating that Cognac is a value game. We are lucky to be in a business where the offer is potentially less than demand. This is, for me, I believe, the fact in the long run. Now I believe we are well positioned in this context of tension in the sourcing with our value strategy, which aims at doing more value than volume, which does not mean no volume, as you saw this year. And I believe that we still -- with the level of stocks we have, we can afford the strategy and the vision we have shared, which is for Cognac, I'll remind you, 2%, 3% volume growth overall, but a 6% to 8% value growth, which leads to me to the answer on the -- to answer to you on the pricing topic. Clearly, we have gained pricing power. And we've gained also mixed power. So for me, the improvement of the sales beyond volumes will come from an improvement of the mix. The growth of 1738 CLUB in China, which are the intermediates and XO, which is a spearhead of the strategy as well in the future, will help us grow the value. And VSOP will grow less, but we can afford this growth on the intermediates, and we can't afford maintaining the volumes of VSOP, which is very important for us to fuel the growth with means to support our brands. And lastly, the name of the game, so sometimes I'm asked whether we can finance our stocks and our BFR. And for me, the main challenge is not there. With our results, yes, we can. The question is more, can we afford the sourcing of our strategy? The answer is yes. And because of our strategy, which is driven by value and also because of our leadership positioning in Petit and Grande Champagne and are long-lasting, very long-lasting, we are pioneer there, relationship with the wine growers.

The next question comes from the line of Simon Hales for Citi.

Two as well for me then, please. Éric, I wonder if you could just talk a little bit more about the scale of step-up in strategic investments we should be thinking about in fiscal '22? And maybe sort of share a bit more as to where that type of investments will be going, how it will be split between specific brand investments? And maybe how much of it is sort of the pull forward perhaps of investments in boutiques and route-to-market initiatives, which perhaps you had planned initially for later years. And then secondly, just coming back to your comments around the strong start to the new year and your sell-in commentary in the U.S. Are you able to share with where you are now in terms of wholesaler levels in the U.S.? I think at the end of March, we were talking about 1 month's worth of inventory sort of broadly in the trade channel. Where are we now?

Okay. I take the first one and let's see who takes second one. But anyway, the first one, strategic investments. We are not going to disclose the figures, of course. But as you have understood, we are determined to accelerate because we can afford it. And this is why we speak of a muted COP margin for the year to come. So I will answer more on what does it consist of, which I believe is very important indeed to understand. And before I say what it consists of, I think I will more insist on, indeed, on which brands are we going to invest. As I said, we have created 3 groups of brands with a clear set of priorities. One group is the global priority brands. These global priority brands are our priority in terms of investment because they are accretive and because they have a great growth potential. So we are going to spend more than before, and we are going to be more focused on our spending on top of that, which will increase even more sharply the support and the investment behind our global priority brands. To name a few of them, obviously, Rémy Martin [indiscernible] for sure. But a brand like Cointreau, which is below $50 is now a global priority brand, thanks to its very accretive margin and its potential growth. Same for the brand, The Botanist or the Whiskies, for instance. So this is it for the brands. So the global priority brands will be the #1 priority. What are we going to invest behind? The big share will be on A&Ps this year. Why is that? Because we have a challenge, which is an opportunity, in fact, on awareness and desirability. Many of our brands are jewels, but they lack awareness in many of their key markets. And this is partially because with this portfolio management we are implementing, we strongly believe now in the growth potential of those global priority brands. And we know that, first, we need to unlock the awareness. This is basic, but we know it works. Second is we are going also to spend on OpEx to a lesser extent than on A&P behind our 4 priorities. This is why they have been highlighted. This is why they have been shared at group level. And this is why they are, for every single business unit, the central piece of their strategy. These 4 priorities will drive us to spend more, particularly this year behind 2 topics, 3 topics. #1 topic is commercial excellence. As you've seen, we are launching a project. The idea is really to have an experience in the field that is aligned with the quality of the products and also to go from a cognac almost solely portfolio management to a broader portfolio management, which requires skills. There is a way of selling the Rémy Cointreau portfolio. So something we're working very proactively on. Why am I saying it's investment? Because it's also about upgrading teams, reinforcing commercial teams, which is now probably more than before a focus as much as the upstream has been in the past and is still, but now it's more balanced. The #2 topic we are going to invest heavily behind is, as you said, direct-to-client. And direct-to-client is 3 things. One is e-commerce, You will see soon some mono-brand e-boutiques openings. We're very proud of it. It's breakthrough in the industry, and it's something that is going to scale up in the coming months and years. At Rémy Cointreau, it's only the visible part of the iceberg because e-commerce is a full ecosystem that we are addressing, tailor made by brand. But so clearly, e-commerce, CRM, we are going to scale up there. And as you said as well, retail and direct-to-client sales through our PCDs. But we are not crazy either. The latter part, retail and PCDs or PCS, is very relevant solely, much less for a brand like Cointreau. So again, don't take it at group level. It is tailor made by brand, depending on where they stand and what their business model is. And the third topic we are going to invest behind is obviously CSR. I'm not going to disclose, but in the 10-year plan, we have tens of millions of investment planned behind CSR topics, some of it being accretive, by the way, as we just said, but it's accretive anyway, more and more, because it is now a criteria of choice for our clients. So it is not only something that we have in our genes, but it's also something that matters to our clients.

I'll take the mic on 2, 3 points. So first of all, to avoid any ambiguity to follow up at the end of the question of Trevor, but it's important for everybody. To avoid any ambiguity, we increased prices in '21, '22. So in April, we increased prices. So we delayed particular reason in 1st of October 2021. So the pricing power is there, has been factored. So when we -- I said we have great expectation of gross margin accretive journey also in '21, '22 will be fed by the mix geographical brands, but on top, compared to 2021, an additional pricing effect because you compound the second half of the year, October 2020 price increase and what we have just factored everywhere in the world. So higher for Cognac, a little bit lower, low single digit or to mid, for the Liqueurs & Spirits. In terms of level of stock now as far as we speak, when we talked end of April, we said something which has not changed dramatically because the result in terms of finance sell-out in some countries like U.S. has been even better than expected. Clearly, if you consider U.S., you can say that 1 week or 2 weeks, you are starting to have been negative because we have huge mountains in terms of comp. But if you compare to 2 years ago and what we -- this expectation, we are running better. So what does it mean? In the U.S., level of inventory at this stage as far as peak is still low. We will normalize, as I said, between Q1 and Q2, more at the end of September. And this is -- so we are around 1 month for instance, for VSOP, few days for 1738. It's only a few days. If you dig in the Nielsen and this [ sector ], which is decreasing. If you do that, out of that, it is different. So as expected, the level is down compared to December, and we will regain to be back 2 months of the new normal, which is higher also compared to the expectation between end of Q1, end of Q2, all along the summer. In China, as said, sell-in and sell-out are pretty much aligned already. So our level of inventories remains very healthy, no major switch to be estimated. And in the rest of the world, Travel Retail, apart from Hainan, still very complicated. It's not solved. This is something that they will be back. It would be really accretive in terms of geographical impact to our figures, but today, it's still quite slipping. And Europe, we have done -- the brand and the teams have done on the field a good job to try to normalize the stock considering the huge pandemic effect on Europe, in which the on-trade most in the southern part in Africa is very strong. So now in terms of sell-in, being the stock level very, very low, it can be only some positive surprise. So I repeat, stock level, still low in the U.S. as far as it was peak. Correct, right one in China. Europe, we might have some positive impact on sell-in because the stock were very, very low. Rest of the world, Travel Retail, Rest of Asia that I forgot before, still very, very complicated. So another year of huge positive news and some also still negative performance. In terms of scale of A&P, it was also your question. First level of '21, '22 to reach this mid-teen organic operating profit increase, I'd say, operating profit organically. Top line being X, the A&P will grow much faster than top line. OpEx will grow lower to be split between some problem for the strategic part that will increase commercial excellence, e-com, CRM and CSR initiatives. But overall, being the other part of the remaining running cost, growing very, very, very low and gaining the EUR 10 million forever of the economy, as already said, makes that the aggregate of OpEx in '21, '22 will grow lower the top line. So if top line is X, you have gross margin with much faster than X of the top line. A&P, faster than the top line. OpEx, lower the top line. And as I said, organically, quite a symmetry between the absolute value evolution between organic COP and operating profit and organic sales. I hope this is very clear with a year of 2 halves.

The next question comes from the line of Olivier Nicolai from Goldman Sachs.