Rémy Cointreau SA (RCO) Earnings Call Transcript & Summary

Welcome to Rémy Cointreau Q1 Sales Publication Conference Call. My name is Ellen, and I will be your coordinator for today's event. [Operator Instructions] I will now hand you over to your host, Luca Marotta, CFO, to begin today's conference. Thank you.

Hello, everyone. As you have seen in the press release, Q1 sales were down minus 15.6% in organic terms. This performance for the quarter reflects continued destocking, particularly in the U.S., high base of comparison, notably in APAC and EMEA as well as a soft context of consumption globally alongside a strong promotional activity. Overall, the Q1 sales decline is split between a strong volume decrease, minus 20.2% and plus 4.6% price/mix effect leading to limited price increase and the lower decrease of Cognac compared to Liqueurs & Spirits that gives the mix effect. Looking at the overall sales performance by region. Americas generated a strong sales decline, reflecting the stocking in the market not showing any sign of depletion recovery yet. APAC recorded a slight decrease mostly affected by Southeast Asia, while China was almost flat due to high comps and in persistent tough market. Finally, EMEA showed a very strong double-digit decline impacted by high comps, some phasing effects and also some softer consumer trends. This was sell-in shipment. In terms of value depletions at group level, all brands over the past 3 months. Starting with the U.S., value depletion were down strong double digit compared to pre-COVID, value depletion were up plus 10% and clearly stripping out the VSOP, excluding VSOP plus 55%. In China, value depletion were down mid-teens in the Q1 versus last year and as well compared to '19/'20. The latter one can be considered particularly negative. However, and we'll be back on that point, I'm sure, I would recommend not to pay too much attention considering the very short period of time, which creates some volatility, small size of Q1 for China and absolute value, and a different split in terms of business compared to '19/'20 linked to the dutyfree. On top, and will be back on that, you have to combine that at least 6 months moving average reminding that the last quarter, we are 200% 3x the way to '19/'20 value depletion footprint in China. So you have to combine that. Following the strong rise in Q4, this is the situation in China. So value depletion should be appreciated on a rolling basis. So combining that in terms of numbers, they are up plus 70% versus '19/'20 or 6 months, up mid-single digits versus last year. Once again, Q1 cannot be appreciated alone because it is small volatile quarter. Finally, a word on EMEA, value depletion were down mid-teens versus last year and down low single digits compared to Q1 '19/'20. But excluding Russia, value depletion would have been flat versus 5 years ago. Overall, at group level, that means that 3 months value depletion, a decline of 4.5% on a 5-year basis, in line with selling trends, minus 4%. But this global alignment compared to 5 years ago, includes some contrasted situation. One, strong destocking in the U.S. clearly is there. Second, more natural evolution in China, where the small size of the quarter cannot really influence the level on inventories. And third, a more or less neutral evolution compared to 5 years ago in big EMEA region. To conclude on this very first slide, we confirm our full year guidance. On Page #3 and 4, we pick up some main marketing initiatives as usual of the quarter. And as announced in June, and as part of the U.S. plan to improve growth rates, we have started improved their investment rate behind VSOP to improve its visibility on the point of sales, the conversion rate. We continue to leverage capital momentum through activation around control, particularly during the week of Cinco de Mayo. Results are positive depletion speaking, all channel and coverage included. In parallel, we have deployed the Mount Gay [ last ] innovation, Eclipse Navy Strength, which will contribute to improve the profitability and the visibility of the brands. And finally, last but not least, we pursue our fourth around Bruichladdich, single malt scotch whiskey to increase education and awareness. This is only the beginning, and we hope that we'll be able to improve next trends in the U.S. On Page 4, a quick word on China e-commerce and particularly good result achieved on 6/18, 18th of June, Shopping for festival that realized, conquered a plus 14% sales growth. As mentioned by Éric Vallat, e-commerce is a very solid weapon for China. The ambition is to continue to grow, building on a team whose know-how and relationships and subskills with the key players are a true asset and a competitive edge. We have successfully launched two exclusive new products for e-commerce channel and achieved a great depletion number to 6/18 campaign. In parallel, at the same time, we leveraged the pop up stores that reopened in Shanghai to celebrate the 300 years of Rémy Martin using livestreaming session and social media. Now let's go back to drive figures moving to the Q1 sales analysis, Slide 5. Sales amounted to EUR 217 million, down EUR 40.5 million year-on-year or 15.7% on a reported basis, 15.7%. This reflects, first, a very strong organic decline of EUR 40.2 million. It means 15.6% of organic sales decrease. This performance is split between as said, minus 20.2% in negative volume effect and plus 4.6% of price mix. And as said by repeat it is important, is a combination of the slight positive price effect and low to mid-single-digit positive mix effect. We have also highlighted a very slight negative currency translation impact of EUR 0.4 million or 0.1% loss for the quarter, so very marginal. But this is interesting because this loss is really mainly driven by the duration of the renminbi, the Chinese one currency for EUR 1.2 million and the Japanese yen [ 40.4% ] , and in parallel in terms of conversion, U.S. dollar turned positive with a gain of EUR 0.9 million. On Slide 6, the usual performance by division versus now 5 years ago, pre-pandemic, Q1 '19/'20. I will not detail all the figures because they are clearly highlighted on the slide. But in a nutshell, volume performance is strongly down in Cognac amidst the current U.S. context, while price-mix continued to be very strong. Overall, total Cognac sales are now down 17% versus pre-COVID, while value depletion are strongly down since -- around minus 20%. In parallel, Liqueurs & Spirits division, continued to generate a significant performance of plus 35.1% versus pre-COVID, driven both combined balance way, volume and price mix and well below value depletion trends, which set at plus 45%. At group level, this shows a global symmetry between selling minus 4% and value depletion minus 4.5% versus Q1 '19/'20. But inside that, there are different situation by region and by division, as highlighted suppose. Let's now turn to Slide 7 to dig more analytical organic trends by region. And let's start with APAC, whose Q1 organic sales were slightly down year-on-year and up at the same time, more than 20% on a 5-year basis. If we look at the volume value equation, the performance year-on-year include a strong positive price mix effect and a low double-digit negative volume effect. Inside that, China sales were almost flat in the Q1 in a market that remains complex, tough, particularly for the high-end segment. In this gloomy environmental market, the only channel which can say we emerge very clearly and positively is e-commerce. In the quarter, it grew more than 15%, representing more than 35% of sales penetration in China. The overall performance reflects strong negative impact coming from Taiwan, Macau and Hongkong. In this context, Q1 value depletions, not selling the value depletion, best approximation sell-out of the group at group level in the region were down mid-teens year-on-year and as well versus Q1 '19/'20, but I repeat, plus 70% on a 6-month rolling period versus '19/'20 to get into account or some phasing effect between Q4 and Q1 of this year. Moreover, the misalignment between sudden depletion does not impact our level of inventories, which remains healthy at the end of June. The remaining part of Asia reported mid-teen sales decline in Q1. Market is very tough. In Southeast Asia, particularly in Australia, Malaysia and Singapore. At the same time, Japan on the positive note of this publication generated very strong sales growth boosted by tourism and partially also the weekend. At the end of June 2024, APAC region accounted for 39% of our group sales, up 4 points compared to last year. Let's talk about Americas. Q1 organic sales were strongly down again year-on-year and down minus 25% compared to 5 years ago mostly impacted by volume, while price maker was as likely negative. And digging in talking about the U.S., while sales recorded a strong sales decline in Q1 impacted by continued destocking given the absence of signs of depletion recovery yet. Despite another round of destocking in absolute value in the U.S., which now brings down the level of inventories to the level of pre-COVID, this is not visible in terms of days of stock coverage considering further sequential deterioration of the depletion over the quarter that just ended. But the absolute value are very, very, very low. As a consequence, in terms of amount of coverage, level inventories in the U.S. is still around more or less 5 months at the end of Q1. On a 3-month basis, value depletion are down strong double digit year-on-year and more or less plus 10% compared to Q1 '19/'20, and as I said, plus 55%, excluding VSOP. In Canada, sales were down low double digit in Q1 impacted by Cognac, and Latin America were also down at very strong double digit. End of June 2024, Americas now accounted for 35% of group sales, which is the same weight of the last year at the same period. Finally, third region in terms of size is EMEA, big region, in which Q1 organic sales were down, a very strong double digit and grew at low single digit versus 5 years ago. This year-on-year performance mostly includes a very strong negative volume effect. Digging in Western Europe was down at very strong double digit in Q1 affected by Germany, Greece and Spain facing high comps and some destocking in a couple of countries. However, this quarter showed a strong disconnection between sell-in and depletion. U.K. was down double digit in Q1, impacted by high comps as Q1 of last year, 2024 were boosted by some restocking ahead you remember, of the rise in excise duty in the country. In addition, the economic counter shows some encouraging sign of improvement on the back of less inflation, positive effects that start to be seen on the final consumption on sellout. The remaining part of the huge EMEA region, sales were down a very strong double digit, impacted by destocking in Africa, Middle East, some negative phases linked to the Orthodox New Year in Eastern Europe and negative Cognac trends in Benelux. Over the last 3 months, value depletions, so more linked to the sell-out were down mid-teens year-on-year and down low single digit on a 5-year basis. Excluding Russia, however, by depletion would have been flat compared 5 years ago. Overall, inventories are now back to healthy levels, slightly up compared to the previous quarter. But we said at that time, there were a little bit on the low side. End of June, in terms of weight, EMEA region accounted for 26% to 6 of group sales, down 4 points versus last year. So in terms of weight compared to 1 year ago, Americas flat, EMEA minus 4, APAC plus 4. Now let's turn to Slide 8 and the analysis by division, and we start by the Q1. So Cognac. Cognac posted Q1 organic decline of 12.2%, reflecting a decrease of minus 18 volumes and a negative price/mix of minus 4.2%. End of June 2024, current division accounted for 62% of our sales, up 2 points versus the previous year. In this Cognac division, lets start with APAC and inside APAC, let's start with China. China sales for Cognac were flat in Q1, affected by high comps and a weaker consumption. In a nutshell, consumer confidence remains low and continues to impact consumption, while cash pressure as well wave on wholesalers. As a consequence, value depletion were down mid-teens in Q1 year-on-year and versus 5 years. But within this global evolution, CLUB, our key reference is overperforming, clearly overperforming while the high-end products are a little bit more on the underperforming side. By channel, on-trade is the most affected one in the current context, also in terms of downgrading and lower spend per capita, while e-commerce is clearly up, I repeat, plus 15% boosted by the 6/18 Festival and banquet, which were relatively resilient during this low season. On the negative side, Hongkong, Taiwan and Macau were particularly weak, impacted by high comps, destocking and tourist preference for Japan over Hong Kong. Rest of Asia was down mid-teens in Q1, particularly impacted by Malaysia, Philippines, Singapore, but on the positive side, Japan generated a very strong double-digit growth in the Cognac division. Second region in terms of weight, it is -- for the Cognac is Americas. In North America, Cognac sales were down low double digits, still impacted by destocking on the back of persistent negative depletion, which are not showing any sign of spark yet. Overall, the market remains highly promotional, and underlying demand continues to be weak. Q1 U.S. value depletion were down a very strong double digit for Cognac year-on-year and minus 10% versus Q1 of 5 years ago, showing a sharp underperformance of the SOP. In fact, Q1 trends are below Q4 of last year. However, we should consider the high comps that explain the sequential deterioration. Indeed, June depletions were up mid-teens last year into [ 3/24 ] before the implementation of the price increase from wholesale to retailers beginning end of June, beginning of July. Considering all that, we've already said, the level of entries in Cognac in the U.S. is still around more or less 5 months in terms of [indiscernible] coverage. That is one of the lowest level in terms of absolute value. 12 months value depletion rolling 12 includes 2 points of negative price mix effect year-on-year end of June on a 5-year basis, price/mix is up 18 points. Finally, a word on Latin America sales that were down for Cognac, very strong double digit in Q1, impacted by a very strong fierce promotional competition. In EMEA, cognac sales were down at very strong double-digit reflecting high comps, negative phasing and softer markets. Overall, EMEA was mostly impacted by South Africa and Germany. U.K. showed really good resilience despite very high comps. As a reminder, last year, we benefited from a strong restocking effect ahead of the rise in excise duty and in addition, I repeat that because it's important, sell-out shows early sign of improvement alongside the inflation decrease, which is encouraging. Western Europe, as a subregion was down double digit in sales. However, sell-in was well below depletion and sellout, which is something with a positive expectation for the next months. Finally, overall, EMEA value depletion were down mid-teens year-on-year in Q1 and down very strong double digit compared to Q1 '19/'20. Let's now turn to Liqueurs & Spirits division on Slide #9. Liqueurs & Spirits division was down minus 20.4% in the quarter on an organic basis, including a very strong decline of volumes, almost 24%, to 2.9% and a positive price/mix effect of 3.55%. End of June, Liqueurs & Spirits division accounted for 35%, down 2 points versus last year. Let's now review the performance of the division by region. In this case, most important region is Americas. In North America, sales were down double digits in Q1, of which Canada was up low single digit. North America was impacted by some destocking alongside the greater cautious from wholesaler in a slow wind market. So the cautiousness of the wholesaler is impacting as well Liqueurs & Spirits creating some mathematically speaking, inapplicable disconnection between dynamics of depletion and replenishment in selling. However, the underlying trends are resilient as shown by the Cointreau Q1 U.S. value depletion or channel, which were up low single digits year-on-year and approximately plus 95% versus 5 years ago. So Cointreau doubled its size of business compared to 5 years ago in terms of value depletions, all channels. Botanist, our gin also showed positive trends. Besides all that, price/mix was down 5 points versus last year in the last 12 months period ending June and up 18 points on a 5-year basis. In parallel, Latin America sales were down also for this division, very strong double-digit in Q1, once again for a persistent promotional market. EMEA, a very strong region -- important region for Liqueurs & Spirits realized sales for Liqueurs & Spirits that were down strong double digits in Q1, impacted by high comps negative in phasing effect and a softer consumer trends. In parallel, value depletion were down high single digits versus last year in Q1, but 30% more than 5 years ago. Beside all that, while Benelux shows a good resilience driven by Cointreau. U.K. was impacted by high base of comps. And in Western Europe, it was sharply down on the back of high comps and the stock in Germany and overall, a soft market. Western Europe was impacted by some destocking following also some slight changes in route to market. Through the region so far in terms of weight for Liqueurs & Spirits is the APAC inside the APAC, China. Let's talk about China. China posted for this division, a strong double-digit decline in Q1, impacted by continued destocking in whiskeys and a weak end-demand mainly from younger generation, more volatile in terms of habits. However, value depletion were strongly positive for Cointreau and The Botanist, while Bruichladdich value depletion posting a more limited decline so some small sign up positive inflection compared to previous quarters. Overall, value depletion were up high single digits versus last year, increased 40% versus a year ago. So focusing on 5 years ago, the end of Q1, Cointreau 95% and APAC, EMEA plus 30% plus 40%, so a huge increase of the footprint of Liqueurs & Spirits and Cointreau, especially in the region -- so in all the regions for the group compared to 5 years ago. Rest of Asia posted a mid-teens decline in Q1. Southeast Asia faced sluggish consumption Australia, New Zealand mainly, but we continue to gain market share in a very depressed market. Japan still booming also for Liqueurs & Spirits, driven by Bruichladdich and Telmont Champagne. One last word on the performance of non-group brands, which represents almost 3% of group sales, so stable compared to last year and the year before. They were down minus 24.6% in Q1 and minus 14% versus Q1 '19/'20. This is clearly okay and fine with the strategic journey that Éric Vallat said put in place 5 years ago. To conclude, let's switch to Page #10. On the back of Q1 sales results, which do not show any specific news, nothing new under the sun. We confirm our full year guidance, which includes two distinct periods, H1 sales still impacted by U.S. destocking, high comps in China and softer consumer trends in EMEA. H2 sales that are expected to show a recovery mostly driven by the U.S. In this tough, very tough context, the group is well determined to use tight cost control and its value-driven strategy to protect its profitability, i.e., its organic comp margin. In the full year, '24, '25, the group will build on these compounders. First of all, the resilience of its gross margin, thanks to the measured selective rise in price, amid moderate inflation; second, normalization of the A&P sales ratio at a much level much higher than in '19/'20 but lower than last year; and third, a tight control of overheads to offset most of the rise in costs in overheads resulting from the reversal of the temporary savings achieved in '23/'24 as you remember. For the sake of clarity for everybody, this guidance does not take into account any potential impact linked to duties increase in China or elsewhere in the world. No duty increase by taking in account in this guidance. Thank you for your attention. And now I am happy to answer to your questions, but before I have to drink a bit of water. Thank you.

[Operator Instructions] We will take our first question from Andrea Pistacchi, Bank of America.

My first question is on Liqueurs & Spirits, which has shown quite a deterioration in the last 2 quarters. So the question is how much of -- how much do you reckon of the 20% to 25% decline that we've seen in the last 6 months is really phasing effects and what is more underlying? And how do you see the rest of the year panning out in Liqueurs & Spirits? And from an underlying point of view, where is the most difficult area for your Liqueurs & Spirits business at the moment? Is it the U.S.? Is it APAC or EMEA? The second question, Luca, please, is it's a couple of things on tariffs in China. I don't know I'm not sure you'll be able to say on this. There's a lot of uncertainty. We don't know, of course, how much the tariff will be. We don't know if it will be still applied to the transfer price or further down the value chain. But two points I want to ask. One, is it reasonable to assume that you will pass it on in full to the consumer? Second, how are you thinking about shipment phasing around the potential tariff, would you be shipping product to China early to get in before the higher tariff is applied? Would you be able to ship more product to distributors ahead of the tariff? Or would this even be possible in the current environment? Yes. And any sense of the timing? I think, I mean, we should hear something before the end of August. Do you have any more insight into potential timing of any announcement and potential implementation?

Thank you for your questions. So we'll start with tariffs. So what are the latest development following the hearing in July, public hearing on July 18, the hearing was organized by the MOFCOM in Beijing, partly antidumping investigation. Everybody was there. This is part of the willingness of the association as well as European companies to fully cooperate, reiterate that with Chinese authorities. In this context, the hearing involved various European party to reject the unfound allegation of dumping, which have led technical and legal support. And on our side, we firmly reiterate the absence of dumping injury or threat of injury. So what are the next steps? So far, the MOFCOM did not make any official communication, again the exact timing to make their decision. So the procedure is still going on, we cooperate. Why I'm saying all that? Because I consider the second part of your question, we were not in a shaky reactivity mood, change our way of making business in China. So we don't take any different habits compared to the previous quarter. So far, the investigation doesn't affect -- didn't affect the consumer taste or the essence of the business. So we are not changing also the operation to try to anticipate offset in extraordinary way the technical impact because, frankly speaking, we still think that we are on the right side. So we don't see why we should be penalized, but that is not only in our end. And if the day come, we'll be prepared to react. I cannot today that will be everything covered by price increase when in a very calm way, we are there, we cooperate and we react. We are in a reactive move, and we are not changing nor gears in terms of [ EBITs ] compared to the usual ways of doing business in China. In terms of Liqueurs & Spirits dynamics for the quarter, more rolling six nights and what will happen in the future. So I will start with the end. For the year, '24/'25, we consider that Liqueurs & Spirits stage will be bit-cognac performance. So no change in guidance in terms of division footprint for the '24/'25. And also for the [indiscernible] term, Liqueurs & Spirits is meant, and we invest a lot not only in A&P, but in all means to improve the size of the business. So coming to your question, we think this is more a short-term concern. Short-term debt need to be differentiated by region. Let's start with the more easy one in terms of explanation, which is China. China, and it is still a small part of the business, reacting still good in Cointreau, Botanist in terms of size, the attention is taken by the Cognac, but we continue to improve the size. And for the Liqueurs & Spirits negative part, it is more Bruichladdich, the single malt that have more roller coaster performance in the last 2 years with the high spikes, younger generation getting on it, part of also of speculation in terms of buying to store and capitalize on the value of the bottles. It's not something linked on to Bruichladdich or to some other brands of our major competitor in this business, Scottish business. I will not name it, but everybody understand what we're talking about. So this decline is linked to the volatility younger generation and some resale value that has been lost during the global gloomy period that we are living in terms of visibility. But it is temporary and is not waiving so much for the overall performance of the group. Second one is EMEA. EMEA is much more a jeopardizing situation because we increased prices very much starting with Cointreau. we are clearly on the right strategy, but now with a pause in terms of volume. So it needs to -- an assessment not an assessment, stabilization, the consumption that will come normalization after this huge price increase. We are continuing to improve the set of tools to improve visibility and rotation, but it's [ leary ] a game country by country. It's very difficult to encapsulate that in only one figure. Overall, at this stage, EMEA is the region which we need to focus more for Liqueurs & Spirits to be able to deliver a clear and steady run rate positive run rate for the future because of the different situation of the single malt. It's a global very complex situation. For the U.S., it is a complex and that easy-to-answer situation. There is a clear misalignment between sell-in and depletions. What I tried to say in an elegant way before is that sell-in is negative, clearly running behind performance on a sellout and depletion and we can say that sometimes on a given quarter, Nielsen is negative. But we look at old channels. Nielsen, remember that for us, is totally not representative, only 35% against 44% for the market because not taking into account some major chains independent liquor stores in which we are beating other peers. So this misalignment is linked to what in the U.S. and then we need to solve. It is not a strategic point. It's more a tactical negotiation execution point. But that we need also our sales to play, sales in the U.S. to play the same game. Destocking following Q4 negative depletion, clearly, but strong cautious from them, a wholesaler and to record in global context value depletion are positive. So in a nutshell, Cognac, depletion under performing for Rémy. Rémy is Cognac is waiving negatively for all other brands. And it is our job, the job also the wholesaler to understand that in 2024, we need to work in a more analytical skilled and dig-in basis. So overall, at group level, I repeat, we think that they are more conjuncture to specific elements that are waiting with a negative news of the publication. I'm well aware that Liqueurs & Spirits is a [indiscernible] compared to the expectation, but it's more [ conjunctural ] than long-term threats. And every single region and country for EMEA need to have a specific booster plan or reengineering plan to address that, starting with Cointreau, but not only, not only Cointreau also for Bruichladdich and for Europe Metaxa as well. Metaxa particularly was -- was pressurised also for some changes in route to market in Eastern Europe, as I said, please?

Sorry, Luca, just to clarify, if I understood what you just said on the U.S. destocking situation. You're saying that the situation in Cognac with very weak depletions and the destocking, that is also weighing or that is driving in part that destocking that you're seeing on your other brands. So it's an execution thing that you have to fix and how you're dealing with the distributors?

Totally exact. Cognac underperformance is overshadowing positive news. So it is an execution element to fix in which we need also wholesaler collaboration. We can't react only looking at global figures, brand by brands, SKUs by SKUs.

We will take our next question from Edward Mundy. I apologize. We will take our next question from Sanjeet Aujla from UBS.

A couple of questions from me, please. Firstly, can you just elaborate on the implementation of the VSOP Boost plan, how that's progressing, appreciate it's early days, but any color you're able to share as you've made those changes in the U.S. over the last couple of months. And my follow-up question is on EMEA. You called out intensified prom activity. Can you just go into a little bit more detail? Is that broad-based across categories or any particular categories or markets you'd call out where you've seen that step change?

Thank you so much for your question. Let me allow to give to your set everybody a more global vision of what's happening, the current trading in the U.S., apart from figures. So it is clearly there that Q1 depletion in the U.S. showed a sequential deterioration versus Q4. So first up for tagline, there's a deterioration. Why that? High comps last year before the implementation of price increase to retailer, June was up mid-teens for the Cognac category. The exit rate was very, very strong. Tough market, still tough markets, still driven by strong promotion and we are far less promotional than other peers, as you know, and promotional intensity, promotional intensity is not lowering. Absolutely not. You can also see it in our spreadsheet when we bench on 3 months or 6 months, the market number discussed compared to our peers, you will see a huge positive. It's clearly driven by other ranges that we do it in the portfolio, i.e., BS. That means also what does it is in terms of alignment between sell-in and depletion for other big peers. Spirit markets slowed overall versus Q4. So market is low in there. Current trading. We do not see the spark yet in the U.S., limited visibility, still negative. Let's see how the next quarter will move forward. So far, small positive news, July showing a strong sequential improvement, not seeing positive, but strong sequential improvement. Too early to determine it will be sustainable and lasting for the Q2, even if on the low base. Another point is important to highlight is the asymmetry between states. We are clearly some very good performance in the U.S., Georgia, Nevada, and we have huge underperformance, California, Texas, New York and partial Illinois. So it is a very complex dynamic state by state. It's like having a huge European state inside in only U.S. market. We are just penalized on the positive side implementation of our boost plan. We started to reinforce our [indiscernible] point of sales in the VSOP. We implement our smart pricing strategy that highlighted very clearly with thresholds that which can be up in some states, down in some states. We have a threshold which is alliance, too early to conclude because just started. The benefit should be there more in the Q2. So far, we recorded encouraging trends in a few states, one of them in Michigan. Then if all confidence and the market is still down, it's very difficult to acknowledge the performance, it is more a performance, which is less negative should have been that clear positive. But so far, some encouraging trends in some states a repeat. And end of Q2, we will be more precise on the result of the boost plan in VSOP. We have signed also something very important, new partnership with [indiscernible] that we also contribute to [indiscernible] in the coming months. And we are confident that we can be better than today. That's so far -- for the short term, Q1 was a deterioration and Q1 in terms of depletion was clearly in miss compared to our expectation. So global, overall, a group level, not only U.S. We have done very marginal needs in sell-in and more important, some points more in terms of depletion compared to our internal estimation. Liqueurs & Spirits, let me repeat what I just said, that is very important. For the U.S., we has had misalignment between sell-in and depletion for the reason I just highlighted, destocking following Q4 negative depletion and a strong cautious from wholesale to take orders in this current context. Value depletions are very positive, including for Cointreau and The Botanist top of mind. Fundamentals, [indiscernible] Cointreau are very, very solid. We gained market share, very clear in 2023, 0.9 points and 7 points of market share compared to 5 years ago, and we intend to continue to leverage this good momentum. In terms of EMEA environment, it's -- I will try not to be too long because it's a complex region. The current trading apart from figures that you already highlighted, Q1 sales were impacted by softer underlying trends and inflation wave is on purchasing power. The fact that we increased strongly our pricing last year, and we give time to consume it, absorb it. High comps in the U.K., some negative phasing effects, particularly Eastern Europe, waving on Metaxa and weak markets in South Africa and Nigeria. In terms of the absent depletion down mid-teens and down low single-digit for [ year ] basis and inventory back to healthy level. The global environment, I repeat, is more complex than other states because it's state-by-state, country-by-country, operational plans that need to be put in place. And with the new organization that has been changed beginning of the year, as we highlighted the full year result. We switched from a more geographical footprint and business unit system to a more developed market and future growth. So there is also a time of this new organization to be put in place. The question you might have is this slowdown more an ongoing concern or is a short-term issue. So far, at this stage, we continue to think that Europe will be able to deliver a positive top line dynamic for the year, but we started lower than the expectation. So we don't think there is a long-term issue. It's a short term probably into inflation, reaction to consumer normalization and adjustment of route to market and our organization to this new environment. So it should be -- we should witness in the coming quarters and more clearly from the Q3 recover and re-speed of the region.

We will take our next question from Edward Mundy, Jefferies.

Two questions for me first. So on China, it appears that your performance is a little bit better than your peer who reported yesterday. Clearly, you've got a slightly different portfolio with that gap between VSOP and XO closed with CLUB. But can you talk about any familiar differences perhaps to in your business and your peers' business, in particular on route to market with your very strong e-commerce and also potentially your channel exposure relative to your peer. What does that allow you to potentially outperform your peer within China is the question? And then the second question is around your guidance were clearly 1 quarter in. I think you're signaling there's no new news really today, you might expect to be the first quarter to be quite tough. But do you think the second quarter will be just as tough as the first quarter? Or do you think it would be worse or it would be better? I appreciate that Q2 has also got very tough comps relative to pre-pandemic levels.