Rémy Cointreau SA (RCO) Earnings Call Transcript & Summary

Hello, and welcome to the Rémy Cointreau Quarter 3 Sales '24-'25. My name is Caroline, and I will be your coordinator for today's event. Please note, this call is being recorded. [Operator Instructions] I will now hand over the call to your host, Luca Marotta, the CFO, to begin today's conference. Thank you.

Good morning, everyone. Thank you for joining us today. As highlighted in our press release, Q3 sales declined by 21.5% organically. This performance reflects several key factors. First, high comparison and ongoing destocking in the U.S., despite a slight sequential improvement in volume depletion from Q2 to Q3. Second, challenging market condition in China and APAC Travel Retail. Third, a significant sequential improvement in the rest of the world, including Europe and rest of Asia, which returned to growth in Q3. And fourth, last but not least, a positive calendar effect linked to Chinese New Year, which is earlier this year, more or less 1.5 points in Q3 at group level, representing in absolute value around EUR 5 million. So far, trends for Chinese New Year are soft, but slightly better than our initial expectation. Q3 sales decline is broken down as follows: volume decrease of minus 13.8% and minus 7.7% of price-mix effects, largely driven by the underperformance of high-end brands. Lastly, the cost-cutting plan is progressing well in line and in line clearly with our road map highlighted some months ago. Looking at the overall sales performance by region. Americas recorded a very strong double-digit decline over the 9 months period. primarily due to, first of all, a high base of comparison. As you remember, most of the H2 U.S. shipment occurred in Q3 last year. Second point, a continued destocking, although volume depletion showed a slight sequential improvement, but still in negative lens. APAC sales decreased by high single digit over the 9 months due to tougher market condition in China. Conversely, rest of Asia showed a strong improvement and returned to growth in Q3, led by Liqueurs & Spirits. Always regionally speaking, EMEA declined by low double digit in 9 months, but showed a sharp recovery in the last quarter in Q3. This was driven by Liqueurs & Spirits, returning to positive territory and a reduced decline in Cognac division. This was sell-in shipment. In terms of the best approximation of sell-out, so value depletion at group level over the past 9 months, in the U.S., value depletion declined by mid-teens year-on-year in 9 months, including a high single-digit volume drop. Compared to pre-COVID, 9 months value depletion are down low single digit, but out of VSOP -- excluding VSOP, increased by around 40% in value. In China, value depletion were flat year-on-year in 9 months, but grew, so been increasing by mid-single digit in Q3. On a 5-year basis, 9 months value depletion in China increased by over 20%. In EMEA, value depletion decreased by mid-single digit year-on-year, but grew, increased by mid-single digit in the last quarter. Excluding Russia, to be a bit comparable, geographically speaking, 9 months value depletion are up mid-single digit in Europe compared to pre-COVID levels. So what we can say, making the global analysis that overall, group value depletion fell by high single digit year-on-year, more or less minus 8% over the 9 months, outperforming clearly sell-in trends with minus 17.8%. And on a 5-year basis, value depletion grew by low single digit, a little bit less than 2%, exceeding sell-in trends that are overall negative over 5 years of around minus 4% -- minus 3.9%. So the message is that -- thanks also to what's happening in the last quarter, last month, we are performing better in the last part of the chain, the more we are near to the consumer compared to the sell-in. So still destocking, but if there is no spark in a clear way visible, we are starting to have some -- to bear some fruits in terms of depletion -- value depletion dynamics. To conclude on this very first slide, we reconfirm our full year guidance for both top line and bottom line. Based on our 9-month sales performance, we expect to reach the lower end of the sales guidance range, i.e., close to minus 18% in organic terms. On Slide 3 to 5, I'd like to, as usual, briefly highlight some of the key marketing initiatives undertaken during the quarter. Slide 3, let's look at what happened in November. In Vegas, we relaunched our LOUIS XIII pop-up store during the Formula 1 Ultimate race at Wynn Las Vegas. This retail activation showcased a wide range of LOUIS XIII offerings, including the iconic collection, drop collection and rare cask. We also provided exclusive accessories and personalization services, which resonated well with our target audience. These initiatives delivered impressive results with double-digit sales growth exceeding our initial projection expectation. While the financial contribution to overall U.S. sales is modest in absolute value, this activation remains a very powerful tool to strengthen LOUIS XIII brand equity and reinforce its premium positioning in this very important market. Turn to Page #4, let's discuss China with a focus on e-commerce, one of our most strategic direct channels. Despite the challenging market environment, e-commerce continued to perform strongly with sales growth of plus 10% more or less during this quarter. This was driven by key activation during Double 11, 11 November festival and Super Brand Day held on December 18. Both campaigns were hosted on our flagship platforms in T-Mall and JD.com, leveraging innovative live streaming from the Remy Martin House pop-up store in Shenzhen. This pop-up strategically located at the Shenzhen Bay Opera House celebrated our 300-year heritage and bridged the gap between our roots in Cognac and our growing presence in China. The fourth boosted our e-commerce performance. And both special occasion, Super Brand Day, Double 11 recorded a double-digit growth compared to the previous year. So once again, I repeat every time and clearly, in China, we are in direct touch with the final consumer. We continue to perform in a very positive way. Lastly, on Slide #5, I'd like to touch base on Metaxa, which our Greek brand, which achieved outstanding results in the quarter -- in the last quarter, particularly in the EMEA region, which is a very important region for this brand, where sales grew by over 20%, 2-0. This success reflects the team's effort to rejuvenate the brands, attracting younger demographic while at the same time, elevating the portfolio of these specific brands. An example is the launch of 12 Stars Zeus, the first ever limited edition of the 12 Stars range. Released in September, these exclusive products saw more or less 50,000 bottles distributed across key markets such as Poland, the U.K., Greece and Czech Republic. Now let's turn to Slide #6 back to figures. 9-month sales amounted to EUR 787.8 million, representing a year-on-year decline of more or less EUR 170 million, EUR 168.9 million to be precise, or minus 17.7% on a reported basis. This performance was shaped by the following factors. First of all, strong organic decline of EUR 117.1 million, i.e., minus 17.8% of organic sales decrease. Performance is split between minus 13.6% on negative volume effect and minus 4.2% of price-mix. So price-mix is negative in 9 months and why? Results from a slight negative pricing effect and more substantially by low to mid-single-digit negative mix effect. Why? Linked to the underperformance of high-end product and to a lesser extent, but clearly important, the Cognac division. We still are mainly a Cognac company. So if we are growing more the Liqueurs & Spirits for the dynamics of valorization at the end specifically is bad compared to the Cognac growth. Second, we recorded a slight positive currency translation impact of EUR 1.3 million, so positive one or a 0.1% gain for the 9 months, the first since a while in terms of conversion. This gain was mainly driven by the improvement of British pound, more or less EUR 1 million and U.S. dollar for the same amount. However, this gain were partially offset by negative impact from the Japanese yen, EUR 0.5 million and Chinese renminbi for the same magnitude in terms of absolute value. Slide #7, an important slide, we provide a breakdown of performance by division, as always, compared to the 9 months of pre-pandemic, so '19/'20. And you can read the spreadsheet, but I'll summarize the key triggering points, the key highlights. In a nutshell, Cognac volumes declined significantly in the current U.S. environment, clearly, although price-mix effects remain very strong on 5 years. Overall, total sales -- Cognac sales were down 16.3% versus pre-COVID, while value depletion were slightly better, declining by low double digit. At the same time, we have the opposite effect. Liqueurs & Spirits division sales showed a significant growth of 34.7% compared to pre-COVID, driven and is very interesting, both by volume and price-mix. Sales are below the value depletion trends, which grew by over 40% over the same period. The trends we highlighted for the short term are also visible, accountable for the comparison to 5 years. So -- and we'll be back to that in the Q&A. I'm sure when we talk about stock, don't forget absolute value of stock are lower than 5 years ago, are lower. At group level, these figures reveal a divergence difference between sell-in, minus 3.9% and value depletion are slightly up more or less 2%, emphasizing. So I reask this concept, I admit the better resilience of the end market demand compared to 9 months cumulative end of '19/'20, 5 years. Now digging more analytically on the organic trends by region, at group level. Let's start with APAC. APAC 9 months organic sales declined by high single digit year-on-year, but increased by around 20%, 2-0, on a 5-year basis. In terms of volume value equation dynamics, year-on-year performance was only impacted by the value component driven by the underperformance of high-end brands ranges. In China, sales were down low double digit in Q3 amid challenging market condition -- tougher market conditions, particularly for the high-end segment. However, as already highlighted, direct channels were more than 45% of sales in the last quarter, and if you consider the 9 months, more than 1/3, more than 30%. And this channel proved to be resilient, rising by strong double-digit e-commerce 10% in the quarter, supported by Double 11 and Super Brand Day events. And as a consequence, e-commerce penetration for China reached nearly 30%, 3-0, sales by the end of December, 9 months. But considering only the quarter, the overperformance is clearly visible, plus 10% on a negative. It was around 40%. Beyond the decline, so relative way of the indirect channels, overall performance were also affected negatively speaking, by the continued weakness of Hong Kong market and softer trends in APAC Travel Retail, where travelers have returned but are spending less. This was sell-in. On a more positive note, value depletion in China showed encouraging and the other way around trends, up mid-single digit in the last quarter, bringing the 9 months performance to almost flat value. On a 5-year basis, 9 months value depletion increased by more than 20%. Given the stronger resilience of depletion compared to sell-in, inventory levels remained in China and APAC generally healthy at the end of December. Elsewhere in the region, so out of China and Travel Retail APAC, rest of Asia returned to growth in the last quarter, increasing by low single digit, primarily driven by Australia and New Zealand, with strong performance in Liqueurs & Spirits. Admittedly, it was time to do that. They were not responding positively since a while. So they are more than welcome. By the end of December 2024, APAC region accounted for 42% of our group sales, 4 points more than the previous year. Second region by important group level is the Americas, in which 9 months organic sales declined by very strong double digit. And compared to 5 years ago, it is the opposite of APAC. It's more or less minus 20%. Year-on-year performance included very strong double-digit negative volume effect and a mid-single-digit negative price-mix impact. Why? It's more reflecting unfavorable mix of products, SKUs, states and format. In the U.S., inside the Americas, sales declined by very strong double digit in Q3, driven by 2 factors. First, extremely high comparables. The majority of the H2 shipments in the U.S. last year were concentrated in the Q3. And second point, another round of destocking due to continued weakness in value depletion, not in terms of dynamics, sequential improvement in terms of absolute value. Down mid-teens year-on-year for 9 months, equivalent to a low single-digit decline on a 5-year basis, but plus 40% when we exclude VSOP. This performance in the quarter, this partial catch-up and sequential improvement was clearly driven by the non-cognac brands. In this context, inventory levels in the U.S. stood slightly below, if we want to shoot a number, of 5 months by the end of Q3. But as I said, not the same absolute value as 5 years ago. In Canada, sales experienced a sharp decline in Q3, while Latin America the opposite recorded strong double-digit sales growth supported by Cognac and the Liqueurs & Spirits. There again, was 2 bad quarters before, so they are more than welcome. By the end of December 2024, Americas accounted for 35% of our group sales, down 5 points year-on-year. Finally, in big Europe region, EMEA, 9 months organic sales were down by low double digit and around 5% versus 5 years ago, reflecting primarily a negative volume effect. But EMEA is a big region, so we have to dig in a bit more on sub clusters. So third-party distributor cluster achieved mid-single-digit sales growth in the quarter, led by Germany, Czech Republic and Poland. At the same time, sell-out trends turned positive, driven, as already highlighted by Metaxa. U.K. and Nordics sales rose by low double digit in the quarter, benefiting from favorable comparables and market share gains due to a robust solid activation plan during OND, October, November, December. In Benelux and France, the opposite, Q3 sales declined mid-teens, impacted by competitive promotional pressure in Cognac and persistently soft trends in Liqueurs & Spirits. Last but not least, in AMEI and CIX -- CIS, not Russia clearly, we don't sell in Russia. Sales fell by low single digit in the quarter, reflecting continued destocking and very intense promotional activity, particularly in South Africa, where the market remains, as you know, heavily focused on VS, a category in which we are not playing. Over the 9 months period, value depletion in the region, so not sell-in, but the best approx of sell-out declined by mid-single digits, but improved by mid-single digit in the quarter. So a change of rhythm. On a 5-year basis, excluding Russia, 9 months value depletion would increase by mid-single digit, boosted by Liqueurs & Spirits. Overall, inventory levels remain healthy across most areas. End of December, EMEA region accounted for 23% of group sales, up 1 point compared to the previous year. So plus 4 APAC, plus 1 EMEA, minus 5 points Americas. Let's now turn to Slide 9 and the analysis by division, starting with Cognac. Cognac division posted 9 months organic sales decline of minus 19%, driven by minus 14.7% drop in volume and a negative price-mix of 4.3%. End of December 2024, Cognac accounted for 63%, so a little bit less than 2/3 of our sales, down 1 point compared to the previous year. Let's start with APAC. APAC -- inside APAC, Mainland China, sales declined by low double digit in Q3, impacted by challenging market conditions in the domestic market and softer trends in Travel Retail APAC. As already said, announced indirect wholesalers and not directly in touch with consumer channels were the most affected due to continued cash flow pressure waiving on wholesaler confidence and their ability to place orders and carry stock. This was further influenced by the transition in LOUIS XIII business model. As a reminder, we are significantly reducing, and we had already, the number of wholesalers a few months ago, a few more or less 1 year to retain only those meeting specific requirements, increasing the direct touch with the consumer. On the other hand, direct channels performed robustly, including e-commerce, LOUIS XIII direct freestanding stores, e-boutiques and PCDs. Talking about ranges and brands, Club -- Remy Club demonstrated greater resilience with value depletion up 20% in value in the quarter at almost 100%, so double on a 5-year basis, while at the same time, high-end brands remain impacted by a bit of luxury shaming. Elsewhere, as I said, Hong Kong underperformed. Taiwan and Macau delivered growth. We are happy with that, a strong growth in both sell-in and depletion in the quarter. Overall, despite very challenging tough context, value depletions for Cognac in APAC in Q3 rose by mid-single digit year-on-year, bringing in the 9 months performance in China to almost flat in value. On a 5-year basis, I repeat, this is equivalent to more or less 20%, both in the quarter and the year-to-date 9 months in China for Cognac. Rest of Asia, Cognac sales declined by mid- to high-single digit in Q3, with Japan, Malaysia and Singapore facing strong competitive pressure from promotion -- from the promotional environment and softer trends in China's tourism, as already highlighted. Second region in terms of weight considering Cognac is Americas. Let's start with North America, so U.S. and combined with Canada. Cognac sales fell by very strong double digit in Q3, affected by high comparables and continued destocking due to depletion that are improving sequentially, but still in negative land considering a softer comparison. So the absolute value are not yet meeting the expectation. It's going better, but not yet the expectation. Q3 U.S. value depletion declining by mid-teens year-on-year with contrasting trends across trades. Control states outperformed with volumes almost flat and VSOP returned to positive growth. It's important. Control states are always considering the low stock, first indicator of really happening in the market. So we consider that a good news. Open states, conversely, were more significantly impacted and more by negative clearly and clearly mostly by Illinois and New York. Given these factors, Cognac inventory coverage was slightly below 5 months at the end of the quarter. And if we consider the 12 months rolling value depletion, we have 2 points of negative price-mix effect end of December. But on a 5-year basis, price-mix remains up 13 points on Cognac in terms of value depletion. In Latin America, sales rose by very strong double digit in the quarter, driven by strong performance in Mexico, Central America, Caribbean and particularly for RM VSOP and XO, so more than welcome. Third region by weight, Cognac, is EMEA, where Cognac sales declined by low single digit in Q3, mainly due to intense promotional competition across most markets. U.K. returned to growth, up strong double digit, supported clearly by favorable comparables and the success of new activation plan implemented a few months ago. And subcluster European third-party distributor performance was negatively impacted by Germany, destocking in Czech Republic following a distributor change at the beginning of the year and weakness in Austria. In Africa, AMEI, sales declined by mid-single digit in the market, essentially driven, as said by VS, a category championship in which we are not playing. Lastly, EMEA value depletion, so best approx sell-out, outperformed sell-in for Cognac returned to growth, up low- to mid-single digit year-on-year in the quarter, but still very negative on a 5-year basis. This was the analysis -- the cross analysis of Cognac division digging into the 3 regions. Let's do the same thing on Liqueurs & Spirits, which was clearly more dynamic in the quarter. Liqueurs & Spirits division reported a minus 14.9% organic sales decline in 9 months, driven by a strong volume decrease of minus 12.2% and a negative price-mix effect of only 2.7%. At the end of December, Liqueurs & Spirits division accounted for 35% of our sales, up 1 point compared to the previous year. What happens by region? Let's start with the first one in terms of weight, the Americas. North America sales were down very strong double digit in the quarter, primarily due to a very challenging base of comparison and increased caution from wholesalers aiming to optimize inventory levels in a slowing market. Despite these challenges, underlying trends showed strong resilience with sequential acceleration. Cointreau Q3 U.S. value depletion were up high single digit year-on-year, and more or less 80% more than Q3 '19/'20, 80%, almost double. Botanist and Bruichladdich delivered strong growth year-on-year at plus 10%, plus 20%, respectively. So on a 5-year basis, we are talking of plus 90% first case, plus 50%. And on top, price-mix was flat compared to last year for the 12 months period ending December '24, but increased in terms of value depletion by around 20 points, 19, on a 5-year basis. In Latin America, sales rose by very strong double digit in Q3, driven by Cointreau strong performance in Puerto Rico, Mexico and Brazil. Second region by weight is EMEA for Liqueurs & Spirits, where sales increased by mid-single digit in the quarter, showing a strong sequential improvement from Q2, driven by growth in U.K., Germany, Poland, Italy. Value depletion were in line with sell-in, so growing, accelerating to mid-single digit year-on-year in Q3, more or less plus 30% compared to 5 years ago. Breaking sales down further, U.K. posted a strong sequential acceleration, low double digit in Q3. Same reason for the cognac comp -- easy comps, a success -- strong success of OND, October, November, December activation plan across 3 brands for Liqueurs & Spirits as well, but mainly Cointreau, St-Rémy, Botanist, Mount Gay and Telmont Champagne. And in parallel, Europe third-party subcluster sales increased by mid-teens in sales. So very strong growth for Liqueurs & Spirits, boosted by strong performance from Metaxa, Germany and Poland, Cointreau, St-Rémy. Third region by weight and for the Liqueurs & Spirits, APAC. Inside APAC, let's start with China, where sales grew by mid-teens in the Q3, driven by Cointreau and some positive phasing effects on Bruichladdich. Overall, Q3 value depletion was strongly positive year-on-year on Cointreau and on the Botanist, but still under pressure on Bruichladdich, which is in line with the whiskey category dynamics in China, most prestigious qualities of whiskey. Overall, Q3 Liqueurs & Spirits China value depletion were down mid-single digits year-on-year, but up more than 40% on a 5-year basis, bringing the 9 months performance to flat year-on-year [indiscernible] compared to 5 years ago. Rest of Asia for Liqueurs & Spirits were up mid-teens in the Q3, led, as I said, by recovery in key markets like Australia, partially New Zealand. In Japan, sales were more impacted by negative phasing effect related to whiskey, but Telmont showed a solid momentum from Telmont Champagne. So we are missing 2% of the group sales. They are non-group brands. They are representing 2%, as I said, of the group sales, stable year-on-year. They recorded so a decline of minus 26.5% in 9 months and minus 26.7% compared to 5 years ago at the same period. To conclude on Slide #11, and then I'll give you the mic for the Q&A, I would like to confirm the guidance, Slide #11. Basically, for this year, we expect sales, shipment, top line of our P&L to decline organically between 15% and 18%. Given our sales performance over the first 9 months of the year, the group expects its full year performance to be at the lower end of the range, so closer to minus 18% on an organic basis. And what about the bottom line? We expect to land between 21% and 22% of operating profit margin in organic terms. Based on recent evolution of our main currencies, the group now expect FX rates to have a positive impact for the full year, both in sales and operating profit. So we are changing, we are updating the guidance in absolute value. In terms of top line, we will be positive between EUR 2 million and EUR 5 million, thanks to the H2, as you witnessed in the Q3, it is visible and positive between EUR 5 million and EUR 10 million on operating profit, primarily accounted in H1. As already said, this '24-'25 guidance, top and bottom line, takes into account the recent MOFCOM decision based on the information that we have as per today. The impact for P&L is marginal for this fiscal year. And last but not least, we reconfirm our '29-'30 midterm guidance. Thank you for your attention. Now I'll be very happy to answer to your questions.

[Operator Instructions] We will take the first question from line Edward Mundy from Jefferies.

I've got 2 questions, both around sparks. So I know we can see that the sell-out trends are better than the sell-in trends and you're talking to inventories being healthy across EMEA and Asia and getting on the right track within the U.S. But if we take both China and the U.S. and talk about sparks, you saw value depletions up mid-single digits in the third quarter. Could you perhaps talk about what's behind that? And to what extent do you think that's sustainable? That is the first question. And then the second question is on the U.S. where you're talking about some improved performance in certain states, but the open states still being quite tricky. Do you think that also constitutes a spark? And are you seeing any green shoots in the U.S. on cognac?

Thanks for your question. So I will use your question to explain in a bit wider way what's happening in terms of current trading in China and the U.S. So maybe it will be helpful for everybody more globally. So what's happening in this moment in China? In Q3, the sales were down low double digit. At the same time, depletion were up mid-single, clearly with a very strong performance in terms of channel by e-commerce, in terms of product by Club, while the indirect channel was suffering because there is less confidence in terms of cash and the [ ice ] part of the portfolio was also suffering as well. Liqueurs & Spirits &, mainly Cointreau and partially some specific SKUs of [indiscernible] effect, outperformed. It is an interesting point of diversification. But in terms of absolute value, as you highlighted, China global performance and China cognac performance gives the same figures. So China is still all about cognac. Value depletion in China outperformed sell-in. So the question is why? Consumers are more active than intermediate layers. Consumers so far are still liking our products. Consumers are more dynamic than our direct partners. Why that? Because they are sleeping now, because there are cash pressure and there is a foggy environment with a lot of also macroeconomic and macro-political elements that are weighing on that. So to be a bit more precise, so by channel, I repeat, we showed the performance in the quarter that we never achieved before, 45% of sales, I think also to the weakness of the global denominator, but 45% is most of 50% and we are not supposed to be a direct brand. So it's something which is very positive for our relation with the consumer, also for the P&L because we can have more of our fixed cost, and we have increased the brand awareness. Clearly, e-commerce is continued hammer that. And boutique, our freestanding store accelerating, generating strong growth. PCD also were more complicated, are catching up. And what does it mean? You see they are there to sell the highest brand, the highest ranking, which is -- they are suffering globally. So inside the global negative figures, there is some positive element. I will not call it the spark in terms of dynamics on the quantitative footprint, but they are positive. On the negative side, indirect channels underperformed, impacted by cash flow pressures and the global environment. They are waiving more on the enthusiasm and the dynamics compared to the figures. If we remain to stick figures, we should have better performance in the Q4. And as you will see, and I will highlight later, Q4 will be a very negative quarter for China. Off-trade was impacted by a soft start in banquets due to the IPO promotion on XO. And at the same time, on-trade was better than the past, more dynamic, but still very small basis. We were at 5%, and we are at 10%. An important thing that we need to highlight in a quantitative basis is that to give also the sense of what's happening that waiving in terms of confidence, softer sell-in is due also to some collateral antidumping investigation effects, not only rational. Difficult to understand the rationale behind that, but this is the way it is. So Cognac category, for instance, in duty-free, so now is not allowed to refuel duty-free channels. So it is -- I don't know why it is totally illegal. I don't think so, but it's the way it is. It's something that it is linked as a collateral impact of the investigation -- antidumping investigation effects. This wasn't clearly manageable for us in the Q3, also for peers that have a lot of stocks more than us. But we should see a catch-up in Q4 if situation normalizes, but nobody knows. My message is that the anti-investigation have also some hidden impact on the dynamics of the next future. I cannot measure this potential negative effect last in Q4. I only wanted to share with you this point because it was not clearly highlighted so far in the market. There are some collateral impact of the anti-investigation -- antidumping investigation effect that are starting to weigh on the duty free. It is important to say it. Coming back to brands in China as well. Club was hammering, plus 20% in Q3 and almost 100% of year basis, more complicated on the high-end and very good performance of Liqueurs & Spirits. And to end this very long and articulate answer on China, giving also some additional hint that I think you don't have it, let's talk a bit of Chinese New Year today -- it's today, the year of Snake Wood, which is my year. I was born in '65, the same year. Chinese New Year is early, 29th of January compared to 10th of February. This wave in technical calendar increasing the Q3 for EUR 5 million. Last year was negative for EUR 8 million. So this is part of the answer to the Q4. You have a reverse effect. Last year, we had a positive impact on the Q4 for China, EUR 8 million, and this year will be a negative for EUR 5 million. So it's EUR 13 million. I know that I'm talking small figures for our peers, but we are a small company. So EUR 13 million at our scale, it's wave. This technical calendar effect of EUR 5 million will impact at group level 1.5 on the quarter in Q3, 4.5 points for APAC and 2.5 for the Cognac. We can qualify the Chinese New Year so far as correct, a bit softer overall, but better than expected and up, so growing compared to last year in depletion sellout so far. So if we are breaking down, analyzing the performance of the Chinese New Year refurbishment and selling scores, the more we are going to Tier 2 and retailer, the more the performance is positive compared to last year, witnessing the fact that the first layer, the Tier 1 are more concerned by the global situation and have a cash pressure limiting the stock. But it's clearly the situation which is far better than we've experienced in the U.S. in the last 2 years. In China, what we are saying is we are performing better and on a constant basis in depletion and sell-out compared to the sell-in. So the restocking or sell-in dynamics will be facilitated by that. This is, I think, a nice transition to the second question. What is the current trading? What's happening now in the U.S.? In the U.S., Q3 sales were down very strong double digit, while value depletion were down more or less minus 10% year-on-year and down mid-single digit over 5 years. This was an improvement, but 9-month sales were down very strong double digit, value depletion down mid-teens because there is a catch-up, but still negative. Let's look at the positive thing before the negative one. Value depletion outperformed were better than sell-in. Why? High comps in sell-in. Last year, we invoiced more or less the big part of the H2 and Q3 and continued destocking. On a subchannel point of view before states, retail chain are now overperforming the independent store. This can show that big chains retailers seem to finalize their stocking, where it's still ongoing for independent store where we are the most exposed. So that's negative for us. At the same time, it's positive because the final dynamics in retail chain more than independents. But for independent, we were always a treasure for Remy, Cointreau. And we always said that, Nielsen, we are not witnessing -- accounting that in a correct way. We are a bit late in terms of performance. So the destocking is still waiving on them. Then switching the analysis by states in terms of depletion more than sell-in. We have -- let's start with the positive, some positive signs. Control states outperformed with volumes almost flat driven by Michigan and Pennsylvania. So big states, top 5. VSOP returned to growth in volume in Q3, so positive. So okay, still very far from 5 years ago, but it's part of the strategy. On the negative side, open states were more negative, impacted by 2 important states, Illinois and New York. While slightly positive, Florida and California returned to growth in Q3 in volume -- not at the same time in value, but in volume. So different performance that are contributing to the sequential improvement, even if this positive element are not yet qualifying for a spark. There is an improvement, but there is no fire. It's still cold. Focus Cognac. Like what happens specifically for the Cognac because now we need to split in the U.S. because the graph of Liqueurs & Spirits and Cointreau is going faster than Cognac. So we need to be more analytical, I think. Let's talk about Cognac in the U.S. Selling was strong -- was down strong double digit in the quarter, affected clearly high comps and the destocking. But Q3 value depletion declined by mid-teens year-on-year with contrasting trends across states. So the minus 10% is more driven by Liqueurs & Spirits overperformance than Cognac. And it is something which is a little bit touch more negative than positive also for the P&L in the future. So given this factor, Cognac inventory coverage is more or less slightly below or slightly bigger than 5 months, has not moved. But in absolute value, is far lower than 5 years ago. On the positive side -- sorry for this long answer, but it's important to give you the whole picture because otherwise, you will not understand why we are saying that we are beating and sell-out our sell-in, and we are now at the bottom of the range. So we are sending, if we do not explain, counterintuitive messages to you. So we need to explain why we are more cautious for the Q4. For Liqueurs & Spirits, sell-in were down very strong double digit in Q3, primarily due to a very challenging base of comparison and increased caution from wholesale aiming to optimize inventory in a slowing market. And I repeat what I said 2 calls ago. The Cognac, is so important in the U.S., is overshadowing a bit also the mechanics of Liqueurs & Spirits, even sometimes also Cointreau. So the wholesaler footprint is sometimes a little bit too massified and they do not enter in the analytics details of the reordering pattern they should be. Despite this challenging, underlying trends showed stronger resilience with sequential acceleration. Starting with Cointreau. Cointreau Q3 U.S. depletion were up high single digit, up high single, and plus 80% compared to 5 years ago. Botanist and Bruichladdich as well, very strong, clearly helped also by some new point of sales compared to 5 years ago, but the velocity also is positive as well. In a nutshell, to answer in a very long way to your question, there was no spark yet, but a slight sequential improvement of the overall meteorological situation. Is this enough? No, less than our expectation. So that's the reason why we are cautious, guiding for the end of the year, remaining on the range. So we are still in the same guidance, while we precise the time of sell-in. We are more at minus 18% on top line. And bottom line, if there will be a question and consensus answer, it is between 21% and 22%. And we will see during the quarter, which is crucial to determine the final balance of the profitability as well. That's the reason why you have this answer. Q4 will be important. Sorry, Ed, I was more than long -- more than Mediterranean and Latin in my answer. I'm clearly not straight to the point in Anglo-Saxon way. But if you analyze the call, you will find a lot of useful information.

We will take the next question from Laurence Whyatt from Barclays.

A couple from me, please. On your guidance around America, you're talking around no recovery before Q4 '24-'25, which presumably is the quarter we are in. Just on that, have you seen much change in January with regard to being able to hit that recovery in this quarter, but also in context of the comments coming in from LVMH last night that they're not really expecting much of an improvement in the Wine & Spirits division for the next couple of years or they're giving it 2 years to see a recovery. It seems to us that the impact that you're facing is a lot of due to the promotional activity coming in from Hennessy in the U.S. in particular. I'm just wondering if you think that recovery could be happening in this quarter given what's -- they seem to be doing on their pricing? And then secondly, similarly on the promotional environment, are you seeing any change in promotional environment in China, whether that's in -- from different brands, different companies or different price points? Are some areas of the Cognac business in China being promoted more heavily or less heavily than others?