Davide Campari-Milano Stock

Good evening. This is the Chorus Call conference operator. Welcome, and thank you for joining the Campari Group First Half 2026 Financial Results Conference Call. [Operator Instructions] Today's call will be hosted by Simon Hunt, Chief Executive Officer; and Francesco Mele, Chief Financial Officer.

At this time, I would like to turn the conference over to Simon Hunt. Please go ahead.

Great. Thanks very much. Good afternoon, everyone. A pleasure to be here with you again. I've got Francesco with me. And as of course, we have our IR team will be available after the call for any follow-ups.

So let's get going with a summary of our first half results. I think it's important to start by stating that we are doing exactly what we said we would do, and we are growing in the important start to the peak season. In fact, we are the only listed spirits player now with 5 consecutive quarters of organic top line growth.

Now overall, in H1, we recorded plus 2.7% organic top line growth with Q2 at plus 2.5% despite a more difficult comparison base. At the same time, we continue to outperform and gain share across all of our key markets in sell-out, especially on our priority brands. In fact, we are gaining share in 95% of our markets.

Now I know you've all heard this a few times, but I think it's worth to reiterate our strategy that we shared at our CMD back in November because that is exactly what we are doing. So first, we talked about sharper portfolio choices with fewer bigger bets. We're doubling down on the key priority brands and the results on the sell-out are clear with solid share gains across regions and especially in the strategic on-premise.

Second, winning the first shared drink every day everywhere with new formats for new occasions. Following our recent new format launches on our aperitifs, we are seeing very strong initial results with positive feedback from consumers and trade and encouraging velocity and distribution gains.

Third, accelerating our geographic expansion. In the first half, we recorded broad-based growth with expansion into smaller seeding markets by increasing our exposure to these high-growth markets where we under-index and also with the rollout of priority brands into new markets, like Sarti Rosa in the U.S. right in time for the summer season.

And the final 2, leveraging our investments to work harder and driving efficiency across each line of the P&L, allowing us to invest more behind our brands.

Now as you can see on the page, we strengthened our gross margin profile by 130 bps accretion, mainly driven by positive mix due to the performance of aperitifs, as well as input cost benefit and lower tariff impact. And Francesco is going to go into that in a lot more detail later on.

Our brand-building investments continued at pace into the peak season and front-loaded in the first half in absolute terms as we guided. In fact, we are deploying one of the most comprehensive coverages across music festivals and other events, both with our existing products as well as our new innovations this year.

Our cost containment program continues to deliver, and we are on track to achieve 70 bps organic SG&A benefit on top line as guided with an H1 delivery of 60 bps. As a result, we achieved 130 bps EBIT adjusted margin accretion. Although the underlying trends on the main contributors to EBIT have not changed, we are raising our margin expectation for the full year due to a more favorable-than-expected tariff impact. Again, more details on this later in the presentation.

On the balance sheet side, we remain comfortable and at sustainable levels. We recorded 64% recurring free cash flow conversion before operating working capital changes and total recurring conversion was impacted by seasonality.

Our distillery expansion in Kentucky is progressing as planned and on track to be finalized by the end of the year. Our leverage is comfortable at 2.6x, supported by business momentum with some impact of seasonality in operating working capital. At the same time, we are continuing to streamline our portfolio with new disposals of the rhum Agricole business, including Trois Rivieres, Maison La Mauny, as well as Bisquit & Dubouche and Cabo Wabo.

As I'm sure you will have seen, we also recently successfully closed a new Eurobond issuance of EUR 600 million and a liability management transaction, which allow us to feel comfortable regarding the maturity profile of our funding base.

So now let's delve into some of the details, starting with the top line. As you can see, the first half organic top line growth of plus 2.7% was broad-based across all regions and most houses again.

In terms of FX, the main impact is coming from the U.S. dollar, while the perimeter impact is in line with what we previously told you and mainly driven by the disposal of Cinzano and 1 month impact of Averna.

We'll go one by one, but first, let's look at sell-out, which, as you know, is the critical indicator. So far in '26, year-to-date, we have recorded outperformance and share gains across all of our key markets. With aperitifs brands, we are growing everywhere, in most cases with mid-single to low double-digit growth. In the U.S., we are outperforming in all channels, especially in NABCA and the strategic on-premise, where the share gains are even more evident.

In Europe, again, we have an outperformance across the board. Total Europe sell-out data includes 12 countries. And you can see we are growing plus 2% compared to the sector decline of negative 1%. And in the on-premise, which you don't see on the page, the outperformance is even more pronounced.

Now as I said upfront, we are gaining share in every one of our markets. And I think with all the noise in the category, CEO changes and significant restructures, merger speculation and consumer pressure, we at Campari are growing. And we are growing share because we have a clear differentiated strategy, and we are executing it without distractions.

So now let's move on to Europe top line. Europe delivered plus 1.9% organic growth in the first half with growth across all markets, except Germany. In fact, Europe growth is plus 2.9%, excluding Germany, where the consumer pressure is most evident. This growth was driven by Aperitif portfolio strategy with contribution from all of our key brands. Innovations also started playing a more meaningful role as part of our convenience strategy. And altogether, we are implementing the biggest ever activation plan in Europe in terms of days of activation, menu placements and festivals.

In Italy, we saw continued growth for our Aperitif portfolio led by strong execution on innovations, notably Aperol on Tap and Campari Spritz ready-to-serve, which hit shelves at the beginning of Q2. In addition, we are executing 4,700 activations during the peak season, especially into Q3, and we already have Aperol on Tap in more than 1,000 outlets, including festivals, events but also new outlets like pizza restaurants.

Aperol's performance is further supported by the rollout of our [indiscernible] campaign, which is reinforcing our leadership in the on-trade with almost 500 outlets already proudly displaying the certification bags that they proudly serve Aperol.

As I mentioned, Germany continues to see a challenging backdrop with subdued consumer confidence and wallet pressure impacting numerous consumer sectors. Now despite this backdrop, Sarti Rosa's performance remains strong, and we've seen strong execution behind Crodino and the early success of our innovation rollout, including Campari Spritz ready to serve and Aperol on Tap.

The environment going forward is expected to continue to be challenging, but we will continue to expand our presence and activate behind our key brands in preparation of the market recovery.

In France, the Aperitif portfolio is performing strongly with high single-digit growth, partially offset by the local portfolio. Aperol continues to lead that performance and Sarti Rosa has also started to gain traction following its launch last year.

The U.K. had a strong first half with plus 4.3% growth, once again led by double-digit growth in our Aperitif portfolio with contribution from Aperol, Campari, Sarti Rosa and Crodino. There's also strong early traction for the Aperol to Go can with ongoing distribution gains and velocity at 3x our original targets.

At the BST Festival in Hyde Park over a 2-week period, we sold 65,000 cans of Aperol Spritz in a format that we wouldn't be able to do previously. And Aperol on Tap will also progressively be rolled out over the summer.

And other European markets, representing about 12% of overall sales, we saw broad-based growth of plus 5.5% across most countries, especially in Spain, Austria, Greece and Benelux. Having just been to both Spain and Greece, I can tell you the potential for our portfolio there is really exciting. And the bulk of the growth is coming from Aperol, Sarti Rosa, Crodino and sparkling wine to support the aperitif trend as well as solid performance on Courvoisier.

Now moving to North America, we recorded a plus 2.6% organic growth with all markets growing. The U.S. recorded a plus 1.5% organic growth, driven by our priority brands, Aperol and Espolon, especially with strong on-trade performances. Aperol saw solid growth, showing the early benefits of increased investments behind the brand, including an amplified presence at Coachella and the 21 new brand activators in the on-premise across the 4 states are really driving the business. In fact, the accounts that they are covering, we are seeing 4x the velocity of the accounts that they are not covering.

In July, we started a campaign with Hillary Duff to sponsor her concert tour, which is further amplifying visibility into the third quarter. Another important development in the U.S. is the June launch of Sarti Rosa. Although it's very early days, we are seeing strong pickup with most locations limiting consumers to a maximum of a 1 or 2 bottle purchase, and we're already seeing people come back for reorders.

TikTok is leading the social media buzz on this brand, accounting for 41% of the coverage, which is an encouraging signal that the brand is resonating with legal purchase age trend-driven consumers.

Espolon also continues to perform well with high single-digit growth, both in Blanco and Repo. Also here, we continue to activate behind the brand with the short King Week campaign featuring Ken Jeong and activations during the World Cup with a series of watching block parties. Commercially, we placed Espolon in over 7,000 menus, double our original target with similar success also in off-premise displays. And we'll talk more about the performance later in the day.

Moving to Jamaica, we recorded plus 8.8% growth with benefit from the faster hurricane recovery as well as pricing coming through in the market. For the rest of the region, all countries registered solid growth, including Mexico, which recovered the quarter 1 phasing impact that we mentioned previously.

So now let's have a look at the developing markets. As a reminder, we formed this region at the beginning of the year in order to become more agile and benefit from a repeatable playbook across some of our seeding markets.

In the first half, we started to see some of the benefits of this increased focus with widespread organic growth of plus 9.1%. Brazil saw continued momentum of Aperol and local brands, partially offset Campari phasing into the next quarter. Argentina benefited from the ongoing strength of SKYY Cosmic. And since the launch of SKYY Cosmic was in June last year, we do expect the growth rate to normalize in the second half.

In the other countries, one of the key drivers of growth was Courvoisier, led by Eastern Europe and South Africa. The new region has completed its strategy work and is now working on capital allocation in line with the group-wide strategy in a disciplined way to target the multiple opportunities we have in these markets.

For APAC and GTR, we registered a flat trend in the first half. The biggest market, Australia grew plus 2.6% with double-digit growth in both Aperol and Espolon, which is now contributing about 1/3 of the total top line in Australia. And this was partially offset with the flattish trend on Wild Turkey, which still contributes more than 50% of Australia's top line. Here, we're continuing our focus in the on-premise and activating strongly.

In GTR, we recorded a plus 6% growth. As you might remember, in Q1, it was negative 13.5%. It was off a high base admittedly, but it was also impacted by geopolitical events in certain geographies. In Q2, while an easier comparison base helped, we also focused strongly on the Aperitifs in Europe. And below, you can see our launch in easyJet and British Airways of the Aperol to Go Can, for example, while also activating across numerous airports.

In the rest of the region, we recorded solid growth in China, India and other partnership markets, but this was more than offset by South Korea, where the completion of our distribution company integration has led to a negative impact this year.

Right. Now let's change the optics from regions to houses, starting with Aperitifs. Overall top line growth was an encouraging plus 4% in the first half. Aperol delivered a solid performance of plus 3.3%, benefiting from the positive trend in the bottle, which was amplified by launch of innovations such as Aperol on Tap. All regions contributed to the positive trend, and we'll talk more about the Aperol innovations on the next slide.

Italy saw a resilient performance, while in Germany, the brand was held back by the challenging consumer environment. Elsewhere, we saw a good contribution from the U.S., U.K., France, Brazil and Australia.

For Campari, we reported plus 2.3% growth with solid performance in Europe and North America. And Campari also benefited from the launch of the Campari Spritz ready-to-serve in Q2 in some European markets. It's early days, but so far, the response from the trade and consumers has been very positive, particularly in Italy and Germany.

The remainder of our Aperitifs portfolio grew 8.8%, primarily driven by Sarti Rosa, which continues its solid growth in its core German market and is also progressively benefiting from the rollout into other high-potential countries. It's important to note that only a few years ago in 2023, only 4% of Sarti Rosa top line was outside of Germany. This has now reached 48%, showing the solid reception that it's having in new markets. As I mentioned before, the U.S. launch is now underway and the initial trends are very positive.

In the U.K., it has already become the #1 innovation launch in spirits in Sainsbury's in just a short few months.

Now one of the key pillars on our CMD was winning the first shared drink with new formats for new occasions and providing convenient options for our consumers. And here, I want to walk you through what we've launched so far for Aperol. Of course, the bottle and the perfect serve remain a critical piece of our strategy, and the on-premise focus remains fundamental in order to reach new occasions and achieve incremental growth.

We've accelerated the expansion of the ready-to-serve into new markets. Now we have 15 seeding markets, and the trends are all positive. And this allows consumers to achieve that perfect serve at home in a glass over ice.

As you all know, we piloted Aperol on Tap last year over the summer in select locations. This year, we are rolling it out across the peak season in more and more high-velocity venues and events in select markets. The Tap program allows us to use events not solely for visibility, but also for sales. In just 3 months, the Tap volume in Italy has reached roughly 1.5% market share of premium beer. This is exactly the profit pool we want to penetrate further.

Lastly, we also launched the long-awaited Aperol to Go Can in the U.K., Belgium, Austria and GTR. The idea is simple, making Aperol accessible in occasions, where we're not able to play in the past. Towards the end of the year, we're also planning to launch a glass to-go alternative for some select markets like Brazil, which similarly to Tap can be an on-premise alternative to offset local constraints like the lack of [indiscernible] in Brazil. Now all these innovations give us incremental top line and higher or on par gross profit per serve versus the 321. .

Now moving on to the House of Whiskey and Rum, we recorded a decline of 6%, mainly due to the impact of the whiskey category challenges in the U.S. South Korean impact that I already mentioned and a temporary demand-led supply constraint on Russell's Reserve, as I've told you before. And going forward, supply will be strategically managed in the upcoming years to ensure that we have a more consistent aging liquid supply.

Jamaican rums were resilient with flattish top line, including solid underlying trends in Jamaica, offset by a high comparison base in the U.S.

In the House of agave, Espolon grew 8.2% in the first half with balanced growth in both Blanco and Repo, supported by the launch of Extra Anejo. Here, while we see the ongoing benefit from geographic expansion, the majority of the growth is being driven by the core U.S., where the brand continues to gain share.

On the next page, you're going to see some additional details on Espolon. First, looking back at the performance of Espolon in the U.S. over the last 10 years on the top left chart, you can see what the trajectory it's had. There's been a lot of growth in tequila overall, but both in the initial period of growth between 2015 and 2022 as well as the most recent period, Espolon has outperformed strongly.

The premium segment is currently the fastest-growing part of the category as many consumers trade down from the larger super premium segment. And Espolon's quality-led premium positioning benefits from both trading up and trading down. Espolon in 2015 was the fourth largest premium brand in the U.S. And now as of 2025, it is the #2 with a CAGR growth of plus 19% between 2022 and 2025.

Now looking instead to the year-to-date sell-out data in '26 in the bottom left, we see this trend continuing. In the Nielsen off-prem, Espolon is 1 of only 4 growing top 10 brands. In fact, across the 4 largest tequila states, Espolon is outperforming by 9 points on average, including in key battlegrounds of California, Texas, Florida and New York.

In NABCA, we have gained plus 70 bps market share and are the only top 10 growing brand with a plus 12% growth. Similarly in the on-premise, we are again the only double-digit scale brand in the category, and we plan to continue this trend with investments behind the brand, selective promotions, but keeping our pricing strategy, which we believe the great liquid supports the strong value equation for the consumer.

And lastly, looking at the right part of the page, you can see we also have ample incremental room for growth. Smaller pack formats are the main growing part of the tequila category today in the U.S. with plus 3% growth in smaller than 375 mil versus negative 4% for the overall category year-to-date.

We launched our smallest format to date, which is a 200 ml bottle only in June this year. It's already seen a strong pickup, and we expect more contribution going forward with potential additional innovations to come in this segment of the market.

The variant innovation will also drive additional growth. The Extra Anejo launch in June at $70 per bottle, for example, cement the brand's accessible premium space with one of the most affordable and frankly, delicious Extra Anejo offerings on the market.

Finally, we're going to have a look at our House of Cognac & Champagne and then the local brands. The House of Cognac & Champagne recorded a plus 4.6% top line growth with solid performance in Courvoisier driven by developing markets and APAC. In the U.S., we held a stable trend despite the ongoing category pressure. The growth in Grand Marnier, on the other hand, is mainly due to an easy comp base with normalization expected in the balance of the year.

Within our local brands, SKYY remains an important part of our portfolio, and we're pleased to see the growth of plus 5.7% in the first half, primarily driven by Argentina due to the popularity of SKYY Cosmic, and that was more than offsetting the ongoing softness in the U.S., in line with other major players in the U.S. vodka category.

I'll now hand the floor over to Francesco, who will walk you through the first half financials in more detail. Francesco?

Thank you, Simon, and good afternoon to you all. Let's start by looking at the EBIT margin trends. Overall in H1, we recorded 130 bps organic EBIT adjusted margin expansion, supported by the pull forward of gross margin benefit, while A&P and SG&A are progressing as planned.

In gross margin, we recorded a solid organic accretion of 130 bps, supported by a combination of stronger mix effect due to the solid performance of aperitifs in early peak season, the phasing of our COGS productivity gains, which we were able to realize faster than originally expected and now in the base, the tail end of agave benefit that we have flagged previously and lastly, limited tariff impact of EUR 7 million. Here, the impact was lower than we originally expected for H1. Due to the fact that between February 20 until the end of the quarter, we paid only 10% tariff in the U.S. instead of the originally expected [ 15% ]. As a result, we have updated our full year guidance accordingly.

Based on the U.S. administration most recent decision of just a few days ago, the 10% tariff was for the time being reconfirmed. We will obviously keep monitoring the development around tariffs.

Our A&P to sales reached 17.4% in H1, leading to a dilutive impact of 50 bps organic, driven by brand-building investments for peak season and to support our innovation pipeline as planned.

On SG&A, our containment efforts are continuing in line with our expectation, and we benefited from an accretive impact of 60 bps organic in H1. This means that we are on track to reach by the end of 2026, the 70 bps guidance that we have provided. Some of you might have seen that Elena Anfosso has recently joined us as CHRO and brings with her significant large-scale transformation and automation capabilities.

To close, EBIT adjust was arrived at EUR 358 million, reflecting a margin of 23.7% with plus 8.5% organic growth, excluding the net negative impact of EUR 23 million from perimeter and FX.

In terms of P&L, we recorded a positive evolution supported by business momentum. Group net profit adjusted grew at 4.7%, mainly driven by the positive evolution of EBIT adjust as well as favorable impact of financial expenses.

EBIT operating adjustments were negative at EUR 109 million, mainly driven by the write-down of assets marked for disposal of EUR 82 million as we recognize the diminished strategic value for the route to market announcing past acquisition, and we had to adjust their asset value as we dispose of them. Simon will comment more on this new disposal later in the presentation.

Negative EUR 17 million related to other fixed assets, negative EUR 10 million related to bad impairments and finally, positive EUR 19 million coming from the Averna and Zedda Piras disposal capital gain.

Adjusted financial expenses were EUR 44 million, with decrease driven by lower average net debt at EUR 2 billion versus EUR 2.3 billion last year, with average cost of net debt stable at 4.3%. The positive EUR 5 million adjustment you see in the table is related to the gain we booked due to the bond liability management executed in the context of the EUR 600 million bond issuance.

For the full year, we are maintaining our guidance of around EUR 100 million financial expenses, also due to the impact of the new bond issuance, which has further improving our maturity profile.

The recurring tax rate was at 27.9%, minus 130 bps versus H1 2025 due to favorable country mix. Recurring cash tax rate is at 25.8%.

Lastly, I will cover the key balance sheet indicators on the next page. Operating working capital as a percentage of sales is at 52%, similar to the same period of last year and seasonally higher mainly due to some buildup of finished goods inventory for peak season and select increase in maturing liquids.

Compared to the end of the year, the increase in operating working capital is also due to the normalization in the net trade position, driven by concentration of CapEx and related accumulated payable at the end of last year.

On CapEx, the maintenance CapEx remained temporarily contained at 3% of sales, slightly below the run rate of around 4%. Extraordinary CapEx on the other hand is at 2% of sales, including the tail of the production capacity enhancement program, especially in Kentucky, with finalization expected in 2026 for a total offer of EUR 100 million.

On cash flow, the recurring free cash flow before operating working capital change conversion is at 64%, in line with our historical 5-year average of 68%. The overall recurring free cash flow on the other hand, remained more limited at 4% conversion or EUR 19 million due to the impact of the operating working capital seasonality. This is expected to normalize into the second half of the year.

On leverage, we remain comfortable at 2.6x, marginally higher than year-end leverage ratio due to some impact of the seasonality that I mentioned before. In fact, the increase of EUR 110 million in net debt is primarily linked to this operating working capital increase as well as some impact from the dividend payments, mitigated by the proceeds of the Averna disposal.

And with that, I will hand back to Simon to talk about certain activity in 2026 and our outlook. Thank you.

Great. Thanks, Francesco. Look, you've all seen this page before, which is a summary of what we plan for 2026. And the reason we put it up, it's exactly what we are doing. And I won't go one by one as we've already covered the majority of these points, but it's important to note that all of these points are on track and will remain so for the balance of the year.

So now just coming back to our portfolio streamlining, we want to give you an update on what's been keeping Fabio Di Fede so busy over the last 12 months. And with this release, we are happy to announce that we have closed another 2 disposals that you see on this page, which might be limited in terms of size, but have a clear and solid rationale. The first is Rhum Agricole business, including Trois Rivieres, Maison La Mauny and the second is the disposal of Cabo Wabo Tequila and Bisquit & Dubouche cognac business.

Now in the past, we needed these brands to open up new markets, but this is no longer the case. For example, the Rhum Agricole portfolio was acquired to support the route to market in France. At the same time, they're margin dilutive, cash intensive and with very limited upside to growth within our portfolio.

So together with the previously announced deals you can see on this page, we have already made significant headway over the last 18 months in this regard with the disposal of more than 10 brands or businesses.

By the end of 2026, we are planning on coming to the end of our portfolio streamlining, which significantly reduces the complexity in the business. It allows us to concentrate resources, investment and management focus behind our fewer, bigger bets, and this is absolutely consistent with our capital allocation discipline.

Now moving on to our outlook for the rest of the year. As you can see, we have an update on our guidance. Starting with the top line, we are confirming the full year guidance of circa 3% organic growth. On the EBIT adjusted margin, we now foresee an incremental uplift. And this is due to the more favorable tariff environment, which means we can expect a EUR 10 million benefit flowing through to the bottom line compared to our previous guidance. Accordingly, the full year negative tariff impact we now expect is around EUR 20 million instead of EUR 30 million.

Considering the positive phasing into the first half, second half EBIT adjusted margin, therefore, will be relatively flattish versus the same period of the previous year in organic terms.

All other contributors to the margin remain unchanged. This means that the underlying gross margin trend where we recorded phasing in the first half is not altered in our full year expectation.

Now as I'm sure you've heard from many companies, the claims on the potential 2025 tariff refund have started. And we've also made a claim and recorded a EUR 15 million as a contingent asset. However, given that the timing and extent of the refund remains uncertain at this stage, and we see additional potential geopolitical volatility impacting COGS in the second half, primarily from things like logistics, we believe that these 2 effects might reasonably offset each other with no incremental benefit for the full year.

Now to be clear, if we do see a benefit of that, we will update the guidance when we give you an update on Q3. But at this stage, we don't want to count on anything given the volatility around tariffs, payments and the geopolitical environment we're operating in.

On A&P and SG&A, we confirm our previous guidance as we invest confidently behind the long-term development of the business.

So overall, we're encouraged by the progress we made in the first half, and we continue to remain fully focused on executing the strategy we presented at our Capital Markets Day with positive traction across our priority brands and geographies for 5 quarters now. For us, the key word going forward is execute, execute, execute.

And we're now happy to open up the floor for any questions you have. Thank you.

[Operator Instructions] The first question is from Sanjeet Aujla, UBS.

Hey, Simon, Francesco. A couple of questions from me, please. Firstly, on the U.S. Simon, can you just clarify if there were any further inventory adjustments into Q2? And how are you seeing the pricing environment evolve across your categories in recent months?

And then just double-clicking on that, I fully appreciate the positives in the portfolio, but there are a couple of drags in particular Grand Marnier and Wild Turkey. What are you doing to try and stabilize those brands in the portfolio, please? I've got a second question after that, but maybe we can kick off with the U.S.

Sanjeet, I've got 3 questions on that first one. So let me see how we go with those. So look, I think in terms of the inventory adjustment in Q2, business as usual, no extraordinary movements on inventory, full stop.

The second one was on pricing in terms of -- some was reading the question. categories in recent months. Yes. Look, I think we continue to see people getting a bit more aggressive as the trends remain challenged. I think in certain categories we're seeing it more than others. I know there's a huge degree of speculation about what's happening in tequila. At this stage, we're not seeing the read across in terms of really impacting our performance on Espolon.

As I've said to you before, we believe we've got the right price strategy with Espolon. We're well positioned in the consumers' eyes and the trade's eyes as a good quality tequila with a good value proposition. And so I think, look, we're going to have to wait and see. There's a lot of speculation as to what may happen in the next couple of weeks in terms of new strategies.

We're confident in what we're doing. We're price promoting in the way that we would normally do it around the key seasons. But let's wait and see. As we've said before, pricing is always relative, but we don't see a big read across between potential movements of brands above us impacting the business.

Last one, I think was Grand Marnier and Wild Turkey. I think [indiscernible] Grand Marnier is -- and you -- I'm sure you see this in some of the data and heard from other people, we're seeing the traffic numbers in the U.S. starting to come back. But what we're seeing is the tickets aren't following at quite the same velocity yet.

So I think where we see the opportunities with things like the Grand Margarita as people are going out again. If they are going out, they want to trade up. I think we can continue to leverage that trend on Grand Marnier and take advantage of people getting back into the on-trade.

I think on Wild Turkey, look, it's a tough category. You've seen it in a number of the reports from other companies. I think we've been rebasing our strategy. We've been looking at what other opportunities we have to work with it. We've got new innovations that we're looking at in ready-to-drink in Australia to keep things moving forward. But look, it's a tough category at the moment, and we've got to carve out our rightful share of it.

That's really helpful color. My second one was really on Germany and just understanding the weakness there. To what extent is that a continuation of the retailer headwinds you had in Q1? Or is it just a weak category and you expect those trends to persist into H2?

Yes. Look, great question. Look, it's -- I think it is just a weak category. We've got no issue with the German retailers. We've managed to continue to work with the retailers across Europe. I think we're pleased with where everyone ended up this year.

But I think, look, if you look at the consumer data, you look at what's happening in terms of other consumer goods outside of our sector, the German consumer remains under significant pressure. And you see that very selective purchase power. And as a result, look, we've got to position ourselves the right way for when they do come back, and I think we're doing exactly that.

The next question is from Andrea Pistacchi, Bank of America.

Two questions, please, on 2 aspects of your guidance. So starting with the top line, just on the 3% in H1. So your guidance for the year, which is to confirm about 3% implies, I'd say, something similar or a fraction more in H2. Now bearing in mind the more difficult comparison base in H2, where do you see the incremental positives that will take you to close to 3%? And are you able to share any color maybe on how Q3 may have started?

And for Francesco on margins, up 130 basis points in H1. I think, Simon, there are a lot of moving parts in the margin, but I think you said flattish for H2. That's the way to think about it. Now the tariff benefit should be a positive in H1 and in H2. Positive mix, I assume, should continue as you outperform with aperitifs. So where is the main offset that will hold back margins in H2 versus H1? Is it -- I mean, it's probably a bit less [indiscernible] benefit, but maybe you can talk about the COGS pressures, the input cost situation along with this.

Andrea -- okay. I mean, I think in terms of the top line question first, we're guiding on the full year at 3%. As you can see, we're pretty close to that for Q1, pretty close to Q2. We've got a bit of work to do. But I think what we've got is we've got some good momentum coming through in terms of the brands.

We're seeing very strong execution, particularly from Q2 and to answer your question and into Q3. I'm pleased with what I'm seeing in terms of the activations we've got across not only North America, but also across Europe, which is giving us, I think, some strong momentum coming into Q3.

So I think from that point of view, that's really where we're seeing the difference between where we've got the first half and then landing the full year. But look, it's a competitive market. We've got some work to do, but that's what we -- that's our target, and that's what we're going for.

So Francesco, you want to take the --

Absolutely. In terms of margin, I mean, we pointed out the key driver of the margin trend during the second part of the year. We still expect a positive COGS evolution, but to a lesser extent compared to H1.

And to be fair, we actually feel that for the entire part of the period, the weight of the tariff on the other side. So we expect some accretion on the COGS side, but limited. And clearly, the rest remains the same. We expect some pressure on price, offset by mix. Mix remained positive, as we see in H1.

And Andrea, I might just add one thing to that comment as well. As I said in my closing comments, I think the key thing here is around the tariffs, we've seen -- I think it's fair to say, a fairly massive degree of volatility on how that has played out. And as a result, any updates we have on that on refunds or anything else we can pick up in Q3. But at this stage, we don't have that level of confidence yet. And I think we can continue to see what that looks like and update you accordingly.

Maybe something I can add in terms of input costs, we're actually still maintaining a good position on general input cost with the exception of logistics. Logistics clearly have increased already in the first half and keep increasing in Q3, and we expect the same to continue in Q4.

The next question is from Celine Pannuti, JPMorgan.

My first question is on Italy. You mentioned that -- can you talk a bit about the market? I understand from your chart on Slide 4, I think market was up 1% on sell-out. It seems to have decelerated in Q2. But what -- if you can talk about like those new tab, you said is 1.5% of the beer market. What is it in terms of total Aperol? And if you can talk about price point in that market and how you think there is further upside to grow in Italy?

And then my second question is in the U.S. Can you talk about the market environment? It seems on-premise has slowed. Are you seeing any change throughout the quarter in terms of maybe an improvement at the end of the quarter or early July, if there's anything you can do? And overall, what is your assumption on the U.S. as you look at your guidance for the second half?

Sure. I think in terms of Italy, the important thing is when you look in comparison between the quarters is you got to remember, the first quarter in Italy is significantly smaller than the second quarter. So there may be some movement there, which is driving your read of 1 point down.

I think the key thing on this is if I reflect on the same conversation we had last year, where the market was very negative and the fact that we're now delivering as a group plus 5% and with a focus brand plus 4%, I think it really reflects the momentum that we've got.

I think it's coming from a number of things, as I said, first one is, I think we're seeing extremely strong execution this year with over 4,700 activations across Italy. I mean that's a massive amount and a real step forward for the brand. We increased the investment.

And we've also -- as I said, we've increased the formats. So something we're starting to broaden what is already a very established ritual in Italy into new occasions we couldn't get in before. I just use an example of one of the festivals we went to, which was the Bad Bunny concert at San Siro recently. Previously, we would have sold 0 Aperol Spritz. By having it on tap, we sold 22,000 Aperol Spritz in one night to a very dynamic legal purchase age crowd.

So I think what we're seeing there is a broadening of the occasionality through the formats. And I think just momentum in terms of getting the brand back on track in its own market. Celine for that first point, maybe that answers that.

I think the second one is, do you see -- any changes seen in kind of quarter-to-date [indiscernible] guidance for the second half?

Yes. I think, look, as we said in our overall guidance, look, it still remains quite a tricky market and you look at all the same data we do. I think the key thing where we have points of difference is on the brands we're focusing on and where we're building them, both in NABCA and also in the on-premise, we are significantly outperforming the market.

And so I think it's a balance between a very positive story on those priority brands, balanced also with the broader portfolio that don't have the same level of focus behind them. And as a result, that's why on the full year guidance, I think we're being quite sensible in terms of balancing those 2 sides of the portfolio out.

Can I just have a follow-up on the previous question and your gross margin saying that the beat in H1 doesn't change the outcome for the year. So if I understand correctly, it's a question of the phasing of the productivity savings and maybe as well a phasing of the cost benefit and maybe again, cost impact in the second half. I just want to understand on the mix because you mentioned that as a positive impact and the fact that you mentioned a good start to the year, is potentially a good summer incremental to your flat margin or, let's say, gross margin guidance for the year?

Yes. Celine, for sure, it's a phasing on the cost side. So we can confirm that. In terms of mix, clearly, mix is still positive also in the second part of the year is driven by the aperitif growing faster. But then the rest is clearly offsetting more when it comes to price, we feel more pressure in terms of price. So the net-net, the impact in terms of margin is lower compared to H1.

The next question is from Simon Hales, Citi.

So 2 for me as well. I wonder Simon, if you could just come back to your comments around how Q3 has started. I hate where you asked about the weather and maybe building on Celine's sort of comments there. Clearly, we've had good weather in Europe through the back end of June and into July. Is that supportive to your business in all of your markets? Or has it been problematic in some regions? I think it's been too hot for people to go out of those is my underlying question because I think there was some fear that what we might see on the tariffs in Italy. Is that something that you've seen?

And then secondly, with regards to the recently announced brand disposals, are you able to help us in terms of how we should think about the impact of those disposals on earnings in 2027? You've given us the rough proceeds number of around EUR 30 million. How do we think about what the contribution of those brands from a sales and EBIT standpoint is at the moment?

Simon, look, I think in terms of Q3, I mean, the way we run the business is, look, we hope for good weather, but we don't count on it is the way we look at it. And that's why we've increased the number of activations and putting out. So I think actually, I haven't got the days in front of me, but from memory, I think actually the number of sunny days across European capital has been reasonably similar year-on-year. So I don't think it's been a big driver of it.

I think what's been a more positive driver was our execution and what we're doing in terms of getting out to the trade and getting into new occasions. So I think from that point of view, I think, look, it's better if the sun is shining, of course, but we're not relying on it.

I think on the second part, on the disposals, the overall impact we talked about coming through. I don't know, Francesco, do you want to take this one or do you want me to?

Yes. No, no. Let me take it. If you look at 2026, we have indicated a perimeter impact of EUR 70 million in sales and EUR 30 million in terms of EBIT. You need to consider that Cinzano is impacting for 11 months and Averna is impacting for 7 months.

So all in all, when you look at the entire asset that we disposed, the, let's say, pro forma revenue were about EUR 130 million, including Cinzano, Averna, all the rest. I mean the last bit, the last transaction are for about EUR 40 million in total. So the other were EUR 90 million and so the additional is coming for a much, much smaller number.

When it comes to Cinzano, Averna, they had a positive EBIT contribution. But when it comes to the last disposal, they had a very, very negligible contribution in terms of EBIT. So they are EBIT accretive in terms of -- and I would say they are also gross margin accretive and EBIT accretive. So you need to look at this disposal in a very different way. These are assets that were more difficult were not generating growth and they were not generating gross margin.

The next question is from Trevor Stirling, Bernstein.

Two questions from my side. Simon, concerning A&P, A&P clearly up in the first half. I think from memory, you said that, that increase in A&P would probably be first half weighted behind the activation. So given the momentum in the business, I wouldn't be surprised if you're going to throw a bit more A&P into the second half as well. But any more -- any guidance on that would be welcome.

And the second thing -- question for Francesco around the extraordinary CapEx. I think, buried in the back of the presentation, there's a chart that says that was EUR 34 million in the first half, so implicitly stepping up to EUR 66 million in the second half. And I wonder if you could just explain why the CapEx is second half weighted on the extraordinary CapEx.

Trevor, yes, look, on the A&P, as we guided, look, we always have a bit of a weighting into the second quarter as we get ready for the peak season. But of course, there's a balance between that as we go. Look, we don't just have one peak season. It runs Q2, Q3. So actually, there's a balance between first half and second half.

Clearly, if we see the opportunity to invest more behind the brands, as I said before in the CMD, I really think now is the time you invest. When everyone is pulling back and kind of making short-term decisions, we're investing for the long term. So if the top line is there, we'll be reinvesting behind that.

And one of the good examples of that would probably be Sarti, where we see some outperformance, and we are maintaining a healthy reinvestment rate to build a brand for the long term.

So Francesco, do you want to take the second one? Yes.

Yes. You actually pointed out, we actually confirm around 8% of CapEx over net sales for the entire year. There are a number of items that have been moved to the second part. There is, for sure, the headquarter where we are progressing, but the vast majority of the work are taking place now because the first part was more foundation, and we are completing the Kentucky. That is the part that is attracting most of the CapEx in the second part. All in all, we are going to have, let's say, maintenance CapEx, let's say, of around 4%, a bit more and extraordinary CapEx a bit less than 4%. All in all, slightly below 8%, and we can confirm that.

And Trevor, as you know, just practically on this, you don't normally pay up all of it until you know it's working. So we're heading out to Kentucky in about 4 weeks' time to make sure it's there.

The next question is from Laurence Whyatt, Barclays.

A couple from me. Firstly, on your -- you've now got your 21 brand activators been in the U.S. market for about 6 months. You sort of mentioned that they were performing particularly well. But I was wondering if there's anything that's appeared from sort of last 6 months that perhaps was unexpected or any other way that you think they've done better than you thought or any issues in them being in the market you didn't expect? And perhaps I assume the majority of the impact has been in the on-trade, but wondering if they had any further impact on any off-trade sales as well.

And then secondly, I was just wondering on Espolon, just wondering if there was anything inherent to the brand that's driving the better performance than other tequilas in the market. You sort of talked about the execution that you're doing. But I'm wondering if there was anything unique to the brand that is helping it, particularly whether the additive-free status was -- do you think was really driving any of those sales?

Okay. Hi, Laurence. Look, I think in terms of the 21 brand activators, as I said, to give you an idea, they look after between 75 to 100 accounts depending on which state they're in and the geographies they're in.

I think in answer to your question, not really unexpected. I mean that's the reason we put them in is we were anticipating that there would be a positive impact on velocity, which is exactly what we're seeing in the on-premise.

But I think there are 2 parts to that, that are not really unexpected, but I think beneficial that it's difficult to quantify from a model point of view. One is, at the moment, a lot of companies are pulling back on their on-trade support, and we're not. And I think the trade is recognizing that and very much welcoming it given the fact they're under quite a lot of pressure as well. That's the first part.

The second part is Campari has always had a very strong on-trade relationship with bartenders through the Campari Academy, through the activations and things like that. So I think from that point of view, I think that definitely helps in terms of reinforcing what makes us a bit different with the trade and with customers.

There is a knock-on effect. We think by investing in the on-trade, we think we do see some uplift in terms of off-trade that is nearby. And that's a model that we've seen work several times, but there's less direct calling into the off-trade of that group. They're predominantly an on-premise focused team.

I think in terms of Espolon, a few things going on there. There's been a lot of speculation for the last 6 months that suddenly it's going to be this massive price war and various other things going on in the category. The key thing that we've been doing is really just focusing on what we do well. And we've been building the distribution. We've been getting the menu placements. As I said, we ended up targeting twice as many menus as we had originally set out.

We got significantly more displays heading through [ Cynar and Mondoro ]. We've got good trade support behind the brand. Bartenders love serving Espolon. We know that. There's a real momentum there. And that's not stuff that you can build in a couple of weeks. That's stuff that's been built over the last 10, 15 years. So I think that's really where we're seeing the benefit.

I think the other part is just practically on the liquid, it's really good tequila and at a fair price. And I think both the trade and the consumers see that. There's nothing on additive-free status. It's nothing that we focus on that. We focus on just really good tequila, fair price, well represented by bartenders because they like working with us and they love the irreverence side of the brand.

As we talked about before, things like the cocktail fights is something that no one else does with them. It's fun. It's engaging. And it kind of puts a bit of fun at how serious the rest of the world is on this. It's a fun brand, and I think people feel that.

The next question is from Olivier Nicolai, Goldman Sachs.

I've got 2 questions. First on RTDs. You had good feedback in the European markets, where you've launched RTD. It doesn't look like there's much cannibalization. Could you give us perhaps a bit of an update on your potential plan to expand in the U.S. and if you will prefer to use a local partner or do it in-house?

And then secondly, going back to Sarti, if I may, on Slide 9. Could you give us an idea of the additional CapEx requirements that you would need if the brand is really being scaled up across Europe? And in terms of marketing difference with Aperol Spritz, is it the same price point? Or is it even more -- and is it even more tilted towards the female consumer?

Okay. I think some good questions there. Just first one is in terms of local production. Yes, on ready-to-drink generally as a principle, I would much rather be in local production as close to the consumer and the customers as we can, particularly given logistics. And I think that's a model that we can look to other industries that you want to -- particularly in higher volume products, you want to be as close as we can.

It's not saying we're going to be building maybe further down the line if this is even more successful than we think it's going to be. But at the moment, I'd rather use someone else's CapEx. There's more than enough capacity in America to be able to go after that. So I think we'll continue to see how that develops.

I think easy one on Sarti, we have no additional CapEx requirements on Sarti. We've already invested in our major plant in Novi Ligure. That's some of the extraordinary CapEx we put in. We're in good shape on that. I don't see any problems on capacity of that taking off. We have enough capacity for both Aperol, for Sarti, for Cynar, for Mondoro, for all of the brands. I'm very pleased that the previous team had already put that in.

I think the second part of the question, I think if I get this right, was the same price point. Sarti is slightly higher. And as a result, what we find on this is with Sarti is that it's not -- even though it's got a very exciting color in terms of being bright for us and pink, it does tilt a little bit female in terms of the color. But in terms of liquid delivery, we see lots of guys very happily drinking this as well. So it's more gender balance.

What comes through is a very different spirit experience from the rest of our portfolio, more tropical, slightly sweeter, passion fruit and blood orange coming through. And as a result, it's -- I think it's more gender balanced than anything.

The next question is from Richard Withagen, Kepler Cheuvreux.

I have 2 questions as well, please. First of all, on the SG&A benefits, the 70 basis points that you're looking for this year, you already achieved 60 basis points in the first half of the year. So is there any reason for a slowdown in delivery of these benefits in the second half of the year?

And the second question is on the FIFA World Cup. You're obviously not the official sponsor, but I think, Simon, you mentioned on Espolon, you had some activation and so on. So is there any impact from the World Cup on your numbers in the second quarter?

We start on the first one. Honestly, when we see at 70 basis points, it means that the accretion in the second part needs to be higher, to be fair, because in order to get to 70 basis points, you need to have at least 60 basis points, but we are going to get more.

There is also some phasing when you think you are -- we actually reduced our workforce by short of 500 people during 2025. So now we are also changing our operating model, which is going to be, I would say, the next phase to gain efficiency. And clearly, this requires some time. But we don't expect to go down in the second part of the year in terms of SG&A accretion. To the contrary, we expect some further efficiency.

And I think, look, as we said at the Capital Markets Day, and you might find this a bit odd, but every single hire in the company is signed off by us. So it's a very strong message to the organization about being disciplined with SG&A, making sure that we're putting the money where it's most important and has the biggest impact. So certainly, from that side, I think we'll continue to keep that a big focus.

In answering your question on FIFA and the World Cup, I don't think it's a big contributor. I think there were a couple of things we saw that worked quite well. One is we had some block parties on Espolon that were irreverent. There was a bit of a counter the $11,000 a ticket final average pricing, which allowed people to get engaged in the event, in the momentum of the event, but in a fun way that was a bit lighthearted and not too serious. And so we had some watching block parties that worked very well.

I think one of the other things is I thought the U.K. team did a brilliant job of actually getting Aperol into some very high-volume, high venue -- high football accounts. And watching some of the videos of England play and every time England scored, instead of seeing beer being thrown in the air, we saw this wall of orange going up as Aperol was being used to celebrate.

So I think the key thing here is our brands can play across these platforms. And it's not about the football. It's not about kind of what's there. It's about the conviviality and the sociability. And as you heard me say before, our brands are uniquely positioned for that. We're down to work, good fun, easy, they can fit into those occasions very well.

The next question is from Chris Pitcher, Rothschild & Co Redburn.

A couple of questions. I want to follow-up on the ready-to-drink question in the United States. Just wonder your view on one of your big competitors sort of taking their cognac brand into the subcategory. I mean, clearly, there's enough stock around to do, whether it's something you're doing, whether I've missed it or not.

And then secondly, sort of a specific question on the U.K., but more broadly for the group. Is the U.K. business now all the supply issues and disruptions a year ago coming through? Is that now on a much more even keel and you're well positioned for the summer? And more broadly on the group, do you feel in the second half that you've got most of your markets on a much more steady footing, having been through quite a disruptive sort of 18 months?

Yes. Chris, look, in terms of the U.S. one, look, I don't really comment on other people's products. You can ask them that question. We're not planning to get into ready-to-drink in cognac. That's all I'll say at this stage.

But I think in answering your question on the U.K. side, yes, very comfortable in terms of supply. I think we've had some good learnings. We made good progress. I think our forecasting is getting better. I think we've also benefiting from the investments we put into -- through the extraordinary CapEx to make sure that we've got the headroom to be able to deal with it.

I think some of the growth that we see in some of these markets where you're suddenly getting double digit, we're all delighted and the whole supply chain team is having a heart attack because it's more than they were planning. But I think what we've managed to do is build that flex into the system. And as a result, we have no issues in terms of supply. Our on time is full is improving, and we continue to make good progress on our OEE and our COGS measures, which is what Francesco was mentioning in terms of some of the input costs and seeing those improve.

The next question is from Tilly Eno, Morgan Stanley.

First just on the U.S. sell-out, clearly still incredibly strong compared to the overall market. But if I just compare the slide on sell-out for H1 versus Q1, there was a bit of a moderation. Is there anything that you would call out there driving that? And if that sell-out trend was to improve into the second half, you mentioned that you didn't do any further inventory adjustments on the nonpriority brands in Q2 in the end. If your overall sell-out trends improved elsewhere, would you take the opportunity to do any more of that cleaning up of inventories on the nonpriority brands?

And then the second one, just for Francesco, you mentioned the working capital seasonality. There was quite a significant increase in receivables as well. Could you just explain what was behind that and what was different this year?

Okay. Tilly, look, yes, answering your question, I think a couple of things on that. You've also got a bit of comp base we need to think through between Q1 last year in the U.S. which you remember was quite a tricky quarter and then a more positive Q2 and then cycling the opposite this year, where we had a steady Q1 and a better Q2. So I think there's always a bit of that going on.

Look, I do think that we need to recognize the U.S. market is still tricky. And I'm really pleased with what the team is doing, and we're getting a good lift in terms of overall market share. But look, it is a tough market. And so we're having to carve that out.

And I think the more we continue to do that, the more we'll continue to see those share gains coming through. We're well positioned for the long term. As you've heard me say before, we're 3% of the U.S. market. So even if the market is tricky, we need to go and get an unfair share going forward, and that's what the team is doing.

I think I'll pass that on to Francesco on the receivables side.

Yes, absolutely. I mean you actually are right, receivable increase. The main reason is that they were linked to innovation that was skewed into quarter end. We've made many, many launches in ready-to-serve, in Tap, ready-to-drink. And so this was concentrated in order to be available for the peak season, and that's the reason for that. So it's in a sense, it's a business-related reason, which is a positive, driving innovation and volume.

The next question is from Edward Mundy, Jefferies.

So I've got 2 sort of interrelated questions. First, and I don't think it's an unfair question because Simon, I know you know the industry very well. But 15 years ago, we saw the growth of the copycat spritz, especially the HUGO, and that lasted a couple of years, it's nip in the bud, I think about 10 years ago. Could you remind us what was the strategy to sort of suppress that and for Aperol to really do its thing?

And then the second question is, as you broaden distribution of Sarti outside of Germany, what are the learnings that you can bring to the U.S. rollout, in particular when it comes to taking on other sweet spritzes such as the Zedda Piras [indiscernible]?

Yes. Look, I think you're testing my memory here from 15 years ago, but I think what I can tell you what we are doing on this is I think as we continue to broaden our offering within Spritz, I mean, let's be clear, this is our category. We invented it. right? And as a result, our leadership position in that, what I'm really pleased to be seeing now is taking more of a category management approach.

And so the fact that we have Mondoro doing very well in Europe, playing in the HUGO Spritz category, HUGO Spritz is not branded like Aperol, like Sarti. And as a result, I think consumers are very happy for us to be able to come in and offer a great tasting HUGO Spritz at a more competitive price point. And so I think some of that we'll continue to see.

But the big thing for me is actually just as we see consumers work through Spritz, same as you see in other categories, the different flavors have built different consumers. And we are uniquely positioned to be able to take someone from a tropical blood orange passion fruit Sarti into a more bit of Aperol, into a more bit of Campari into a very bit at Cynar with all the flavors that run through that.

And I think that's unique. And as a result, we continue to see the trade recognize that and want to work with us. So I think from that point of view, I think it will be more of a combination of doing what we do well and just reconfirming our leadership in the category we created.

I think your second question on Sarti, I mean some of the learnings we have on this is the -- what's a bit different on this brand is, we still build in the on-premise. That's very much where the brand lives and we will build it that way. I think one of the learnings we have in Germany is that the brand can also be built in the off-premise. And that's what we've seen. And we're seeing some of that already in the U.S.

So if you look at Total Wine and -- more and the pace that the brand seems to be moving there, we're seeing a significant lift from it already. Now we're still in the on-premise. We're still building the brand and 321 and all the stuff we do really well. But we're now seeing the off-premise potentially playing a bigger role than we've seen in the past.

And I think that may just be that the -- as you see that the more consumers looking for earlier in the day, lower alcohol, all the brand fears, all the great color cues and the exciting passion of Italy behind all of it, then I think we're seeing a bit more permission to steal from other categories.

The next question is from Paola Carboni, Equita.

I have a few questions. Maybe if you can come back on COGS phasing at the gross margin level and if you can elaborate a little bit more what is the reason behind? Then on tariffs, I'm puzzling a little bit that we are going to have a bigger impact in H2, let's say. So I was expecting a bit more balanced impact. And so I was wondering whether you have been cautious to some extent in quantifying the EUR 20 million impact for the full year?

And possibly a clarification, if I may, on your indication about phasing for marketing costs. Is it still valid to stick to your previous indication of a skew on H1? I was I didn't get clear on that.

Okay. Do you want to kind of start this one, gross margin? Okay.

So gross margin, what actually we experienced in H1 is a number of positive on glass -- sorry, glass, other agave input costs. The only negative, the only headwind was coming from logistics and insurance and the cost of moving goods that clearly are affected by what's going on. And so this is clearly -- we actually improve also our technology to do that. But at the end of the day, the price of energy has increased.

We -- on the other side, when it comes to tariff, you are right that there is 20 is more than the 7 that you saw in H1. We are taking a balanced view about the quantification for the year. We don't know whether the 10 will continue or whether we are going to be 15. There is a second investigation pending. Honestly, we don't know. So that's why we are taking a guess, which I think is an indication of where we see a reasonable amount for the entire year.

And I think the only other thing adding to that, I mean, if you look at the volatility we've seen on this topic over the last 12 months, I think you're absolutely right. I think Francesco comment is bang on just to make sure that we are being as prudent as we can. It also depends a little bit on the brand mix. So as you're seeing what happens with tariffs in Mexico or tariffs in Europe, again, we're going to have to see how some of that plays out.

I think in terms of your other question around the marketing costs, I mean, we're still skewed to the first half. But to Trevor's question, like it was -- or Ed, I don't know who it was -- but I think, look, if we see continued momentum behind the brands ahead of what we are planning, then we will see some balance in the second half. But I think we'll still stay skewed to first half front loading in terms of the key peak season.

[Operator Instructions] Gentlemen, there are no more questions registered at this time. I turn the conference back to you for any closing remarks.

Great. Thanks very much, everyone. Thanks for your time. Hopefully, you can see we've had a solid first half. I'm really pleased with the results. But further questions that come up, please follow up with the IR team directly, and thanks for your time. Thanks very much.

Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.

Good evening. This is the Chorus Call conference operator. Welcome, and thank you for joining the Campari Group First Quarter 2026 Financial Results Conference Call. [Operator Instructions] Today's call will be hosted by Simon Hunt, Chief Executive Officer; and Francesco Mele, Chief Financial Officer. At this time, I would like to turn the conference over to Mr. Hunt. Please go ahead, sir.

Great. Thanks very much. Good afternoon, everyone, and thank you for joining us. Today, we're going to go through our quarter 2026 net sales in this new format and also cover the outlook for the balance of the year. Francesco is here with me. And as always, our IR team is available after the call for any follow ups. So let's start with the summary.

In our smallest quarter, we continue to gain share in almost all of our markets, and we recorded plus 2.9% organic growth, in line with our full year expectations, and this reflects the resilience of our business and the effectiveness of our strategy, and we achieved this against a challenging operating backdrop that we continue to view as largely cyclical, including additional recent impacts like increasing gas prices and further economic pressure on consumers. A key indicator for us is the moving annual total growth covering a 12-month rolling period. As the chart shows, our performance has improved consistently over the last year, and we remain one of the only spirits companies delivering sustained growth in -- against this challenging backdrop.

Now this growth is, in fact, fully aligned with our strategy that we announced at our CMD last year with 5 key drivers: first, sharper portfolio choices with fewer, bigger bets. In fact, you will clearly see in our sell-out data that we are growing exactly in the brands and categories that we've identified across the regions and especially in the on-premise. Second, winning the first shared drink with new formats for new occasions. The innovation pipeline is accelerating rapidly to ensure we tap into occasions where we were not able to play in the past. For example, with the Campari Spritz ready-to-serve small bottle launch in Italy, Austria and Germany towards the end of Q1 and the Aperol ready-to-drink can launch in the U.K., Belgium, Switzerland and Austria in Q2 so far, with more countries to come in the upcoming weeks and months.

Third, accelerating our geographic expansion, supported by our new regional setup, we are progressing with a clear playbook and already making good progress. In fact, in quarter 1, we had broad-based growth across our houses and regions with 18 countries, all in growth. Fourth, continuing to leverage our investments to work harder against our new strategy. And fifth, driving our efficiencies across each line of the P&L to allow us to invest more behind our brands, which means that while we contain SG&A, we are able to accelerate our investments in A&P, as we told you in a period that is the most cost-effective moment to gain market share. In fact, in Q1, we continue to activate heavily to deseasonalize and expand further.

In Q1, we also took the opportunity to carry out some targeted inventory optimization in the U.S. together with our partners on our nonpriority brands, and this is supported by the very strong performance of our key brands like Aperol. This amount, which is around EUR 10 million will not be recovered, and we may potentially be doing some more in Q2, depending on the performance of our priority brands. Clearly, it impacts the quarterly figures, but it's a rounding error, considering our full year top line of circa $1 billion in the U.S. What is important is that we confirm our trajectory to reach our full year guidance of circa plus 3% growth as we head into the peak season and execute exactly what we told you. We've had a bunch of questions on the Aperol To Go launch, so I want to share some early visuals regarding this launch.

On this page, you can see some of the initial marketing and placement of our new offering. The Aperol To Go can, which has now been launched in selected European markets, as I already mentioned. And we'll share more with you as our rollout progresses. But I can say the initial reactions are very positive with excitement from the trade and on social media. So now let's dive into details, which as already anticipated during the full year results and only at a net sales level. Of course, further details will be provided in the half and the full year results. As you can see, the top line growth of plus 2.9% that I mentioned was broad based across all regions and most houses. The House of Whiskey has been impacted by the fact we continue to have demand-led supply constraints on Russell's Reserve, which will be strategically managed going forward in order to have a more consistent aging liquid profile over the coming years. The rest of the brands in the house continued to grow nicely. In terms of FX, the main impact is coming from the U.S. and Jamaican dollar while the perimeter impact is in line with what we previously told you, mainly regarding the disposals of Cinzano and our Australian plant.

So now let's have a look at sellout. Our outperformance and share gains continued in most markets. In the U.S., we are outperforming across all channels with robust growth in our key aperitifs and tequila brands. The performance in the on-premise especially shows the marked outperformance versus the sector, which is exactly what we aim for to build awareness and trial. More broadly, the fact that the on-premise is growing faster than the off-premise, but with smaller ticket sizes, solidifies our belief that social interaction and the role of alcohol in consumers' lives is still very much relevant and the current pressure is cyclical. Accordingly, we are investing for the long term as we execute our strategy to ensure that we are strongly positioned for when the environment improves, and it makes sense to do that now. In Europe, we are outperforming across most markets with significant growth in our aperitifs portfolio. Germany has been impacted by some promotional phasing on nonpriority brands, but aperitifs continue to perform extremely well. This is fully aligned with our focus on fewer bigger bets and a clear sign that our strategy is working.

Let's now start looking at the top line growth by region, starting first with Europe. Europe delivered plus 1.9% organic growth in Q1, led by continued strength in the U.K., positive performance in our core markets of Italy and Germany. In fact, all of our key markets were in growth, except for France, which was impacted by a high comparison base due to the relisting of Campari a year ago. Aperol and sparkling wines continue to grow nicely in France, which clearly confirms the spritz trend is accelerating. If we look at what drove this growth in terms of houses and brands, aperitifs and sparkling wines were solid contributors. For Aperol, while the bottle remains in growth, there were also early encouraging performances from the availability of the ready-to-serve in new markets and the expansion of Aperol on Tap.

Crodino benefited from campaigns, especially during dry January with 12 countries growing at more than 20%. And at the same time, Espolòn and Courvoisier also contributed to the growth. During Q1, while Easter phasing positively impacted but with some shift into Q2, we didn't achieve the full execution with the European retailers during negotiations while we held the line on pricing. Since then, European alliance negotiations have closed successfully. Although the environment remains challenging, and we're monitoring consumer confidence closely, especially in light of rising energy and fuel prices. Looking at the MAT growth, we see a positive momentum over the last year.

Now moving on to North America. We recorded plus 2.2% organic growth, driven by solid underlying trends in the U.S. and recovery in Jamaica. Although the performance in the U.S. was impacted by the targeted inventory optimization, as I said before, the Aperol franchise recorded very solid growth, and Espolòn continued to grow positively in a competitive market. Now before I move on, I'm sure many of you are wondering how the additional investment we're putting behind Aperol in the U.S. is developing, and we're doing exactly what we said we would. The additional 21 people have been deployed as brand activators since February across 4 key states, and we are already seeing encouraging early progress on velocity and distribution. In fact, it's early days, but based on 8 weeks' worth of data, we are seeing velocity at nearly 3x the rest of the market in those target accounts. And having met with the teams there, the enthusiasm from the trade is fantastic, and they really appreciate our commitment to the on-trade in these tricky times.

Now we also started deploying additional A&P ahead of the peak season. And as we have updates, we'll share them in upcoming calls. In Jamaica, the recovery following the hurricane at the end of October 2025 is on track, and our brands benefited with mid-single-digit growth, especially driven by Wray&Nephew. For the rest of the region, there was growth across all countries, except for Mexico due to some minor shipment timings that affected the quarter.

Now to discuss our newest region, developing markets. As most of you know, we formed this region at the beginning of the year in order to become more agile and benefit from a repeatable playbook across some of our seeding markets. It's early days, but we're already seeing some of the benefits of this increased focus. Overall, the region recorded plus 12.7% organic growth, admittedly off an easy comparison base of negative 4% and is especially driven by the 2 largest countries in the region, Brazil and Argentina, but also with widespread growth across most of the other countries. Brazil was positively impacted by increasing Aperol penetration with more innovation to come, while Argentina continues to perform positively due to the ongoing popularity of SKYY Cosmic. The main driver of growth in the rest of the countries was Aperol, once again, demonstrating the power of the brand and the benefit of our increased focus on fewer, bigger bets.

On the next page, you can see that APAC registered a 1.6% negative organic change, but this was entirely driven by GTR, travel retail, I should say, with a decline of 13.5%. The rest of the region grew by positive 1.9%. Australia was positive, supported by double-digit growth in both the Aperol franchise as well as Espolòn RTD and bottle, while Wild Turkey ready-to-drink offset some of the gains as preferences continue to move towards white spirit ready-to-drinks. We also recorded decent growth in China, India and other partnership markets. And in the rest of the region, we have fully set up the new management teams and finalized the acquisition of our distribution companies in Japan and South Korea to ensure we are well positioned for future growth. We are confident of the potential of our brands in this region.

So based on our performance so far and our perspective for the peak season, we are confirming our 2026 guidance despite the challenging operating backdrop. Not much time has passed since we originally provided this guidance on the 4th of March. But at the same time, there continues to be a lot of major developments in the global geopolitical and operating backdrop, which remains very volatile. We're focusing on what we can control and executing the strategy that we shared with you during our CMD. And that means focusing on fewer bigger bets, focusing on the launch of new formats for new occasions and focusing on the acceleration of our geographic expansion. You saw clearly our outperformance in the sellout in Q1 and the data continues to trend positively in Q2. Top line growth guidance of circa 3% for the entire year incorporates the impact of the inventory optimization and the quarterly movements that we have seen and may continue to see in the upcoming quarters as we navigate the volatile backdrop and the evolution of the weather conditions. What is important for us is to progress on our path towards the midterm targets and deliver what we promised.

On the P&L side, we are again focusing on what we can control while continuing our investments at full pace as we previously guided. The direct impact for us of the volatility in the operating environment remains limited for now, but we are monitoring it closely, especially with the evolution of potential additional increases in costs like energy, logistics and insurance. So I won't go through the rest of the lines on this page as they essentially remain the same, but I'm happy now to open up the floor for any questions you may have on our Q1 performance.

[Operator Instructions] The first question comes from Trevor Stirling of Bernstein.

Simon, one big picture question, maybe one smaller one. In your guidance of 3%, you also highlighted your MAT growth is running at 3.9%. So I guess your guidance is sort of assuming there's quite a strong risk of a deceleration in the second -- in the next 3 quarters to come. And I was wondering just where you think the risks of that deceleration are highest, which brands and which countries are you most nervous about?

And then second detailed point is those European negotiations that you mentioned are all your European negotiations fully closed now? So as of Q2 onwards, we shouldn't be expecting any disruption from those retailer negotiations.

Trevor, look, thanks for the questions. Maybe I'll cover the second one first. Yes, the European negotiations are closed. And very pleased with that the team managed to close those successfully. So our focus is now executing at retail through the key seasons coming up. I'm taking your first one, I think in terms of the overall shape of the curve, we are operating in a highly volatile environment. So I think we are being cautious in terms of our outlook, recognizing the fact there's a lot of stuff happening we can't control. So I think the team and I are really looking at saying what can we control and how are we comfortable making sure we can actually deliver the full year guidance that we've already provided.

The next question is from Mitch Collett of Deutsche Bank.

I'm going to ask a similar question to what I asked on the full year call about the pricing environment, specifically in the U.S., but I'm conscious at the time I asked about what you thought was the right way to approach pricing. And I think you said that you didn't think reducing prices was a good way to build brand equity. I'm conscious that the industry environment has moved on a bit since then. I think your -- one of your peers today certainly sounded like they were interested in increasing competitiveness. And I'm also conscious that on some of your brands, I think Espolòn in particular, there are some signs that prices are moving lower. So I just wondered what were your thoughts on how you see industry pricing evolving, particularly in the U.S. and what your response will be if you do see peers reducing prices, I guess, more materially than we're currently seeing?

Mitch, yes, it seems to be a topic of the week in terms of pricing from what I'm seeing in terms of coverage. Look, I think I'll reiterate kind of 2 big comments and then I'll answer a bit more specifically. Pricing is always relative. Pricing is always relative to our competitors and how our consumers actually see the value in our brands and whether or not those values actually support the price that's being charged. So I think that's the most important thing. So at least to my second point on, I don't believe that reducing price long term builds equity. I think it will give you a short-term lift, and that's part of what you're seeing. But as we've talked about before, building the price of these brands and building the value into these brands takes a lot longer than a couple of quarters.

And as a result, our focus is reinforcing the value with our consumers for our brands so they see the value when they're feeling the pinch and they feel good about purchasing the brand. So I think that's the overriding point. I think more specifically, as I said through Q4, we continue to monitor what's happening in some of the categories. We will maintain our shelf pricing, but we will also make sure that we are optimizing our promotional pricing to ensure that we are picking up those incremental opportunities. And I think that's really what you see on our sellout data. So if you look at the promoted volume, we've seen a bit of movement on a couple of the brands, but ultimately on this, you look at the performance, whether it's in off-premise on Espolòn at plus 5% or on NABCA at plus 14% or in the on-premise at plus 22%. That's not all driven by price. That's driven by consumers and customers seeing value in Espolòn.

The next question is from Simon Hales of Citi.

My first question was just coming back to the comments you made about the inventory optimization you've been doing in the U.S. I just wanted to clarify I heard you right, Simon, that you said it was noncore brands. I don't know if you can provide a bit more detail there. And if there is further inventory reduction in Q2, will it be on a smaller scale, do you think than you saw in Q1 in euro terms? And is it around the same brands? Or could we see it broadening out to sort of other brands in the portfolio? That's my first question.

And then secondly, around the 3% guidance for the full year. I appreciate the backdrop, as you say, is volatile. But what assumptions are you making at the moment around the knock-on impact from the Middle East conflict given that you saw that GTR disruption hitting your Asia-Pacific region already at the end of Q1?

Simon, thanks for the questions. I think we start maybe just with the inventory optimization. As I said, this is on noncore brands. I'm happy to provide a bit more color on it. This is primarily on SKYY and on Grand Marnier and a couple of the other brands. But you see the sell-out data on some of those brands where we have seen it affected by the downturn in the U.S. We have then decided to make sure that our inventory is down at the right level reflecting what's happening on the sellout. Just to reiterate this, this is on nonpriority brands. None of the brands that we have prioritized, we are doing this on. And we saw the opportunity given the performance in Q1 to be able to take that down. We'll continue to review it. I don't anticipate a significant movement in Q2. This is just about responsible inventory management as you see the trends ebb and flow in the current environment.

I think on your second question, there are probably 3 areas that we're looking at in the 3%. And the reason we're still guiding on a full year at kind of circa 3% is a little bit leading maybe back to Trevor's point, which is we also have some upside and some ways that we can manage this. So net-net, we are confident that we can manage some of the downside risks that we're seeing. The first one would be looking at the cost base and the knock-on effect of the inflationary environment on input costs. While we have a lot of long-term contracts on the procurement side, some of them do have clauses where if there is a significant volatility, we would renegotiate. So an example of that would be glass, about 16% of our cost of goods.

The other one that's probably more immediate is more on the logistics. Again, we have contracts there, but that is one that I think you'll see continue to be quite tricky as the situation either continues or even once it's resolved, we see that lagging for a bit of time. I think the second area, as you rightly said is on GTR. Now you saw, I think the news said today, nearly 2 million passengers will be cut out during May. No one is quite clear what that means yet because it depends on which routes, which consumers and which brands they'd normally be picking up in GTR. So we've got a healthy business in GTR, but it's a smaller part of our business overall. And so I think that's where we see the downside risks are balanced with some of the upside risk opportunities that we're seeing.

The next question is from Richard Withagen of Kepler Cheuvreux.

Question is on Aperol Spritz To Go. I mean you say it's been launched in several European markets. I mean, what are the early KPIs? Are you looking at distribution, repeat purchase, incrementality versus cannibalization? And can you say what the gross margin is versus standard Aperol?

Richard, yes, it is -- look, it's very early days, and I'm not going to give too much information because we're still waiting for it to come through. But in terms of more at this stage, what we're looking at is the distribution builds and the assumption. We're targeting specific occasions that we cannot compete in today with our existing format. So whether that be in cash and carry or whether that be in convenience stores. I think quite important in terms of the targets that we have there. One of the key measures on this is velocity. So we can see per point of distribution, are we getting the rotation ahead of the competitive set and that will be the second one. The third one is really more anecdotal, which is are we getting the brand into the occasions we want to, which is more about how we see people consuming the brand, and that will vary across different markets. In terms of answering your question from a margin point of view, as I guided before, the margins at this stage, we're making good progress on, but they will continue to improve as we scale this opportunity, but they are broadly in line with the company average.

[Operator Instructions] The next question comes from Chris Pitcher of Rothschild & Co Redburn.

Can I just get a little bit more detail on the performance behind Grand Marnier and Courvoisier? I mean you flagged that you're destocking on Grand Marnier and it's not a priority brand. But historically, quite a bit was made about the sales growth behind that brand and how much of that was actually really just stock buildup. Can we get a sense for what the impact on Grand Marnier was in the quarter? And then on Courvoisier, encouraging to see that it's still growing and as it starts to cycle some tougher comparatives. Can you give us a sense of where that growth is coming from? Because you highlight that the U.S. is still weak.

I think, look, in terms of Grand Marnier, what we're seeing at the moment is the more encouraging signs in the on-premise in the U.S. is actually helping the brand. Where we're seeing it having a tougher time, as you will have seen in the Nielsen, is in the off-premise. And I think that's where consumers are being quite careful with where they spend their money at the moment. And as we see, trading down to small sizes, trading out of the category into ready-to-drinks continues to be a broad trend. So I think from that point of view, I wouldn't read anything other than the fact that we are working through a slower sales momentum on Grand Marnier and as a result, adjusting the inventory accordingly. I think on the second question on Courvoisier, what was the second question was? I'll answer your second because I didn't get it.

Where is the growth coming from? Because it sounds like the U.S. is still tough for cognac. And you mentioned Courvoisier was in growth.

Yes. I think -- sorry, on that point, yes, it is still tough in the U.S. Courvoisier, we actually saw positive growth coming through on a number of the European markets. It was small, but it was positive. And given the trends in cognac at the moment, we'll take it. So yes, the U.S. still remains quite challenged in terms of it. We are still working on the plans for a second half relaunch, as we've talked to you about before. But we're also making sure that given what's happening in the category, we're going to get one shot of this. We want to make sure we get it right. And as a result, we're not rushing it.

The next question is from Celine Pannuti of JPMorgan.

My first question is on Europe. You -- it seems that the retail negotiation had been difficult and have been closed now. Do you expect any sell-in benefit in the second quarter from that? And then maybe I missed it, but can you comment on the Italian market? I may have missed that if you did during the presentation.

And my second question, coming back on the guidance and the building block. So thank you for putting that around 3% for the year. Now if I look at through the year, you have a tougher comparative. There may still be some impact from inventory cleanup in the U.S. So what gives you the visibility and the confidence given what you said is a challenging environment around the 3%. Can you -- are there some building blocks in terms of sizing of innovation or recovery in some market that help -- could help us understand the 3% amidst a tougher comp in the second half?

Celine, look, good question. Thanks. On the European negotiations, as we said, we saw -- as we went through that and we held our discipline on pricing. As you would have heard from other people, it's always a bit of an interesting couple of weeks as we work through that. But it meant that some of our brands didn't get the full activation during Q1 that we would have seen. So I think as we see the brands now having full listing, we've managed to not be delisted anywhere. We've also maintained our pricing on -- across the board. We're now focusing with the retailers to ensure that we deliver against their expectations in terms of sell-out as we head into the key period. So don't anticipate a big benefit, but I see a more positive benefit coming through than we had in Q1, given the fact we have full activation, whereas in Q1, we didn't.

I think the second one is in terms of the Italian market. The team, I think, has had a solid Q1, as you've seen in terms of performance. The second part on this is we have more innovation going into the Italian market than we've had in prior years. So the launch of the Campari Spritz ready-to-serve, given the size of the Campari brand here, the initial results are encouraging in terms of that. And also, I think, a recognition that the company is innovating into some new formats is getting a good level of support from the trade. In addition to that, the launch of Aperol on Tap has allowed us to really get into some of the higher-volume accounts where previously we were a bit challenged in there because other people had gone in. So we've now been able to go in, regain some of our real estate for the brand and accelerate the growth.

I think more generally in terms of the confidence around the 3% as I said on the earlier question, it's a balance. As I've said to you all before, I'm always a bit cautious with a crystal ball. But what we're trying to do is balance out what we're seeing as risks through the balance of the year with the opportunities. And on the opportunities, the initial response on the ready-to-go, on Tap, on the ready-to-serve Campari Spritz is looking encouraging. I think the expansion into new markets, as you see, the momentum is looking good. Our focus on fewer brands in the strategic channels like the on-premise, there are, I think, no other companies growing at what Espolòn at plus 22% in the U.S. Aperol is at plus 15%. Campari is at plus 21%. So our strategy is working in the strategic channels we're investing in. And as a result, that gives us some confidence to say we can balance out both the positives and negatives through the balance of the year.

The next question is from Alessandro Tortora of Mediobanca.

So just a follow-up on the ready-to-go commercial strategy. Are you planning at a certain point to bring this format also in the U.S. because you mentioned selective penetration just in Europe so far?

Alessandro, yes, it's funny. It's the fourth time we've been asked that today actually. So I think, look, at this stage, we recognize that half of America doesn't know Aperol at all. And so we have a job to do in terms of building that. That's why we put more people on the street. That's why we're getting into the accounts and why we're focusing those target accounts. As I've said before, to make sure that we turn the neighborhoods orange and then we move to the next one. So I think, look, we're looking at it. We're having a look at what that could mean. Unlike some of our competitors, for us, this is delivering a finished drink in an occasion we can't compete in today. And that's what there is a big difference for our strategy versus, I think, others.

So as we look at that, we probably look at a state-by-state approach based on where we see Aperol, the stage of development and that we make sure that American consumers recognize that perfect serve comes in a glass with lots of ice and a slice of orange. And that's where we want to start. So when they want to enjoy that different occasion, that's where the ready-to-go has a role. So I think we'll be careful in terms of how we look at it. But ultimately, on this, yes, I would see it going into the U.S.

The next question is from Gen Cross of BNP Paribas Exane.

Just one question from me. I'm just keen to understand your view of the kind of underlying growth rate of the business kind of from a sellout perspective at the global level. And I appreciate you probably don't have sell-out data for every market. But if I just think about the sell-in, obviously, there's quite a lot going on in the Q1 with a bit of destocking in the U.S. impact of retailer negotiations in Europe. But if you think about the kind of sequential trend in the business between Q4, which was looking pretty strong, I think it was about 7% underlying, excluding the impact of the hurricane in Jamaica and where the business is now in Q1. Would you say that there's been any significant shift on an underlying basis, maybe excluding the impact of the Middle East conflict on the GTR business?

Yes, I think, look, ultimately, on the sellout, as you know, on a global level, it's just about impossible as too many channels and complexity around the different markets. I think what I would say is if you look at our performance through Q4, you then look at our Q1 and you actually then recognize that we took EUR 10 million out, the underlying performance in Q1 is pretty close to the consensus you all had. Now it's a decision we make, so it's the right decision to make in terms of optimizing the inventory because on the priority brands, we are seeing some really good performance coming through. So I think that's more the way that we're looking at it. So I don't think there are significant shifts.

I think we are getting tighter on the strategy we're executing, as I said, the fewer bigger bets, all the things we talked about in the CMD, now we're getting better and better at how we're executing those, which gives us more confidence in terms of the full year number. As you know, on a 12-week period, there can be volatility a lot. In the current environment, there can be even more given what's going on with the geopolitical situation and also what we're seeing in the consumer behavior. So we're kind of looking at ensuring we deliver what we told you for the full year. There may still be volatility going through different quarters for things that are potentially outside of our control.

The next question is from Edward Mundy of Jefferies.

Two questions, please. The first, Simon, is on Page 5 of the slide deck, where it's -- and I appreciate that Nielsen on-prem in the U.S. is not the entirety of the on-prem, but it's quite noticeable how the on-prem is doing quite a lot better than the off-prem. And I know the off-prem number doesn't include ready-to-drinks, but I'd just love to get your perspectives on why you think the on-prem is doing better than the off-prem given some of the pressures on the industry. That's my first question.

And then my second is on both the new formats for Aperol in terms of both the ready-to-serve and also the ready-to-drink and canned format. Is there any experimentation going on by consumers putting perhaps, let's say, a slice of orange into the bottle like what you might see with the Corona to try and preserve that perfect serve? And if not, does the absence of an orange slice, does that sort of hold back the brand a little bit in that format?

Look, I think in terms of the different trends that you're seeing in off and on, and this is not unique to us, just to be clear, if you look at the industry shape, with on trending at plus 5% and off at negative 4% on Nielsen and NABCA kind of negative 3%. I mean you see our performance across all of them, which is encouraging. But I think there's some fundamentals we talked about during the Capital Markets Day. And that is that we still believe that the big challenges we're seeing are cyclical. Consumers still want to get together. They still want the social interaction. They still want to have those moments of sociability out with their friends in bars and restaurants. And that's exactly what we're seeing come through in the on-premise in America. What we're seeing at this stage is that traffic is up, but the ticket is marginally down. But net-net, the overall is up.

So I think that's where we see our brands really fitting into that and then also accelerating for the long term. As you all know, you build the brands in the on, you then take them to the off. That's exactly for me what this chart is showing. I think the second part on the cans, again, we're only in cans at this stage. We haven't done bottles. As we said in the CMD, we'll have a look at that. On cans, I haven't seen anyone putting orange in the top of the can yet. But Ed, I really like it. If it's a trend you could start, that would be helpful. But so far, the initial feedback we've had is encouraging velocity even without an orange going into the can. But I think we'll see how we go with it.

The next question is from Tilly Eno of Morgan Stanley.

I just had a couple of follow-ups on the Europe point. Could you just clarify which countries you saw those retailer disputes in? In particular, was there anything in Italy? And then I think at the end of last year, there was maybe a little bit of pre-shipping ahead of the Milan Winter Olympics. Was Europe Q1 performance also weighed on by a bit of an unwind of that? Or just any comment on the sort of Q1 specific dynamics?

Look, I think in terms of the -- we don't comment on individual retailer conversations. I think more generally in Q1, what I'd say is as we're having these negotiations, we are not getting the full attention and the full promotional calendar that we want to see at certain times of the year. And as a result on that, I think there's a bit more muted in some of those accounts. But again, within that, we saw probably a bit more in Germany. We didn't see it in Italy, maybe a bit more in Switzerland. But again, the fact that we've now successfully closed those, I think, is a great testament to the team. I think in terms of for Q1 more generally, there wasn't really -- a tiny bit of shipping, but nothing material. We didn't load up the end of the year and then try to have to destock it in January. We saw pretty consistent depletion shipment growth through each of the months, which you wouldn't get if we are heavy on inventory.

The next question is from Sanjeet Aujla of UBS.

Simon, my question is just on the gross margin outlook. And just going back to the point you made earlier on your glass contracts. Can you just remind us how those contracts are structured? And at what point could that be triggered? And if that's the case, what sort of contingency plans do you have whether it be on cost or pricing to maybe mitigate that.

Thank you, Sanjeet. Clearly, we -- glass is 16% of our COGS, so it's an important component. We have a long-term contract, 90% of our procurement is under long term. It's diversified with under different even geographically located provider. They are clearly based on fixed contract where there is a price adjustment formula, which is triggered if in the event certain component items like energy cost trigger certain threshold. I have to say that we already renegotiated in 2026 these triggers. So for the time being, we are achieving some efficiency still on glass, but clearly, it depends where the oil price is going to be and then the energy. But at the moment, through diversification and this type of contract, we actually are containing our costs.

And just a quick follow-up on that, Francesco. Like if energy costs and oil stay at current levels for the next 3 months, at the spot current levels at a point which would potentially trigger it or it's not at that point yet?

No, no, absolutely not.

[Operator Instructions] Mr. Hunt, gentlemen, there are no questions registered at this time.

Great. Well, listen, thanks, everyone, for joining us. Look, certainly, please do feel free to follow up with the IR team directly. But I think you can see we've had a solid start to the year despite the backdrop, and we are on track for the full year target. So thanks very much for your time.

Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.

Good evening. This is the Chorus Call conference operator. Welcome, and thank you for joining the Campari Group Full Year 2025 Financial Results Conference Call. [Operator Instructions]

Today's call will be hosted by Simon Hunt, Chief Executive Officer; and Francesco Mele, Chief Financial Officer.

At this time, I would like to turn the conference over to Mr. Simon Hunt. Please go ahead.

Great. Thank you very much. Good afternoon, everyone, and thank you for joining us to go through our 2025 results and our perspectives for 2026. Francesco is here with me. As always, our IR team will be available after the call to deep dive with you in coming days.

So let us start with a summary of our results. 2025 was a year in which we delivered a solid performance, supported by the strategic priorities we put in place at the beginning of the year. We navigated one of the most complex operating environments our industry has faced in decades. And a key message I want you to take away is that we are growing. We are growing top line, we are growing margins and we are growing profits. And while we continue to grow, we've increased our investments behind our strong portfolio of unique brands because we are confident in building long-term value.

In fact, we've done everything we had said we were going to do. First, our outperformance in sell-out continued in a very challenging backdrop, and this is exactly our key focus. Organic top line growth was plus 2.4%, driven by growth across 24 countries, a clear testament to the relevance of our brands, matching consumer trends across geographies and reinforcing the potential going forward.

At the same time, we further strengthened our gross margin profile with 100 bps organic accretion through our efficiency program. One point, we've been very clear on is that we see this environment as an opportunity to strengthen our position and gain market shares. And therefore, we're not shying away from investing behind our brands, leveraging the efficiencies we have achieved to increase our A&P to sales up to 17.9%, and this strategy will continue.

Our cost containment program is well on track to achieve 200 bps organic benefit on sales by the end of '27. And in '25, we already recorded 70 bps improvement as guided. You can clearly see that all these efforts paid off, and we recorded strong profitability with plus 60 bps organic accretion on EBIT margin.

On the balance sheet side, we made significant progress. 73% recurring free cash flow conversion shows the solid cash generation of the business. And as you all know, we put in place a major extraordinary CapEx program a few years ago to build our production capacity for our future ambitions. We're now nearing the end of these investments with a tail end in 2026, primarily focused on finalizing our distillery expansion in Kentucky.

Our leverage is down to 2.5x from the peak of 3.6x after the closing of the Courvoisier acquisition in September '24. And we reached this level a year ahead of what we had guided, led by solid cash generation, our disposal program and effective working capital management.

Now some of you may remember this chart from our Capital Markets Day presentation. Adding the 2025 figures to it shows acceleration in the underlying growth. Excluding the impact of the hurricane in Jamaica, we recorded plus 3% organic growth. Achieving this result despite the significant volatility in the operating environment shows the strength of our brands and the great work by our team of Camparistas around the world.

Now this pace of underlying growth is expected to continue going forward, supported by our confident investment behind our brands and we are on track to reach mid- to high single-digit top line growth in the medium term, assuming a stable environment. The drivers will be the 5 areas that we highlighted in our CMD. First, sharper portfolio focuses with fewer bigger bets. Second, winning the first shared drink with new formats for new occasions. Third, accelerating our geographic expansion. Fourth, leveraging our investments to work harder against our new strategy. And finally, fifth, driving efficiency across each line of the P&L to allow us to invest more behind our brands.

The top line growth that I mentioned was broad-based across all of our regions and all of our brand houses. In fact, as I said, we recorded growth in 24 countries, and we gained share in nearly every market globally, showing the results of our focus on fewer bigger bets and our geographic expansion.

On the next page, you can clearly see the momentum that we achieved during the year with the accelerating quarterly progression across our main regions. I'm not going to spend too much time on this as we'll go through this in detail region by region. But what I will say is that our aim is to achieve sustainable and progressive evolution of our top line growth going forward.

Now let's have a look at sell-out, which ultimately is our main focus. As I mentioned in the beginning, we recorded outperformance and share gains in sell-out in almost all markets despite a really challenging backdrop with overall shipments and sell-out relatively aligned across the U.S. and EMEA.

In the U.S., we outperformed in the strategic on-premise channel with plus 8% growth, showing a 6-percentage point beat compared to the sector, becoming the #1 supplier for value growth in 2025. This was led by our priority brands with plus 15% growth in tequila and plus 15% in Aperol. And this momentum continued in NABCA with a growth of plus 10% in these brands.

In EMEA, we also outperformed in each of our main markets with growth of plus 1% versus a market of negative 2% in the region despite the pressurized context. And our main aperitif brands, Aperol, Campari and Sarti, significantly outperformed and contributed to our growth.

Germany was impacted by the delisting we'd already flagged earlier in the year and some retailer disputes in Q4.

So now let's have look at our top line growth region by region, starting with the Americas. Americas grew plus 2%, driven by resilient trends in the U.S. ahead of the market and solid growth in the rest of the regions more than offsetting the impact of the hurricane in Jamaica. In the U.S., each of our brand houses recorded plus 2% growth in 2025, but this was offset by the softness we saw in SKYY. As I mentioned, our aim is to have fewer bigger bets and we see the positive results of this focus on our prioritized brands.

Jamaica recorded a plus 1% growth despite the significant impact of the hurricane in Q4. Wray & Nephew and Magnum Tonic Wine continue to lead the growth in this region, where our brands truly are part of the DNA of the country. Given our production sites are only temporarily impacted, we expect to continue to benefit from the strength of our brands in the local market as consumption starts to return to normal.

The rest of Americas, which makes up 12% of our group sales, recorded a solid plus 8% with broad based growth across most of the regions, except for Canada, where our performance was impacted by the tariff volatility. Geographic expansion will continue to be a key focus going forward.

Now moving to EMEA. We recorded plus 2% growth with resilient trends and market share gains across our main countries despite the challenging backdrop. At the same time, geographic expansion continued. In Italy, Q4 benefited from an excellent execution of our winter campaigns on Aperol, delivering a plus 1% growth. And we see our portfolio approach in aperitifs bearing fruit, especially with solid trends in Campari, Crodino, Sarti Rosa as well as the spirits portfolio. In 2026, we will further support growth via the spread of Aperol on Tap during key events in peak season as well as the launch of new formats for new occasions, such as Campari Spritz Ready to Serve.

In Germany, the backlog is very challenged, as you know. This is also leading to pressure from retailers regarding promotions as consumers' disposable income remains challenged. We're also cycling the impact of the delist that we previously told you about. All of this led to a negative 3% top line change in '25. But if we exclude the impacts I mentioned, we would have recorded plus 3% growth. mainly driven by the ongoing success of Sarti Rosa, which now accounts for more than 10% of net sales and continues to consolidate its position in the market. Again here, the benefit of our portfolio approach and Spritz leadership is evident.

In France, our solid performance is continuing, mainly driven by Aperol and the successful launch of Sarti in that country.

In the U.K., we recorded plus 7% growth, mainly driven by Aperol and Courvoisier. And this is another country where we launched Sarti in '25 and we're already starting to see the positive uptake. Crodino and the newly launched Aperol Spritz Ready to Serve are also accelerating, going from less than 1% of our U.K. business to more than 3% in just 1 year.

In the other countries in EMEA, which contributed 18% of our overall sales versus 15% the year before, we saw broad-based growth across almost all countries, especially GTR, Greece and Belgium. And the bulk of the growth is coming from Aperol, Sarti Rosa and Courvoisier.

Moving on to APAC. Growth was plus 4% in 2025, mainly driven by the outperformance and share gains in Australia. In Australia, we grew plus 7% with acceleration during the peak season in Q4, leveraging our increased focus in the on-premise. This growth was supported by double-digit growth in both the Aperol franchise and Espolon, our focus brand in the country. In the rest of APAC, we recorded plus 1% growth, mainly driven by Russell's Reserve and Courvoisier. In this region, we have made some significant changes to the management teams and organization, headed by the appointment of Sash Sharma as the MD of the region, and new MDs in 3 of our Asian markets. Going forward, we believe we can consistently enlarge our presence in the region, leveraging the route to market investments that we have already made.

Now let's talk about the brand houses, starting with the House of Aperitifs. Here, we recorded a resilient growth of plus 2% in 2025, primarily driven by Aperol, Sarti and Crodino. As of this earnings release, we have started to report Aperol as a franchise, given the new format for new occasions that we will progressively introduce as we told you in our CMD, such as tap that we tested in '25 and ready-to-drink in the current year. For now, these figures primarily include Aperol bottle and ready-to-serve, which is 6% of the total.

In 2025, Aperol performance was impacted by challenging operating conditions in its larger markets of Italy and Germany. But despite that, we recorded growth of plus 1%. U.S. shipments were flat in the year. Despite the volatility, though, Aperol still achieved a plus 15% growth rate in these all-imported on-premise channel. Outside of these 3 countries, there was a solid plus 8% across the other countries, reinforcing the global potential. Especially in Q4, as I mentioned before, we recorded a very strong performance, supported by the largest ever deseasonalization activations with excellent execution across the holiday and ski seasons.

For Campari, the main impact on performance is coming from Brazil, where we had a very high comparison base from last year due to rapid growth and price increases. In addition, our sales were impacted in Jamaica due to the hurricane, and Germany due to the delisting. Outside of these 3 countries, the performance remains solid with plus 2% growth across our main geographies.

The remainder of our aperitifs portfolio is growing double digit, with positive trends across the regions. Sarti continues its solid growth in its core German market, and also progressively benefiting from the rollout into other European markets as well. Crodino, our non-alcoholic spritz is also performing strongly across all markets with plus 7% growth, including the U.S. where it was recently launched.

So let's move on to the next page. Whiskey was relatively resilient, supported by Wild Turkey in the U.S. with plus 2% growth, benefiting from the new campaign. And this was offset by demand-led product shortages in a premium variance in Russell's Reserve in H1, a point we've already flagged in previous calls.

Jamaican Rum showed a solid growth of plus 9%, benefiting from positive underlying trends until the hurricane in Q4 and in the core U.S. market.

In the House of Agave, Espolon grew 3% in '25. Growth was supported especially by Reposado, plus 8%, where we still under-index the category, while Blanco was negative 1% due to our focus on price discipline in a very competitive backdrop.

Within the House of Cognac & Champagne, Grand Marnier was impacted by focus on pricing in a highly competitive market. Courvoisier recorded EUR 157 million of sales and was included into our organic growth as of May. As we already highlighted in previous calls, we are piloting some brand marketing in the U.S. and in the U.K., which is showing initial positive results. And we will come back to you regarding the future plans as they become more concrete, but with some very good progress made so far.

For the rest, I won't comment too much, just to note that 22% of our overall portfolio is currently classified as local brands given their geographic concentration. SKYY remains an important part of our portfolio and great to see it back in growth showing a very positive performance in Q4, driven primarily by Argentina, which is now 27% of the total brand sales following a highly successful launch of SKYY Cosmic more than offsetting the ongoing softness in the core U.S., in line with the other players in the vodka market.

As we shared with you at our CMD, Aperol is identified as our champion and will therefore receive the highest share of A&P investments. As part of this, we already started to implement this strategy in Q4 with the strongest ever holiday activations across the U.S., the U.K. and Italy. As of the beginning of the year, we are also activating proactively across the slopes of winter locations, as many of you have probably seen.

In the U.K., White Christmases Are Overrated campaign took over tube station, covered buses and walls across London. It was supported by visibility in key off-premise locations. And we doubled the spend versus the previous year, reaching 92% of spirit drinkers in London alone and 21 million consumers nationally and connecting Aperol with iconic winter moments at the famous Somerset House ice skating rink in Central London. In the video, you can see some of the key achievements of Aperol throughout the year in the U.K. but a highly successful year with plus 11% top line growth.

In the U.S., we launched our first ever Aperolidays campaign with Vampire Diaries star and Aperol Spritz fan, Nina Dobrev at the forefront. Results show 600 million earned media impressions and a 78% increase in Aperol mentions in social media versus the previous December.

We continued our pace of activations with Espolon to continue to drive awareness and trial across key cities in the U.S. and via social media influencers and PR. We were present at ComplexCon in Vegas for the New York City Halloween Parade as well as the Latin GRAMMYs and Dia de los Muertos celebration in L.A. We also activated our impactful drone shows in Austin and L.A. with over 1 million impressions.

As I mentioned before, on Courvoisier, we're now finalizing the new strategy and the planned relaunch. In the meantime, in key markets like the U.K., we are running interim campaigns. And these campaigns already started to have an impact showing the brand has the potential to carve out its rightful place in a tough category, especially in recruiting the next generation of cognac consumers. In fact, we recorded a 7-percentage point increase in penetration amongst 18- to 35-year-olds in the U.K. I'll just remind you all that Courvoisier is the Most Awarded Cognac House since 2019 based on the top 20 spirits competition.

Okay. I'm now going to hand over to Francesco, who is going to take you through the P&L and the balance sheet. Francesco?

Thank you, Simon, and hi to everyone on the call. Let's start looking at the drivers of our adjusted EBIT margin in 2025. I'm happy to say that we have recorded solid results with 60 basis point organic adjusted EBIT margin accretion, supported by gross margin gains and cost containment benefits, while we accelerated brand-building investment as planned.

In terms of gross margin, we recorded 100 basis points organic accretion in 2025, supported primarily by input cost benefit, especially driven by agave. Within this number, the impact of tariff was EUR 11 million. This was lower than we originally expected due to ongoing benefit of the pre-tariff in our inventory position we are holding also in the last quarter of the year. Given the challenging backdrop, pricing provided minimal contribution in 2025, but can prevent opportunities going forward as market conditions normalize.

A&P to sales closed the year at 17.9%, up 100 basis points organic from 16.7% in 2024. As Simon mentioned before, we are fully committed to reinvesting efficiency behind our brands, in line with our new portfolio strategy. This means that we are concentrating our investments on fewer bigger bets and supporting the brand that we believe has the higher growth potential going forward. You saw some of these investments earlier in the presentation.

On cost containment, we have a clear road map that we shared with you at the beginning of 2025. Our aim is to achieve 200 basis point SG&A organic benefit on sales by the end of 2027. In 2025, we already achieved minus 1% organic decline in SG&A, leading to 70-basis point benefit, which is slightly higher than our initial guidance of 50 basis points as we accelerated savings initiatives. Accordingly, adjusted EBIT landed at EUR 637 million. Within this, there was a limited net impact of minus EUR 1 million with perimeter and FX offsetting each other.

Let's now move into full P&L. In 2025, we recorded adjusted net profit of EUR 386 million with 3% growth, mainly driven by positive evolution of EBIT. Reported group net profit was up 72% due to the high base of operating adjustment in 2024, which was EUR 213 million, mainly including accruals related to the 3-year cost containment program.

This year, operating adjustments were EUR 69.3 million at EBIT level due to asset impairment of EUR 90 million and settlement payment of EUR 31.1 million. which were partly offset by EUR 55.3 million business disposal capital gain.

Total financial expenses before exchange effect was EUR 101 million, with increase versus 2024, driven by higher average net debt. EUR 2.3 billion versus EUR 2.1 billion last year and base effect of high cash position ahead of Courvoisier closing following the capital increase. Average cost of net debt is at 4.4% versus 3.8% in 2024.

Under the earn-out income expenses and hyperinflation effect line, we had operating adjustment of EUR 49.6 million, driven by the reduction of earn-out of Courvoisier.

Lastly, under the profit loss related to joint ventures and other investment line, there were EUR 54.6 million nonrecurring impairment of investment related to Capevin for EUR 59.4 million, net of EUR 4.9 million gain from Tannico business disposal flowing through the Dioniso JV.

The recurring tax rate was realized at 30.2%, up 40 basis points versus 2024 due to unfavorable country mix. Recurring cash tax rate is at 27.7%.

Lastly, I will cover the key balance sheet indicator on the next page. We achieved a positive trend in operating working capital as a percentage of sales, down to 44% from 47% in 2024. This was driven by effective cash management, which was partially offset by an organic increase in maturing inventory of whiskey, cognac and rum. This means that maturing inventory increased to EUR 1.2 billion, which is in line with the guidance that we provided in our CMD and at a comfortable level to support our future long-term growth.

Finished goods inventory on the other hand remained stable. On CapEx, we are maintaining the trend in maintenance CapEx at 4% of sales, in line with our historic envisaged general rate. Extraordinary CapEx was EUR 143 million, driven mainly by our production quality and capacity enhancement program as well as ongoing IT investment, with finalization expected in 2026. The remaining part is primarily related to the distillery expansion in Kentucky.

We also achieved solid cash flow generation with recurring free cash flow conversion of 73%, EUR 571 million, again, in line with our guidance and plans.

On leverage, as Simon mentioned at the beginning, we reached 2.5x a year ahead of plan, supported by solid business momentum and financial discipline. We expect this ratio to remain at a sustainable level in 2026 with some potential saving considering the finalization of the extraordinary CapEx.

Now I will hand back over to Simon for the rest of the presentation. Thank you.

Great. Thank you, Francesco. So look, I'm going to briefly touch on our ESG-related initiatives and position. And you can find much more detail in our annex or the summary 200 pages in our annual report, which has all of our key figures and targets in it.

In terms of ratings, we have continued to make good progress and are positioned at the leading levels in our industry and have also achieved upgrades in '25, for example, on the MSCI ESG Rating.

As you can see on the page, there have been significant developments in our key metrics. As you know, we publish our ESG initiatives and figure in 4 key areas, which are the environment, responsible practices, community involvement and our people.

In the area of environment, we've recorded a significant improvement compared to our 2019 baseline in emissions, water consumption and waste to landfill. In '25, we also set new targets on absolute Scope 1 and 2 emissions and circularity.

In terms of our people, we've achieved a Fair Pay Certification for the second consecutive year and also set new targets in this regard in 2025.

Responsible practices is also a key focus area. And here, we not only hold awareness campaigns on responsible consumption, where we'll also work to ensure our procurement practices embed all aspects of ESG.

In addition to these initiatives, we continue to work on making our production plants more sustainable. Accordingly, we've invested EUR 40 million in sustainability-linked CapEx this year, of which EUR 16 million was related to water and EUR 24 million related to energy efficiency.

Lastly, and very importantly, following the severe hurricane that took place in October in Jamaica, we showed our support to the local community with a donation of JMD 250 million, a contribution that was very much appreciated by the community and the Jamaican government.

So let's have a quick look at the evolution of our strategic priorities in '25. And in terms of cost containment, Francesco already mentioned in detail that we are on track with our plans. In the last 2 quarters, we actually had a year-on-year decline in SG&A and closed the year with negative 1%.

On the business streamlining, we announced the disposal of Averna and Zedda Piras in Q4 for a total consideration of EUR 100 million, with the closing expected in Q2 2026. Including the previous disposals, we will have disposed of 3% of the portfolio so far. We still have discussions ongoing and the timing of further potential disposals will be based on the optimization of proceeds with no rush, given the robustness of our business. And I want to be very clear on this, we don't have to sell anything, but we are choosing to if we can see a sensible value and balance our value with the benefits of the focus it can bring to executing our new strategy.

As we mentioned in the CMD, we put in place a new 4 business unit structure as of 2026, including Europe, North America, APAC and developing markets. And just as a reminder, this is how we will be reporting the business going forward. We've given quite a lot of reference to our Strategy Day during this call, which was our first ever, and thanks again to all of you that connected or joined us in Milan. So now let's take it a little further.

As we talked about in the CMD, our mission is very simple and execution-focused, to win the first, shared drink, every day, everywhere. To win the first, shared drink, every day, everywhere.

And our new strategy is being rolled out across the group. In fact, so far, I've met with nearly 2,000 Camparistas this year and are aiming to meet every person of the team by the end of the year. We are embedding the new strategy across everything we do and grounding it in our unique Camparista culture. And this will be the leading light in ensuring we reach our ambition and our midterm guidance.

Now as a reminder, our midterm guidance is also clear. Basically, no change, but that is assuming a stable environment. We are confident in achieving cash generative and margin accretive growth with outperformance, focused on the areas we took you through in the CMD.

So let's have a look at what's new. Innovation is a key focus for us this year. This means new formats for new occasions like the launch of our new Aperol Ready to Drink and Campari Spritz Ready to Serve, in line with our portfolio strategy. It also means the expansion of Aperol on Tap that we piloted for the first time in select markets in '25. Sarti Rosa already saw significant expansion to new markets in '25, and we will continue to support its growth in 2026 with further reach.

Bolder investments. What this means is continuing to invest behind our brands, both in terms of A&P but also commercial strength. For Aperol in the U.S., we have already hired and put into the market 21 brand activators across 11 states and cities to drive the acceleration in growth. We are also further stepping up our A&P spend on key brands as outlined in our portfolio strategy with our focus on fewer bigger bets.

In terms of execution, we have a new governance to accelerate decision making, a new business unit structure to drive our expansion and a renewed and energized team. We're also driving revenue growth management actions, which will ensure we are effective in the market with a clear playbook across the various regions.

And while we do all of this, we also continue to be extremely disciplined on our costs, our COGS, our A&P and our SG&A, as we mentioned, at the CMD. On COGS, we have initiated our end-to-end supply chain optimization, focusing on our input costs, our operating efficiency and leveraging our extraordinary CapEx program. On A&P, we are driving our efficacy and effectiveness and targeting a meaningful reduction in our nonworking cost base to target a 10% to 15% efficiency in A&P to reinvest behind our brands. That's equivalent to about EUR 50 million. And this is a significant increase in consumer-facing investment. On SG&A, we remain on track to deliver the 200 bps by the end of '27.

Now lastly, we will maintain strong balance sheet focus. You've already seen the progress we've made on leverage, and we will continue to keep a comfortable level, also with less relevance on bolt acquisitions for now, while we continue to streamline the business.

Now having talked about what we will focus on, I'll also comment on what that means in terms of our financials for 2026. Assuming a challenging but stable operating environment, our industry outperformance with the pace of underlying growth is expected to continue in 2026, on track to reach mid- to high single-digit top line growth in the medium term. Clearly, we are seeing an elevated volatility currently, which we're going to have to continue to monitor.

Next, contained organic accretion in EBIT-adjusted margin with a skew into the second half due to the front-loading of A&P investments and the base effect of tariffs, which affected the second part of 2025. Gross margin and moderate COGS tailwinds offset by U.S. tariffs impact, assuming a stable outlook again, with an estimated impact of about EUR 30 million. Further increase of A&P investments while focusing on ensuring effective mix to support continuous enhancement in on-premise execution, in line with our new portfolio strategy. Ongoing benefit of SG&A containment, circa 70 bps in sales in 2026, reaching a cumulative impact of 140 bps in 2 years out of the 200 bps we've guided by the end of '27.

As a perimeter impact of around EUR 70 million due to disposals on top line and roughly EUR 30 million EBIT-adjusted margin, and FX will be subject to currency evolution.

Leverage to be maintained at sustainable levels, considering the tail end of the extraordinary CapEx program and operating working capital dynamics.

Disciplined capital allocation with focus on sustaining growth momentum, portfolio streamlining with about 3% of our net sales already disposed and less relevant on bolt-on acquisitions for now.

And finally, a step-up in our dividend payout with DPS up from EUR 0.065 to EUR 0.1, indicating a 54% increase with a payout of 35%, leveraging strong cash conversion, accelerated deleverage while still maintaining financial flexibility.

Now while business growth remains our biggest priority, there are several reasons why we've made this decision on dividends. Our new strategy of focusing on fewer bigger bets means there is a new capital allocation rationale. We are deleveraging faster than planned, and we are very optimistic about future further deleverage as our extraordinary CapEx program comes to an end with the current year, and we expect to remain disciplined going forward given the fact we have everything in place that we need to be able to grow.

We want to reward shareholders with a more balanced CSR, also through an increased contribution from dividends. Given that our peers are already significantly higher than us in terms of payout, we believe this will be appreciated by the market and reinforces our belief in the strong fundamentals of our business and our cash generation capabilities.

Going forward, based on the evolution of our business and balance sheet, we will evaluate the path for dividends and potential additional increase on payout ratio.

Before we close, I'd also like to note that as of 2026, we will be moving to a top line only reporting in Q1 and Q3. This is a norm for our industry and actually even more widely adopted across many companies. It's going to allow us to ensure we keep investors updated with the developments of our business while simplifying our reporting, ensuring we can focus on executing our strategy and consistent with our focus on a longer-term horizon. As always, we will continue to hold our analyst calls and give you updates on our guidance in case of any revisions.

Okay. So that's the prepared remarks. I'm now going to open up the floor for any questions.

[Operator Instructions] First question is from Andrea Pistacchi, Bank of America.

Simon and Francesco. I have a question on the U.S. and one on Italy, please. So in the U.S., the industry clearly remains challenging, but you're clearly outperforming. In Q4, the outperformance, I think, was mainly driven by Aperol and Espolon, which are back both to pretty strong growth. I think -- I mean both brands seem to be growing faster than they were 6, 12 months ago, at least based on the data we see. So I wanted to ask what do you think is driving this acceleration? Is it the increased focus that you are referring to that you're putting behind the brands? And how -- in particular, Espolon, how do you feel about it in a category which clearly isn't getting easier. I'd include Diageo's comments about potential price reinvestment.

And then Italy also had a strong end to the year, sales, I think, plus 5%, sellout plus 1%. The comparison base wasn't easy. You referred to good execution there. Could you give maybe a bit more color on this? Is it the rollout of your Spritz portfolio? Is it cracking down on Aperol me-toos? And would you expect this more positive momentum in Italy to continue also given that you'll be starting the rollout of the new Aperol formats.

Thanks, Andrea. Yes, good questions. Look, I mean, I think ultimately on this, I think you'll see this isn't just on the U.S. and on Italy. I'll probably answer both markets with quite a similar answer. I think what we've managed to do with the new portfolio strategy is focus the entire organization about the most important brands. And as a result, that has improved our planning through Q4. It's improved our execution in Q4. And having been out in the market during Q4, I was absolutely delighted with what the team managed to do. They got out the execution was great. Our displays look great. We look better than I think we've ever looked before across all of the markets.

And so I think the combination of the focus of the team, the fit with the portfolio strategy, I think we are more aggressive in terms of displays than we've been before. And I think, ultimately, on this, the performance in the U.S. on Aperol and Espolon stands up to it, plus 15% in the on-premise, plus 10% in NABCA. We were more competitive in the tequila category than we had been on Blanco in the final quarter. As we know, it's a key time of year where we can bring consumers into the franchise. But all in all, it was just better execution, better plan and passionately executed by the team.

If I can then just squeeze one in, please for Francesco, on gross margin. You had a year of very strong gross margin expansion, 100 basis points in '25. Q2 was better than I think the Street was expecting. Q3 was better again. Q4 another beat. You mentioned that the tariff turned out to be less of a headwind. Now for '26, though, you're suggesting a more muted level or probably no -- I mean a couple of things sort of offsetting each other. So I read it there's probably not much gross margin expansion. So could you provide a bit more color on these gross margin drivers? And is the EUR 30 million tariff impact that you're talking about for this year. Is that incremental or -- to the -- I mean you had EUR 11 million impact in '25, and for '26, it's a EUR 30 million incremental, all incremental.

Thank you, Andrea. So EUR 30 million is the total tariff effect for 2026 to clear. So essentially, that's compared with the EUR 11 million we had in 2025. Clearly, 2025, we were able to compensate with some strategic management of our inventory position.

I would say that you are right, we expect that 2026 to still have some benefit in terms of cost on the COGS side, but this will be more than offset by the full effect of tariff. However, we expect to compensate it with good mix impact coming. So all in all, we expect to have a positive impact in terms of COGS, clearly very different from what we have seen in 2025, but still we see a positive upside. And to be fair, we are still working to improve further our efficiency on the manufacturing side.

Next question is from Sanjeet Aujla, UBS.

A couple from me, please. Just going back to your outlook for 2026. I kind of interpret that as sustaining the underlying growth you achieved in fiscal '25 of around 3%. And what are you embedding into the U.S. within this? Do you think the U.S. can achieve that piece of growth for the year ahead, just given some of the challenges we still see in the market?

And I guess, just tied to that, how are you thinking about the pricing environment in the context of what we observed to be a negative pricing environment in the U.S., still weak in Europe. You spoke about minimal pricing in 2025. So I guess your outlook is just entirely predicated on volume growth. Is that fair?

Yes, look, good questions. I mean I think, look, in the current environment, I'd be crazy if I didn't say it's definitely dynamic. I think everyone is responding to that situation. So we're going into it cautiously on the underlying growth, and we think we have different levers to focus on. We think our portfolio really plays to that aspirational yet accessible price point. We think the focus and execution that the team is putting behind it gives me a lot of confidence. And also remember, we have opportunities that other companies don't have. And so if you put all those things together, I think that's what we're looking at in the U.S.

More specifically, your question on pricing. I think in terms of frontline pricing, it's going to be quite a tough environment to see that coming through. But there are still opportunities on revenue growth management, as we talked about. It's an area where we probably have a bit of catch-up to do, which gives us a few levers.

But also in terms of that, I think the environment we're seeing, there are still opportunities for us to go after. I'm not going to give you specific numbers for our targets in the U.S. I think we have to wait and see what comes out. But one of the overriding messages is that we've got really good plans. We could just do with a bit of a stable environment for the whole balance of the year.

Can I just sneak in a follow-up on Germany? Clearly, some disruption from retailer disputes in 2025. Have those been resolved? And how are you thinking about the setup there in '26?

Yes. Sanjeet, I'm not going to comment too much on our European retailer conversations at the moment because I think you know they're still pretty live. And normally on these things, what happens in one year forms a big part of the negotiations. All I can say is I'm positively encouraged by what I'm seeing so far. I'll leave it at that for now.

Next question is from Laurence Whyatt, Barclays.

A couple from me, too. Just wondering if you just give us a status update of the 21 people you've hired in the U.S. to do Aperol marketing. Is it quite a substantial increase in the marketing team there? How are they landed? Have you seen any immediate impact? Is there anything unexpected from having such a large number of people doing that one brand?

And then secondly, on the increase in dividend, when we go to a 35% payout ratio, is that the sort of level that we should expect going forward? Or is there -- would you expect a continued step-up as the balance sheet continues to strengthen?

Laurence, yes, absolutely. I mean in terms of 21 people, Francesco and I were at the U.S. conference last week, at which point we met them. So it's not a number on a page. They're already part of the team, varying stages of getting going with it. So it's very early stages. But what we want these people to do is to really go out and tell our story of Spritz leadership. Yes, it's led by Aperol, but we have a great story to tell and doubling down, as I said at the CMD on the key markets where we already are, but we know we've got further opportunities to go.

In the current environment, getting out into the trade, really making our brand come to life is a big, big opportunity because a lot of people are not doing that. So we see a competitive advantage of having those people already hired and hitting the street literally this week. So I think that's great. I think in terms of the dividend side, I think we'll continue to evolve, and I'll pass that one to Francesco.

Thank you, Laurence. On dividend, I think we decided to move considering the different phase of our development. We actually think if we look at the -- any criteria or KPI in terms of dividend yield on one side or payout, there is still room to grow. We will monitor our ability to grow dividend depending on our requirement and our ability to deleverage. So we remain flexible. We think there is room to grow even more.

Dividend yield, we are probably at 1.5%. So if you look at the other peers, they are 2%, 3%, 4%. So they are pretty different. And payout varies and so there are different payouts also depending on the different situation of the company, the different capital structure.

So we -- I think we now because of our pause on M&A, I think we have flexibility. And so we decided that was something that would enhance our total shareholder return also with the contribution of dividend.

Next question is from Mitch Collett, Deutsche Bank.

Two questions, please. Just coming back to the commentary on margins in '26. I think you said gross margin, including the tariff impact likely slightly up or maybe flattish and you're going to increase A&P again. So I guess would it be sensible to assume all in a similar level of organic margin expansion in '26 to what you achieved in '25?

And then perhaps more for Simon. Clearly, there's some uncertainty about industry pricing. In a scenario where you did see competitors take a much more aggressive approach to pricing, particularly in key categories for you like tequila, what would be your response? Would you hold your price where it is? Or would you follow them in order to remain competitive?

Mitch, listen, I'm going to pass the margin one over to Francesco, and then I'll take the one on pricing.

So on margin, clearly, we are seeing some improvement, but not to the level you have seen in 2025. There will be essentially strong contribution from SG&A, that's for sure. The increase in dilution in investment in A&P would be lower, but then the contribution coming also from gross margin due to the tariff essentially is going to be lower. Also, in general, we see less opportunity or less visible opportunity in cost benefit. But in general, also we see an accretion coming at EBIT level but to a lower level compared to what you have seen in 2025.

Okay. Great. Thanks, Francesco. So Mitch regarding -- there's a lot of speculation on price at the moment. And the benefit is we've done this for a long time. I've never seen price readjustment build long-term equity. So from a short-term basis, yes, there may be some headwinds, but actually, our focus is getting our team to execute in the strategic on-premise is investing in establishing equity and making sure that our brands equity and in the consumer's eyes match our pricing. So I think that we'll continue to see it, but we take a longer-term view of building the equity that we think it takes a long time to get these prices up at which point I'd rather invest behind the equity, make sure the consumer sees the value versus getting a short-term price fight.

Next question is from Trevor Stirling, Bernstein.

Simon, a couple of times you talked about a stable environment and quite a few talked about medium term. And I wonder if you could just be slightly more -- don't expect it to be precise, but how would you define stability? Are we looking at a world where just the pricing environment is stable or the industry is back to mid-single-digit top line growth? And likewise, medium term, is that sort of 2 to 3 years? Or is that 1 to 5? Just could be a bit of a range on medium term.

Yes. Trevor, you know me well enough, I'm not going to pull out a crystal ball because I found in this game, it's not a winning strategy. But I think, look, there's a couple of things we're saying in terms of stability. In the last 6 days, we've seen the world change again very, very quickly. On top of that, the geopolitical challenges we saw last year, some of the activities in the marketplace, we had to respond very quickly to. We had natural disasters of hurricanes and various other things coming through.

So I think when I talk about a stable environment, it's actually having confidence in what the tariff situation may be, having confidence in the geopolitical situation. Clearly, the weather, we can't do much about other than respond the way we do, which is kind of bounce back and get our numbers back to where they need to be. So I think at the moment, it's more, I think, probably caveating our ambition a little bit on what we can't control.

Based on what we can control, we're confident of getting to our midterm guidance. And I'm not going to be drawn into kind of where that is at the moment. But I think you see the progression that we're making of 2.4% last year, underlying of 3% this year, we're heading in the right direction. And as I shared at the CMD, we're very clear that we've got the plans, the geographic expansion, the opportunities and the team to be able to actually deliver against that. And I think 2025 is a great example of us managing to show that in what was a very, very tough year.

Next question is from Celine Pannuti, JPMorgan.

My first question is on Aperol performance, which clearly accelerated. Is it possible to understand what's the difference in growth on on-premise versus off-premise? And you mentioned that 60% of the business is now the non-bottle. Where you have -- I mean can you give us some example where you've trialed the Aperol on Tap and what are the ambitions or the plans for '26 on that development? Same, I would say, on RTDs and RTS. So that's for Aperol.

My second question is on the outlook for the year. You mentioned H2 weighted profitability. In terms of top line, I note that you have quite an easy comparative in Q1. But -- so could you help us understand whether there will be any -- I mean is H1 more weighted on top line growth? Or is there activity through the year that will make a difference? And maybe just squeezing another one is, I think you did very well in emerging markets. Is there, you think, durability of that momentum as we look into '26?

Hi, Celine. I think, look, in terms of Aperol, as we said, look, 6% of our franchise at the moment is ready to serve. And what we are seeing is a really positive uptick of the convenience that offers consumers in all the markets we've been in. So we're seeing I think it gives us a lot of confidence that by expanding into more convenient formats, it opens up new occasions that at the moment, we haven't been able to tackle. So I think what we saw is that coming through in Q4.

I think the other part, as I said in the presentation, we saw a bigger deseasonalization push. So we saw some positive lift coming through where we saw consumers enjoying Aperol over the Christmas holiday period and actually not relying on the sun to be shining to be able to do that. So I think that was a big part of what we saw in the off-premise.

The difference between the on-premise and the off-premise is on-premise is where we put most of our focus. So as I quoted the numbers at plus 15% in the U.S., that's a big area where we believe we've got to build the brand and build the equity for the long term, which is why we're focusing more on that than we are on the off-premise performance, and that was reflected in the numbers.

I think in terms of your question around first half, second half, I'm not going to comment on Q1 at this stage. What I will say though is that if you look at the investment profile that we have on our Aperol TV, we are heavy heading into Q2, Q3. And as a result, we see the benefit of not being so heavy on A&P running through in the latter half of the year. And I think that was more the focus in terms of the split. And I think the final question was on, sorry can't read my notes here.

Emerging markets.

Emerging markets, that's right. Thank you. So I couldn't read my own writing there. I think on emerging markets, you look at the -- whether it's across the Americas or EMEA or even in APAC, you see the performance of the smaller markets. We've mentioned before in other calls that we have double-digit growth in a number of these, and that absolutely continues. And we are very confident on that, as I said, at the CMD, we have a significant geographic expansion opportunity for the portfolio. Aperol is leading the way on that, but we continue to see significant opportunities. The new structure we put in place, a dedicated team in APAC and also the team in the developing markets means that we can really now go after that with the right resources and the right team.

Next question is from Chris Pitcher, Rothschild & Co Redburn.

A couple of questions for me sort of partly linked. In terms of Courvoisier performance. It was much stronger than certainly I had expected, but it's obviously still down quite a bit on what you acquired. It looks like that was a big chunk of your growth in the fourth quarter. How much of that is real growth and how much of that is just lapping some very soft comparatives?

And then in terms of the investment behind the brand, you talk about building brand equity. You've got good operating leverage in all of your regions, obviously, apart from Asia where you put in what looks to be about EUR 15 million extra cost. Is that the cost in Asia now that you think you need to build those markets you were just referring to, Simon? Or is that an area we should just expect not to be profitable for a while yet?

Yes, look, in terms of Courvoisier, yes, there is an element of a perimeter coming into that. But actually, what was encouraging is that we are seeing a positive uptick on Courvoisier in a number of markets. So in the U.K., it hasn't really had much going on for quite a while. So the fact that we're now starting to get listings into the U.K. on-premise, we're starting to have activations around the key holiday periods. And also the interim campaign that we've used is bringing some new consumers into the category.

So yes, there's a bit of perimeter in there, but there's also, I think, a positive movement in the fact that there hasn't been much on the brand. So the fact we've started that is giving us a bit of lift.

In addition to that, when we can leverage 27 end market companies around the world, it also allows us to then start building more of the geographic footprint for the brand. So that's the second driver of it.

But as I said, we're finalizing the strategy now. We'll come back and we'll share that when we're ready. We're not rushing as you rightly said, it's a tough category. We want to make sure we get it right. But I'm very encouraged by what I've seen so far.

I think the second question on APAC, if I understand, it was more on the cost base. And I think we've invested in our in-market companies, whether it be in China, South Korea, Japan or even the structures in Australia and New Zealand. And at this stage, the key thing we're focusing on with Sash Sharma coming on board is relooking at all of the strategies.

He's been in the business now for a few weeks. He's getting around, both Francesco and I are out with him in 3 weeks' time, meeting with the team to see kind of what we think will be the fastest way for us to get that cost base really delivering against the strategic ambition we have, which is to build more of the portfolio more successfully in APAC. We definitely under-index. So I think in terms of the cost base, I don't see it significantly increasing. What I do see is an ability for our revenues to start accelerating off the back of the investment that's already been made.

Next question is from Olivier Nicolai, Goldman Sachs.

First of all, on free cash flow was much better than expected. Could you perhaps help us how to think about it in 2026, and we should expect similar working capital improvements, similar CapEx and cash tax.

And the second question, I know it's a little bit early to assess the situation in the Middle East, but what kind of impact on duty-free you would expect there?

First one, Francesco, you want to take the first one.

Absolutely. So if you look at the free cash flow in 2025, we have a recurring level of EUR 571 million. This included an improvement of operating working capital of EUR 35 million. So if you exclude that we are at EUR 536 million. So what's going to be different in 2026, you consider that we have indicatively EUR 100 million of extraordinary CapEx, including the finalization of our capacity in Kentucky, the headquarter, some IT upgrade. So this is part of the last part of extraordinary CapEx. This will be offset by the profit coming from the Averna closing, which is more or less the same.

So the remaining part will have to do with the increase of the inventory, okay, which is something that -- on which we are trying to optimize. But we expect, in any event, cash flow to remain solid.

So essentially, if you look at the level of EUR 500 million, that is before any change in operating working capital. As you have seen last year, we had EUR 100 million of increase in maturing inventory. This was offset by improvement on the payable and receivable. We keep working on both. So in order to minimize the impact.

Okay. And just answering the question on the Middle East. We've got a big caveat upfront. But we're 6 days into this. As a result, if we had to be having this call last week, we wouldn't be having this question to put it in context. So I think what we look at is we break it into 3 areas. We'll break it into domestic impact in the Gulf States and some of our business there. We then look at the impact on duty-free and what that may mean in terms of traveler numbers and airport penetration, and the third area is we look at what the impact may be on input costs through oil and gas.

So at this stage, we've had a quick look at that, given the fact it's only just really happened. We don't see any material impact at this stage. We think they are manageable. We do not have a big business in the Middle East. We do not have a big business that skews heavy on duty-free in the Middle East. The bulk of our travel retail business is in Europe. And so I think we'll continue to monitor it pretty closely.

From an input cost point of view, look, we've got some long-term contracts that I think give us a fair degree of protection through this year. But the key thing is that the business has been around since 1860. We've been through disasters and wars and various other things and I'm very lucky to have an extremely experienced team. So I think we'll navigate that as we come through.

Next question is from Alessandro Tortora, Mediobanca.

Just let's say, 3 questions, quick questions. Okay. The first one is if you can elaborate a little bit more on, let's say, the Crodino side, you recently introduced a bigger format and also if you see any other possible new brands in the, let's say, zero alcohol space or basically is Crodino your full bet? So this is the first question.

The second one is on the perimeter change impact you see in 2026. Can you help me to understand if you're including Averna into these or, let's say, this is just, let's say, excluding Averna because I see this EUR 70 million, but also EUR 30 million EBIT, which looks, let's say, a little bit high.

And the third question, sorry, is just on financial charges, considering that you were able to cap that close to EUR 100 million, so if you can give us some kind of indication on these.

Okay. I mean I think in terms of Crodino, what I'd start with, as I said at the CMD, is look, I think any other company would bite your hand off to have a viable non-alcoholic play that's got 60 years' worth of amazing Italian heritage. So I think we're in quite a good position to be able to leverage that. And I think there are probably 2 parts to it. One, we saw good performance in the home market in Italy. And in addition to that, in the markets where we've launched it, we saw double-digit growth in most of them. So I think the underlying opportunity with Crodino is significant. We're still working on how quickly we can roll with that. But the increase in size worked well. We managed to manage the pricing through on the Italian market and really encouraging signs so far from the international markets.

In terms of Averna, I'll pass it over to Francesco, do you want to take that one?

Yes. Averna is included in EUR 70 million net sales impact and EUR 30 million EBIT impact. Clearly, the vast majority has to do with Cinzano but there is a portion also attributable to Averna, which we expect to close in Q2.

Moving to financial charges. As you've seen, we have EUR 101 million in 2025. We expect the number to be similar in 2026.

Next question is from Paola Carboni, Equita SIM.

I have a first question about your A&P budget. If you can guide us a bit on what you expect in terms of commitment to raise your A&P budget for the current year.

Second question is about the test you had started for canned Aperol. So you have -- you've spoken about Aperol in that, but I was wondering whether you have any update on the project for Aperol in can. And secondly, just trying to reconcile your indication of a 3% organic annual growth, excluding the hurricane impact, which would imply, if I'm not wrong, about 7% organic growth in Q4 alone, adjusted for that. So I was wondering why -- I mean, to what extent you see this as non-replicable at the start of 2026. So what you see as a non-repeatable, let's say, in this Q4 performance, which is driving you to a more subdued guidance for revenues in 2026, sorry.

Okay. Great. Yes, I think, look, in terms of the A&P, the guidance we give really is 2 things. Yes, we intend to continue to increase behind the opportunities that we have. As I said before, we've got some brands where we think we can really invest behind it and get a great return. We also have the opportunity of taking our brands into new geographies, which means we want to take up the A&P.

I think also in the current environment, it's going back to Trevor's point, as I said, I passionately believe that investing now when other people are pulling back on their A&P gives us a disproportionate return on the investment. And I think the proof of that is what we managed to pull through in 2025. So I think what we guide that we'll see that going up. But perhaps more importantly, going out would be the consumer-facing A&P as we make our existing A&P more efficient by reducing our nonworking and the team is working hard in terms of that.

In terms of your second question, any update on the can? Yes, the can is progressing at pace. We will be launching into 5 countries, and no I'm not saying which ones. So watch this space over the summer and hopefully, you can enjoy one.

The third one was in terms of the 3% underlying, yes, the math is correct. It would have been close to 7% in Q4. And I think in total, we've estimated the hurricane impact about a $21 million impact. So in answering your question, why can't we have it again this year? It sounds like you're in one of my budget meetings. I was asking the same question. Look, we're keen to see what we can do, but we recognize, as I said earlier, it's still a pretty bumpy market out there. So I think we're cautiously optimistic, but we've got to see how the year plays out.

[Operator Instructions] Gentlemen, there are no more questions registered at this time.

Okay. Great. Listen, thank you to everyone that joined. As usual, any questions, please follow up with the team, and we look forward to seeing you over the next couple of weeks in many cases. Okay. Thanks for your time. Bye-bye.

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.

Good evening. This is the Chorus Call conference operator. Welcome, and thank you for joining the Campari Group 9 Months 2025 Financial Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Simon Hunt, Chief Executive Officer; and Paolo Marchesini, Chief Financial and Operating Officer of Campari. Please go ahead, gentlemen.

Fantastic. Thank you very much. Good evening, good afternoon to everyone. Thank you for joining us to go through our 2025 9 months results and perspectives for the remainder of the year. Paolo is here with me; our IR team, Chiara and Gulse are happy to connect after the call to further deep dive with all of you in the upcoming days as necessary.

Now just before I get going, I think all of you already know, this is going to be Paolo's last call with us before he transitions to his new role as Vice Chairman. I'd like to thank him for all of his support, long-standing contribution to this group and looking forward to continuing to work with him in his new role. And it's pretty rare these days. He, as a CFO that has presided over more than 100 earnings calls, and holds the title being the longest serving CFOO in the Italian Stock Exchange and certainly across our industry by a long, long way. That is an amazing track record and an achievement.

And on behalf of everyone in the company, me, my predecessors and all of you here on the call and in our investment community, I'd like to say a big thank you. And for those of you who are joining us on the Strategy Day on the 6th and 7th November, you have a chance to celebrate together with Paolo. Thank you, again, Paolo.

Welcome.

Now a short summary of our results. As you can see, our performance is on track with what we told you last time. Clearly, the operating environment remains challenging. Despite this, we are continuing to outperform the industry in sellout, and this is exactly our aim. We're keeping our strong focus on commercial execution and continuing to invest behind our brands to ensure we are well positioned for when the market normalizes. In terms of profitability, we're making strong progress, and this is supported by gross margin accretion and visible savings in SG&A more than offsetting the ongoing A&P investments, as I mentioned.

And we're maintaining our guidance of moderate organic growth on the top line. While on EBIT-adjusted margin, we continue to expect a flattish organic trend as a percentage of net sales, but now with the tariff impact incorporated. And we'll dive into the details later on. We continue to make solid progress across all of our strategic priorities in line with our expectations. As highlighted in previous updates, our focus remains firmly on the areas we can control, and we are consistently advancing towards our goals.

On brand building investments, as already shared, we're not making any compromises. On SG&A, as we already guided, the deceleration trend is evident, and we're also making progress on COGS efficiency. On CapEx, we are on track to complete our extraordinary program for production capacity expansion.

In terms of portfolio streamlining, the disposal of our 50% investment in Tannico in Q3 is another step towards simplification following the disposals of Cinzano and the Australian plant in the first half of the year, and we are maintaining our pause on M&A.

On the balance sheet, our disciplined approach means that we have now been able to reduce our financial leverage in terms of net debt-to-EBITDA ratio by 0.7x in the last 12 months, down to 2.9x with further improvements to come. Our portfolio approach continues to bear fruit. And while we will discuss this more during our Strategy Day, I can say that we keep growing across geographies where we are continuing to gain share and prioritizing execution and pricing discipline in a challenging backdrop.

Now let's look at our top line performance and the drivers. In Q3, we recorded growth across all regions. I'll say that again, we recorded growth across all regions and delivered a very resilient 4.4% organic growth overall. And this means as of 9 months, our organic growth was plus 1.5%, in line with our guidance. And yes, we are still growing even in this tough market. The peak season started possibly in terms of weather, but we did see some variation across geographies in the latter part of the quarter, plus the impact of economic pressures on consumers play a role, especially in the on-premise and in the U.S. But despite this, we recorded solid growth.

Regarding some of the technical impacts coming from the first half of the year, you'll remember that of the $11 million U.S. logistics delay impact we flagged in Q1, most of that has now been recovered with a limited impact expected in the fourth quarter. The delisting we flagged in Q2 in Germany continues to impact with EUR 3 million in Q3, leading to a total of $8 million in the 9 months and an expectation to reach $11 million by the end of the year. Net-net, these 2 impacts balance each other out in the quarter. And over the 9 months, the underlying performance broadly matches our reported organic growth.

The perimeter impact is plus 1.1% on our top line while the FX impact was negative 2.4%, mainly driven by the U.S. dollar devaluation and Latin American currencies. Overall, our total reported top line growth is 0.2%.

Now looking at the sell-out data, which is ultimately the main focus. Our outperformance continued across almost all markets in a challenging backdrop with overall shipments and sellout pretty much to line across the U.S. and EMEA. In the U.S., our outperformance in the strategic on-premise channel and in NABCA is ongoing in Q3 with plus 5% growth year-to-date in the on-premise, indicating a 4 percentage point beat compared to the sector, and a 2 percentage point beat in NABCA. And this is driven by a very resilient growth of plus 12% and plus 9%, respectively, in our tequila and aperitifs portfolio.

Note that due to some data policy issues from the provider last night, we're only able to show a 52-week trend in the on-premise data, not the usual quarterly performance, but I'm sure that data will be corrected soon. On the off-premise, while our focus brands continue to show a resilient performance. The rest of our portfolio, which has a higher weight in this channel, impacted our total growth. And by the way, we should highlight that given its universe composition, Nielsen off-premise doesn't sufficiently represent a full picture of Campari America's performance or momentum in the market as we continue to make good progress across the club channel.

In EMEA, we also outperformed in each of our main markets with growth of plus 2% versus a market of negative 2% in the region despite the pressurized context.

Now let's start and look at our top line growth by region, starting first with the Americas. And Americas grew by plus 1% in the 9 months with an acceleration in Q3 of plus 5%, driven by positive top line across the region. In the U.S., the 9-month performance was impacted by the destocking in Q1, while the last 2 quarters have both been positive with plus 3% and plus 1% growth, respectively, in Q2 and Q3. The main drivers are Espolòn, Courvoisier and Wray&Nephew.

And the aperitifs recorded a stable trend with a positive Campari, offsetting inventory reduction post tariff volatility in Aperol in the third quarter. In line with the category trends, we continue to see persisting challenges on SKYY.

Jamaica recorded plus 11% growth in the 9 months with a very strong quarter 3 due to the base effect of last year's hurricane but also benefiting from a very positive local market dynamics. And given the news at this stage, I think it's important just to update you with what we know about Jamaica. So at this stage, the team are evaluating the impact of the hurricane from last night. And our primary focus is the safety and well-being of our teams, which we are confirming diligently given the lack of communication available.

After that, we have got teams on the ground at each of our sites to assess the impacts and next steps to get us up and running as quickly as we can, recognizing the infrastructure damages anticipated by the Jamaican government. Once we have clarity on the situation, we'll then be able to confirm our support for whatever those recovery plans are and can provide more of an update once we receive it.

In terms of the rest of the Americas, which makes up about 11% of our group sales, continued its solid performance with plus 3% growth in the 9 months and quarter 3 was flat, impacted by trade disruption in Canada in connection with the tariffs. But on the positive side, Campari has now become the second largest premium spirits player in Brazil, driven by the strong performance of Campari, and leading Brazilian brands.

Now moving on to EMEA. The plus 2% growth was broad-based across almost all countries. In Italy, the environment remains challenging, especially in the on-premise. We saw less willingness by consumers to spend and decreased numbers of visits. Regarding tourism traffic, even though accommodation occupancy rates were relatively solid during the summer, consumers were more selective about spending.

There were also a few Italians taking holidays during August pressured by increased prices. In August, we saw all main beverage categories. That's all beverage categories, down 10%, including water a mainstay of Italian consumption in both the on and -- in and out of home, really reflecting the economic pressures that consumers are seeing. And all of this played a role in the performance of Aperol.

At the same time, we see our portfolio approach in aperitifs bearing fruit, especially with solid trends in Campari, Crodino, Sarti Rosa as well as the Spirits portfolio. In Germany, the environment has become more challenging over the last few months across all categories and sectors, as I think you know. And consumer propensity to save versus spend has increased significantly. And we are still cycling the impact of the delisting at a retailer to hold our line on pricing.

Despite this, we recorded positive top line growth in Q3, mainly driven by the success of Sarti Rosa, which now accounts for more than 10% of our net sales and has become the second largest brand for Campari Group in Germany after Aperol. Again, here, the benefit of our portfolio approach and Spirits leadership is evident.

In France, our solid performance is mainly driven by Aperol with plus 6% growth in Q3, and the U.K. performance remains strong, supported by our excellent execution during the peak season with the added benefit of some good weather, too. The main drivers of the plus 22% growth in Q3 were Aperol and Aperol Spritz as well as Courvoisier benefiting from the ongoing marketing campaign.

In the other countries in EMEA, which contributed 16% to our overall sales, we had a positive trend in all countries in the 9 months, especially in GTR, Greece and Belgium. And the bulk of the growth is coming from aperitifs and Courvoisier.

Now moving on to APAC. Growth was plus 5% in the 9 months. In Australia, the growth of plus 6% in the 9 months was driven by a 15% growth in Aperol with ongoing focus on accelerating the on-premise activations as well as a plus 12% growth on Espolòn bottle and ready-to-drink, which keeps leading the tequila ready-to-drinks. In quarter 3, which in any case, is an off-season quarter for Australia, performance was impacted by the phasing of shipments in Wild Turkey, leading into the key upselling -- upcoming summer selling period.

In the rest of APAC, we saw a positive momentum in Q3 with plus 14% growth, mainly driven by China, India and South Korea. And Wild Turkey/Russell’s Reserve continued to perform well and we've also seen some initial reorders on Courvoisier following a clearing of the trade channels that we undertook following the acquisition.

Okay. So let's now move on to look at it different way via the houses, starting first with the House of Aperitifs. Here, we recorded resilient growth of plus 1% in the 9 months, primarily driven by Sarti Rosa and Aperol Spritz. As I mentioned, while talking about the regional performance, Aperol performance was impacted by a variety of factors during the quarter, and I'll deep dive a bit more on the next page.

But in Italy, the impact was a result of pressured on-premise, Germany due to the delisting and operating conditions. And in the U.S., we had an alignment of the inventory post tariff volatility in the U.S. market, which impacted shipments. Excluding these 3 countries, all other countries remain on track with plus 4% growth in the 9 months.

For Campari, the main impact is coming from Brazil, where we had a very high comparison base from last year, I think, near on 50% due to the rapid growth as well as price increases. And excluding this impact, the performance remains solid with a plus 2% growth in Q3 and a plus 1% in the 9 months, led by the U.S., Italy and the rest of the Americas. The remainder of the aperitifs portfolio is showing positive trends across the regions. Sarti Rosa continues its solid growth in its core German market and has started to benefit from the rollout into other European markets as well.

Aperol Spritz is performing nicely, driven by the convenience trends. And Crodino, our nonalcoholic Spritz, is growing double digit across all seeding European markets. As I said, let's have a closer look at Aperol. The geographic expansion is fully on track across all seeding markets. More than 10 countries representing 12% of the brand's total sales are delivering outstanding double-digit growth, reinforcing the strength of our approach and the excitement in these markets. And this really is a testament of the fact that Aperol's desirability and consumer trends continue to support its growth.

On sellout, our outperformance is continuing in the strategic on-premise and in NABCA in the U.S. European markets are facing some pressure and it's evident, especially in the on-premise data. In Italy, despite this stock levels remain healthy in the trade. In Germany, given the operating backdrop, Aperol's been impacted, especially in the on-premise. But if you include also Sarti Rosa, in fact, we continue to perform better than the market.

In France and the U.K., the performance is very robust, particularly benefiting from favorable weather conditions and excellent execution. This is all to say we are very confident in the trajectory of Aperol. It's a tough market without a doubt and the quarterly performance can get impacted by various factors, but the long-term opportunity remains fully intact.

Okay. Looking at the House of Whiskey & Rum. In whiskey, we recorded strong growth in Q3 with Wild Turkey benefiting from the stock availability in its core U.S. market. And you'll see it later in this session, but we also launched a new campaign, which we expect to support more going forward with initial encouraging results.

South Korea and China are also supporting off a small base. Jamaican Rum showed a solid growth of plus 16% with Q3, driven by an easy comp from the last -- from the hurricane last year as well as strong underlying trends in the U.S. and in Jamaica.

In the House of Agave, Espolòn grew plus 3% in the 9 months. Growth was supported especially by Reposado plus 11% while Blanco remained broadly flat due to our focus on pricing. And Q3 was impacted by the phasing of shipments. Key seeding markets also continue to grow for a small base, in line with our international expansion strategy.

Within the House of Cognac & Champagne, Grand Marnier recorded a stabilized performance in Q3, also supported of an easy comp from last year. Courvoisier recorded EUR 99 million of sales in the 9 months and was included into our organic growth as of May.

As we already highlighted in our H1 call, we are piloting some brand marketing in the U.S. and U.K., which has shown initial positive results. And above all, I'm very proud to say that Courvoisier took top honor as Best Cognac for its 30-year XO Royal in the 2025 Beverage Testing Institute Awards. In fact, out of the total of 8 categories awarded during the event, Courvoisier was on the podium in 4 of them, with XO Royal winning the top prize with XO, VSOP and the VS expressions. And this clearly reinforces the quality of our liquid in our bottles.

For the rest, I won't comment too much, just to note that 21% of our overall portfolio is currently classified as local brands given their geographic concentration. SKYY remains an important part of the portfolio and showed a positive performance in Q3 driven by Argentina, China and Brazil, more than offsetting the ongoing softness in the core U.S., in line with other major players in the category.

Okay. I'd also like to share some of the highlights of our activations from last time. And given that we're in our peak season, the key focus for us has been imperative in this period. So let's start with Aperol. Music festivals are and will continue to be at the heart of our activation strategy for Aperol. This summer has been our biggest and boldest yet with over 130 festivals in EMEA alone reaching more than 10 million consumers and selling, yes, selling over 2.5 million Aperol serves. We're also once again in the U.S. Open, where Aperol engaged with more than 90,000 attendees, driving 26 million influencer impressions.

For Campari, the main highlights of the quarter were the strong partnerships with the major film festivals. Venice for the 8th, Locarno for the 5th and Toronto for the 2nd year. We're also very active during Negroni week because as you all know, there is no Negroni without Campari. And this linked with our cinema and the Negroni are critical for the positioning of Campari, and we'll continue to strengthen this further in the upcoming period.

And moving from aperitifs to tequila, Espolòn is also very active during the summer with its mark days of summer campaign. Media impressions increased by more than 28% compared to last year. Social impressions reached millions leading to additional coverage in Forbes and Vogue and all of this culminated in a widely publicized drone show over New York.

And lastly, we're going to have a look at our new Wild Turkey campaign, which was launched at the beginning of September, focused on our legendary master distiller Jimmy Russell. This initiative represents the brand's largest ever investment with a media spend planned up to $12 million through 2026. And this campaign is rolling out across the U.S. and Japan in '25, expanding to Australia, South Korea and other markets in 2026.

The and the pre-launch testing ranked the campaign in the top 1% to 5% of benchmarks, showing strong purchase intent, brand saliency across the key markets. So let's have a look at the video.

[Presentation]

Okay. I think back, hopefully, if the technology is working properly. So before I hand over to Paolo for the P&L and balance sheet section, I'd like to give you an update on our key strategic priorities. We're really excited to welcome many of you in-person to our first-ever Strategy Day coming up on the 6th and 7th of November in Milan. The agenda is going to be pretty packed, giving us the opportunity to review our future direction and priorities while not forgetting to have a bit of fun, showcase our brands and our amazing production capabilities.

So moving on to cost containment. You can see that in Q3, the declining trend we guided for in SG&A has started and will continue in Q4. Therefore, we are on track to achieve our target of 50 bps benefit on sales in 2025 and 200 bps benefit by the end of '27. On portfolio streamlining, we continue to take the right steps after disposal of Cinzano and our American plant in the first half. We've now divested our 50% stake in Tannico, the Italian online wine and spirits business.

Although this has a limited impact on our results, it's another step in the right direction in terms of business simplification, in line with our strategy to focus on fewer, bigger bets. Any additional potential disposal will be based on the optimization of potential proceeds. And I can say that more conversations are ongoing.

Okay. With that said, I'm going to hand over to Paolo. Paolo?

Thank you, Simon. First and foremost, I wish to thank Simon for his kind words at the beginning of the presentation of my past contribution to the Campari success. It's been an incredible journey, a privilege to engage with such a thoughtful and committed community of analysts and investors over the years. I look forward to continuing to support the group in my new role as the Vice Chair, and I hope to see you -- many of you again at our Strategy Day in November.

For now, let's dive into the results and the outlook for the remainder of the year. Now if you follow me to Slide 17, let's start by looking at our EBIT margin dynamics for the last time together. I am happy to say that we have recorded solid results so far in 2025 with a flat EBITDA adjusted margin supported by gross margin accretion and cost containment benefits, offset by brand building investments as planned.

In terms of gross margin, 9 months was up by 90 basis points with an acceleration in Q3 of a positive 180 basis points. This was mainly due to the positive mix and ongoing benefits of input costs, especially Agave as well as contained tariff impact of just EUR 6 million in 9 months. Tariff impact benefited, in fact, from some pre-tariff in-house inventory position we were holding. Accordingly, our full year impact has been revised down to EUR 15 million for 2025. A&P to sales reached 17.3% in 9 months with an acceleration during peak season leading to a positive 9% organic yearly growth and a negative 110 basis point dilution impact on margin.

As Simon mentioned before, we continue to invest behind our brands and our full year guidance of 17% to 17.5% is fully confirmed. As you all know, our cost containment efforts are becoming more and more visible. In Q3, we had a declining trend of negative 4% in value, and we are on track to reach a 50 basis point accretion guidance driven by ongoing value reduction in Q4. Accordingly, EBITDA adjusted was realized at EUR 517 million in 9 months.

Within this, there was a positive contribution from perimeter of EUR 1.1 million driven by Courvoisier until April, net of agency brands and co-packing. Foreign exchange impact was realized at a positive EUR 9.8 million, driven by devaluation of the Mexican pesos offsetting the negative impact of U.S. dollar devaluation.

Let's move on to look at our group pre-tax profit with a few comments. So far this year, operating adjustments totaled EUR 41.9 million and that includes the impact of plant disposal in Q1 and severance payment. Financial expenses came in at EUR 80 million in 9 months. This is on track with our expectations of EUR 105 million to EUR 110 million for the full year. The increase versus 9 months of 2024 was driven by higher average net debt, actually EUR 2.365 billion this year versus EUR 2.071 billion last year, mainly due to the base effect of Courvoisier closing on cash and debt. Average cost of net debt is now at 4.3% versus 3.7% in 9 months 2024.

As in previous quarters, we need to remember that last year's figure was artificially low, given cash at hand ahead of Courvoisier closing coming from acquisition funding. Adjusted 9 months 2024 figure would have been 3.8%. Overall, group pre-tax profit adjusted amounted to EUR 440.4 million in the 9 months, indicating a negative 2.6%. And group pre-tax profit came in at EUR 398.8 million with a negative 5.7% decline.

Moving on to look at the net debt, Slide 19. Net financial debt was EUR 2.241 billion in 9 months, improving by EUR 136 million compared to 2024, thanks to positive cash generation. This is before the further benefit expected from the proceeds of Cinzano disposal after the closing, which is expected to occur before the end of the year and will further contribute.

Cash and cash equivalents were at EUR 509 million, up versus first half due to cash generation. Compared to the end of 2024, it is down by EUR 157 million due to EUR 78 million of dividend payment, CapEx initiatives, loan repayments and employee termination payments.

Lastly, in line with our strategic priority of balance sheet discipline, our leverage ratio improved to 2.9x in 9 months, down from 3.6x in 9 months of 2024, following the acquisition of Courvoisier, 3.2x at the end of 2024. So in 12 months, as we said before, we have a deleverage that is accounting for 0.7x. Pro-forma including Cinzano disposal, the ratio is slightly better at 2.85x. This is a testament to our capability of actively manage our balance sheet following acquisitions and bringing leverage ratio down with further improvement expected going forward.

Let me hand back to Simon to comment on our outlook.

Great. Thanks very much, Paolo. So I started this year by saying it was going to be a transition year. And in these 9 months, we've showed a resilient performance despite the ongoing challenging backdrop you all know. The environment is still one of the most complex any of us has gone through, but we continue to outperform in key markets. At the same time, we keep our focus on what we can control in order to manage our balance sheet and P&L effectively and the results as clear as you just heard from Paolo.

For the full year, we continue to expect moderate organic top line growth, assuming no worsening of consumer confidence in Europe or in the U.S. and especially in the on-trade. So far in the 9 months, we recorded plus 1.5% organic growth which confirms our targeted progression. On EBIT-adjusted margin, we're maintaining our flattish organic guidance.

Have this in guidance now includes the tariff impact and the drivers behind this provision are as follows: first, lower than previously guided negative impact from tariffs of EUR 15 million as Paolo mentioned before, due to the benefit of our pre-tariff in-house inventory position. Of course, this is assuming the current tariff rates remain the same, which we hope they do. But now anyway, given the stability we've established. But just to consider, we will not have the same benefit next year.

Second, the benefit of efficiency gains in COGS and SG&A, where we continue to make good progress. This is more than offsetting the reinvestments in A&P which are critical for our brand building, and we believe investing now while many others are cutting their budgets, helps to deliver strong long-term brand benefits.

In terms of FX and perimeter, we expect limited overall impact in value terms. And regarding the medium long-term outlook, we confirm our previous guidance, and we are confident for the future. As I mentioned before, we'll come to the market with more details of how we're going to get there next week during our Campari Strategy Day.

So to summarize, we keep our focus as planned in the key areas that we've mentioned before. We continued relative outperformance in sellout, which we are doing; financial deleverage trend, which we are achieving; deceleration in SG&A growth driving operating leverage, which we are delivering; continued focus on commercial execution and pricing discipline, which we are controlling; and portfolio streamlining, which we are delivering.

So let's close here, and let's open up the floor for your questions. Thank you.

[Operator Instructions] The first question comes from Andrea Pistacchi of Bank of America.

So first of all, Paolo, I haven't been on all the 100-plus calls you've done, but many of them. So I really want to say a big thank you for the help, detailed answers, insights that you've consistently provided. And also, of course, congratulations for your appointment to Vice Chairman of the Board. And all your best -- all the best in your new chapter, and I look forward to seeing you in Milan next week.

So I have 2 questions, please. First, I'll start with Paolo, on gross margin. Gross margin being one of the key highlights, I think, of these results. Now there are a lot of moving parts here from the tariff impact, the input cost benefit, Agave, mainly mix effects, maybe other things. So it would be helpful, please, if we could go through these drivers in a little more detail if that is okay?

For example, how much of a benefit are you getting from input cost and Agave, and is there more to go as we go into next year? And also, if you could say, what is driving the mix benefit? Because I think your aperitifs was a bit more subdued this quarter growing below group average. Yes. So putting all this together also on the margins, how you're thinking about how these moving parts play out in Q4 and maybe going into next year?

And then for Simon, please. I wanted to dig a little deeper on EMEA, which I think was very solid overall. Some markets are strong. Others not, however, various companies are calling out how affordability is weighing on consumer demand. Now given that the affordability headwind probably won't go away in the short-term, what are you doing to deal with this to adapt with this? What does it mean for pricing in EMEA in the next 12, 18 months? And in Italy, stock levels, given that there's been a bit of a softer performance that you're calling out in the on-trade in the summer, how are wholesaler stock levels there?

Thank you, Andrea. On -- I'll start with the gross margin question. So vis-a-vis key drivers on the COGS, we have originally highlighted EUR 20 million benefit from input costs, most of it coming from Agave. But also, I have to say that many other commodities are -- the prices are coming down. The only exception to that still remain logistic costs, where we have seen negative variances vis-a-vis a year ago.

In terms of -- if you look at the upcoming quarter and more directionally into 2026 for the upcoming quarter, we think we will still benefit from positive contribution at the gross margin level, as we've seen in the third quarter of the year. We will keep on benefiting from a reduction in value of SG&A due to the restructuring initiative that is having an impact in the second half as we have originally guided, more to come with a further 90 basis points in 2026 due to the full year effect of the initiatives that have been implemented in year 2025.

Vis-a-vis the mix, the very good news is that on Espolòn, originally the objective was to achieve parity vis-a-vis group average gross margin by Q4 of this year. Instead, we managed to put it forward to Q3. So Espolòn in Q3 was no longer a bleeder and that contributed to a positive mix. Clearly, if we look at the composition of the margin gain in the third quarter, giving the pricing pressure that we had, most of the -- if not most of the gain is coming from cost benefits more than mix and so the very same dynamic we are expecting to see in Q4 with promo pressure negatively impacting the company's ability to take net price gains.

COGS, will keep on being positive and mix as we hope will positively contribute. So this is a little bit how we see the first quarter and next year. In terms of clearly, perspective in the past years, our ability to drive gross margin expansion based on sales mix improvement is linked to the performance of primarily aperitifs but now also tequila, Espolòn will be no longer a bleeder. So we remain extremely positive vis-a-vis the possibility of expanding gross margin via sales mix. Commodities remain a tailwind in 2026, whilst at this stage, we believe pricing, the opportunity is minute and less evident given the current market conditions.

Andrea, looking forward to seeing you next week. Look, your question on EMEA, look, EMEA, overall, it's tough, as you rightly said. But I'm really pleased with the performance that the team has delivered. And I think the call out on affordability, you're seeing consistently across categories and this whole cyclical structural debate. I think one example of cyclical EMEA is a great one where you're seeing it across every category. It's not just within our category, put it that way.

I think, look, in terms of what we need to do on this, we are very good, I think, at positioning the brand as aspirational, yet affordable. So the space we play in, we've got to really create that value in the consumers' eyes. And so the best way to do that is execute brilliantly. And that's in the markets where we're carving out, we're getting -- gaining share or outperforming, it's where we're really doing that, and the consumers are seeing the value in what we offer. So I think that's the first thing in terms we need to do.

The second thing is then leveraging our portfolio. We have a collection of brands that allow us to compete very effectively in these markets. And you see that whether it be there may be a tougher performance on Aperol in Germany, but the growth in Sarti or the growth in Crodino and other markets. So leveraging our portfolio is key. I mean, more tactically, there are some opportunities, I think we've got to focus on around revenue management, which you'll hear more about next week. And just generally, in terms of our overall strategy, I'm not going to take away from what you're going to hear next week. So maybe by the end of Friday, you can let me know whether I've answered your question probably.

The next question is from Sanjeet Aujla of UBS.

Hi Simon. Paolo, I'd also like to echo massive congratulations on your new role and many thanks for all of the help of the years [indiscernible]. So also 2 questions from me. Simon, I just want to come back to the consumer demand environment in the U.S. and Europe. Would you highlight there's been a deterioration between Q3 and Q2? And in particular, how are you seeing the evolution of the competitive and pricing environment? Would you say that's further intensified over the summer months? And that's my first question.

And then just coming back to stock levels. I think Andrea asked the question, but can you just give us a flavor for where stock levels are, particularly in the U.S. and Italy and anywhere else that might be noteworthy?

Sure. Absolutely. So I think in terms of the performance in Q3 and Q2, it is really mixed. And as you know, looking at this data from a national point of view, it kind of blurs what's going on. Yes, if you look at the Nielsen data, and it seems very kind of doom and gloom across the industry in many cases, but we have pockets of growth really coming through quite nicely. I mean a good example is not picked up is, in our 11 cities that we're really focusing on building Aperol, we have 10 of them in double-digit growth. So when you talk about the deceleration, it really depends where and on what.

And I think that's where we've got to be a bit careful that we [indiscernible] too many conclusions simply because of the negativity in the off-premise. We are still growing. We're growing in the on-premise. We're growing in NABCA and we're growing really successfully on the brands that we're focusing on that we're prioritizing. So I think for me, it's -- it's more about what we're doing and where we're doing it than actually what's happening in the marketplace. As I've said before, we have the benefit of being a smaller operator in the U.S. and therefore, we've got to go after opportunities and maybe some of the other companies don't have.

Having your second point on the pricing environment, I think you're saying you see the same data we see, which is from a mix point of view, again, it depends on which category. I think you're starting to see a bit more price competition coming through in Blanco as we've seen within the tequila sector. Repo is dipping down a bit. But if you look at the overall price mix, actually, the tier that most of it is coming from is the tier above where we play with Espolòn. It's up at the super premium price point, where you've got a mix, from memory, at 2.6% negative as consumers are now trying to -- our brands are trying to capture that consumer affordability in that end.

And that's actually creating a good opportunity for us, some people on the down trade. So, we're going to have to carry on [ sale. ] I think it's going to be a pretty aggressive festive period. I think everyone is going to be up trying to close out the calendar year strongly. So we'll have to wait and see, but I'm very confident in terms of the plans that the team has got. I mean in terms of the stock levels just quickly in the U.S., I'm very happy, as I said before, with the levels of stock we've got we can -- we've managed to take down some of the pre-tariff stock that we put in, which on the flip side of that allowed us to not get hit by the tariffs quite as much as we originally forecasting.

So that's impacted some of the shipment numbers that you see in Q3. In Europe, again, very happy. We see the stock levels we've seen in Italy and perfectly normal with what we're seeing in terms of sell-out. I'm not concerned about excess stock anywhere. There was -- I'm not concerned about heavy pushing through to land Q3. I feel pretty confident. And without getting into the performance in Q4, but I'm not seeing any hangovers running from Q3, put it that way.

The next question is from Simon Hales of Citi.

Can I echo the congratulations to you, Paolo, and look forward to celebrating properly with you when we see you next week at the Strategy Day. So just a couple of quick ones for me as well, please. I want to start, can I just go back to the U.S. sort of briefly. And I wonder if you could just talk about whether you -- obviously, we're seeing a deteriorating underlying trend in the industry through Q3. I appreciate you're outperforming that and some of your comments earlier in terms of you're still winning where you're investing.

I wonder what you're seeing as we're coming to the early parts of Q4, obviously, an important festive season to come. Has that deterioration in trends fed through to just sort of do you think weaker ordering by wholesalers in the U.S.? I mean, any comments and color there would be interested.

And then secondly, just coming back to Jamaica. I appreciate it's very early days, given the hurricane only hit last night and your focus is rightly on the safety of your people. But you're obviously confirming at this stage, your full year '25 guidance for group moderate organic sales growth. I think consensus is looking for around about 2% to be moderate for the year. I just wonder, is that deliverable that moderate sales growth even if the disruption in Jamaica ends up being pretty significant given the hurricane?

Yes, Simon, good questions. I mean I think, look, in terms of the underlying Q3 and heading into Q4, we're certainly living in a dynamic environment at the moment is the way I describe it. So I think ultimately, we're not seeing any real pressure from, certainly from our relationships. We came through on the wholesaler side, but that's also probably because we're actually in a reasonably healthy stock position already, healthier than not too high is what I mean by that and appropriate for what we need going forward.

So I think -- as I've said on previous calls, the cost of capital, both in on-premise retailers and wholesalers is clearly ask -- people are now asking about what -- are people destocking further. For us, we feel pretty confident in terms of the flow. We're very confident in terms of the stock levels at each level. So we don't really see too much of that coming through. I think what will be interesting is whether or not retailers are willing to take in the holiday stock that they normally take in. And I think that's something we don't know yet. We've had no indication they're not going to. But again, things are changing quite quickly in the marketplace, and we'll see.

Maybe they're taking half as much through to a holiday to wait and see what the consumer does. So that may impact. Again, for us, it comes back to a big chunk of our business is in the on-premise as well. So we've got to make sure we're executing really well in the on-premise, which the team is doing a good job on, but also making sure that we can respond to those changes if they come through in the purchase patterns.

So I think on the first question, again, it's difficult to kind of predict what's going to happen, as you know, but we feel pretty confident with the plans that we've got. On your second question on Jamaica, you're absolutely right. Look, it's all about the team and making sure everyone is safe at the moment. I've got calls later tonight with the team to find out where we are. In terms of this year, I want to be clear that we've already shipped a vast majority of the stuff that we need to close out the year out of Jamaica. And we're sitting on healthy inventory positions to meet the demand. So I don't see that being an impact into this fiscal or impacting our ambitions to close out the year strongly.

I think until I see or until I hear really what the team has found, once I've established everyone is okay, then I'll be in a better position to give maybe a bit more of an update next week in terms of what we found out. But at this stage, it's very hard to get the communication. I think you know electricity is out, phones are out, a lot of the roads are blocked. We're getting kind of piecemeal information. We've got a call later tonight, and I'll know a bit more, but I probably won't have the full picture tonight either. But in terms of full year impact, I don't think there's -- it's a significant impact.

The next question is from Mitch Collett of Deutsche Bank.

And I'd also like to say thank you very much, Paolo for all your help and patience over the years and good luck with the future. Two questions for me, please. So the first one is a little bit similar to what we've had before, but you've obviously reiterated this year's guidance, but you've added this line about assuming no further worsening of consumer confidence in Europe, especially impacting the on-trade and in the U.S. I appreciate the importance of OND, but maybe just a bit of color on why you felt that additional line was necessary given how far we are into 2025?

And then I wouldn't want to take anything away from next week. But clearly, you've confirmed your medium-term outlook. And I appreciate visibility is low. It's still early to ask for a read on 2026. But the question I want to ask is, do you think that next year, you'll be in that mid- to high single-digit organic growth range? And I guess, if not, what do you need to see to get there?

Okay. Mitch, yes, in terms of the guidance, the reason we put that in is, as I said on -- literally on the first call, I think I came on with it, we're controlling what we can control. And so the team is working through that. And so yes, we've only got a couple of months to go to close out the year. But this has probably been a year with high volatility than I've seen in 31 years. We've had tariffs, we had economic pressures, geopolitical changes. And as a result, we're seeing consumer behavior really change quite quickly and certainly a lot quicker in terms of purchase behavior.

And that was the only reason we put it in. We want to be prudent. We want to make sure that we land the year in line with what we've told you, each one of these calls of what we're going to do. So I think we're just kind of being a bit prudent there. I'm confident we can get where we need to get to. But I think it's also recognizing there are some things outside of our control. And therefore, we want to make sure that we've kind of covered that off in terms of our guidance.

I think in terms of your question on '26, yes, you're right. I'm not going to give you an answer yet in terms of where we are, but I think -- the reason we set our medium-term outlook, and we'll talk more about this next Thursday and Friday is really about our confidence in that longer-term outlook and medium-term outlook.

What we anticipate '26 will be, will be a step on that journey. Exactly what step? We need to confirm we want to close out this year, and we'll be able to give more guidance once we see how we finish out the year. But it would be, I think, a positive step in that direction. Again, the only caveat on that is there's a bunch of stuff outside of our control and volatility at levels we haven't seen before. So again, what I want to be able to do is be prudent, make sure we can deliver what we tell you we're going to deliver.

Next question is from Laurence Whyatt of Barclays.

Simon and Paolo, and can I echo all the comments to Paolo, and thank you for all your hard work and help over the years and look forward to seeing you next week at the Capital Markets Day.

A couple of questions for me there, please. Just on the tariff impact. You mentioned you've managed to get around some of the tariffs by using some of your stock. Presumably, that means that some of the impact will be felt next year. I was wondering if you could quantify what sort of tariff impact you would expect next year once you no longer have that -- the benefit of the stock and whether you think you have taken any price in order to overcome some of those tariffs and if so, sort of on what brands do you think that will be taken on?

And then secondly, with regard to Espolòn, of course, the expectations of tequila over the past few years have been, I guess, pretty heroic. The growth has been enormous. And of course, that's slowed down somewhat in recent months and quarters. Just wondering on your sort of contracted Agave supply, whether you've had to adjust how much Agave you're buying in from Mexico and whether that's giving you some of the benefit on the margin on Espolòn recently?

Yes. On the tariff, the -- we confirm -- although this year, we're benefiting from already existing in-house stocks for next year, unfortunately. If nothing changes, the EUR 37 million guidance that we've highlighted before stays. So it's completely unchanged. You alluded to opportunity of taking price. Of course, there's always the opportunity to partially mitigate the impact. But we also have to recognize the fact that the U.S. environment is particularly competitive at the moment. Therefore, I wouldn't bank on it at this stage.

Whilst on the second question vis-a-vis the Espolòn brand, we've managed to tweak down the prices and the commitments. And so this is why we're benefiting from the decline of the Agave price. For next year, there will be still a tail end opportunity sitting in the current trend. We have directionally highlighted in the past EUR 5 million, which is, I think, makes sense is confirmed for next year. So we have a little bit of tailwind also on that -- on input costs for next year. We're in a good spot on Agave suppliers.

Next question is from Trevor Stirling of Bernstein.

Simon and Polo, let me add to the que Paolo and look forward to really having a proper drink and celebrating next week. Simon, probably one question for you. If we look at the Espolòn shipment data, it looked kind of weak around minus 1%. And so the sellout data we see in NABCA is much stronger than that. I think you alluded to shipment phasing. Maybe could you just give us some sense of where you think Espolòn is on an underlying basis?

Trevor, you're right. I mean in terms of shipments down 1% and then you see the performance on the sellout, we basically -- there are 2 drivers of this. One was actually just destocking the stock that we brought in ahead of the tariff, we're still unsure as to what was going to happen there. And so we've just been working that through, which is whether ultimately the shipments will catch up with the sell-out performance, is the first thing.

The second thing on that is just there's some mix around the different states is about where we're shipping stuff as well. So in terms of whether Repo, whether it's Blanco, again, there's just some different phasing in terms of that. So I don't think either of them are big drivers. It's more just about -- I think you'll see some catch-up on that as we close out the year and head into Q1.

And then maybe just one follow-up. The strength of both Jamaica and the Jamaican Rum portfolio, it seems really strong. I mean, I think Jamaica and Jamaican Rum is down about 19%, 20% this time last year, and you're up 45%, 50% which would imply you got underlying growth as you're probably in some of the region of 20% at least. Does that sound about right?

[indiscernible] you have your phone on mute?

Sorry about that. I thought -- Trevor, I thought I hit it. The -- in terms of the Jamaican Rum performance, really a couple of drivers on that. One is the performance in Jamaica. So we're cycling the disruption of the hurricane last year, which now it looks like we might be doing the same this year. So that's one of the drivers. But the brand is incredibly powerful on the island, and the team has done an excellent job of continuing to drive the execution. So that's been one area.

The second area has been the fact that we were out of stock in the U.S. And so now that we've got stock back in, that's allowed us to give us a very positive performance there as well. So put those 2 things together, that's really why.

The next question is from Chris Pitcher of Rothschild & Company.

Another round of thanks for Paolo from me for [indiscernible] over the years. And also congratulations on the, The Glen Grant sale, which you highlight in the Annex, which has gone to raise some good money for charity. So good work there. One question on Courvoisier again. Are we through the last really disrupted period for Courvoisier? Because if my numbers are right, you've probably done EUR 13 million, EUR 14 million of organic sales through on Courvoisier. And should that be normalizing into the fourth quarter? Or should we still expect to see continued strong momentum as that brand comes back? Because certainly, the EUR 99 million was a bit ahead of what I was forecasting for the 9 months.

I think as we progress further into the upcoming quarters, the shipment performance of Courvoisier will basically mirror the depletion and the sell-out trend. So it's clearly at the beginning, we benefited from the first time consolidation of Courvoisier. So I think most of that is behind us.

The destocking phase? So it's on a more normal comp in the fourth quarter. And are you still expecting to release -- continue to release cash from the inventories given the levels they were at?

On the inventory side, we -- as we said that, we have a lot of aging liquid. Over time, we will more than selling liquid, contain the intake of new aging [indiscernible]. So yes, it's directionally positive. It will take time to absorb the stock we've taken on board as we bought the brand. It was more than EUR 440 million.

The next question is from Alessandro Tortora of Mediobanca.

I have 2 questions. Okay. The first one, if you can comment a little bit on the debt-EBITDA trajectory, considering the leverage ratio you already got in the 9 months, if we can assume, let's say, that you're going to stay below the 3x by year-end or if we need to think about any seasonality or any, let's say, factor that should bring this ratio, let's say, again above the 3x. This is the first question.

The second one is just a follow-up on Cognac. If you can comment a little bit, let's say, the recent change on the duty-free side and if you expect also on Courvoisier side, a significant, let's say, impact on the reorder on the duty-free.

On the leverage ratio target, we're not giving any guidance. We have also to take into consideration the fact that in Q4, we still have a significant tail of extraordinary CapEx. The total amount of CapEx is EUR 200 million. And in the first 9 months, we've already spent EUR 120 million. So there is EUR 80 million cash outlay coming from extraordinary CapEx in Q4. Yes. But directionally, you're right in saying that the company generates a lot of free cash flow, one of the highest free cash flow to EBITDA conversion in the sector. Average for the last 5 years at about 60%. So we -- you can easily calculate the deleverage potential in coming years.

Okay. And Alessandro, sorry, I couldn't quite hear the question. [indiscernible] We got the recent change in duty-free on Courvoisier and others, but we aren't sure what the question was?

Yes, it was related to China. I know it's, let's say, is not so big for you. But if we look at, let's say, the GTR and the restock that is now possible according to the recent tariff agreement. If you see, let's say, any restock for Courvoisier in the coming months?

Right. So yes, so I couldn't hear you. Look, for us, as you know, look, China is very small for Courvoisier and so is the Asian duty-free at this stage. So it's not a big driver for us. I think China represents less than 2% of Courvoisier sales. So the key thing we want to look at in GTR as part of our relaunch plan of Courvoisier across the region is the strategic role that GTR plays as a shop window for the consumer. So I think that's more where we'll see it with part of the new strategy. But there's no -- we're not looking at a restock and it would be negligible in our case anyway.

[Operator Instructions] There are no more questions registered. Would you like to make any closing remarks?

Yes, I would just very quickly, thanks very much, and look forward to seeing many of you next week. Just to reiterate, all of your thanks to Paolo again. A remarkable run and a remarkable set of earnings reports, and [indiscernible] to him next week. So thank you again, Paolo. And we'll see you next week. Thanks for your time.

Bye.

Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.