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Speaker 1: Now.

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Speaker 2: Prono Ricar shares are falling today. The French maker of

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Speaker 2: Absolute Vodka and Jamison Whiskey expect sales in the US

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Speaker 2: to decline in the first quarter as a boom in

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Speaker 2: demand for premium spirits loses steam. Joining us now from

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Speaker 2: the company's headquarters in Paris is Alexander Ricar, the CEO

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Speaker 2: of Prono Ricard, Alexandra, thank you so much for joining

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Speaker 2: us this morning.

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Speaker 1: Look.

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Speaker 3: Shares are down about four point four percent.

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Speaker 2: I'm sure you're going to tell me that you don't

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Speaker 2: care about one day price moves, which is fair enough,

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Speaker 2: But what do you make of what seems to be

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Speaker 2: a sense of investor disappointment in this set of results.

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Speaker 4: Listen, I have to say I'm a bit surprised. Indeed,

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Speaker 4: I don't look at share price day to day. You're right,

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Speaker 4: that being said, coming out of a very strong set

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Speaker 4: of results, very strong performance for the year with double

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Speaker 4: digit growth top line, ten percent organic growth coming from

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Speaker 4: all regions, very rug based growth coming from basically all

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Speaker 4: our spirit categories, with six key spirit categories driving more

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Speaker 4: than eighty five percent of our growth. And very strong

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Speaker 4: as well profit growth with pro profit from recurring operations

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Speaker 4: growing double digit eleven percent with some margin expansion and

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Speaker 4: a clear protection of our gross margin. So very strong

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Speaker 4: set of results. Maybe markets are currently focused on very

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Speaker 4: short term deliverables because we did indicate that we were

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Speaker 4: expecting a soft Q one.

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Speaker 1: You mentioned the US.

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Speaker 4: The underlying consumption in the US, just to be clear,

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Speaker 4: is resilient. Then there's phasing and technical issues which will

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Speaker 4: lead us to believe we'll have a soft Q one

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Speaker 4: in the US, but a positive outlook for the full

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Speaker 4: year in the US, of course, how.

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Speaker 3: Would you characterize the American consumer right now?

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Speaker 4: Well, the American consumer is resilient. I mean, premiumization is

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Speaker 4: still ongoing, although there is a slowdown in the pace

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Speaker 4: of premiumization given the global environment. But at the end

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Speaker 4: of the day, we do see resilience for the American consumer.

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Speaker 5: Is the American consumer trading down? Are they simply buying less?

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Speaker 5: How are their spending habits changing?

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Speaker 1: Spending is still growing.

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Speaker 4: The US market is a four to five percent value

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Speaker 4: growth mortgage market on average over time. We've just come

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Speaker 4: out of an amazing period of double that growth rate

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Speaker 4: per annum. So the last three years post COVID have

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Speaker 4: grown on average for our industry around eight percent, So

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Speaker 4: what we're seeing is a normalization based on a high basis.

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Speaker 4: But the market is still growing. We believe it's growing

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Speaker 4: in the low single digit, maybe around one and two percent.

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Speaker 4: And the real question is the rate of recovery to

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Speaker 4: that longer term trend of four to five percent. So

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Speaker 4: still positive dynamics with a lot of inventory management happening

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Speaker 4: after a couple of years of supply chain disruption.

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Speaker 5: Can you continue to pass on some of the increasing

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Speaker 5: input prices that you've seen to consumers or are they

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Speaker 5: kind of hitting a wall here, especially in the United States.

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Speaker 4: Listen, to be fair, inflation has been there. We've been

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Speaker 4: hit by inflation in terms of our costs, and therefore

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Speaker 4: we were driven by price increases to cover for inflation.

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Speaker 4: We do believe when we look specifically at ourselves, that

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Speaker 4: inflation is going to ease and has started easing, especially

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Speaker 4: regarding transportation, and therefore you should expect more normal behavior

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Speaker 4: and more normal I would say pricing ax.

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Speaker 2: I'm just looking over some analyst notes on your earnings

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Speaker 2: at the moment. One bright spot at least from City.

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Speaker 2: They're pretty excited about this buyback that you've announced for

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Speaker 2: twenty twenty four five hundred million to eight hundred million euros.

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Speaker 2: They said it was unexpectedly large, should soften any blow

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Speaker 2: of other concerns.

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Speaker 3: Talk to me about the upper.

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Speaker 2: End of that, the eight hundred million euros, How ambitious

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Speaker 2: do you see that as being?

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Speaker 1: Well?

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Speaker 4: Over the last two years, we've done sure buyback programs

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Speaker 4: of seven hundred and fifty million, So we just came

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Speaker 4: out of a seven hundred and fifty million share buyback program.

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Speaker 4: Over the fiscal year twenty three, we've guided five hundred

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Speaker 4: to eight hundred million euro share buyback for this current year,

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Speaker 4: which now started this current year. We'll see we have

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Speaker 4: the flexibility and you know, as we go through the year,

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Speaker 4: we'll see where we end up between five hundred and

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Speaker 4: eight hundred million azon.

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Speaker 2: I'm also told by one of our producers that you

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Speaker 2: just returned from a trip in China.

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Speaker 3: What was it like over there? What kind of conversations

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Speaker 3: were you having?

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Speaker 4: Well, so, first of all, a lot of excitement I met.

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Speaker 4: All our teams in China cited because of the end

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Speaker 4: of the zero COVID strategy. So therefore they they're they're

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Speaker 4: happy to be to be to be a little bit

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Speaker 4: like us now, so we did experience a little bit

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Speaker 4: of revenge conviviality starting March.

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Speaker 1: It's fair to say that.

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Speaker 4: And obviously the macro economic situation in China has slowed

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Speaker 4: down and it is having somewhat of an impact on

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Speaker 4: consumer demand, in particular in the late night trade and nightclubs.

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Speaker 4: But we are seeing the emergence of live bars where

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Speaker 4: you have live entertainment. We are seeing the development of

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Speaker 4: the cocktail culture as well. We do expect because of

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Speaker 4: the environment, somewhat of a soft start for sure this

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Speaker 4: quarter in China. Bear in mind, we're lapping a very

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Speaker 4: strong mid Autumn festival last year, which was a record

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Speaker 4: year for US, and a previous year which was even stronger,

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Speaker 4: So we're lapping two years of very strong growth. It

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Speaker 4: was twenty three percent Q one two years ago. It

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Speaker 4: was nine percent again last year, so we do expect

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Speaker 4: a soft Q one.

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Speaker 2: I got to ask the cocktail culture, what's what's the

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Speaker 2: favorite drink out there?

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Speaker 3: Alexandra Howard tastes evolving.

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Speaker 4: So listen, you have you have many, many cocktails because

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Speaker 4: you have mixologists that are really happy to experience all

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Speaker 4: the different cocktails, whether it's based with cognac and the

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Speaker 4: leading brand, which is our brand Martel, but as well,

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Speaker 4: for instance Absolute Cosmos you see that as well, and

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Speaker 4: whiskey based cocktails.

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Speaker 1: So it's basically.

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Speaker 4: Cognac based cocktails, whiskey based cocktails, and vodka based cocktails.

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Speaker 5: Interesting, let me take you back to the data and

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Speaker 5: the numbers and what you're seeing.

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Speaker 3: Talking about a soft Q.

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Speaker 5: One expected in China, how long do you think that's

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Speaker 5: going to last? Because what some analysts are telling us

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Speaker 5: is the consumer hasn't really fully felt the impact of

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Speaker 5: some of this housing downturn and some of the we

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Speaker 5: your data we're seeing out of China, Well.

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Speaker 4: We expect improvement as of Q two and again in

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Speaker 4: part amplified by favorable comps, so contrary to the Q

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Speaker 4: one where we're lapping a very strong year last year.

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Speaker 4: Bear in mind you had lockdowns and COVID impacts in

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Speaker 4: China in our Q two October November December, and then

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Speaker 4: we had a very poor Chinese New Year because the

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Speaker 4: zero COVID strategy stopped just ahead of Chinese New Year

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Speaker 4: and it was a big mess for Chinese New Year.

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Speaker 4: So we'll have very favorable comps entering our in R

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Speaker 4: Q two as of October.

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Speaker 5: You know, I know it's not an enormous it's never

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Speaker 5: been an enormous piece of your business Russia. But you

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Speaker 5: did get some flak for saying you'd resume market exports

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Speaker 5: to Russia and then kind of didn't about face after

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Speaker 5: there was a bunch of consumer pressure talk me through

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Speaker 5: the decision, making their understand that it's still going to

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Speaker 5: take some time, it's going to wind down those operations.

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Speaker 3: What made you do the about face.

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Speaker 4: Listen, we stopped shipments to Russia last April, and we

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Speaker 4: stopped definitively, so we're winding down the inventory, but there's

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Speaker 4: not much left and we're closing closing our operations in Russia,

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Speaker 4: which our distribution basically will end up with a rep office.

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Speaker 4: We're well underway with this UH and UH and that's

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Speaker 4: basically it. You're either in or out, and in our case,

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Speaker 4: we made that decision back in April and May of

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Speaker 4: this year.

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Speaker 2: Ason, we're in this market environment right now here in Europe.

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Speaker 3: We're extremely concerned.

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Speaker 2: About stagflation given higher inflation data that's come in and

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Speaker 2: weakening growth. Given your exposure what you see to the consumer,

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Speaker 2: do you see any hints of that of undoe inflation,

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Speaker 2: yet consumers and an economy that's that's slowing down or

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Speaker 2: halting at the same time as well.

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Speaker 4: Listen, Europe so far delivered by the way, the last

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Speaker 4: twelve months in Europe have been very strong. Europe delivered

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Speaker 4: eight percent net sales growth. This for Europe is quite high. Obviously,

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Speaker 4: I don't think this kind of level of growth is

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Speaker 4: sustainable forever, of course, but we do see resilience people.

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Speaker 4: You know, people reserve some part of their discretionary spend

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Speaker 4: to go out and to celebrate together. And because the environment,

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Speaker 4: to be fair, is of course not the most celebratory

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Speaker 4: environment we know for many many reasons, but people still

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Speaker 4: want to keep that discretionary spend for their gatherings with

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Speaker 4: family and friends at affordable levels.

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Speaker 2: Alexar, before we let you go, I have to say

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Speaker 2: there's one question that I've really been dying to ask,

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Speaker 2: So you got to forgive me for this one. But

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Speaker 2: it used to be that celebrities would launch perfume clone brands.

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Speaker 2: Now it seems like everybody wants to have an alcohol brand,

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Speaker 2: from Clooney to Kendall Jenner. What do you make of

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Speaker 2: that trend? Is that sustainable? Are they making good stuff?

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Speaker 1: Listen, it's a great question.

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Speaker 4: We've always by the way, you had the celebrity endorsement

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Speaker 4: for some brands, leveraged some celebrities on other brands, or

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Speaker 4: some celebrities can be actors, can be famous, people can

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Speaker 4: be singers, and so on and so forth. What it

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Speaker 4: does mean is the spirits, the premium spirits industry is

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Speaker 4: so attractive that a lot of people want to get

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Speaker 4: into it, and, like in anything, some will succeed and

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Speaker 4: others won't. But bear in mind it does require as

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Speaker 4: trung expertise in terms of marketing of course, in terms

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Speaker 4: of execution, in terms of sales execution and so on.

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Speaker 3: Alexander, really great to get your thoughts today.

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Speaker 2: That's Alexander Ricard, CEO of Perno Ricard