Davide Campari-Milano (Milan:CPR) Q1 2026 Earnings Call

0:01 Good evening. This is the Chorus Call conference operator. Welcome and thank you for joining the Campari Group First Quarter twenty twenty six Financial Results Conference Call. As a reminder, all participants are in listen only mode. After the presentation, there will be an opportunity to ask questions. 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 gonna go through our quarter one twenty twenty six net sales in this new format and also cover the outlook for the balance of the year.

0:51 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 a 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 twelve month rolling period.

1:36 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 five key drivers. First, sharper portfolio choices with fewer bigger bets. In fact, you'll clearly see in our sellout 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.

2:25 For example, with the Campari Spritz ready to serve small bottle launch in Italy, Austria, and Germany towards the end of Q1, Amiaprol ready to drink can launch in The UK, 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 one, we had broad based growth across our houses and regions with 18 countries all in growth. Fourth, continuing to leverage our investment to work harder against our new strategy. And fifth, driving our efficiencies across each line of the p and l to allow us to invest more behind our brands, which means that while we contain SG and A, we are able to accelerate our investments in A and P as we told you, in a period that is the most cost effective moment to gain market share.

3:28 In fact, in Q1 we continued to activate heavily to deseasonalize and expand further. In Q1, we also took the opportunity to carry out some targeted inventory optimization in The US together with our partners on our non priority brands, and this is supported by the very strong performance of our key brands like Aperol. This amount, which is around €10,000,000 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 $1,000,000,000 in The US. 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.

4:21 We've had a bunch of questions on the AppRoll2Go 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 AppRolls2Go can, which is now being 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, they're only at a net sales level. Of course, 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.

5:12 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 continue to grow nicely. In terms of FX, the main impact is coming from The US and Jamaican dollar, while the perimeter impact is in line with what we previously told you, mainly regarding the disposals of Ginzano and our Australian plant. So now let's have a look at sell out. Our outperformance and share gains continued in most markets. In The US, we are outperforming across all channels with robust growth in our key aperitif and tequila brands.

6:02 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 non priority brands, but imperatives continue to perform extremely well.

6:55 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 UK, 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.

7:43 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. Crudino benefited from campaigns, especially during dry January, with 12 countries growing at more than 20%. And at the same time, Espelon and Corvoje also contributed to the growth. During Q1, while Easter phasing positively impacted, although 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.

8:37 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 Espelon 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 US 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 four key states, and we are already seeing encouraging early progress on velocity and distribution.

9:30 In fact, it's early days, but based on eight weeks' of data, we are seeing velocity at nearly three times 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 and 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 twenty twenty five is on track and our brands benefited with mid single digit growth, especially driven by Ray and 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.

10:20 Now to discuss our newest region, Developing Markets. As most of you know, we formed this region 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 four, and is especially driven by the two 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 Sky Cosmic.

11:10 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, 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 S1 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.

11:57 We also recorded decent growth in China, India, 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. To place 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 March 4, 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.

12:44 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 mid term targets and deliver what we promised.

13:33 On the P and 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. Thank you, sir. This is the Chorus Call conference operator. We will now begin the question and answer session. The first question comes from Trevor Sterling of Bernstein.

14:31 Sanjeev. Just 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 a quite a strong risk of a deceleration in the second in the next three 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 detail point is those European negotiations that you mentioned, are all your European negotiations fully closed now? So as of q two onwards, we shouldn't be expecting any disruption from those retailer negotiations. Hi, Trevor. Yeah. Look. Thanks for the questions.

15:16 Maybe I'll cover the one first. European negotiations are closed, and, you know, very pleased with the 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 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 we comfortable making sure we can actually deliver the full year guidance that we've already provided. Thanks, Simon. The next question is from Mitch Colette of Deutsche Bank.

16:07 Hi, Simon. I'm going ask a similar question to what I asked on the full year call about the pricing environment, specifically in The US, 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 you're 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 Espolon 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 US, and what your response will be if you do see peers reducing prices, I guess, more materially than than we're currently seeing? Thank you.

17:04 Hi, Mitch. Yeah. It seems the topic of the week, does that answer the pricing from what I'm seeing in terms of coverage. Look, I think I I reiterate kind of two big comments, and I'll then 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 those values actually support the prices being charged. So I think that's the most important thing. So at least my second point on, well, I don't believe that reducing price long term builds equity. I think it will give you a short term list and that's part of what you're what you're seeing. But as we 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 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 think that's the overriding point.

17:57 I think more specifically, as I said through q four, you know, 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 Espolano plus 5%, or on Napka 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 Esperan. Understood. Thank you. The next question is from Simon Hales of Citi.

18:46 Thank you. Good evening, Simon and Francesca. My first question is 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 broadening out to sort of other brands in the portfolio? That was 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?

19:40 Simon. Thanks for the question. 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 that. This is primarily on Sky and on Grand Marnier and, you know, a couple of the other brands, but you see the sellout date on some of those brands where we have seen it affected by the downturn in The US. 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 a non priority brand. None of the brands that we have prioritized, we're doing this on. And we saw the opportunity given the performance in q one to be able to take that down. We'll continue to review it. I don't anticipate a significant movement in q two. This is just about responsible inventory management as you see the trends ebb and flow in the current environment.

20:27 I think on your second question, there are probably three areas that we're looking at in the 3%. The reason we're still guiding on a full year as kind of circa three is, you know, a little bit leading maybe back to Trevor's point, which is we 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, you know, a lot of long term contracts on the procurement side, some of them do have clauses where if there's a significant volatility, we would renegotiate. So an example of that would be glass, about 16% of our cost of goods. The other one is probably more immediate. It's 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.

21:21 I think the the second area, as you rightly said, is on GTR. Now you saw, I think, the news that today, there are nearly 2,000,000 passengers will be cut out during May. No one's quite clear what that means yet because it depends on which routes, which consumers, how much brands they'd normally be picking up in GTR. So we're we are out we've got a healthy business in GTR, but, you know, 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 the upside risk opportunities that we're seeing. Very helpful. Thank you. The next question is from Richard Whittigan of Kepler Cheuvreux. Yeah. Good evening, Simon and Francesco. Question is on Aperol Speaks to Go. I mean, you say it's been launched in in several European markets.

22:13 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 at all? Richard, yes, it is Look, it's very early days and I'm not going give too much information because we're still waiting for it to come through. But in terms of more at this stage, we're looking at is the distribution bills and the assumption. We're targeting specific occasions that we cannot compete in today with our existing format. So whether it be in cash and carry or whether it be in convenience stores. So 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 for point of distribution, are we getting the rotation ahead of the competitive set? And that is it will be a 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.

23:10 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 our with the company average. Thanks. The next question comes from Chris Pitcher of Roshanell and Co, Redburn. Thanks very much and good evening all. Can I just get a little bit more detail on the performance behind Grand Marnier and Corvoisier? You flagged that you're destocking on Grand Marnier, and it's not a priority brand.

23:59 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 before what the impact on Grand Marnier was in the quarter? And then on Corvazia, 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. Hi there, Chris. 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. We're seeing it having a tougher time as you will have seen in the Nelson 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 drink continues to be a broad trend.

24:52 I think from that point of view, 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 Covada, what was the second question? Hang on two seconds. I guess I didn't get it. I'm sorry. Where's the growth coming from? Because it sounds like The U. S. Is still tough for Cognac. And you mentioned Corvazia was in growth. Yes. I think it would sorry. On that point, yes, it is still tough in The U. S. It was here where she saw positive growth coming through on a number of the European markets. It was it was small, but it was positive. And given the trends in Cognac at the moment, we'll take it. So, yes, The US still remains quite challenged in terms of it. We are still working on the plans for a 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 gonna get one shot of this. We wanna make sure we get it right. And as a result, we're not rushing it.

25:48 Thanks. The next question is from Celine Panuti of JPMorgan. Yeah, thank you. Good evening. 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 that. Can you comment on the Italian market? I might have missed that if you did during the presentation. And my second question, coming back on the guidance and the building blocks. So thank you for putting that around 3% for the year. Now if I look at through the year, you have a tougher comparative.

26:35 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 recovering some market that helped could help us understand the 3% against a tougher comp in the second half? Yes. Hi, Celine. Yes. Look, good questions. Thanks. On the European negotiations, as we said, we saw as we went through that, 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.

27:36 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 have to say a big benefit, but I see a more positive benefit coming through than we had in q one, given the fact we have full activation, whereas in q one we didn't. I think the second one is in terms of the Italian market. The team, I think, is at a solid q one 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 having a recognition that the company is innovating into some new formats is getting a good level of support from the trade.

28:22 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 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 risk 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 s one s one's at plus 22% in The US.

29:20 Apple's at plus 15. Campari's 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 both the positives and negatives through the balance of the year. Thank you. The next question is from Alessandro Torstara of Mediobanca. Yes, hi. Good evening to everybody. So just a follow-up on the ready to go commercial strategy. Are you planning at a certain point to bring this pharma to us because you mentioned no selective penetration just in Europe so far?

30:09 Thanks. Hi, Alessandro. Yes, it's funny. It's the fourth time I've been asked that today actually. So I think, look, at this stage, we recognize that half of America doesn't know Apple 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, that's why we're focusing on those target accounts. As I 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 owning 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.

31:05 And that's where we wanna start. So when they want to enjoy that in a 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 US. Okay, got you. The next question is from Jim Cross of BNP Paribas, Exane. Simon. Hi, Francesco. Just one question from me. I just need to understand your view of the kind of underlying growth rate the business kind of from a sellout perspective at the global level. I appreciate we don't have sellout 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, impacted retail negotiations in Europe.

31:55 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? Thank you. Yeah. Hi, Jim. I think, look, ultimately, the sellout, as you know, on a global level, it's just about impossible. 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 q one and you actually then recognize that we took €10,000,000 out, the underlying performance in q one is pretty close to the consensus you all had.

32:47 Now it's a decision we made, so it's the right decision to make in terms of optimizing the inventory because on the priority brands, are seeing some really good performance coming through. So I think that's more the way that we're looking at it. So I 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 it's 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 twelve 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 with consumer behavior. 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, things that are potentially outside of our control.

33:35 Thank you. The next question is from Edward Mondi of Jefferies. Good evening, everyone. Two questions, please. The first one is on Page five 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 in canned format. Is there any experimentation going on by consumers putting perhaps a slice of orange into the bottle like what you might see with the corona to try and preserve that in a perfect serve?

34:33 And if not, does the absence of an orange slice, does that sort of hold back the brand a little bit in that format? Hi there, Ed. 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, you look at the industry shape, yeah, with on trending at plus five and and off at a negative four on on Nelson, and that could go negative three. 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 the Capital Markets Day, And that is that, you know, we still believe that the big challenges we're seeing are cyclical. Consumers still wanna get together. They're still on the social interaction. They still wanna 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.

35:23 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 of the cans, and 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 you 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. So I think we'll see how we see how we go with it. Okay. Thanks. The next question is from Tilly Enno of Morgan Stanley.

36:11 Hi. Good evening. Thanks for taking my questions. 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 does any comment on the sort of Q1 specific dynamics? Thank you. Hi, so, you know, I think in terms of the we aren't coming 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 in at certain times of year. And as a result on that, I think there's a bit more muted in some of those accounts.

37:05 But again, within that, we saw probably a bit more in Germany. We didn't see it in Italy or maybe a bit more in Switzerland. But again, the fact that we've now successfully closed those, I think is is is great testament to the team. I think in terms of the the q one more generally, there wasn't really it was a tiny bit of shipping but nothing material. We didn't load up the end of the year and then try to 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. Great. Thanks very much. The next question is from Sanjit Aljfa of UBS. Hey, evening, Simon, Francesco. 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?

38:05 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, Sanjit. Clearly, glass is 15% of our cost, so it's an important component. We have a long term contract. 90% of our procurement is under long term, is diversified with under different even geographically located provider. They are clearly based on peak contract where there is a price adjustment formula, which is triggered in the event certain component item like energy cost trigger certain threshold.

38:55 I have to say that we already renegotiated in 2026 these triggers. So, for the time being, we are achieving some efficiencies still on the asset, but clearly it depends where, you know, the oil price is going to be and then energy. But at the moment, through diversification and this type of contract, we actually are containing our cost. And just a quick follow-up on that, Francesco. Like, if energy costs and oil stay at current levels for the next three months, you know, at the spot current levels, you know, at a point which would potentially trigger it, or it's not at that point yet? No. No. No. So absolutely no. Okay. Very clear. Thank you. Mr Hunt, gentlemen, there are no questions registered at this time.

39:54 Great. Well, listen, thanks very much for joining us. Look, certainly, please 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.