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Good day, and welcome to the Rémy Cointreau First Quarter Sales 2018/2019 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Luca Marotta. Please go ahead, sir.
Good morning. Thank you for your participation in the Rémy Cointreau conference call for its first quarter sales '18/'19, covering period from April to June 2018. Today, we have 4 key messages to highlight. First one is that groups enjoyed a solid start to the year '18/'19, up 5.9% organically, clearly led by own Group Brands, which were up 8.8%. This overall brand is a bit slower than what we delivered in '17/'18, as Q1 was negatively impacted by the early timing of price increases, particularly in Americas and EMEA. Second key message on top of that phasing impact, Q1 was also impacted by technical factors, which lowered sales by about EUR 5 million or 2.2 points of growth. This was due to the termination of 2 partner brands distribution contracts, Campari in Czech Republic and Slovakia and Russian Standard vodka in Travel Retail. Adjusted for these technical factors, the group's organic sales growth was plus 8.1% in the Q1.The third key message is that group depletion trend have remained very, very solid during the 3 month period, in line with last year's trend. In other words, depletions has been running above shipments in the quarter.First of all, in Greater China, we continue to experience very, very strong depletion trends, led by some replenishment after an excellent Chinese New Year. Second, in the U.S., cognac continued to outperform and trends are improving for Cointreau. In Western Europe, trends remained fairly uninspiring as good consumption trend in U.K., in Germany and some early signs of improvement in France and Italy, are offset by further weaknesses in Belgium and Spain.In Russia, we continue to see strong double-digit depletion trends, pretty much throughout the portfolio. Inside Africa, Nigeria's recovery has continued to materialize with double-digit depletion trends, while South Africa is also performing well. Last but not least, Global Travel Retail is enjoying very healthy trends with strong traffic growth and prospects for Asian and Russian travelers, along with strong demand for a high-end cognac product.Last -- fourth key message of the day on the back of this good Q1 performance, we confirm our full year '18/'19 guidance on current operating profit of delivering profit -- positive organic growth, i.e., at constant currency and constant scope.Now let's move to Q1 sales figure in detail, Slide #3. Pre-IFRS 15 sales amounted to EUR 241.5 million in the Q1 '18/'19, an increase organically of -- [indiscernible] of EUR 1.3 million or 0.5% on a reported basis. This reflects an organic gain of EUR 14.1 million, which corresponded to a plus 5.9% in terms of organic sales growth and a negative translation currency impact of EUR 12.8 million or minus 5.4%. On a post-IFRS 15 basis, sales were equal to EUR 222.2 million, about 8% below the pre-IFRS 15 level, which is coherent with what we expect for the full year. As a reminder, as disclosed, the main effect of this new accounting standard is the reclassification between SG&A and net sales over certain expenses, notably some promotional cost.Looking at the currency impact sales, like look at Slide #4. Currency translation reduced sales by EUR 12.8 million in Q1. This was mostly driven by the depreciation of the U.S. dollar versus the euro, but also the weakness of other currencies like Hong Kong dollar, Russian ruble and Japanese yen. On a positive side, Czech krona was the only meaningful strengthening currency in the quarter versus last year. Let's now move to Slide #5, which shows our quarterly performance over the past 9 quarters. As shown in this chart, while Q1 performance was a bit slower compared to the full year '17/'18 trend, we still view it as a very solid quarter because of 3 different factors. First of all, fairly high comps in the Q1, particularly for Group Brands. Second one, a very strong Q4 performance, partially helped by the timing of Chinese New Year but also some prebuying as a result of early price increases in the Americas and EMEA. And the third [ factor ] is fairly high impact on sales from [ technical factors ] in the quarter on certain brands. As a result, considering the 12 months rolling trend, which is shown by the red line, the 12 months trend is slightly slowed down to a plus 6.8% at the end of June to be compared to plus 7.2% at the end of the previous quarter. Let's now turn to Slide #6 and the organic sales by region, and let's start with Asia Pacific delivered very strong double-digit organic sales growth in the quarter. Main [ engine ] of the region remains Greater China, where sales grew strong double digit in the quarter. It was driven by very good replenishment trend resulting from an excellent Chinese New Year. Depletions on their side are also running very good and continue to grow at solid double digit in volume and strong double digit in value. Outside Greater China, Singapore and Japan also delivered a sustained double-digit growth, while Travel Retail continues to experience a very solid momentum led by strong traffic growth from Asian travelers as well, this is very important, improved value per basket, particular for the cognac category. End of June, Asia Pacific accounted for around 33% of our group sales, up 7 points compared to the previous year.Now let's move to the Americas, which delivered low single-digit organic sales growth in the Q1 due to some shipment phasing effect in the U.S. and Canada. So starting with the U.S., sell-in was clearly weaker than sell-out in the quarter due to the earlier timing of price increases this year versus last. But if we look at Group Brands' value depletions, trends remained very strong with 11% growth over the 3 month period ending June, broadly in line with plus 9% and plus 6% and plus 10% in the last 12. This performance was largely driven by cognac category but also improved trends for Cointreau. Just like for the U.S., Canada shipments were below depletions in the Q1, and we expect some catch-up in the coming quarters. In contrast, LatAm is enjoying a satisfying performance versus last year, led by successful change of distributor in Mexico but also some recovery in the Caribbeans after a challenging year '17/'18 due to the hurricanes. And Travel Retail inside Americas continues to deliver very solid growth, thanks to new listing, good traffic, strong demand for high-end cognac products. End of June, Americas accounted for 39% of group sales, down 2 points year-on-year.Let's now turn to Slide #7 and get a look inside the big Europe, Middle East and Africa region, which delivered a double-digit organic sales decline in the quarter due to technical factor as well as some shipment phasing related to the early timing of price increases. As already mentioned, these technical factors were the termination of 2 third-party brands contracts, Campari in Czech Republic and Slovakia and Russian Standard in Travel Retail, essentially inside EMEA region. They lowered regional sales by around EUR 5 million in Q1, implying around a 6 point negative hit on top line growth.Now let's get a look at trends by subregion. Let's start with Western Europe, which remains under pressure, even though there are some signs of improvement. U.K. and Germany have continued to perform well in the Q1, and France is showing some light at the end of the tunnel after a transitional year in '17/'18. Same thing for Italy, we just reached to a new distributor. In contrast, Belgium and Spain remain quite complex. Central and South Europe was penalized globally by the end of Campari distribution contract in Czech Republic and Slovakia but, in those key markets, Group Brands' sales were up a sound mid-single digit.Russia and Northeast Europe continued to experience solid growth led by double-digit sales and depletion plans in Russia. Travel Retail, inside EMEA sales, were impacted by the end of the Russian Standard distribution contract but looking once again at Group Brands, Metaxa, St-Rémy and Mount Gay delivered good growth in the quarter. Lastly, Africa experienced a slow start globally speaking for the year as a result of significant price increases across the region. But yet, our key significant market, Nigeria and South Africa, confirm their good health, growing at double-digit depletion trends in the quarter, while India continued to benefit from the faster development, particularly for the high-end products like whiskeys. Again, I will read that every time, which was important, to note that EMEA is a work-in-progress region for the group where you should continue to expect to some volatility as we adjust also our route-to-market in coherence with the brand elevation strategy of the group. End of June, EMEA region accounted for around 28% of sales, down 5 points versus last year. Now let's move to our Q1 performance by divisions, Slide #8. As already mentioned, our plus 5.9% organic sales growth reflected the strong performance of our Group Brands, up 8.8%, while Partner Brands sales declined by 19.7% due to the termination of the 2 third-party distribution contracts. Once again, House of Rémy Martin was the main engine of our Group Brands' performance, up plus 11.1%. But Liqueurs & Spirits division also renewed its growth in the quarter, up 2.8% on an organic basis.Let's now turn to Slide #9 and the analysis by division, starting with the cognac. As we just mentioned, House of Rémy Martin grew by 11.1% in Q1. Strong performance, despite some impact from the shipment phasing headwind. The main driver of that solid growth of the division was Asia Pacific, which delivered another quarter of strong double-digit growth in cognac thanks to Greater China, Singapore, Japan and Asian Global Travel Retail.As already mentioned but very important to repeat it, to [ re-ask ] that, Greater China enjoyed ongoing growing strength in [indiscernible] consumption for the upper middle class and good replenishment as a result of the very successful Chinese New Year. Overall, Greater China volume depletions continued to grow at solid double-digit rates in the quarter where value depletions were up strong double digit in the same period, so implying positive price and mix benefit.Growth in the Americas region was largely driven by the U.S., where sales grew mid-single digit, sound performance helped by below depletion trends. Again, the difference was due to some prebuying in Q4 as significant important price increases took effect on April 1 this year. Going back to depletion, they continued to run at double-digit rate, implying further share gains in volume and even more in value. In particular, if you compare our performance to the category based on NABCA data. As shown in the table, we are a little bit skeptical about the global reliability of the Discus part, which are provided on the clarity basis. Prices gains were flattish in the 12 month period as positive pricing and depletions was offset by adverse state and product mix. We expect price/mix to turn clearly more positive in the upcoming quarters as we get the full benefit of the most recent price increases on depletions and final sell-out basis. Inside EMEA region for cognac, cognac posted a slow start to the year again due to some phasing around the timing of price increases but still recorded strong sales growth in Russia, Nigeria and India. Concerning the volume value equation of the cognac division, the plus 11.1% sales growth was driven by around 4% volume growth and very strong 7% price/mix. End of June, the House of Rémy Martin accounted for 68% of our sales, up 3 points year-over-year. Now let's move to Slide #10, where we highlight the partnership between the Rémy Martin brand and the kinetic artist, Matthew Moore. The brand is currently launching a limited edition Rémy Martin VSOP designed by the artist, along with a specific art targeting millennials called ARt by Rémy Martin, which uses augmented reality and combines strong symbol of the House with Moore's abstract graphics. A series of city tours have been launched with Matthew Moore, and several influencers will be there, starting with New York City, Moscow, London and Shanghai.Now let's dig inside Liqueurs & Spirits division, Slide #11. The Liqueurs & Spirits division renewed its growth in the quarter with organic sales up 2.8%. This performance is somewhat below what we would expect for the full year as the division was also impacted by some shipment phasing related to the early April price increases, particularly in the U.S. and Europe. Looking at the volume value equation for the division, overall, the organic sales growth was entirely driven by positive price/mix, while volumes were slightly negative. End of June, Liqueurs & Spirits division accounted for 24% of sales, down 1 point compared to last year. Now let's review the performance of the major brands, starting with Cointreau. Cointreau posted a promising start to the year, led by solid performance in the Americas and Asia Pacific while EMEA was hampered by Belgium and Germany. Looking at the U.S. specifically, shipment trends below depletion in Q1 as they were negatively impacted with some pricing phasing effect, as already mentioned, and in contrast, depletion trends have been showing encouraging signs of acceleration with around 5% growth in the last 3 months to be compared to plus 2%, plus 3% growth in the last 6 and 12. We believe the brand is starting to reap the benefit of the new Art of the Mix campaign as well as marketing and media activation around a very important event, which is the 70th anniversary of the Margarita cocktail. In the 12 months period ending June, value depletion benefited from about 1 point of price/mix effect on Cointreau and, again, a very mature category should hopefully improve even more after the brand reaps the full benefit of the most recent price increase, and we are very, very happy with that. Our Greek brand in Metaxa had a good start to the year, led by Russia/CIS, Germany and Travel Retail, particularly in Travel Retail EMEA, which is experiencing a good start to the summer season.Let's now turn to Slide #12 and other brands within the division. A slow start to the year globally for Mount Gay as lower [ clips ] shipments to U.S. were not offset by good price/mix overall and the solid, stable performance in Canada, Asia Pacific and Travel Retail. Mount Gay depletion in the U.S. remained under pressure as a result of further price increases on the lower end of the range, but despite that, our brand price/mix, it was flattish over the 12 months period ending June. A slow start to the year for St-Rémy as well due to some promotional phasing in Canada, which is its largest market, but we expect Canada to improve in the coming quarters, while Africa, Asia Pacific and Central Europe performed well in Q1 and should remain solid. Botanist gin pursued its very strong performance with sales up double digit led by all geographical areas.Last but not least, single malt whiskies overall delivered double-digit growth led by Scottish Malts, particularly in the Americas and Asia Pacific. The new brands, Westland and Domaine des Hautes Glaces, continue to focus on building inventory capacities while targeting the right accounts both in the off- and the on-trade. Let's move to Slide #13 and some marketing communication activities around Port Charlotte, 1 of the 3 brands of Scottish single malt. Port Charlotte is currently being [ re-faced ] with new pack, which we think will be more high end, more distinctive and more visible in liquor stores and bar. In addition, we are currently launching a new media and digital campaign promoting Port Charlotte but also, more broadly, our Islay whiskey portfolio called, #WeAreIslay. Clearly, the objective behind that is to convey in a pretty disruptive way that our malts are conceived, distilled, matured and bottled only on Islay and made from barley exclusively coming from Scotland, of which 1/3 coming exclusive from Islay. Finally, let's now turn to Partner Brands on Slide 14. The division posted a very strong decline of 19.7% in Q1. As already mentioned, the division was impacted essentially by the termination of the distribution contract for Campari, Central Europe, and Russian Standard in Travel Retail, which represent a EUR 5 million loss in sales in the quarter or considering only this division, an 18.8 points on growth. So adjusting for that technical factors, Partner Brands were down around 1% in the quarter, while good growth in the Americas and Asia Pacific was offset by weakness in Partner Brands in Belgium. As you know, this division, Partner Brands, is not a core focus for Rémy Cointreau and in coherence with the group's strategy to move upmarket, you should expect Partner Brands to continue to decrease as a percent of total sales. As a reminder, we already disclosed that for the full year '18/'19, we expect the termination of these 2 contracts will have a negative impact on sales of around EUR 15 million with a very limited impact on operating profit of around EUR 3 million.Last, looking at the volume depletion of Partner Brands, the 19.7% organic sales decline was almost entirely driven by negative volumes, while price/mix remained positive. End of June, Partner Brands accounted for 8% of our group sales, down 2 points year-on-year. Last slide of my speech, #15, we can say that Q1 sales came in well in line with our expectation. As a result, we can reiterate our guidance for the full year '18/'19 of delivering positive organic growth in current operating profit, as usual, at constant exchange rate and constant scope. Thank you for your attention, and now I'll be very happy to answer any questions you may have. Thank you.
[Operator Instructions] We will now take our first question from Simon Hales from Citi.
Luca, 3 questions please, if I can. Can we just start off, you -- obviously, last full year, you had a run rate of organic sales growth on the Group Brands of 9.2%, 8.8% in the first quarter. Can you give us some idea what the underlying rate is, what you think it was in the first quarter, if you x out some of those technical effects that we saw in the period? Or to put it another way perhaps, what was your global depletion rate in Q1? Secondly, just in regards to the China cognac business, obviously, solid double-digit volume growth, strong double-digit value growth. Has there been any change that you've seen in the first quarter in terms of the mix of that delivery in terms of product qualities in cognac that's driven that strong depletion rate? And then just finally, are you still comfortable with a 12% to 13% organic EBIT growth guidance that the market expects for the full year?
Thank you so much, Simon. So as you know, starting with the guidance on the net sales, we do not [ give ] them. We give obviously some color quarter-by-quarter and adjusting that with the moving average of the last 12 months, you get a right approx of what we should land. We can say that after 2 years of very strong acceleration, thanks to the own Group Brands, we are reaching a good rhythm of development of our sales. Strategic brands are clearly are own Group Brands. Partner Brands are no more focused, so you should expect, and for this year, we have highlighted EUR 50 million impact on a globally as a negative element on net sales. You should expect that decrease. So at this stage, the actual performance on 12 months 6.8. We expect some acceleration in the next quarter to come. So you can model around this figure without committing to specific ones. So that is to come the coming quarters starting with 6.8 globally because we think that the price increase and depletion shipment will impact even more our performance both on a sell-out and sell-in basis. In terms of changes of mix in China in the Q1, we didn't highlight very strong changes. We can say that we were globally very active with the results on all of the chain, sell-in, sell-out, the internal intermediate depletions. We do not highlight any specific change by channel. It's not a neither stronger acceleration of e-commerce. So we are very, very successful in the Q1, even more than the previous quarters, even more our expectation. We continue to serve on that because that's new type of client touched by this channel. And it is quite broadly interesting our portfolio. So it is our QSS plus qualities are running very good, but also VSOP, CLUB, all the elements of the component of portfolio are performing well, and everybody is playing an accretive game in terms of price/mix because we passed through price increases that were accepted. And so we can benefit for further acceleration for all categories, even for the intermediates. In terms of consensus, once again, we do not give specific figures. Let me retrace a little bit the historical events. Early June, during the yearly presentation, I was very clear on that point because sales at that time was 12.8%, 13% in terms of organic growth, and we said we were okay with this guidance. Now just 1 month has passed. This is 20th of July, 1.5 months and I see that the global consensus is 1 point higher, 14% and 13.8%. So I reiterate that we are okay with what I said in June, but you guys, you are not going to increase every month by 1 point because otherwise, it would be 24 in 10 months. It's not the way we can adjust our business. I understand for your model there is an issue in terms of impact on published rate, in terms of ForEx, but as you know, we do not manage our strategy and our short-, medium-, long-term P&L in that way. So we are fine what we said, around 13%. Do not start every quarter or every month to increase even more because I have no magic crystal ball and magic stick to change the reality every day. I hope it's...
We will now move to our next question from Edward Mundy, Jefferies.
Luca, 2 questions please. Perhaps, if I could ask Simon's question on the impact from shipment phasing in the quarter. Do you have a sense as to what the overall impact was from shipments in delayed depletions in the first quarter, given that the timing issues around price increases in both EMEA and Americas? The second is on FX. I think since you last gave guidance, the dollar has strengthened a little bit, but the Chinese yuan has weakened a little bit. Are you able to provide an update at this stage on how you think FX could evolve or guidance for fiscal '19? And the third question, Luca, I appreciate you didn't have a crystal ball, but if there was to be higher tariffs on European imports into the U.S., is there anything that you could do from a production perspective in particular around Cointreau that could help to manage that situation?
Thank you. In terms of the impact of phasing, there is no clear figure, otherwise, I would have highlighted that during the presentation because I have to answer to the question with the same integrity of which I prepared the presentation for the group. So I do not have specific figures. We are clearly in some region adding performance, which is positive but less positive what depletions are. What will be the estimation of the catch-up in the next -- second or third quarter, I cannot answer precisely. I would be a liar if I -- but we are very -- quite optimistic on that. And as I said, the 12 months rolling average performance, 6.8%, we expect this to be increased in the coming quarter. In terms of FX, in a word, we'll talk about that in November, when the 6 months with that will be delivered and analyzed. I remain on what I said in June. So as a reminder, we have to split between 2 different hypotheses, the first one is for the conduction rate. So the second one is for the hedging rate. Conduction rate, 1.18, which equals, on a yearly basis, to an impact on sales of a negative EUR 10 million. Why for the first quarter it was higher to be compared to that? Because 1.18 is a weighted average, and for the first quarter, you compare 1.10 of last year in conduction with 1.19. So clearly, in the next coming quarters, the difference between -- in top line, between average sales and organic sales should be shrink and should be reduced. In terms of bottom line impact, comparing 1.23 with 1.19 with different weight of demands, we are still around EUR 18 million, EUR 17.7 million impact on the operating profit for the full year, of which depart more than EUR 12 million for the first half of the year. As a reminder, today, we cover around 80%, 84% to be precise on the mids, and we have around 60% in terms of option. So this is the situation right now. It's not changed, but I wanted to be precise what the -- our assumption were, and we'll be more precise in terms of update in November. In terms of trade war, what you can do and do -- can we change something, Rémy Cointreau has the habit to manage the macroeconomics IAS macroeconomics trends. So we think that one of our strength is the global geographical exposure, which is quite balanced, and the fact that, at this stage, as you know, Asia Pacific is running very, very, very good and our strategy of luxury strategy gives more elasticity in term of price, in term of reaction to eventual trade wars. So what I'm saying to you that we cannot clearly change the way we are building our operation. I cannot produce cognac in Texas. That's in case if it were, we would be obliged to increase our tariff without changing the footprint in terms of industrial and manufacturing soul of our group. At the end, it will be the fine American client that will pay the bill. That's the reason why the situation and the pressure has been slowing down because a lot of American company understand that it's quite a dangerous game because you might have a reverse impact on the performance as well.
We will now move to our next question from Chris Pitcher of Redburn.
Could you give a little bit more detail on some of these new markets that are starting to drive growth, such as India, Nigeria, South Africa? Can you give us a feel for just how significant they are in terms of sales contribution today and what sort of resources you have on the ground in these markets? And then on Cointreau, encouraging to see that the new campaign is starting to breathe some life back into the brand in the United States. But in markets like Germany and Belgium and some of the other European markets, where it's not performing as well, can I confirm, has the campaign been rolled out there as well? And why do you think it's not working there, whereas, it is in the United States?
I will start with the second one. It's nothing to do with the campaign itself, but the difference between in the performance are more linked the focus and commercial marketing execution that you might have in some market then in U.S. Clearly, with our team, with the wholesaler, there is a clear focus on that. In other markets, with other routes-to-market, the situation might be different considering each brand. That's the reason why, as I highlighted in Europe, in Europe, you should expect some changes in the next year to come. But it's even more important the fact that you have to consider that the equation in sell-in, sell-out by market is not the same overall. So in some situation, there was some little bit of started that, even if the campaign is running very, very good in itself, but the shipments are impacted. In terms of weight of the new market, you might consider globally on 4% to 5%, I do not give you specific colors, although -- which way we are performing in the market compared to the other because, as you know, we do not give some specific answer to that. We are -- Nigeria is not new. It's coming back because I experienced the 2 years of very, very slow performance. South Africa has been always there. Singapore is increasing its performance, but it's not new. So it's more this new indirect market that are in a good momentum and regaining the share that it should have.
Could I -- sorry, one more final question I forgot to ask? Just on pricing, you talked about U.S. and European price increases. Can you -- forgive me if I missed this, in terms of what you've done in China on pricing?
Yes. In China, I do not like that because we increased prices but there was no phasing impact, but our understanding and we are always in the same pattern, whereas, previous year in China and Asia is low- to mid-single digit for some categories, and so we made it plus, and for the highest one is -- even more is high single to low double. So overall, if we consider all the portfolio in Greater China, you can model it between 4 and 5.
We will now move to our next question from Trevor Stirling of Bernstein.
Luca, one question from my side please. Luca, if you look back at China 3, 4 years ago, when the market was very strong, when there were big prices increases going through, we started to see people build stock and sit on stock because it was very profitable. Do you think there's a danger of that? And what steps are you taking to try to make sure that doesn't happen?
Thank you so much. In terms of stock, we try to -- on the field, to measure the state of the art of the stock. As you know, we do not have -- nobody has clear data, but making check and stock check on the different tiers of our distribution, we have a right idea where the stock stands. We do not think that there is this threat to building stock to speculate or anticipate biggest price increase to be in the months to come, but it's very important to have the coherence between sell-in, intermediate depletions and final sell-out estimation. And not having the data, it's important not to be too optimistic in term of reaction. It is true globally for everybody, when we have a long, long chain of 5 to 6 years, you might have a deferred impact between the performance and the fact that you do not adjust the right timing if things are running bad or good the stock. At this stage, what we have done to evolve, to be in the same situation again, is to increase our reading of the market increasing our sell-in, sell-out depletion stock equation locally with monthly analysis and at least 2 times a year stock take in all major partners.
We will now move to our next question from Marion Boucheron of Raymond James.
Luca, I just have 2 questions, follow-up, one on the U.S. You mentioned the negative mix mainly at pricing is positive. Could you give us some flavor on what drove that mix? And then you also mentioned the end of the tunnel in France, so is it the end market that is finally improving? Or more it's linked to your distribution changes and so how this is rolling out?
Thank you. On depletion because the price, the product and stated negative mix was on depletions on cognac is more linked to the fact that we are overperforming in some states, like Florida, in which the average price is lower compared to other big, big state, but in the spectrum of the state has a negative mathematical impact. We are very happy with that. That consequence is that it gives some mathematical headwind. In terms of product, it is the fact that even if we are performing very well with the QSS plus qualities, the growth is higher with 1738 and VSOP, so mathematically, we have less-important impact in terms of price/mix on depletions. In terms of improvement in France, it is both but much more linked to the distribution setup that is more stable now, and we think that we should -- or that improve in the coming quarter. We hope that because France, even if it's not very important for the group, it's at 2%, it is iconic and is our next market. So we should -- and we are always focusing to perform correctly in our net interest.
And you were talking about Europe distribution, the changes that we could expect. In which market would you actually like to...?
No. This is something that we did not disclose. It is a global mis-message that we highlight to you to let you understand in the coming quarters and years, figures will be volatile in Europe because we are rethinking the way we're doing business in Europe globally. So we'll inform you more, explain more after it is done without anticipating or disclosing.
We will move to our next question from Laurence Whyatt of Societe Generale.
One on stock levels, if that's all right. You've got a lot of your recent growth, especially at the high end of your cognac division, and that's driven a lot of the growth over the past few years. Could you confirm that you have sufficient levels of stock, especially of the high-end brands, in order to maintain that strong growth?
The answer is yes because we have it in volume. We are personally, specifically as a company increasing our price intensity year-after-year, quarter-after-quarter, situation-by-situation. The global environment is more positive, optimistic in term of price increases because the allocation game is something that everybody is focused in. So we have more than enough at this stage also for the QSS plus quality. As a reminder, our model in cognac overall our portfolio is to grow in the mid- to long term no more than plus 3, plus 4 in volumes overall and to have a big impact in term of prices and mix to be able -- in CAGR level, be able to grow to between a very high single to a double-digit growth in terms of CAGR, net sales and depletions. So volumes controlled; price increase mastered and improved; mix clearly is the obsession of the game for our company. And we are okay. We are fine with the stock. We do not have issue to fill with our mid-term plan.
[Operator Instructions] And our next question comes from Nico Von Stackelberg of Liberum.
Luca, just had a quick question. If I were a Chinese consumer, I'd see that my yuan is depreciating a little bit and the equity markets are off. I'd probably have some equity investments and may have lost a little bit of money. Could lead to some real wealth effect, but yet, I see that depletions were strong double digit. So just sort of trying to understand. Do you expect to see any incremental softness due to the market developments? Why or why not?
Incremental softness?
Yes, within the Chinese consumer. Yes, as you know, the yuan and the weakness in the equity markets felt a problem for the real wealth effect. Yes?
No. Because we don't think that because, in a way, we have a lot of clients to touch. So we are not sat on a huge boat. So we have a lot of different client to touch, to understand, to drink our products, to experience them. So the impact of new people getting to know the brand should largely offset big time, eventually, some long-time consumer, which will be more concerned about these more macroeconomics impact or monetary effect. So absolutely, we do not think this is a threat for ourselves.
Thank you, ladies and gentlemen. And as there are no further questions in the queue, that will conclude today's question-and-answer session. And now I would like to turn the call back to Mr. Luca Marotta for any additional or closing remarks.
No, no other remarks. So thank you so much for your participation, and have a nice summer to everybody. Thank you so much. Bye.
That will conclude today's conference call. Thank you for your participation, ladies and gentlemen, you may now disconnect.