© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good day, and welcome to the Rémy Cointreau First Quarter Sales 2019/2020 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Luca Marotta, CFO. Please go ahead, sir.
Good morning, everyone. Thank you for your participation in the Rémy Cointreau Conference Call for its First Quarter Sales '19/'20 covering the period from April to June 2019. Four key messages today to highlight. The first one is that the Q1 performance is in line with our expectation with the guidance provided. As a reminder, back in June, we had called for a slight decline organic sales growth for Q1. So now here we are. 3% organic sales decline in the first quarter. 2 main reason behind this performance. First, technical factors. The decreased sales by EUR 12.5 million in Q1 or down points 5.6 point of growth. These factors were the termination distribution contract in Czech Republic and Slovakia further to the disposal of our distribution subsidiaries in those market and the termination of distribution of Piper Sonoma in the U.S. Second, the plus 3.3% organic growth for our Group Brands in Q1 is below its yearly run rate and our full year expectation. This is due to 2 main factors. First of all, as highlighted already in June, phasing effects related to the price increases taken across the portfolio at the beginning of fiscal year. And the second one, some disruption to the changes in route to market essentially in the EMEA region and in particularly for the Liqueurs & Spirits division.The second key message is about Group's depletion trends. Group depletion trends had been -- also been affected by phasing effect in the last 3 months, but we expect them to improve in the coming months starting on the Q2. First of all, in Greater China, 12 months depletion trends continue to show solid double-digit growth, despite lower trends in the last 3 months, which is to be reminded is a very low season for Cognac consumption. So it's not completely meaningful for the rest of the year. In the U.S., Cognac depletion are penalized by phasing effects further to the strong price increases taken at the beginning of the fiscal. In contrast, Cointreau depletions continue to grow a very strong double-digit run rate. In Western Europe, depletion figures are polluted by many changes in route to market. Stripping them out, we estimate sell-out trends continue to be flattish. In Eastern Europe, we see sustained depletion growth in the region largely driven by ex-CIS countries, but slower trends in Russia. Inside Africa, the whole region continues to show strong growth and particularly in 2 large markets, South Africa and Nigeria. Last but not least, Global Travel Retail enjoy sustained growth led by group traffic in particular from Asian travelers. The third key message of the day is that, we confirm that we expect growth at Group Brands to improve and accelerate from Q2. Fourth one, we also confirm that the full year '19/'20 will unfold within the framework of the group's midterm guidance. Now let's move to Q1 sales figures in detail starting with the Slide #3. Sales amounted to EUR 223.2 million in Q1 '19/'20, saw an increase of EUR 0.9 million or 0.4% on a reported basis. This reflects an organic loss of EUR 6.6 million or minus 3 bp organic sales decline and a positive translation currency impact of EUR 7.5 million or 3.4%. Moving to Slide #4, as we just said, we can get a look at currency translation, the increased sales by EUR 7.5 million in the Q1. This was mostly driven by the strengthening of the U.S. dollar versus the euro, even if most currencies were also well-oriented. The Chinese yuan was the only minor marginal weaker currency in the quarter versus last year and this can be seen in the spreadsheets. Now a very important slide, Slide #5, which shows our quarterly performance over the past 9 quarters. The key message here is the quarter volatility is the name of the game for a group like Rémy Cointreau. The more we raise and we will continue to raise prices, the more the volatility will be a reality, despite our attempt to limited trade loading and deloading effects. This is a natural, logical consequence of our global strategy. End of June 2019, the 12 months organic growth trend stands at 5.9%, so around 6% for the Group and at 8.6%, round up 9%, for the Group Brands. Now let's turn to Slide #6 and the organic trends by region for the Group Brands only. First of all, it is important to note that Group Brands overall plus 3.3% in the quarter. Also growth in all 3 macro regions. And starting with Asia-Pacific, we can say that we delivered mid-single-digit organic sales growth in the quarter. While Asia-Pacific was somewhat less impacted than the Americas by the phasing effect and all the price increases, we still saw a bit of an impact there in the Q1. Inside the different countries, we'll say that Greater China was up single-digit in the quarter, but zooming inside Greater China, China Mainland continue to grow double-digits, still a very good performance, but mitigated in a way by slower trend in Hong Kong and Macau. 12 months depletion trend in China continued to show solid double-digit growth, a trend that is coherent with our full year expectations, volume and value. Within the region, we continue to see sustained growth in Southeast Asia with Japan, Malaysia and the Philippines among the others, delivering very solid double-digit growth. Asian Travel Retail also continued to grow double-digit led by good traffic and strength across the portfolio. End of June, Asia-Pacific region accounted for 31% of group sales, up 2 points versus last year. Now let's move to the Americas, which delivered low single-digit organic sales growth in Q1 due to some shipment phasing effect linked to the price increases. Let's start with the U.S., which grew mid-single digits reflecting a strong performance of the Liqueurs & Spirits, partially offset by slower Cognac performance. Group Brands value depletions were also affected by those phasing effects with a minus 1.4 decline over the 3 months period ended June, when we compare the plus 3.5% in the last 6 months and around 5 plus 4.8% in the last 12. Canada and LatAm also started the year on a weak note as we eliminated some low-end volumes as part of our brand elevation strategy. Last but not least, slow start to the year in the Travel Retail in the Americas due to short-term commercial tensions. End of June, Americas accounted region -- as a region for 44% of group sales, up 2 point year-on-year. Let's now move to Slide #7 and get a look in Europe, Middle East and Africa region, this wide region. It's delivered mid-to-high single-digit organic sales growth for the Group Brands in Q1. This performance, including the impact of the Partner Brands' distribution contract would have been different because EMEA sales declined clearly double-digit on organic basis at the whole group sales level. Now looking at the trends by region for the Group Brands, again, only for the Group Brands. Let's start with the Western Europe, which was flat as already said in Q1. Good start of the year in the U.K., Switzerland and the Nordics, offset by weaknesses in Spain, still impacted by recent change in route to market and to a lower extent in France. Central and South Europe was up low-single digit. Most market performed well, very well, except for Italy and Germany also penalized by recent changes in route to market. Talking about Russia and Northeast Europe, Baltics and ex-CIS markets continue to show strong growth but Russia is more difficult. Growth in Travel Retail Europe was driven by Rémy Martin, which is benefiting from the success of its CLUB and XO qualities. So very positive also for our profit and loss in this subregion. Last but not least, Africa experienced a strong double-digit growth across the continent held by easy comps of 1 year ago and as well as ongoing strength in key important market like Nigeria and South Africa. End of June, EMEA region accounted for 25% of group sales, down 4 point to be compared to last year, but adjusting this figure for the technical factors of the Partner Brands EMEA's Group Brands weight would have been flat around 23%. Now let's move to our Q1 performance by division and brands, Slide #8. As already mentioned, our 3% organic sales decline was entirely driven by the Partner Brands division with sales growth by 66.6% as we are accelerating withdrawal from this business and with the termination in specific case of the distribution contract in Czech Republic, Slovakia and 5% only the U.S. If we adjust the overall performance in the quarter of the group of these technical factors, the organic sales growth for the group overall would have been positive at plus 2.6%. In contrast, very positive contrast, Group Brands were up 3.3% driven by the House of Rémy Martin, up 5.5%, while Liqueurs & Spirits organic sales was down 2.6%, mostly as a result of the change in route to market we made on April 1. Now let's turn to Slide #9 and continue to analyze by division starting with our Cognac business. As we just mentioned, the House of Rémy Martin grew by 5.5% in the Q1, a performance, very good performance, but which is below what we expect for the full year. It is well in line with our expectation for the quarter, but more acceleration to come. Why this is so? So this is a progressive start to the year because as we highlighted in June, this is linked essentially to phasing effect around the price increases taken in April. Let's start with Asia-Pacific. Asia-Pacific for Cognac grew high single-digit in Q1, once again in line with our short-term expectation, but below our full year expectation, acceleration to be witnessed due to phasing factors. Main drivers were China Mainland, Malaysia, Japan and Travel Retail Asia. As already mentioned, inside Greater China performance, volume and value depletion continue to grow at solid double-digit rate in the 12 moving months period ending June despite lower trends in the last 3 months. Beyond effect that every June is a very, very low season, it's not a meaningful quarter in terms of Cognac consumption, these lower trends can be largely be explained by phasing effect and as we said weakness by Hong Kong and Macau. Americas region reported slight decline in organic sales in Q1, but the U.S. market was up low-single-digit. Again, this performance was below our full year expectation due to temporary phasing effect further to the significant important price increases taken in April. U.S. Cognac depletion are also reflecting this phasing effect with a 9.3% decline in volume depletions in the last 3 months period to be compared to the flattish market. So around 9 points difference in terms of volume. By the way, a word on that, it's very important. You see significant important differences between NABCA and Discus market data, which we think are due to the much greater volatility of the data declared by spirit companies to discuss, not to mention their partial reliability. In other words, we think NABCA data is probably a better reality of underlying market trends. As a result of the significant price increases taken over the past 12 months in the U.S. you remember 3 in the last 12 months, value depletion enjoyed a very strong price/mix effect of around 5 points in the last 12 months period and even greater in the last 3 months, so there is a clearly positive spread in term of price mix to be considered. Inside the EMEA region, Cognac posted double-digit growth in the Q1 led by a rebound in Africa and accelerated growth in Western Europe and Travel Retail. Concerning the volume value equation of the Cognac business overall for the company, the 5.5% sales growth was driven by a 4.4% volume drop more than offset by very strong 10% price/mix gain. End of June, House of Rémy Martin globally accounted for 72% of our sales, 7 2, up 6 points year-on-year. Now moving on Slide #10, where we highlight Rémy Martin's new limited edition XO Steaven Richard launched in April 2019. Rémy Martin launched the limited XO Steaven Richard at the Shanghai Design Week, of which Rémy Martin is a part of. It was also on the occasion that the Centaur piece of art, specially created for the brand by ironworker by Steaven Richard, was unveiled as a world premiere. We crafted 32,700 units 2x more than the last year's limited edition and launched in 21 markets. Now coming back to figures, now let's get a look of Liqueurs & Spirits division on Slide #11. Liqueurs & Spirits division posted 2.6% organic sales decline in the quarter, while the division was also impacted by certain shipment phasing to the April price increases, it was mostly essentially affected by the changes in route to market in Europe. Looking the volume value equation for the division in the Q1, the organic sales decline was entirely driven by mid-single-digit decline in volumes, while price/mix was a single-digit gain. End of June, Liqueurs & Spirits division accounted for 25% of our sales to 5% flat compared to last year. Now let's review the performance of the major brands, starting with Cointreau. Cointreau posted double-digit growth in the Americas, but had a slow start to the year in the EMEA and Asia-Pacific. Looking at the U.S. specifically, shipment accelerated in Q1 on the high heels of the very strong depletions experience since last summer. As shown in the table, volume depletions are currently running at plus 10%, taking full advantage of the success of the Margarita Cocktail and our advertising campaign, which Cointreau is a key ingredient. Despite the price increase taken in April, price/mix gains remained muted in the 12 months period ended June as the positive pricing continued to be offset by negative state and channel mix. Our big brand in Metaxa also had a good start to the year in the Americas. Yet that was more than offset by weakness in the EMEA region penalized by, once again, changes in the route to market. Metaxa is very important for the European market. In particular, in key markets like Germany, Czech Republic, Slovakia but also a negative performance in Travel Retail, which is expected, which is what we want because we are gradually pulling off the level of promotion essentially on the entry range of Metaxa. Moving to Slide #12 and the other brands of the division. Let's start with Mount Gay, our rum brand, which posted a good quarter in the U.S. offset by some weakness in the U.K. and Travel Retail. We remain cautious and on the U.S. outlook for the year as volume depletion continue to reflect the trimming of the entry-level Eclipse brand, which was a significant part of the brand volumes. To be honest, the real focus of Mount Gay will be next year when we'll be relaunching globally competing brands. A slow start to the year for St-Rémy brandy as well as we continue to refocus on the XO quality and this emphasis from the lower end qualities, in particular, in Canada, it's larger market. Good performance in newer market, including U.S.A., Australia, Africa and Travel Retail. The gin brands, Botanist fantastic brand, which showed its very strong performance with sales up strong double-digit, in particular, driven by the U.S. and the successful brand expansion across Asia-Pacific. Last but not least, Single Malt Whiskies posted a strong growth in Asia-Pacific with sales up double-digit, while the U.S. was lower in the Q1 after an exceptional and very important year '18/'19. Moving to Slide #13, we have to say that on June 12, the House of Cointreau celebrated its 170-year anniversary in Paris and introduces new communication tools with Le Cocktail Show. Over the course of 1920, Le Cocktail Show will bring the convenient spirit of the French Belle Époque era to bars and shops all around the world. Signature drinks like Cosmopolitan, Margarita, Cointreau Fizz, and so on as we can see in the spreadsheet, will be animated throughout digital activation, grocery stock pop-ups, eye-catching merchandise and the French rendezvous of the year, Cocktail Monday's bar events. Finally, let's now turn to the Partner Brands, Slide 14. The division posted a devil number, minus 66.6% organic sales decline in Q1. As we expected, the sales decline of division accelerating with the terminations from contracts in Czech Republic and Slovakia, part to disposal of the subsidiary [indiscernible] the first as well as termination solution of Piper Sonoma in the U.S. This represented on the quarter EUR 12.5 million loss in terms of sales or 62 point it to be precise on growth of this division or this aggregate of brands splitting between EUR 11.1 million it from Czech Republic and Slovakia exit and EUR 1.4 million loss from Piper Sonoma in the U.S. Adjusting for that, Partner division would have been down by the very moderate modest 4.3% of the quarter as what is mostly left now in the division is the distribution of Partner Brands in Belgium, which are affected by challenging market condition. End of June, Partner Brands accounted for 3%, which is our yearly guidelines in terms of weight for this aggregate, down 6 points year-on-year. So finally before Q&A, let's turn to Slide #15 where we confirm, reiterate our '19/'20 outlook, given that the Q1 performance was well in line with our expectation, with our estimation. And second point, important, we expect an improved and accelerated performance from Q2 for the Group Brands. So overall, we anticipate that '19/'20 will take place within the framework of the group's medium term objective disclosed in June. As a reminder, the termination of distribution contract for Partner Brands, Czech Republic, Slovakia and United States will have an impact on a yearly level of EUR 56 million, 5 6 million sales and EUR 5 million on current operating profits. The EUR 56 million hit on sales will split between EUR 31 million, 3 1 million in H1 and EUR 25 million in H2. Thank you for your patience and now, let's move to Q&A question session.
[Operator Instructions] We will now take our first question from Edward Mundy from Jefferies.
Three questions, please. First is on China, and I appreciate your 12-month depletion trend is still solid double-digit in volume and value and the first quarter was impacted by phasing and the low season. But are you able to quantify what the slow depletion trends actually were in first quarter? And the second question is on Q2, I think, you're highlighting a better Q2, are you able to provide a bit more color on where the improvement is, is it in China? Or is it in the U.S.? And then the third question slightly theoretical question around potential U.S. tariffs. I know at this stage, it's pretty hard to really get a feel for what they could be or whether it will take place but is there any message you're able to share from your own internal assessment as to what the potential impacts could be as we try and frame that up?
Can you repeat the third one? There was a little bit disturbed line, the third question.
Yes. That the -- the third question is around -- it's a theoretical question around potential higher tariffs into the U.S. on imported European spirits. Is there any message you could share from our own internal assessments as to what the impacts from this could be?
Thank you. So let's start with China depletion trends. I don't think it's meaningful to enter into details in terms of subregions inside China Mainland or a specific subzone for this quarter, which remains not very important and was positive. It was positive even if it is not so important in term of weight. The reason of the slowing down and the ones that were highlighted essentially the phasing or the price effect on the slower extent compared to the Americas because there is more -- the average to increase prices every year. As a reminder, for VSOP and intermediate, 3% to 5%; XO, 5% to 6%; and with XIII, 7% to 10%. So significant price increase. And essentially a subregion underperformance of Hong Kong linked to the political situation that happened there. And Macau, which historical it's an important market, but is more led by prices that inside Greater China a little bit weaker in terms of the stock management that we have we prefer to privilege so it's also a decision, the subregion with a higher contribution demo prices.So it is a depletion situation that is also driven partially by ourselves. And we are absolutely zen and very calm about the acceleration that we will witness inside Greater China and all Asia-Pacific subsequent in Q2. And as a reminder, we reiterate our full year guidance in this part of the world, Greater China, which is double-digit depletion and a surge in volume and value performance. One thing is very important. I will repeat every time. Also in Asia, not only in Asia, but for the group, we are a group that wants to increase the value of this product every year. So our strategy is based on price increase and we are a leader boat that takes all the waves of the internal and external storm. So volatility is really clearer that the name of the game, so don't be focused starting from already some here, but it would be even more evident, a little more clear if the macroeconomic and geopolitical situation, it would be more confusing in the next coming years and quarters. And please listen very carefully to our underlying estimation that we are sharing with you. So what we are saying to you at this moment for China is double-digit growth. It can be a quarter, which really a bit softer. It can be a quarter that could be even softer that the single-digit. It's not a problem. Everything is taken into account. Everything is matching with our strategy. And listen to our yearly guidelines and the extense and with the clarity we can provide. So Greater China, I repeat double-digit objectives for sales and depletion for this year's volume and value. In terms of acceleration of Q2, it would be a little bit spread, but clearly we are estimating a strong come back for the Americas and the mathematically -- and U.S., also for Asia-Pacific but the phasing effect or the price increase, the third one in 12 months, third one in April 2018, September/October 2018 and April 2019 in the U.S., which some increase that and compound effect that was around 12% to 15% for some ranges, which is quite obvious for the American market and an impact of the quarter, we are right at that and we are waiting for improvements starting now. And the first highlight we have on the July are very promising, very positive. So we are optimistic on this acceleration on the Americas, which clearly should be and will be the major regime of the acceleration of the Group Brands, Group Brands in the second quarter because -- why I insist on Group Brands? If you remember, we had that technical factors, EUR 56 million to be split for the Group Brands to be split EUR 31 million and EUR 25 million. In this Q1, we witnessed EUR 12.5 million, so EUR 31 million minus EUR 12.5 million is a big chunk of the non-partner, non- Group Brands technical factors that will be hitting the Q2 overall, but Group Brands will improve in an important way. The third question, trade war. It is quite, quite impossible to share with you some mathematical estimation because we do not know what's happening. We are preparing many scenario clearly. We are preparing ourselves. It'll be hitting. What we can say that we are optimistic on the fact that our DNA of being a luxury company inside Liqueurs & Spirits environment will be -- will give out to ourself the credibility to increase prices because at the end, we will increase prices. So I don't think that we will have a strategy to absorb this price increase if any in the future. So we'll increase prices. And that will be in a negative elasticity on volumes, but it will be only a short-term problem. So if the tariff increase will happen, I repeat myself, we will increase prices at the same month. We are trying to estimate all the scenario doing what we want in terms of stock movements to avoid to be hit by this tariff for the most part of the year. But in term of pricing strategy, we will be increasing prices at the same time of the announcement.And to what extent, there would be a difference between one quality to another, from one state to another for sure, because if it is the case, we'll consider that to also like an opportunity to reset our competitive arena when in necessary in some states some ranges compared to the competition. So clearly, if it is our decision, we'll prefer not to happen, but if it will happen, we'll react with price increase and can be also an opportunity with bearing fruits maybe in a longer-term, but it will be used as a weapon for our company.
Very helpful. And just on the U.S. I mean, I think you've shown the abilities to take price within your Cognac business, but for Liqueurs and the Cointreau, do you think that's at same pricing power?
For the -- sorry?
For the Cointreau business in the U.S.
Cointreau?
Yes.
It's lighter, lighter. For Cointreau, it's a different game. So the thinking process if trade -- this tariff increase will be applied for Cointreau could be and probably will be different compared to our Cognac qualities.
We will now take our next question from Simon Hales from Citi.
Just a couple of quick ones, please. On the European retail market changes you made in Italy, Spain, I think you said Germany and France, could you just sort of explain a little bit more of what you've been doing there? And from a Liqueurs & Spirits standpoint, and as the impact of those changes now fully through in the first quarter, which we expect that continues to drag in Q2 and beyond. And then just secondly, just coming back to China and Cognac depletions that I want to label the point in terms of the slower Q1, but did you see any impact at all perhaps on the business from the KTV changes? Or the clampdown that we've been witnessing there? Is there anything you can share or shed any light on any impact you've seen from that?
Thank you. If you don't mind, we'll start with the second one. So China depletion, I don't think this is lower. It's a little bit less strong, but as well -- still in a very, very strong figures, so in 12 months and also in 3 months we are not in negative lines. KTV measures what it being specific series, but the impact, which is quite marginal at the group level, it was more in the southern part in Shanghai was more than offset by the incredible success, once again, of e-commerce. I don't give you the exact figure of the quarter because otherwise you extrapolate to the moon, the commercial weight and performance inside China in the Q1. But it was more than offsetting and we guide for the year in terms of weight of e-commerce inside China Mainland between 20% and 25%. And as a reminder, they're new clients, new profile, different region, we're in a -- on the optimization or logistic and with a strong difference in term of operating -- marginal operating margin. So it is -- it was an impact for KTV, marginal and more than offset positive by the booming on the quarter of e-commerce and we're very happy with that with this channel mix or China switch and mix. In terms of route to market changes, as you know, we guide already 1 year now to 2 year ago, the fact that Europe will be a land of transformation of organization of route to market progressively and we'd be discussing the disclosing of what we can once it is done. So your question is well appreciated, what we are doing. In Italy, we changed a little bit less than 1 year ago and now they are still perturbation, why? In our experience, when you change route to market in countries, which you don't have a subsidiary, so you do not control globally your final retail and distribution that you have exact distributor there, wholesaler, the normalization had been following the rest of the market, the final consumption between 18 and 24, 30 months because the first year you have the destocking that we put in place in new commercial policy. In the second year, you will start -- starting to have a nice comp but you need also more A&P to be able to increase the natural consumption on that market -- those market that normally if we change, we are not headed in the right way because otherwise we don't change. So in Italy, we should expect normalization because it's something that belong to a decision and act taken 1 year ago, starting on the Q2 or the maximum Q3. Spain and Germany are more recent. And for Spain, there is a specific topic in terms of overstock in the market to be absorbed for Liqueurs & Spirits, and mainly Cointreau, which is an important country for Cointreau and Spain, and will be progressively absorbed all around the year. So it will take a little bit more longer because the decision was taken and the act was realized end of this year. Same for Germany. We end up with our joint venture with Diversa. We have a new distributor. It's taking care in a much proper way in our opinion of the market, but we're just again, at the beginning of the journey. So Italy will be circling between Q2 and Q3, Spain and Germany will a little bit be with us all round the year. Is it a problem of our expectation? No, no, this is part of our budget construction, so it was partially expected. Italy is partially expected. Overall, as I said, if the price increase strategy of the company is causing volatility in terms of performance by quarter, you have to consider that EMEA is even more volatile because of this change route to market decision that we are taking progressively by the very steady and constant way.
And Luca, are you able to quantity at all just what percentage impact that the distributor changes actually had in on your overall Liqueurs & Spirits business in the quarter? Just to help us with the maths.
No, we cannot disclose that. Yes, we cannot disclose that. Well, to help you is that, if you consider because we don't guide in terms of the brand specific, but if you consider that our group performance for the year is x in terms of the region, the clear contributor we said that Asia-Pacific will be double digits. We said that Americas would be mid-to high single. And as a result, you have as a difference EMEA. But the global figure is the x that you have to guess estimate.
We will now take our next question from Laurence Whyatt from Barclays.
Two from me. Previously, you often talk about the various performance of QSS plus versus the rest of the Cognac portfolio and we haven't heard a huge amount about that today. I was wondering if you could let us know if there's been a better performance by any of the price categories, particularly in the Asia region. Or if they are all performing around the same level in terms of growth? And secondly, you took pricing in the U.S. on Cognac and according to the NABCA data, you presented as underperforming the market over the past 3 months and in the recent 12 months. Do you know or could you disclose to us whether your price rises were similar to the rest of the market? Or from you raising prices ahead of the market?
So in terms of performance, QSS plus, other qualities, I think that your question is even more related to Asia-Pacific and to China. Overall, in 12 months, it's more spreads also because we have huge comps and CLUBs is really booming. So in terms of without giving the clear figures, in terms of increasing performance, CLUBs themselves increased the first one and then LOUIS XIII XO and in a lower extent VSOP, which is for us is not a problem because we prefer to sell more CLUB than VSOP, there is a clear difference on that. So it's more spread essentially in terms of ranges and these are -- and the comp was very, very high and is more balanced with a huge, huge overperformance of CLUB to be compared to VSOP. In terms of price increase, it's a strange question in my opinion, sorry to say that because don't focus too much on the last one. We started in April 2018. We didn't start, we continue with a strong price increase and then again, $1 to $2, as an example [indiscernible] September and October. Now again, 3% to 5% in average. So once again, overall, we had a carryover in terms of value, which is following the quality 10, 12, 15 points. So for sure, there is a phasing effect. And for sure, if you compare that with some compare so they decided to wait a bit to take this price increase and there are also other calendar year, but I'm not commenting on competitors what's reality, can play a negative role in term of shipment and depletion as I said in the quarter. But so what? It's not our problem. And if the natural consumption is there and if we think it's there, the reorder and depletion, the rhythm will improve and we are very confident on that and that starting from the Q2 and the first highlight we have mid-July on that on iconic, iconic product line like VSOP are very, very positive. So we do not focus or react on a short term in terms of competitors calendar or attitude. So we continue to follow our path, our destiny and we are confident and focused. Very humble. We can assume volatility, but we'll continue to follow this strategy without changing our position or our habit.
Our next question comes from Fernando Ferreira from Bank of America.
I have 3, if I may. First one, just to follow-up on the U.S. tariffs. Do you still believe that the likelihood of them being implemented is a 50-50 chance like whether you said during the full year call? Then second question is still in the U.S. and also follow-up on this volume depletion declines. I'm just curious to know what's the strategy if the sales take a little bit longer to recover than you're expecting. Are you may be planning to increase A&P or brand support dollars to get the sales going? And then last point on Greater China, last question on Greater China. I appreciate that the sales trends are consistent, but can you perhaps elaborate a bit more on the weakness you saw in Hong Kong and Macau and the reasons behind the discrepancy relative to Mainland?
So the first one was -- what are the odds of 50-50? I really don't know. If you consider the rumor started 1 year ago, everyone was sure that was happening and then, nothing happened. Some months ago, we're sure, then was not sure. Now it seems to be sure. So I can say only 50-50 because it's quite -- sorry, to say that, I don't want to bother anybody, but it's quite irrational. So it is quite on the basis of what's happening during the day, what are also the collateral discussion on other type of sectors and economies than Liqueurs & Spirits are there keeping up your ecstasy in terms of threat. So I cannot say other than 50-50, but we can assure that we are preparing ourselves to cope with all the possible situation. What's up if the depletion -- consumption depletion and so shipment in the U.S. will be not improving so fast? We will -- your question is we will prefer to protect our operating profit. We increase support to improve sales and add the profit even if it was 1 or 2 quarters. We already started. We are increasing support A&P big time in the U.S., specifically. So clearly, if there will be any sign of weakening recovering time of the shipment with the old chain, will improve the A problem, more A and below the line, less B because B, promotions are really always shorter. So in a way, as we have seen, if you want to be credible, reliable as a look sort of company, we cannot increase prices and then improve -- increase promotion if there is more store or even a quarter, a blank quarter. So will be an increase of advertising, digital communication, education and below the line, with testing programs sampling, following the DNA of each brand because we cannot compare what we will do for VSOP or XO, we will do for Botanist. The whiskeys are 2 different business models. So we will privilege the investment for sure. Cause on Hong Kong and Macau. Hong Kong is clearly political, so we think that we will recover, but in terms of events what happened has lowered down a lot the consumption and also created a climate of in substitute of doubt on a short-term in Hong Kong. For Macau, as already said, historically, it's a market that has been dynamic, but prices are a little bit lower compared to the China Mainland and compare also to the southern part of China. So they are 2 different lands, but there is only a bridge behind them. So they are not so far. So it's also our decision to reallocate volumes, you may -- considering that we are in managing our inventories, our stock, in terms of subregion. So once again, this element are there in negative expression, negative way for the quarter, but on a whole year basis everything is factored inside the intention to realize double-digit growth in volume and value, top line and depletions inside Greater China. So considering all the 4 subregions, China Mainland, Hong Kong, Macau and Taiwan. Taiwan, we did not mention this time because it performs very good, well in line, it is a little bit better than expected, but the weight of Taiwan is not so high. So not so big. Hopefully, this helps Fernando.
Our next question comes from Marion Boucheron from MainFirst.
Just 2 questions from me, please. The first one on Cognac on the price/mix you had in Q1, which was very, very strong. How do you see it evolving? I mean what was the -- can you give us more color on the split between what was in the prices and what was mix? And then, how do you see this evolve during the year, I guess, after September, if you don't raise more prices, we should have the pricing components decreasing slowly, but this is well ahead of the target, I mean you have for years, which is around 5% with regarding to Q1? And then the second question was about consensus, how do you see it for the year?
Price/mix of Cognac for the Q1, it is -- I'll say now it's 50-50 more or less. It is inside mix. It is a little bit less in some Cog because I want to be precise, a little bit less of product mix that is a more of the regional and channel mix. So 50-50 between price and mix. In terms of consensus and operating profit, they're really too early. We'll discuss them as well as we committed to revision for the operating profit of the full year '19/'20 end of November in London, in Paris, when we'll be discussing the half year results. It's really, really too early. There are many things and factor has to be considered because the tariff increase will be happening, yes/no, and I think that we cannot control 100% on the geopolitical and economical that will impact the year for everybody. At this stage, I cannot comment and once again, I promise, we respect our promise, a commitment to share on the -- at the end of November, our vision for the operating profit organic 1 for the year at the end of September -- end of November, for the half year results.
Our next question comes from Nico Von Stackelberg from Liberum.
Luca, I was wondering if you could tell me more about China's pending social credit system. There is one score down when you purchase alcohol. Do you know roughly how it's going to work when it's implemented next year? That's my first question. Second question is really just around, well, I mean, I guess, I sort of have a feel for the price less to see if demand from a qualitative perspective, but could you quantify this for us across the portfolio just roughly what the price elasticities are by major brand group?
So thank you for your question. I'm not able to answer to the first one, I never heard about that, very social threat. And it's something new for me, but I will talk another time about that because I have to get some information, something new. It is new for me the things that has not been highlighted by our team, so I don't think it's an issue, but -- sorry, but to be very frank, I don't know. Price elasticity by quarter, no, we cannot say that. So we will disclose that after postmortem but not before [ mortem ]. So I'm sorry.
Now at this time, I would like to hand the call back over to you, Mr. Marotta, for any additional or closing remarks.
Very simply thank you to be here today with us. We are satisfied with this quarter. It is well in line with our expectation for the Group Brands. The overall performance in term of sales this year can't be considered as representing the performance of the company because of the weight of the technical factors. I will repeat that, again and again. So look at the Group Brands performance and take into account the fact as I said, the volatility is the name of the game because it's a natural consequence of our strategy to increase prices, to increase mix and to increase with specific decision done and guided by ourselves in terms of channel. So no short-term tension and long-term vision being very cold with our decision. Thank you so much. Have a nice summer for everybody and talk, again, mid-October, maybe there will be some positive, negative news in terms of trade until then, that's -- have a nice summer and everything will be good. Don't worry. Have a nice day.
Ladies and gentlemen, this will conclude today's conference. Thank you all for your participation. You may now disconnect.