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Diageo plc (NYSE:DEO)

June 10, 2013 8:00 am ET

Executives

John Randolph Millian - President of Latin America & Caribbean

Analysts

Trevor Stirling - Sanford C. Bernstein & Co., LLC., Research Division

Simon Hales - Barclays Capital, Research Division

Ian Shackleton - Nomura Securities Co. Ltd., Research Division

Christopher Wickham - Oriel Securities Ltd., Research Division

Andrea Pistacchi - Citigroup Inc, Research Division

Chris Pitcher - Redburn Partners LLP, Research Division

Alicia Forry - Canaccord Genuity, Research Division

Laetitia Delaye - Kepler Cheuvreux, Research Division

Operator

Welcome, ladies and gentlemen, to today's Brunch-time Call with the Presidents. [Operator Instructions] Just to remind you, the call is being recorded.

I'm now pleased to hand over to the President, Diageo Latin America & Caribbean, Randy Millian. Over to you, sir.

John Randolph Millian

Thank you. Good afternoon, everyone, and thank you for joining me on the call today. I am taking my last call as President of Latin America & the Caribbean from our offices in London. We will follow the usual format where I will start with a short update of the business in LAC, and then open up the line for your questions.

Let me start by reminding you of the opportunity we see in LAC and our strategy to deliver in the region. The opportunity for our business in LAC, which we presented at our investor conference last November, is exciting. Each year, it is estimated there are roughly 10 million new consumers of legal drinking age in the region. The portion of households rising out of poverty has increased significantly in the last 5 years. Over half of the population of Latin America is now middle class, a consumer segment we are targeting through increased distribution and investment in the relevant brands.

Equally important, the growth of wealthy consumers is increasing at an even faster rate, expected to double in size to 60 million consumers, with increasing purchasing power by 2017. Over the last 7 years, average alcohol growth in Latin America has increased 9% per annum. Diageo has grown net sales in the region even faster at 14%. By category, we've experienced growth of 15% in scotch, 19% in vodka, 23% in rum and 21% in reserve brands. Diageo has fueled this growth by increasing marketing investment, launching new products and building our route to market.

Our marketing strategy focus on 2 growth areas to capitalize on the region's socio-economic shift. The first is premiumization across the portfolio by expanding deluxe and Super Deluxe reach with brands such as Johnnie Walker Blue Label, Buchanan's Special Reserve, Zacapa and Cîroc. The second is a focus on the emerging middle class opportunity. Today, 35% of our business in Venezuela, 20% in Colombia and 50% in Brazil is already coming from the emerging middle class. We estimate that roughly 1/3 of our business in the region comes from the emerging middle class. Providing aspirational brands within arm's reach of the consumer, local relevant marketing and an advantaged route to market across the region are the key ingredients for the success.

At the same time, we have stepped up efforts to build our route to market, particularly in Brazil and Mexico. We are also increasing innovation by launching new products, line extensions and new formats. Year-to-date, our innovation portfolio is growing at more than 50% in every market; in some markets, nearly doubling innovation sales versus last year. We expect another strong year for LAC, with double-digit top line growth, operating profit growth of roughly 20% and significant improvement in operating margin.

Let me now comment on the recent developments in each of the markets since our last conference in Miami. In Brazil, the market has slowed down in the last 6 months, and we expect to finish this fiscal year with top line growth flat or even slightly lower than last year. There are 3 drivers of the slowdown in beverage alcohol in Brazil. The economy is slower at a time when the government has eliminated some tax incentives and increased enforcement of interstate taxes. This is the right action to take to avoid internal state tax competition in the long term, but in the short term, changes have impacted trading and forced a destock in the wholesale channel. Better enactment of drink-and-drive laws has also resulted in decreased on-premise sales. We believe this is the right thing to do, however, and are supportive of the new 0-tolerance measures.

In addition, nightclub safety enforcement following the fire at Santa Maria earlier this year is also impacting the entrée. More than 1,000 outlets were closed temporarily, with roughly 10% of those clubs still closed at this time. In spite of this, our scotch brands continue to outperform the contrary, gaining 3.5 points of value share year-to-date. Overall, Diageo holds roughly a 21% value share of spirits in Brazil. We are more than 50% bigger in value than our key competitor and growing at a faster rate as well.

Diageo was deploying a new route to market of scale, significantly increasing activation in outlets. The team activating Diageo brands have grown from 650 to over 3,800 people in the last 18 months. The route-to-market expansion has been a staged rollout. With the majority of stakes under the new structure, we are now focused on building capabilities with our distributor teams.

We are making strong progress on the integration of Ypióca. Although it is still early days, the business has grown value share by 1.1 points in the cachaça category. The new marketing campaign will be on air next month, and we are very excited about the synergies and opportunities that we have identified between our 2 spirit businesses in Brazil. As an example, the 2 companies have already started to buy glass together and local production of Smirnoff in the North and bottling of cachaça in the South is planned.

To sum up, despite some short-term challenges, our business in Brazil is getting stronger. We are growing leading brands in our most important categories, positioning the business to capture the long-term opportunity, capitalizing on premiumization and recruiting emerging middle-class consumers.

Diageo Mexico continued to deliver efficient growth in F '13. This is driven by successful share gains, particularly in standard scotch and rum. Value share within the spirits category continues to grow, with share at 21.3% versus 20.1% same time previous year. Year-to-date, sales are up in high-teens versus prior year, with operating margin and cash flow improving significantly. We are also seeing strong consumer response for Captain Morgan and Zacapa in the rum category at 11% value share, up from 8% last year. Sales from innovation and the introduction of new brands are strong behind Captain Morgan for rum, Johnnie Walker Double Black, Buchanan's Master and Black & White for whisky.

There are 3 growth drivers behind Mexico's performance. First, our sales team implemented an in-store execution program which has increased share of shelf and display, reduced out-of-stocks and improved execution. Second, Diageo launched a successful strategic partnership program with our key wholesalers to improve their teams' capabilities. Third, Diageo has leveraged the growth of the modern trade and convenience channel sales with these programs, up mid-teens and 30%, respectively. Lastly, but definitely not the least, Mexico economy remains stable and GDP is expected to grow by 3.8% in 2013.

In the Andean region, the last 6 months in Venezuela has exemplified the market description we used in -- at the November investor conference, which we showed Venezuela as a volatile and highly complex market but one that presents a big business opportunity. With the deterioration of President Hugo Chávez's health and his ultimate passing, the country experienced both political and economic instability. This was followed by new elections in April won by Chávez successor, Nicholas Maduro. Adding to the market complexity, the opposition has not recognized legitimacy of the election process and therefore, Maduro as the elected President.

Economically, Venezuela's currency was devalued by 46%, accompanied by 17% inflation, the highest 6-month inflationary period in the last 5 years. During this period, the prices of Diageo's imported products rose by 80%, with local products increasing by 20%. Notwithstanding these price increases, our business has maintained its leading position within the market, with a 57% value share in scotch, 50% in rum and 26% on imported vodkas. Some of our leading import brands have hit important milestones, including Buchanan's Master, achieving 75,000 cases in the year; Gordon's vodka and Gordon's gin surpassing the 100,000 cases in F '13. In the long run, Venezuela continues to be a land of opportunities. However, we believe the challenges will continue to influence and impact our business until the economic and political environment stabilizes.

West LAC, our biggest market in the region, comprises 38 countries, including Argentina, Chile, Peru, Costa Rica and the Dominican Republic. The foundations of our strategy, reserve, innovation, emerging middle class and premiumization, continue to deliver solid double-digit top line growth. There is strong progress in most countries with specific examples of double-digit top line growth in markets such as Central America or Jamaica, where, for the first time in several years, the team is delivering double-digit top line growth as a result of price increases on beer, most notably, Heineken and Guinness. We expect the growth will fully accelerate in the future after our new distribution joint venture in Jamaica with Cabcorp. The only noticeable exception is Argentina, where the government restriction to imports will prevent top line growth during this year.

Allow me to give a brief summary of the progress against West LAC's 4 initiatives. In luxury, the deployment of our reserve model is showing success. We have the model implemented in 17 countries, a dedicated team of 35 people and a growing reserve outlet universe of over 1,400 accounts. The resulting growth is double-digit net sales growth and growing momentum. With emerging middle-class consumers, Johnnie Walker Red Label step-up program is driving strong response among consumers and customers, recruiting and expanding in our markets. Execution in Peru, Costa Rica and Guatemala is giving us the confidence to expand the rollout throughout the region. For example, in Peru, Johnnie Walker Red Label net sales are now over GBP 11 million , having more than doubled in the last 2 years.

We have introduced a number of innovations in F '13, including Johnnie Walker Platinum, Johnnie Walker Gold Reserve, Johnnie Walker Double Black, Cîroc flavors and Smirnoff confectioneries, to name a few examples. As a result, over 50% of West LAC's market growth has come from innovation in the first 10 months of this year. In premium scotch, West LAC continues to experience very strong momentum in our 3 key brands: Johnnie Walker Black Label, Old Parr and Buchanan's. As we continue to extend the leadership in this segment, volume growth has been accompanied by significant price increases, which are allowing us to drive top line growth into very high double-digit growth.

Before I take your questions, let me summarize the 3 key messages I want to leave you with from this call. Diageo is very well positioned in the region as a result of driving innovation growth, building our route to market, capturing middle class, capitalizing on premiumization and growing the reserve business. Scotch will continue to be the engine of growth with an aggressive expansion in other categories like rum and vodka, covering both the affluent and emerging middle class. Despite some headwinds in Brazil and volatility in Venezuela, these are long-term, high-growth markets with very favorable population demographics.

Jerry, can I ask you to open the line for questions.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question is from the line of Trevor Stirling at Sanford Bernstein.

Trevor Stirling - Sanford C. Bernstein & Co., LLC., Research Division

Randy, before the question, just wanted to say congratulations on everything you achieved in the last 8 years, truly amazing results.

John Randolph Millian

Thank you, Trevor. Thank you.

Trevor Stirling - Sanford C. Bernstein & Co., LLC., Research Division

Randy, 2 questions. One, concerning Brazil, you mentioned that there's been a lot of destocking going on. When do you think you'll be through the worst of that and so at least the rate of decline in the market will start to slow?

John Randolph Millian

I think by the end of this fiscal, and it's mostly in the wholesaler channel that we can't do interstate parallel anymore.

Trevor Stirling - Sanford C. Bernstein & Co., LLC., Research Division

Great. And second question, broader, even in the last month or so, we've seen quite a lot of weakness on some of the currencies, particularly, I guess, the real. How quickly do you need to pass through price increases to cover that FX weakness in order to make sure you're not going to end up with pressure on parallel movements?

John Randolph Millian

Well, first of all, we have some of the highest pressures in Brazil anyway. Right now, I think Johnnie Walker Red Label, if you do it -- even in today's currency, it's about $38 to $40 a bottle for a liter bottle. That's Red Label, okay? So we're consistently taking price increases. And we think we've had great margins in Brazil, so I don't think we're in a panic because of -- obviously, if we have a 30%, 40% devaluation, that's a different case, but I don't see that happening.

Operator

The next question is from the line of Simon Hales at Barclays.

Simon Hales - Barclays Capital, Research Division

Randy, just wanted to just first confirm just the numbers you gave around the guidance just for this year. I think you said double-digit sales growth and around 20% EBIT growth. I just wanted to just clarify those numbers. And then, with regard to that EBIT growth number, I know, obviously, around 20% has been the run rate recently. Do you think that is still the achievable run rate looking forward when you look across your markets as you look into F '14 and beyond? And I suppose linked to that, I was interested in your comments around synergy potential you're increasingly seeing between the Ypióca business and your existing Brazilian business. Should we expect to see some of those synergies dropping through to the bottom line as early as F '14?

John Randolph Millian

Okay. Well, let's take each one to begin with. First, yes, I do confirm the numbers for this year, okay. That is what I said. I'm not talking about F '14 right now. I think I'll say what I said at the investors conference, which we can see this thing doing double-digit growth consistent in the future. We will have volatility. We've been able to manage through those through the times. On Ypióca, I do see some interesting synergies coming together. We've been very careful about putting the businesses together too quickly because we didn't want to take a very traditional cachaça brand that's Brazilian and run it via a big conglomerate. So we've taken care to go in, get the employees on our side to understand our business and really understand the brand. So yes, I do see some synergies coming together in F '14.

Simon Hales - Barclays Capital, Research Division

Okay. And just generally, Randy, I mean, across the -- I think, at the Investor Day in November, the implication was that you saw overall that the region will continue to deliver margin growth ahead of the group overall average growth rate over the next sort of couple of years. Is that still your core belief despite the slowdown we've seen in Brazil short term?

John Randolph Millian

Yes, I think it's on or above what the corporate is doing. I think we're going to see some good margin growth this year. But we've now got this business to a scale that I think we can continue to do that. Obviously, we're going into some of the lower-value products because scotch business has been so profitable that I think we can offset that with our reserve business and our overhead efficiencies as we go into that. We just put a new shared service center in Colombia that we talked about in November that is going to give us a lot of synergies in the back office and also a good control and compliance environment. So the short answer is yes.

Operator

The next question is from the line of Ian Shackleton at Nomura.

Ian Shackleton - Nomura Securities Co. Ltd., Research Division

Randy, all the best as well for the future, echoing Trevor's comment. You talked about the destocking in Brazil and I just wonder where you see sort of stock levels across the region at the moment.

John Randolph Millian

I think other than Brazil, where we've had a change in channel shifters, they're at healthy levels. It's something we look at very carefully.

Ian Shackleton - Nomura Securities Co. Ltd., Research Division

So you don't feel that high levels are a little bit like history at the moment?

John Randolph Millian

No.

Ian Shackleton - Nomura Securities Co. Ltd., Research Division

And one specific thing on Mexico. I understand there's a sort of potential regulatory review of your exclusivities. I just wondered does that have any impact at all on your business.

John Randolph Millian

I mean, not really. In our view, they tend to do things differently than we do, but no.

Ian Shackleton - Nomura Securities Co. Ltd., Research Division

And the final question, Zacapa, which I know is a brand close to your heart, I mean, you mentioned a few times. Just give an update of how it's going generally. And I guess, are you approaching potentially supply issue in terms of Zacapa in terms of stock shortages?

John Randolph Millian

No, I think we've laid down some good stuff. It continues to grow. We're beating our business case in the acquisition. We have enough stock. And if not, we know how to react quickly.

Operator

And the next question is from the line of Chris Wickham at Oriel Securities.

Christopher Wickham - Oriel Securities Ltd., Research Division

Just on 2 things. I mean, one follows on from Ian's comment. I mean, just over the continent as a whole, I was wondering perhaps you could expand a bit more about the potential to do anything in beer and particularly, the premium end. And obviously, it's a big beer drinking region, but it's a heavily concentrated one that's very sort of hostile to entrants. And the second thing is just really tying up some of the comments that you made in Miami about innovation and then the presentation we had from Syl earlier on the last month. Just in terms of the amount of innovation that's going on in Latin America, I just wondered perhaps you could give us some -- if there's any sort of quantity you can put -- or quantification you can put on the pace of innovation in Latin America and how much that is accelerating.

John Randolph Millian

I'd be happy to. First, the first question again was on beer. I think, obviously, we have to be selective about beer. I think we're going to need to do this in stages. When you look at the shares that we have in scotch and the shares we're gaining in vodka, the next is really to make those shares be predominant in the whole spirits category and -- which is what we're focusing on. Once we've done that and we've laid down our route to markets, then I think maybe you could look at a premium beer. But I wouldn't do that, okay, for another year or 2 at least because I think we've got more than enough to really capture the middle class. You've seen the strategic agenda that we have. Getting beer into that will probably take us off focus, and that's your first question. The second is innovation. Basically, we're -- it's 39% of our growth for F '13. We're growing close to 100% versus last year in many markets, so I think I'm happy with it. But I think one of the things we're learning is we're just scratching the surface on innovation because the way we do the strategy for Latin America was, "Let's focus on building a very good share in scotch by getting strong brands, then vodka, then rum and then innovation." So we're playing a little bit catch-up on innovation. But as you can see by the growth rates, I think we're onto a good track. And obviously, laying down our route to market gives us a bigger ability to do that.

Operator

The next question is from the line of Andrea Pistacchi at Citigroup.

Andrea Pistacchi - Citigroup Inc, Research Division

A couple of questions, please. Firstly, a country you didn't mention was Colombia. If you could just spend a couple of words on the current situation in Colombia. Then, on Brazil, talking about the slowdown there, could you say what is -- in terms of category, what is more impacted, what is more resilient from a consumer point of view in the current difficult environment? And then, finally, a bigger-picture question on your route to market. You've obviously enacted some important changes in Brazil in the past couple of years, and that's still work in progress. Are there any other countries in Lat Am where you think you need to tighten your relationship with distributors or make some important changes to route to market?

John Randolph Millian

Okay, great. Andrea, let me go through, first, Colombia. Colombia has slowed down a little bit, but we continue to show top line growth, and we're gaining share. So I think it's on track. A part of it, I think, is the exchange rate in Colombia and things like that. But there's been a little bit of a slowdown, not as bad as Brazil. On Brazil, I think probably the hardest hit would be the general cachaça category, then vodka, and the least hit is whisky. Whisky, while its growth has slowed down, it hasn't stopped. It's probably 7% or 8%. Vodka is growing through 4%, and I'm talking in this during the slowdown, which happened after the end of December, okay? And cachaça, if you look at it from a total category, is down 6%. And I remember with our Ypióca business, we're basically just strong in the Northeast in Serra [ph], okay, and building a national brand. So while we're showing growth, the category may not be. So that would be the categories that are being affected. And you -- I'm sure you've picked up from the reports that their industry is having issues. And then, the final on the route to market, we have been -- what we've done in Brazil, Brazil is a -- we put a distributor model in there. We'll continue to have what we call the modern on-trade -- modern trade, excuse me, which is supermarkets. And then, we'll still be wholesaler-based to a certain extent because it's such a big country. But we have spent 2 or 3 years. It's going to take us 5 years to get it up to the capabilities we want to. We're constantly evolving our route to market. We've got a project looking at Colombia. We've got a project looking at Mexico. And in Peru, which we don't talk a lot about, we've redesigned our route to market and in Chile a couple of years ago. So this is something we're constantly evolving to do because while I think we have best-in-class route to market, we constantly got to be evolving it because we've got more and more consumers coming into our portfolios.

Andrea Pistacchi - Citigroup Inc, Research Division

And can I -- sorry, just a quick follow-up on the question on what is going on in Brazil. Now in this sort of environment where you have some degree of slowdown, you said scotch is proving to be more resilient than the other categories. Within scotch, do you typically see -- in a downturn environment like this, do you see sort of the standard Johnnie Walker Red being impacted a bit harder or is it the slightly more premium versions?

John Randolph Millian

I think it's the slightly more premium. Johnnie Walker Red, as I mentioned before, is probably $38 to $40 a bottle so that's -- I wouldn't say it's not premium. But it continues to grow in that area. What we find is people tend to not -- and I have found over the years when there is a slowdown, people wouldn't tend to trade down within the category. They'd rather trade out of the category, okay, because they want to say, "I have less money, I'm going to buy something cheaper."

Operator

The next question comes from the line of Chris Pitcher at Redburn.

Chris Pitcher - Redburn Partners LLP, Research Division

I have a bit of a follow-up question on your Brazil route-to-market strategy. In terms of the enlarged sales force that you now have with Ypióca, can you give us an update on the number of accounts that you're now covering in terms of percentage addressable? How many of this enlarged sales force are actively working with the entire Diageo, Ypióca sales force? And then just to see -- because, obviously, one of your major competitors has spoken about upgrading or increasing their investment, whether you're starting to see any increased money being put on the ground by your competitors in Brazil.

John Randolph Millian

Yes. I mean, I guess to answer your question -- thanks, Chris. I'll come back and answer it in 2 ways. There's the Diageo route to market and there's the Ypióca route to market. The Ypióca route to market for the -- had a strong route to market in the Northeast, mainly in Serra [ph] and had representatives, sales representatives, through the rest of it. Diageo route to market, which now has the 60 distributors that we've put in there, most of them -- many of them who were wholesalers were teaching them how to build their capabilities in our area, and that will take some time, is where we will put the Ypióca business into eventually. We've started with them in the south of Brazil into that route to market, so that's our investment. And yes, if we do see our competitor investing in a route to market, we think we got a lead advantage because we started this 2 years ago, when we saw that these tax incentives things were changing. So basically, what it does is because you can't do as much play with interstate tax, we can actually give an exclusive territory and protect that territory for a distributor. We couldn't do that in the past. So we saw it a couple of years ago, and that's why we started laying down what we've laid down. But eventually, I see Ypióca going in the Diageo route to market and outside of the Northeast.

Chris Pitcher - Redburn Partners LLP, Research Division

And I suppose a follow-up question, again, on Mexico, where you've got, obviously, a very strong position. But again, your competitors had a significant rehold to that portfolio, I would imagine, to that RTM strategy as well, again. Are you able to comment on where you think your competitive advantage is there and whether you're seeing anything visible?

John Randolph Millian

I think, at the end of the day, what's going to make the difference is brands, okay, and our people. Of course, I think we have strong, strong brands that we've invested consistently behind over the last 10 or 15 years. And they continue to grow, and we have a good share of scotch, which continues to be aspirational and growing. And yes, they have restructured here. Yes, they have looked at the route to market. They may have more volume brands than we do, but I think we can continue to grow the way we are. And we are looking at a route to market to see if we can expand our reach. We want to that appropriately.

Chris Pitcher - Redburn Partners LLP, Research Division

Okay. And one final question, and I apologize, this may be a bit technical. But in terms of Venezuela, you mentioned that you had, I think, an 80% price increase locally. Could you give us a feel for what your cost inflation is in that market, whether that helps to protect margin? And then, it's being debated whether Venezuela is back into hyperinflation. Whether your double-digit top line growth for the region, how much of that is contributed by this high inflation pricing in Venezuela?

John Randolph Millian

Well, I think, the reason for high inflation pricing on imports because of the devaluation of the currency. And if you remember, I also said that our local products are increased by 20% and inflation was 17%, okay? But right now, we don't think it's going back to hyperinflation, where in that -- but it's also -- so this is mainly due to -- the 80% is due to import costs.

Chris Pitcher - Redburn Partners LLP, Research Division

So it's 20% on your local brands? Sorry I misinterpreted, I thought that was local competitors?

John Randolph Millian

Yes. No, local brands.

Chris Pitcher - Redburn Partners LLP, Research Division

Okay. And just in terms of the organic contribution from this high priced -- the high pricing to the import brands.

John Randolph Millian

It helps us.

Chris Pitcher - Redburn Partners LLP, Research Division

But you're not able to quantify?

John Randolph Millian

No.

Operator

[Operator Instructions] And the next question is from the line of Alicia Forry at Canaccord Genuity.

Alicia Forry - Canaccord Genuity, Research Division

I appreciate that you don't want to talk about F '14 guidance. But just with regards to some of the issues impacting Brazil, I was wondering if you could perhaps give us some sense, from your perspective, how long these pressures might be impacting your business there.

John Randolph Millian

That's a fair question. First of all, we think we're probably going to be flat or a little below last year this year, but I can see high-single digit growth next year for the market. Not double digit, but high-single digit. And one of the things that -- my wife is Brazilian. I lived in Brazil for 13 years. And these countries go up and down, especially Brazil, and I realize we're going through a tough time in the next 5 or 6 months. There's questions on the economic policy and other stuff. I'm going to find it hard to believe that there's not going to be some good growth out of Brazil with the World Cup coming next year. I don’t know if I answered your question.

Operator

And the next question is from the line of the Laetitia Delaye from Kepler Cheuvreux

Laetitia Delaye - Kepler Cheuvreux, Research Division

I just had a question maybe on the M&A opportunities in the region, whether you could comment maybe from a product or from a regional point of view.

John Randolph Millian

Sure. Well, I mean, we've just done a big one in Brazil, which we want to make sure meets all the success criterions, which is Ypióca. We're looking. We don't comment on M&A activity in a way. We decided not to do the Cuervo deal, although I think we're pretty much the same we were in Mexico before anyway because we distributed ourselves alone other than the fact we'll get Smirnoff back in 2017, which would be, from a Latin American point of view, a good M&A deal for us. So that's about all I can say at this time. If the right opportunity comes out, it could be accretive to our growth, okay, and it makes sense to do, we'll go after it.

Laetitia Delaye - Kepler Cheuvreux, Research Division

And beyond Brazil and Mexico, there is no local brand that you could maybe look at in the rest of the region?

John Randolph Millian

We've looked at some, but they haven't been accretive to what we can do, and we think we can continue to grow the business better alone. If, for some reason, that changes, we'll continue to pursue it, but not now.

Operator

[Operator Instructions] At this stage though, it appears we have no further questions. I will turn the conference to you, Randy.

John Randolph Millian

Thank you. First of all, thank you for joining me today. I am leaving the region in the very capable hands of Alberto Gavazzi, who has a proven track record in different key senior roles in the region as Brazil and West LAC Managing Director, as well as Global Director for Diageo Whiskys and Reserve. I have full confidence in the leadership of Alberto and what he will bring to the region.

I would like to thank you, all, for your continuous support over the last 15 years. I am proud of what we've achieved in LAC. The overall strong performance of LAC has been underpinned by our strong Latin talent base and our culture that is always striving for more. Latin talent are in key leadership positions both in LAC and the other parts of Diageo.

We have strong brands and market share positions in the key growth categories. These are now supported by 14 well-run in-market companies, coupled with strong distributors in the other countries. Our sales force and route to market are best-in-class and constantly improving. We have a strong control and compliance agenda. Finally, we've had strong holistic performance, including Learning for Life, which has positively impacted the lives of 40 -- 80,000 underprivileged young adults. Thank you again, and good afternoon.

Operator

Ladies and gentlemen, this now concludes the conference. Thank you, all, for attending. Participants, you may disconnect your lines now.

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