Good morning, and welcome to Diageo's 2020 Preliminary Results Investor Q&A Call. Your call today will be hosted by Diageo's CEO, Ivan Menezes; and CFO, Kathy Mikells. [Operator Instructions]. We're now ready to start the call. Mr. Menezes, please go ahead.

Thank you. Good morning, everyone, and welcome to our preliminary results call. I hope you and your families have been staying well through this time. Fiscal '20 was a year of two distinct halves. In the first half, we delivered good, consistent performance, with broad-based organic growth across regions, categories, and we had margin expansion. Our second half performance, however, was significantly impacted by the global outbreak of COVID-19, with the peak of the impact occurring in Q4. We adapted quickly and acted decisively to protect our people and our business. We supported our customers, trade partners and communities. We stayed connected to our consumers and rapidly responded to the changing needs. We reduced expenditure, conserved cash and raised additional liquidity. The strong foundation we built over the last 6 years has increased our resilience and agility and smart investment has given us the technology tools to be effective in this environment. Our insights have enabled us to stay close to consumers, and we've continuously refocused our marketing investments to capture opportunities and strengthen brand equity. The U.S., our largest and most profitable market, has been most resilient. Off-trade demand was strong during lockdown, and our tequila and Canadian whiskey brands continued to perform particularly well through the year. Depletions were ahead of shipments, which resulted in a reduction in distributor inventories. In our other regions, we had a much higher on-trade exposure, which meant the impact on our business was more severe. For example, in Europe, around 50% of our sales are normally on-trade, and Africa is a strongly on-trade-oriented region. As these 2 regions are our largest beer markets, the decline in our beer business looked significant during COVID-19. In aggregate, around 3/4 of Guinness sales are on-trade in the larger Guinness markets in Europe and Africa. The…

[Operator Instructions]. We have our first question from Sanjeet Aujla from Crédit Suisse.

A couple of questions, please. Firstly, the latest market data from the U.S. and also the new data from Europe, it seems like Diageo is underperforming the category within the off-premise channel. Can you just talk a bit about your competitiveness in the off-trade, in particular, post-COVID? And then in emerging markets, are you seeing any signs of consumers down-trading from the spirit category to [indiscernible] or even to beer?

Sure. Sanjeet, your question on U.S. share performance in the off-trade, if you look at our performance across the portfolio, we've got, I'd say, share-gaining brands and share-losing brands. Clearly, tequila, our North American whiskey brands are doing very well. Vodka and rum are tougher. What I would point to is, firstly, Nielsen and NABCA represent about 40 -- 45% of the market. As I had indicated, our depletions ran ahead of our shipments. However, we're slightly behind the market. If you go back the past 18 months, the U.S. had got to be in line with the market. We were slightly behind right now when you look at our depletion growth relative to the industry growth. And we are very focused in our actions to make sure we improve that going into fiscal '21. I have to say, overall, the strength of our U.S. performance, I'm very pleased with. And you would see our price/mix is higher than the industry. And one of the actions we have taken is not to chase share, but to really keep the quality of share growth strong. So our price/mix is running well ahead of the industry price/mix if you look at the last recent few months. On the emerging markets, I'd say you've got a couple of impacts. One is imported products like scotch. Particularly when you have currency devaluations and economic slowdown, you do have a natural impacts of some down-trading that takes place from there. And this is not new, we've faced it over cycles, over many, many decades. So you would see some of our primary scotch brands like Black & White and VAT 69, et cetera, picking up and the top end of deluxe and super deluxe scotch slowing down. I would say, overall, spirit continues to be healthy. And the breadth of our portfolio gives us the ability to say our mainstream spirits play in Africa, we see as a real opportunity for actually spirits to gain share from beer through this period. So it's market-specific trend within scotch in emerging markets, particularly where currencies have -- and economies had taken a downward trend, we will see some short-term down-trading in scotch whiskey. But overall, spirits is healthy. And I'd say the actions we've taken to broaden our portfolio position us better to maintain our positions and indeed grow share as we go through '21.

Got it. And just following up on Europe. Any comments on share trends in Europe, particularly in the post-COVID environment in the off-trade channel?

Yes. So just the context on Europe. One is we are heavily skewed to the on-premise in Europe, right, because of our beer business. Guinness is significantly on-premise skewed. If you look at our performance in the most recent months, the at-home performances or the off-trade performance on beer is improving. Guinness is actually gaining share in the off-trade. And as the on-trade comes back, and I'm just using the data point of the last few weeks in the U.K., we are also seeing Guinness perform relatively better within the beer category. So I'm feeling very good about Guinness. On spirits, we are underperforming the markets slightly, but we feel confident going into the first half of fiscal '21. We've got strong programs, good innovation and fully expect to do better in our spirits performance going into F '21. We have some specific commercial issues in markets like Germany where there were -- because of price increases, we have taken some short-term hits. I do believe the Europe team, you'll see sequential improvement in our share performance as we go into fiscal '21.

Our next question is Simon Hales from Citi.

Just 2 or 3 for me as well, please. Can I just go back to your outlook comments just so I understand the messaging into the first half of next year clearly? I appreciate you're going to see some sequential improvement in the volume picture from Q4 into Q1 and Q2. But with regards to the margin development in the first half of the year, would you also say you expect to see a sequential improvement from the H2 level? Is that improvement relative to the sequential decline you saw in H2 on organic margins, at around sort net of 600, 700 basis points? Or is it in terms of the absolute margin level in the second half to pick up from the sort of -- from that level? And then secondly, on stock levels. I think, Kathy, in the presentation, you talked about stock days in trade being up in a number of markets due to the reduced demand. Why don't you just expand a little bit on that? And I wonder, should we expect to see some further destocking in the first half, not only in travel retail, but perhaps around scotch whiskey in emerging markets? And then just a final quick one, if I can. Back at the Capital Markets Day last year, you talked about a further GBP 100 million, GBP 150 million of efficiency savings to come by the end of F '22. Is there any opportunity to accelerate some of those savings a little bit more quickly into the current fiscal year, please?

Shall I take the stock levels and maybe you can take one and three?

Sure.

Okay. So on the stock levels, we feel really good about where we closed the year. Clearly, the big variable on stock levels is forward demand, forward consumer demand, and we're tracking that very closely. And our sell-out culture and the data we have now has us moving very rapidly. We indicated global travel. It's really hard to call the recovery on global travel. And so that could be an area, we think, which is going to be much slower in coming back. So we will not sell into that channel until we start seeing end demand pick up. In the rest of the emerging markets, I feel good about where we are on our stock levels. And we will continue to monitor it real time and adjust very quickly. So I'm not expecting destocking in other emerging markets in a big way happening. Unless, of course, end consumer demand really drops off, which we're not anticipating. So we're in good shape on the stock levels.

And then I'll go ahead and address, first of all, your question about our outlook comments. So we've clearly said as it relates to top line, that we're expecting to see sequential improvement in the first and the second quarter in the first half relative to what we saw in the fourth quarter in fiscal '20. As it relates to overall margin improvement, I do expect that absolute margin in the first half to be better than what we saw in the second half of fiscal '20. Obviously, I also commented that we continue to expect to see some pressure on a year-over-year basis. And then you had asked about overall cost savings. What I'd say is, clearly, we've looked to continue to push hard on everyday efficiency. And during this COVID period, I'd say we especially scrubbed harder at what I would call discretionary spending. So we've tried to take the approach of, I'll call it, going to the paper on discretionary spending and do the spending that we think is critical to the business. So overall efficiencies, I would characterize, is actually running on the higher side, if not ahead of what I talked about on Capital Markets Day. Now the flip side of that is we've unfortunately seen the volume decline and that's causing negative gearing in the P&L. And I would just remind you that roughly 15% of our business is a beer business. In a place like Africa, 60% of our Africa business is a beer business. And so that business has, I'll call it, higher fixed costs within COGS. And so when volumes decline, we would see a bit more pressure in terms of negative leverage across the P&L.

Our next speaker is Olivier Nicolai from Goldman Sachs.

Just a couple of questions, please, on e-commerce. You mentioned in the presentation you've seen some relaxation of regulation allowing you to do more e-commerce. In the U.S. specifically, what is the current business model that you're using? And how do you see things evolving as we come out of this crisis? And just lastly, can you remind us what's the strength you faced in e-commerce as a group, please?

Olivier, the percentage of sales , firstly, is small. It's low single digit. But what I'd point to you is, if you look at our Q4 e-commerce sales relative to Q3, it doubled. So there's some accelerated growth, but we are far less penetrated than other consumer product categories, mostly because of the regulatory environment. Now some of those things are changing in markets. And we are seeing more access to e-commerce channels in Latin America, Africa, in addition to Europe and China. On your point on the U.S. The U.S. system is still operating within [indiscernible] the business is running 4x, 4 times what they expected in the last few months. Now what this does is it takes its order from the consumer that picks up the product at a retail shop, a liquor store, and then delivers it. You also had retailers within states who are able to take e-commerce orders and deliver within the state to customers, and that business is growing rapidly, but it is from the liquor store to your home within the state. So we don't have national big players like Amazon, et cetera, in the alcohol category. It is very focused on liquor retailers and a few platforms like Drizly, and that business is growing. You also have a pick up at the store, it's growing, where people can place their orders electronically and drive by and have the product delivered at the stores so they don't have to enter the store. And you've seen in states like New Jersey, I mean, that has increased a lot. So the convenience and delivery to the home is -- has picked up in the U.S., but still very much within the framework of the three tiers.

And then one other thing I would think is the cocktail to go that's also been enabled in the U.S., which allows people to -- especially when they're ordering from a restaurant to not just pick up great food, but to pick up great cocktails was well.

Our next question comes from Trevor Stirling of Bernstein.

Just two from my side, please. The first one, Ivan, maybe could you give us a little more color in the U.S.? Shipments are running a little behind depletions. How far behind depletions were they? And that's now stabilizing. And the share trends you mentioned earlier, is that slightly where share performance coming from lower share gains from the Casamigos of this world? Or is it higher share losses from Smirnoff and Captain Morgan? And I guess, final question, can you just comment a little bit on the Indian run rate performance? Now we're through the lockdown, what's the state of demand in India at the moment?

Sure. I'll take the U.S. questions and Kathy can handle India. So what we're seeing in the U.S., I would say, broadly, it's an industry, Trevor, that we think it's a little hard in the last couple of months, but our estimate is it's growing around 4% in value. I'm talking U.S. spirits. You saw our shipments were doing a bit. And I'd say our depletions were somewhere in between. So we are still slightly behind the market. And the main areas where we are losing spirit share is in vodka, Captain Morgan and a bit in Johnnie Walker, and Johnnie Walker is also linked to the lapping of White Walker from the year before. So that's broadly where we are. We have very focused plans that Debra and the team have on improving this picture as we go into fiscal '21. And we still have very some good momentum on Casamigos and Don Julio and Crown Royal, the share gainers. So that's how I would characterize that.

And then if we just talk about India. As everyone is aware, they had a 6-week complete lockdown in terms of the alcohol beverage industry in its entirety, the production as well as overall sales. And so coming out of that, we continue to see good sequential improvement there, kind of May to June, and then especially into July. So July, really much stronger. So I would say we feel pretty good and confident that, that continued sequential improvement in India now that the whole kind of countrywide lockdown is over.

Our next question comes from Edward Mundy of Jefferies.

A few ones for me. The first one is capital return for fiscal '21. I think, Kathy, you mentioned in the pre-release that H1 '21 net results can be impacted given where the numbers are falling. As the Board thinks around dividends, are there any financial metrics that will help you provide a steer around the capital returns? For instance, if you hit 4x net debt-to-EBITDA. The second is on innovation, which has been an important driver of Diageo's growth over the last couple of years. We've seen some really good innovation. How does COVID-19 impact your ability to launch innovations? And then the last one -- last one, Ivan, is on sustainability. You've got this [indiscernible] water bottle. And it's really interesting. You mentioned a near 2030 social environment structurally in target. Without getting away too much, can you talk about what the main changes will be following your 2015 to 2020 targets?

Well, I'll go ahead and take the first question. So you would have seen our leverage ratio increased to 3.3x. And we have said that we target to maintain that ratio between 2.5 to 3x. We made the decision, our Board made the decision and we announced today, although this needs to get approved at our AGM, that we're maintaining our final dividend flat. And we earlier announced in April that we paused our share repurchase program as a result of that leverage increase that you've seen. And we've further said that program continues to remain paused in fiscal '21. As you think about the impacts of COVID-19, clearly, it's had a huge impact in the fourth quarter, and we said we expect to see sequential improvement in the first quarter and the second quarter. But when we get to interims and report at that period of time, we'll be reporting a leverage ratio off of our 12-month trailing EBITDA, right? So that's going to take into consideration a 12-month period of time that will have been fully impacted by COVID. As a result, I expect our leverage ratio is going to peak at that point in time. And then we would see improvement as we go into the second half of fiscal '21 and into fiscal '22. I kind of take a step back from that, Ed. And I'd say, if you look at the total financial picture for Diageo, I mean, we do have real financial strength. We're an A- rated company. We've taken actions to further bolster what was already a strong liquidity position. We've got GBP 5.3 billion of standby credit facilities. We ended the year with GBP 3.3 billion in cash. So I think we're in a quite good position to continue to make balanced decisions, I would say, with regard to shareholder return, but ensuring that we really support the ongoing investments in the business for the long term.

And Ed, on innovation, I'd say this is one of the areas we very quickly kind of reassessed our pipeline and our approach. And I mean, simply, what we are leaning in more to is big recruit and re-recruit innovation on big brands. And I'll give you an example. In the U.K. in the last few months, the line extensions on Gordon's Sicilian Lemon and Mediterranean Orange, we've had 3 of them. And literally, in the last 3 months, we've gained 7 -- I think, 8 points of market share in the U.K. with those launches. They're doing very well. There's a Captain Morgan line extension going into the U.S. or has gone into the U.S. So we're going back to big brands with innovation. Brands that need seeding and building and particularly on-trade support, we are delaying because this is not a time to be building, let's say, grow and go Irish whiskey in the U.S. when the on-trade is down. So we're slowing those down. And then we are looking at new opportunities. And as an example, the whole space of ready-to-serve cocktails and premix, we see as very attractive. And so we are -- we're doubling down on being much more ambitious on our goals there. So Diageo has had a strong track record of innovation. We're not backing off. We're reshaping it to the times. And I feel confident going into fiscal '21, we have some pretty exciting things in the pipeline, which should help our performance. On sustainability, as you pointed out, yes, the Johnnie Walker bottle was -- got a lot of excitement around it, the paper bottle and Johnnie Walker. Also, we -- our Bulleit distillery, the new one, is carbon-neutral, which is really a big first as well. You will see in -- we're just coming to the end of a period in 2020 where we have set our goals 5 years ago, and you see the results with our annual report, we've done very well. I'm really proud of our performance in carbon and water. Going forward, in the 2030 goals, it's going to be in 3 areas. One is sustainability. So carbon water recyclability, packaging, the standard metrics there. The second area is in inclusion and diversity. And the third is on positive drinking. And on all 3, we are setting, I'd say, pretty ambitious goals. Diageo leads in this area. We want to continue to lead. And later in the second half, we will be releasing our 2030 objectives, but I can assure you they are going to be ambitious. And they are very core to our strategy, so we are putting the resources and efforts behind it.

And Kathy, just to come back to the first question. There's no sort of hard leverage target that [indiscernible] for dividends? I mean you look at a number, including the run rate, your liquidity is a bit clear. There's no high leverage target that you're offering the dividends at this point?

No. In fact, that I would have said, if you went back into Diageo's past history, at about the time that we acquired the USL business in India, we also would have exceeded our leverage targets at that time. So we will take a holistic view. And a big part of that is just getting more data and information on the pace and overall slope of the improvement and positive trajectory that we'll be seeing in the business as the on-trade starts to open up. So that's something we'll obviously be keeping in mind. And we said that the capital return decision will continue to be under review throughout fiscal '21.

Our next question comes from Pinar Ergun, Morgan Stanley.

I have a quick follow-up to Simon and Trevor's question on the U.S. With depletions running ahead of shipments, should we expect some catch-up in H1? And do you see wholesalers stocking up ahead of potential tariff risk? Another quick one on the U.S. Did demand for your products benefit at all from the government stimulus plans year-to-date? And do you see down-trading as a risk at all going forward? Or would you see continuation of solid demand in the U.S.? And finally, a quick one on India. How has your long-term view on the growth potential over this market change? What was the key driver behind the impairment charge you've taken?

Okay. I'll handle the U.S. and then turn to Kathy on India, Pinar. Yes. So on U.S. spirits, firstly, I would not -- the depletions being ahead of shipments is on the margin. So I -- this is not a big deal. Where -- so I wouldn't factor -- the key factor that's going to be important is consumer offtake in the second half, and that's what we are very focused on because the -- we are encouraged by the trends we continue to see in the U.S. And you can see it in the overall industry trends and Nielsen and NABCA remained strong. To your point on demand and how much of it is supported by stimulus, I mean there's no question there is an impact that consumers have the spending power right now. And while they are stuck at home, we are seeing, both in food and drink and entertaining generally, that there is a willingness to spend. I would point to previous economic recessions in our end. And the global financial crisis to me is the best set of data to look at where there was a severe impact. And what we saw was a very short period of slowdown and down-trading that happened. It was literally 2 or 3 quarters. And right now, we're not seeing down-trading. In fact, if you look at U.S. industry data, the higher price points are the ones that are growing the fastest. But could we see some? I'd say we could see it moderate, but I don't expect it to be a sustained trend because the main source of our growth from spirits in the U.S. is still spirits growing faster than beer and wine. And younger Americans in the 21-plus are consuming much more spirits. And in the time of lockdown where -- cocktails at home have only gone up. And so I see the long-term trend here in terms of premium spirits brands continuing. We could have some short-term impact as -- if consumer spending gets severely hit. But our history would say that that's not a -- it's not -- I don't see it as a sustained or structural trend. It could be short-term for a little while.

And then I'd say specifically with regard to India, we continue to have a lot of confidence in the long-term opportunity that we have in India. More recently, we would have seen in the first half, GDP is starting to flow in India. So even ahead of the pandemic impact, we were starting to see the economy slow a bit. So that softened our results in the first half. India was up about 2% in the first half. That is later than what we think the potential of the market and our business is in India. And then as we've already mentioned in the second half, literally, the entire outside industry was closed down for 6 weeks. So their impact from COVID in the second half was very significant and much more material than you would have seen at the total Diageo level. We obviously had to take that into consideration, and you've seen the impairment that we've taken. But it doesn't change our view on India at all for the long term. The long-term trends there in terms of population growth over time, per capita, income growth, enabling more people to afford our brands, both our international spirits and as well as our Prestige and Above brand. And really importantly, the people in India just love whiskey. And that really goes positively for the long term for our business. So I would say, over the long term, we continue to be very boorish, but that's a business that's going to be good for Diageo, good for its shareholders.

Our next question is from Chris Pitcher, Redburn.

I have a couple of questions and a clarification, please. Firstly, on China, it looks like you had a very dramatic stock reduction in the final quarter there. Could you give us confidence that you've now cleared out the excess Chinese New Year stock and that you should start to see the recovery early in the new half? And could you give us a feel for a sense of your Baiju market share is doing? Then secondly, on the U.S., you mentioned your price/mix is running ahead of the industry. It does look like it faded a bit in the second half despite what I would expect would be the period with reduced promotion. And we've been here in the past before where you've priced mix ahead of the industry and driven good margin expansion, but market share has suffered. How should we think about your relative price position? You're comfortable with the price gaps on some brands or going into the softer economic backdrop. Should we expect increased promo in the new financial year? And then just finally, a clarification. I think you said you wouldn't ship to global travel retail until you saw a recovery. I assume you must be selling something into global travel retail. Or is it -- are you literally not shipping anything at the moment?

I'll take 2 and 3, Chris. Chris, global travel, yes, it's a trickle. I don't know. Very little because, clearly, I mean there's a dramatic reduction in passenger numbers. So we would -- we're ready to respond quickly as it picks up. But right now, we're not being -- virtually, no -- very little business. On the U.S., well, we're very -- one of the things I feel really good about is the NRM capabilities that we had built in the team, and they've been at in the last 18 months. And the second thing I would say is we are hyper local in our focus in the U.S. We now have data down to the zip code, to the store level. And so the analytics and data, we are putting behind execution, behind pricing. And the management of mix has moved significantly in the last couple of years. And we've got to get the right balance of share, price, mix, margins. And I feel very good about our capability and focus here within our team and working with our distributors to get it right. We have eased up some lower ROI programs that we used to do in the past. And we are leaning in more to ensuring our execution at the point of sale in terms of visibility and display and the launch of innovation and the pace at which we are measuring our execution at stores now with our EDGE 365 capabilities. All of that is significantly ahead. So our focus going forward is to get that right balance of price, mix and share. And I'd say that managing it at a very micro and very sophisticated level now. And I feel good about going into '21 seeing improvement in our share performance, as I talked about earlier.

And then specifically, as it relates to China and overall stock reduction. So our Shui Jing Fang business has reported publicly. And so you would see that in, I'll call it, our third quarter and fourth quarter. Their first quarter and second quarter top line was down as we look to reduce stock and trade. So for the first quarter -- our third quarter, the top line is down 22%, more like 90% in their second quarter, our fourth quarter. And that was all about reducing stock and trade so that they could basically kind of end what our second half was in good stead in terms of the stocks that remained in stock and trade. So they made commentary on their call about ending the half with stock levels closer to kind of 2018, 2019 levels. So I think they're feeling very good about where they ended stock and trade. And I would have said the same thing overall for our scotch business, and that we're beginning to see, especially the deluxe part of our scotch business now, pickup in China. And overall, the scotch business in Taiwan, which is reported in our Greater China market, actually, is very resilient during this period of time. And then finally, I think you asked a question about our guide view kind of market share of one thing I would say is if you look across the industry in this most recent period of time, the price point sort of at this RMB 600 level and below has not performed as well as some of the higher price points. And our business participates in the price point of the RMB 300 to RMB 600 level. That's in part because bank risk and especially, I'd say, business occasions have not yet picked up to the same degree as other occasions. But if you see how our business was performing kind of ahead of this period of time, we were gaining very strong share. And so I would say we're very confident that we'll get back to that place pretty quickly.

Our next question comes from Nik Oliver at UBS.

It's Nik here. Well, two, actually. One, the first is an extension of Pinar's question on the U.S. And I guess if we look back to the financial crisis, I guess that the U.S. market held up fairly well volume wise. I think it's like 2%, 2.5%, if we look at NABCA. Would that be kind of a sensible run rate to assume going forward?

I would say based on current conditions and what we see, the U.S. spirits market showing kind of modest volume growth and little better value growth will continue, yes. So -- and as I said, the biggest source of that volume is coming -- are the beer and wine, like it's growing faster than that. So the occasions are shifting. So we remain confident about the long-term consistent trend of growth in the U.S. spirits market. And as I said earlier, could you have a quarter or 2 if things -- if the economy really gets tough and spending gets constrained heavily? You could see some slowdown and some down-trading, but we don't see that sustaining. And yes, so I'd say that's a reasonable assumption, that we will continue with low single-digit volume growth.

Okay. And then one final one from me, please. It's [indiscernible] of the scotch portfolio. And you called out obviously [indiscernible] in the malt with the gin doing very well. And I guess, obviously, the blends, obviously, then comping with the launch of White Walker last year. And how are you thinking about like malts versus blends over the next 12 months?

Are you talking about the U.S. or overall?

Yes. Sorry. U.S. Sorry. U.S., yes.

Yes. So I'd say we have a big focus clearly on our Malts business as well as on Johnnie Walker and Buchanans and the blends business. In the early stages of the COVID lockdown consumer habits, American whiskey has done better than scotch and in part because scotch is more about -- the malts are more about deferment. And we also skewed to the on-trade in many of these brands. So -- but we've got to focus on really getting Johnnie Walker coming back in the last few weeks, the share performance is a little better. And so we've got big plans on the brand. And single malt, I mean, continues to be positive, and we expect that to continue as well.

Our next question comes from Alicia Forry of Investec.

Ivan and Kathy, three questions from me, please. The first one, on the U.S. You mentioned distributor destocking in the U.S., but we've also heard from many consumer companies in alcohol and in other categories that U.S. retailers are also destocking. So I was wondering if you can give us your assessment of the U.S. landscape over the near term. And then secondly, beer trends at the end of the H2 period. Some peers have reported significant improvements around June. Have you seen a similar development? And then finally, on excise. You mentioned the excise in India. Are there any other key markets where there is a risk of excise or other unfavorable regulatory developments over the near term?

Thank you. I'll take the U.S. and excise and I'll let -- and Kathy take the beer question. I think broadly for the U.S., distributor and retailer stock levels are normal, where they should be. So I don't see a -- if your question is, are there going to be big changes going forward in stock levels in the trade on the spirits side? I'd say, no. They're pretty stable. On excise, we've not seen -- India had a few states where just jacked up the excise when they opened up, and many of them have reversed the GG increasing. Generally, I'd say, so far, we have not seen significant changes. One of the things I'd say that's very much in the message we are getting across the government is the hospitality industry is so critical to the recovery of the economy. 1 in 10 jobs in the world, and in most countries, sit in the hospitality industry. It's mostly young people. And this is not a time to be penalized in the hospitality industry. And I think that message is landing. There's far more appreciation for what bars and restaurants and pubs mean to the economy and to society now probably than pre-COVID. And we and the industry are working with bars and restaurants, and hotels are really getting that message through to governments.

Okay. And then as it relates to beer, I would say you have to look at the specifics of our beer footprint, because Europe and Africa, it's the largest, kind of overwhelming majority. Kind of 2/3 of the overall beer business are in those 2 large regions. And so what we see is the improvement in our beer business as the on-trade opens up because both of those regions are also heavily weighted to the on-trade. So we mentioned Europe, we're about 50% weighted to the on-trade, but our beer business would be even more heavily weighted than that given how popular Guinness is in Europe specifically. And then similarly, in our Africa business, you've got countries like Kenya where some of their keg is a very strong part of that business, and it would be over 90% kind of weighted into the on-trade, and so very much tied to the on-trade of malt. I'd say when you dissect this on a market-by-market basis, the impacts of COVID and the closing of the on-trade was very different market by market. And it kind of came to Africa and Latin America later, right, than it landed in Europe. And so as we've seen on-trade starts to open, we see that improvement coming through our beer business. But it's very market specific. And we would certainly expect now that the on-trade is opening up more broadly across markets, that we would see that sequential improvement in beer as we talked about for the overall company.

Our next question comes from Nico Von Stackelberg from Liberum.

Can I just summarize here? It sounds like you're saying that you do expect modest recessionary environment and maybe some down-trading for a bit of time. But the recovery of the on-trade should certainly overwhelm any temporary impacts from recession when down-trading? My second question is on just the growth rates. Could you provide me with your growth rates for Q4, how you finished Q4 and the start of Q1? Anything for short term, but it would be interesting to hear. And then finally, I'm not sure if you'll give me the answer. But I'd be curious to hear if you have any comment on consensus for FY '21. So you can see what we can see. But do you think it's achievable? And yes, what's your thoughts on consensus?

And so clearly, what we're saying is we talk about sequential improvement to our top line in the first quarter and the second quarter of this fiscal half, we are saying that while we are expecting some impacts from both recessions overall, impacting different markets differently and some level of down-trading, that we think volumes coming back are going to overcome those other impacts. Hence, the sequential improvement we expect to see coming from the fourth quarter. As it relates to kind of overall what does our fourth quarter look like, top line overall for the half was down 23%. And for the fourth quarter, it was closer to 40%. And then specifically, as it relates to the first quarter, we're not giving out monthly numbers for the quarter. I would just go back and again tell you we've clearly already seen an improvement in terms of July relative to June. And we'd expect overall the first quarter to sequentially be better than what we saw in the fourth quarter.

Okay. And on consensus?

We're not giving specific guidance, so I'm not going to comment on consensus.

Our next question comes from Nikhil Chandak from Landmark Family Investment Office.

I have two questions basically. One was on the U.S. market. Clearly, the hard seltzer market there is booming and taking significant share from traditional markets. I understand we don't really consider that as a focus opportunity. I was just wondering why -- any specific reasons why we've not looked at the hard seltzers market in the U.S. and try to expand that? And the second one was follow-up to some earlier questions. China market share -- or China share in our total revenues is, say, less than 5%. Do you think this grows over a period of time? And anything specific that we still have to do where China really becomes a more significant part of overall business pie?

Sure. I'll take these. In the U.S., as we haven't talked about it much on the call, Diageo Beer Company which sells Guinness and beers and FMB and seltzers, we have a line of seltzers, is doing really well, right? It's among the fastest-growing beer companies in the U.S. right now. And we have a small position in seltzer, but we have deliberately decided not to make a big investment into that category because, quite frankly, we have better places to invest in the U.S. when we look across our total portfolio of beer and spirits. But we're clearly benefiting from the trend right now, and you see it in our beer business performance -- or the beer company performance in the U.S. We have taken the seltzers into Europe. They're in the U.K. and in Ireland right now, that's of lineup. So we are participating in that sector, but not making it a big strategic priority for investment. China is -- we remain -- to answer your question, yes, I expect China to keep becoming a bigger part of Diageo. And our 2 main businesses there, Baiju has a very good runway ahead of it, and we fully expect that to be a business that gets back on a steady trajectory of growth. And we're very encouraged by the early signs on scotch whiskey, and we are building the top end of scotch whiskey. When I say early signs the last few years where the interest in scotch at the top end, super deluxe and malt is really building very nicely. And even in this very challenging period, our scotch whiskey business in Mainland China grew. And in fact, if you look at e-commerce, scotch whiskey outperforms other forms of international spirits on e-commerce platforms as well. So long term, I'd say China should be a very attractive growth engine for the company. Okay. This is the last question?

Our last question comes from Richard Withagen from Kepler.

Yes. I have two, please. First of all, in your prepared remarks, you talked about leveraging malts.com and thebar.com. Can you give some more details what initiatives you take in this area and how that benefits your brand portfolios? And then the second question I have, as you mentioned Radar, your tool to project market demand. Can you talk about what kind of underlying data go into radar and if the sensitivities to this underlying data in the various regions are very different?

Sure. Firstly, on, I'd say, digital commerce more broadly, the posture the company is taking is we want to be a leader here in the shaping of digital commerce in beverage alcohol. And so we have a number of initiatives, including working with the big platforms, working with retailers. And as you point out, we have some direct-to-consumer platforms like malts.com and bar.com. I'd say they're still small. We're very much in experimenting mode in markets in Europe and Brazil, et cetera. And we're doing it for learning, and we will clearly learn and scale up from there. But if I look at what we're doing in Europe and China and even in the U.S. through this 3-tier system, we're really building our digital commerce capabilities and moving very rapidly in that area. We're investing behind it because we do believe it's going to grow faster than the overall market. And one of the things I'm encouraged by is actually our market share in e-commerce channels, for the most part, tends to be higher than in physical channels. And it is an environment where well-known brands that are well supported do well.

And then the second question was about Radar. This is, I'll call it, another module that we're adding on to our Catalyst tool. So sometimes, we'll talk about our EDGE tools, which is about everyday execution at the outlet level in markets and that we're able to get a lot of data and information about what's happening around a particular outlet. So what are consumers drinking in terms of bars in the neighborhood? What are the demographics of the neighborhood? And what would that tend to lead us to believe are the best types of Diageo brands to really have at that outlet? And what are programs that we can run that will be a win-win both to Diageo and the outlet owner? So it's all about trying to get, I'll call it, hyper-route information and really trying to make sure we're on the ground getting those local insights. And so with this next module within Catalyst that is something similar, and it's looking to grab external information, not just about the macroeconomic situation in a place like the U.S., but about the specific economic situation at a zip code level or within a region, within a state, so that we understand what's happening both at a very micro and local level. Again, so we can determine what are the best programs for us to run so that we have high confidence that our marketing dollars are really going to get a high return. So it's all about having more and more local information so that we can make local decisions. We -- clearly, we've run some national advertising campaigns, but this is about really being able to, on the ground, do different things locally that's great for our brands and overall growth for the business.

Well, why don't I go into a close here. Again, a big thank you to everyone for your interest in the company. I hope you and your families stay well and safe. And Kathy and I look forward to connecting with many of you in the next few days. Thank you.

Thank you, everyone. This concludes today's conference. Thank you for your participation. You may disconnect.