Good morning, and welcome to Diageo's 2023 Interim Results Q&A Call. Your call today will be hosted by Ivan, Diageo's CEO; and Lavanya, Diageo's CFO. This conference is being recorded [Operator Instructions]. We are now ready to start the call. Ivan, please go ahead.

Thank you. Hi, everyone, and thank you for joining our interim results call. I hope you've had a chance to read our press release and watch the presentation webcast on diageo.com. I'm pleased with our results for the first half of fiscal '23. We delivered organic top line and operating profit growth above our medium-term guidance. Net sales up 9% with growth across all regions. Volume grew 2% even as we implemented strategic price increases, operating profit up 10%. Organic margin expanded 9 basis points. We generated GBP800 million of free cash flow, fueling continued investment in long-term growth. We expect to deliver stronger free cash flow in the second half as we lap more normalized working capital movements. We continue to gain or hold share in the majority of our markets, 75%. Our Super Premium Plus brands grew organic net sales by 12%. I'm particularly pleased with the strong growth in scotch, up 19%; tequila up 28%; and Guinness up 17%. On a constant basis, Diageo is 36% bigger than before pre-COVID and with a 4-year CAGR for organic net sales of 8%. In North America, organic net sales grew 3%, lapping strong double-digit growth in the first half of fiscal '22. U.S. Spirits net sales grew 2% on top of strong double-digit growth for 4 consecutive halves and we had depletions ahead of shipments. Our U.S. spirits business is 44% larger than fiscal '19, with net sales growing at a 4-year CAGR of 9.4%. We took price and held share of TBA. As expected, growth in the U.S. spirits category is normalizing, trending towards a historical mid-single-digit range. Consumer demand remains resilient and the market continues to premiumize. 33% of American drinkers surveyed said they had spent $50 or more in a bottle of alcohol in 2022, and that was up from just 24% in 2021. In Europe, organic net sales grew 10%, and we maintained volume despite the challenging economic environment. Asia Pac grew 17%, despite Greater China, which only grew 2%. Latin America grew sales by 20% and delivered the highest margin across all our regions in the half. This business is 64% larger versus fiscal '19 with net sales growing at a 4-year CAGR of 15%. I'm very proud of our performance in Latin America. In Africa, net sales grew by 6% with growth across all markets. And we're delivering consistent returns for shareholders, increasing our interim dividend by 5%. And today, I'm pleased to announce an additional return of capital to shareholders up to GBP500 million in fiscal '23. As I look ahead to the second half of fiscal '23, I am pleased with our start in January and the resilience of our business. I'm confident in our strategy and ability to deliver our medium-term guidance. And with that, I'll turn it to the operator, let's take our first question.

[Operator Instructions]. Our first question comes from Sanjeet Aujla of Credit Suisse.

Ivan, Lavanya, a couple from me, please. Firstly, could you just give us a sense of where you see U.S. spirits sellout trends at the moment? And how that contrasts with inventory levels and the numbers you've given us on the shipments and depletions so far in the first half. And secondly, would just love some early thoughts on how Chinese New Year has gone?

Sure, Sanjeet. So the U.S. consumer is robust. If you look at the industry, we see it growing at about 4%, 5%. And I've said this for a long time, a couple of years or more, that post-COVID, we expect the industry to come back to that mid-single-digit growth range. And what I'm really pleased about is the consumer through the last 6 months has come to that rate. So we're feeling very good about it. Within that, premiumization remains strong. You see in our numbers, our Super Premium Plus business grew 10% in the U.S. So feeling really good about the health of the U.S. consumer. The spirits industry has 20 years of volume growth, taking share of TBA, outperforming beer and wine, premiumization is strong. And I quoted those numbers of the robustness of above $50 a bottle. So overall, strong, robust and pretty much where we expected it to be. If I turn to Chinese New Year, clearly, the -- I mean there's three pieces to Chinese 2 years. The sell-in before what happens in a couple of weeks and what happens after. The sell-in before we were cautious obviously, with the lockdowns and the COVID conditions in China. Actual Chinese New Year itself is subdued in terms of socializing and consumption. And certainly, the large events is more subdued, but we remain optimistic about China recovering fast, both for our scotch business and for a Byju. And as we go into Q3 and Q4, we're very much playing and into assuming a strong recovery. Obviously, we have to watch it week by week, but I'm feeling positive about the China consumer environment going forward.

Got it. And just a quick follow-up there on the U.S. If you think the industry is growing 4% to 5% in sellout terms, do you think Diageo is outperforming that? And just a quick word on where you think inventory levels are and how comfortable you are with that in the U.S?

Yes. I'll turn it to Lavanya.

I'll answer your question on inventory in a bit. But in terms of our performance in the U.S. itself, I mean we are holding share of TBA in the U.S. And so that's -- we're feeling good about that. Obviously, not we were growing share, and we plan to go back to that. And I will have a very strong point of view about that I know. But coming back to inventory levels, fiscal '22. We ended fiscal '22 with healthy inventory levels. We talked about this in July when we announced our results and inventory levels were to back to close to where it was pre-COVID, right? A little bit higher on imports just because the supply chain was longer, but broadly back to pre-COVID levels on inventory levels. Where we ended the half, we ended with inventory levels that distributed slightly below where we ended last fiscal year, not because we wanted to destock or we needed to do stuff, but just because December was with a really good month. And so a lot of depletions happened towards the end of December, especially which just led to inventory levels being a little lower. We feel good about where inventory levels are. And the -- we're lapping the [indiscernible] of inventory last year because if you go back to the start of fiscal '21 -- fiscal '22, sorry. We were coming off of a very, very, very high growth rate in fiscal '21. Fiscal '21, we grew 24% on U.S. bills so when we started fiscal '22, it was very low levels of inventory across the entire supply chain, which we recognized through the year. Some brands came in faster, some brands came in a little later in terms of when supply was available. And so that's what we are lapping here on ships versus depletes.

I'd just add, we've helped TBA share. I think if you look below that, what I'm really pleased with is we're gaining substantial share in the on-trade. So the on-trade in the U.S. -- and NAPCA has the most reliable data here. So if you look at NAPCA on trade, it's about 20% bigger than pre-COVID. And we've gained outsized share. So -- and to me, that's a huge measure of the health of our brands and the portfolio. And even in the last 6 months, we gained over 100 basis points of on trade share in NABCA.

Our next question comes from Oliver Nicolai.

Just a couple of questions, please. First, on the U.S., just following up there. As comps normalize, should we assume a stronger sales performance in H2 in North America in terms of organic sales growth? And then if we think about the margins, obviously, your margins was done in H1 in North America. Should we -- when could we expect a stabilization in margins in the U.S., what least kind of gross margin inflection to start with? And then just on FX, a quick question for you, Lavanya. You [indiscernible] that you were expecting GBP300 million positive impact on FX for this year. How much transactional FX impact do you expect this year? And is it fair to assume further transactional FX impact in fiscal '24?

Yes. So maybe I'll take the first part on U.S. top line and Lavanya margins [indiscernible]. So yes, we do anticipate, as I talked about earlier, the U.S. industry should be in solid mid-single-digit growth in the second half. We expect to perform in line ideally better, but that's going in [indiscernible]. So focusing on the consumer, I think we feel positive about our ability of consumer offtake to be in the mid-single-digit range. Now we have an intense sell-out culture, right? So as we look at managing the depletions and shipments, you will recall from last year's results because we were in the restocking phase. We had shipments ahead of depletions three points when we closed out the year. So we will lap through all that stuff, but to me, that's just supply chain. The main thing -- most important thing is ensuring we're well positioned to win with the consumer. And we've got phenomenal marketing plans, great innovation. We've got Super Bowl coming up and Crown Royal is going to be on the Super Bowl for the first time. Really excited about that. So the team has a significant ammunition behind our brands going into H2. So I'm feeling good about our ability to win with the consumer.

Olivier, to your question on margins in North America. I mean, look, I'll just start off by reminding us that North America is -- has very, very strong margins, 41% operating margin. It was the highest margin region for this business just got coupled by Latin America who surpassed them by 30 basis points. But it is -- one of our strategies has been to invest in North America for growth because every point of growth in North America comes with really, really strong margins. And so what you're seeing in the margin story is a bit of that. And we have invested strongly in A&P, also in digital and capabilities to enable continued strong growth of the business in North America. The gross margin -- some of it is inflation and the impact of that is what we're seeing there. But again, we have many levers to offset inflation, premiumization, volume growth, pricing and the work that we do on revenue growth management, all of that helps us to offset inflation. So I'm not concerned about where the margins are in North America. I think it's a very healthy P&L and business in the U.S. On FX, that was your second question. In terms of transactional FX, in fact, not really expecting much in terms of transactional FX impact, our major currency pairs are hedged. And as you saw in the first half, we really did not have any impact from a transactional perspective on FX.

Our next question comes from Pinar Ergun of Morgan Stanley.

I have one on marketing. Byju invested very significantly into marketing in recent years, and you're indicating that the investment will rise faster than sales in H2. How do we reconcile that with your expectation of moderating sales growth across all regions? And specifically in the U.S., are your market shares evolving in line with your expectations given the investment that's gone into this region? And then two quick clarifications, I guess. One is on free cash flow. Can you please take us through the different moving parts here? Why have the creditor balance has shifted so large and so on? And then on capital allocation, has your thinking evolved at all now that the cost of borrowing has gone up substantially. Does that change how you approach buybacks, M&A and so on?

I'll take the first two on marketing and share. So marketing, we -- as you know, we built a lot of sophistication in the data and analytics and tools we now have to assess marketing effectiveness. And as we look to the second half, we see very good opportunities to step up the investment behind our brands, and that's why we indicated in the second half we intend to increase our reinvestment rate. This is built up by market, by brand and very much with the degree of confidence on returns. Now our marketing is not just to make the second half sales number, it is about the next 3 years, right? So everything in our business, upweights and marketing are not for short-term return alone. You do get some short-term impact, but the bulk of the impact really comes down the road and in line with our goal to be a very reliable top-tier compounder. This flywheel of Diageo of upweight investment, drive efficiency and get quality top line growth. So it's really in that context because we really want to ensure we're setting ourselves up well for the quality of growth through the medium term, but it's going against very specific brand opportunities where we have a high degree of confidence in the return that we will get for this investment. And I have to say the quality of our marketing continues to step up significantly, and I feel really good about that. On market share, I mean, we are especially at a global level where 75% of the world is in green. That's a high benchmark, and I'm pleased with that. In the U.S. context, we're holding share at BA we're coming off a period where we've grown significant share. And we've also taken price ahead of the industry, if you look at the last 3 years. And so flat share in the first half, but fully expect and want to do better Lavanya alluded to earlier. So we want to get back into the share growth mode in the U.S. And I expect in the medium term, we will do that. And that also takes me to the point when you look at our portfolio in the U.S. We've got a phenomenal tequila portfolio, which has still a long way to run. We're the leader in whiskey and whiskey is a hot category. Innovation, we've got a lot of exciting things in the pipeline that are going to be coming in to second half and into And our execution and investment levels in the U.S. So I do feel good about our -- the ability of our U.S. business to outperform the industry going forward.

So Pinar, on your question on -- you had two other questions, one on free cash flow and capital allocation. I'll take the free cash flow question first. So what we are seeing on free cash flow is working capital specifically, is the lapping of what happened last year. So again, I go back to reminding us of what happened in fiscal '22. We were coming off a very low inventory levels in the entire supply chain. We had a phenomenal growth year in fiscal '22. We grew 20% with 10 points of that coming from volume. We were buying a lot of stuff, like bottles, grains, marketing spend. Our total spend increased dramatically. And with that, our creditors increased tremendously in fiscal '22. Our creditors have increased in fiscal '23 in half 1 as well, but not -- just not to the same extent that it increased in fiscal '22. So what we're lapping is that huge increase in creditors that happened in fiscal '22 and that's about GBP500 million of lower creditor increase this year than the increase of last year. In addition to that, we have invested more -- a little bit more on inventory, mainly to ensure our ability to support continued growth of the business across as APAC has grown tremendously. Latin America has grown tremendously. So there's been about GBP150 million of increase in inventory. And the third piece is investing in maturing stock. And this is something that I had spoken about as we announced results last year. It is a part of our capital allocation strategy is to continue to invest in maturing stock to support the growth of our business, almost -- around half of our business today is in aged inventories. I mean with the growth of tequila, et cetera,…

Our next question comes from Nik Oliver of UBS.

Just one on the U.S. and just to make sure that I'm clear. When we think about U.S. underlying trends, we're thinking kind of 4% to 5% right now with Diageo outperforming, given the [indiscernible] portfolio. Is that the best way to think about growth for the U.S. market? And then I'll come back with other questions afterwards, if that makes sense.

The U.S. market at mid-single digits, yes, that's what we've always said the market will return to, and that's what we're seeing, and that's what we feel confident about going forward. And it's driven very much by demographic state preferences. It's a long-term secular trend, which -- that is right, that level of growth for the industry.

Great. And then when we think about marketing investment in the U.S., I guess, because there's been unprecedented pressing levels coming through, is the best way to think about marketing investments still market as a percent of NSV? Or should we think about it more in absolute terms when you are modeling? Any thoughts there would be helpful.

I mean if you look at the last 3, 4 years, we've massively upgraded investment in the U.S. market. We don't target a percent of reinvestment we actually build our plans, bottom up, right? So you take a brand like Crown Royal, I mean, we put in place a very rigorous process of what is the right level of spend behind Crown Royal and what mix of activities we put it behind. And so we built our marketing budgets bottom-up, but what you see in the trend is -- our orientation is to lean in and spend more because we do believe there's plenty of attractive growth to be had. And we're very focused on the sustainability of the growth. As I talked about earlier, this is not just about delivering a return in the next 6 months. So that's the approach we take. And the U.S. market, I've always said it, if there's any opportunity to spend more we will.

Final question. I think back in last August, you were talking about share gains for Diageo on-premise one of the reasons why, obviously, maybe there's a disparity between the Nielsen and NABCA data and what Diageo was reporting. Is on-premise share gains still continuing?

Yes, very much so. I said we had over 100 basis points of share gains in the last 6 months. So we're feeling really good about our on-premise momentum Claudia and the team made some really big changes in our approach to the on-premise about 3 years ago. And you just see the consistency of performance coming through now. And that's a phenomenal indicator of the health of the business. So I'm really happy to see the growth in the on-premise, the share growth in on-premise.

Our next question comes from Simon Hales of Citi.

Van. I have three, please. Firstly, sorry to labor the point, but can I just come back on the U.S. depletion trends first item. Obviously, you said that you held TBA share in the first half, am I right to read that a share loss in spirits and a share gain in beer from a depletion standpoint? And if that's true, what's really been driving that relative depletion share loss in spirit in the first half? And what gives you the confidence that we'll see the pickup so you'll be growing spirits depletions at least in line with the wider market in the second half of the year? That's the first one. Secondly, at the group level, I think price/mix is running 7.5%, 7.6% in the first half. You indicated that pricing was up high single digits. So perhaps the implication of that is that mix, overall, was a bit negative globally. Is that correct? Is it geographic mix that's driven that some channel shift? Just some color there would be handy. And then just finally, for Lavanya with regards to share buyback outlook for the year. Obviously, you said that given the macro uncertainty, we might be at the lower end of the 2.5x to 3x leverage range sort of for now. How do we think about sort of how you'll think about buybacks when we get to the full year and beyond? Does it make it more difficult in the current environment to perhaps commit to a multiyear share buyback program? And perhaps therefore, we should more think about rolling 6 months or 12 months forward commitment to capital return from here?

Okay. I'll deal with the share question and then turn it to Lavanya. So firstly, the share is consumer offtake, right? It's not depletion. So depletions is wholesaler -- distributor sales to retailers. So when you look at us holding share of TBA that comes in part from spirits doing better than beer and wine, right? So we are benefiting from the 20-year trend of spirit steadily gaining share of total TBA. And we've held share there. Now when you -- to your question on channels, we did gain share in the on-trade, as I talked about earlier. We are marginally down in spirits in the off-trade. But you have to remember, we're stronger in NABCA, which is a very stable channel to measure. Nielsen tends to be more promotional. And we've taken, as I mentioned earlier, we've taken -- if you look at the last 3 years, we've taken more price. We've led the industry on price on spirits. So net-net-net, we're about flat. And our intention is -- as we go forward, is very much to look at getting back to sustainable share growth. So that's how I would characterize the share performance. Lavanya?

Thanks, Ivan. So on price, Simon, what we said was that price contributed to high single-digit growth of [indiscernible] right? So I think that's the clarification to your question on price. On share buybacks, I mean, look, if I just point to the fact that prior to fiscal '19, Diageo did not have a multiyear share buyback program for well over a decade, but we have been very consistent in returning value to shareholders. And our TSR is on a 5-year and a 10-year basis is extremely strong. So we will come back as results with further guidance on share buybacks, but our approach to capital allocation continues to be very consistent.

Our next question comes from Celine Pannuti of JPMorgan.

My first question is on your margin bridge. So we've seen gross margin under pressure in the first half. Can you help us how we should look at your cost setup in the second half? And maybe as well in terms of the pricing cycle, are we expecting further price increases? And I was looking at that bridge, I think marketing, you said will be up. So how should we think about the SG&A bucket in the second half? My second question is on trying to come back on Chinese growth, you said that you expect a very strong Q3, Q4. I think compared to the growth rate of the market for international spirits in your [indiscernible] what do you think the growth rate could be in China? And what are you planning for not only for fiscal year '23 than H2, but as well for the fiscal year -- the first half of fiscal year '24. And can I also ask on another number if you said a normalization of growth in Europe in the second half what is the normalization of the market growth you are looking for?

Okay. Celine, let me deal with China and Europe and then Lavanya cover margins. So in China, just to be clear, I'm not saying we're going to have a massive acceleration in Q3, Q4. I'm saying -- I said earlier, we are ready for the recovery of the Chinese consumer. I don't have a crystal ball on the pace at which that will happen. We're confident it's going to happen. Whether it takes 1 or 2 or 3 quarters, we'll need to see. So -- but we're certainly our approach to the marketplace in terms of marketing support, distribution is very much counting on a recovery of the Chinese consumer. And so the phasing of it, I think we'll obviously need to watch in the next 3 months. I think longer term, we remain confident about double-digit growth in China for our business, both in international spirit, which is primarily top end scotch and in Byju. And so we feel confident about China being accretive growth engine for Diageo. And as you know, it's at very high margins. We have very good margins in China. So we're encouraged with the reopening of China that we shall see good momentum. And the phasing and timing of it, obviously, we will watch very closely and stay very agile to respond to. On Europe, I mean, I'm delighted with our performance in Europe. I mean, 10% growth in the first half, strong market share gains in spirits and phenomenal performance on Guinness. And I know it was in the presentation, but I have to say it again. Guinness is now the #1 beer in the British on-trade. I never believed I'd see this day. It's fantastic. The brand is really healthy. So we're gaining share. We're going to watch the European consumer, obviously, is something that we put a lot of scrutiny behind, but we're confident we will continue to maintain the share momentum, what the external world does we will deal with. But we've been pleased with the resilience of the sector as we've gone through the first half with all the negative news flow on consumers in Europe, our category and our sector has held up very well. And we hope to see that continued resilience going into the second half.

Celine, your question on cost in the second half price increases and operating margin in genral. On cost -- look, we've seen higher inflation in the first half of this year than we did through last year. A lot of it was driven by energy costs. And -- but then on the other hand, we've -- we also have a lot going for us in terms of the levers that we have that helps us deal with inflation, volume growth point of our growth this half has come from volume. And that gives us operating leverage all the way through the P&L, premiumization, revenue growth management. We have taken more pricing and smartly while holding market share at -- in 75% of our measured markets holding or growing market share in 75% of our measured market aged liquid is definitely gives us some hedge as well in the sense that any inflation that is -- that happens on our aged liquid gets deferred to the P&L. Productivity, I do want to remind [indiscernible] we've delivered GBP220 million of productivity in this half. And that's a great way for us to offset inflation as well. Cost -- in terms of what I see coming forward in the second half, I mean inflation, it's persistent. It's not increasing, but it's not going away either. We are hedged from a commodity exposure perspective, so for the second half and beyond. Price increases, we take price increases across markets at various points in time. And so especially when you think about the emerging markets that are -- there will be pricing actions that will be -- that will continue to happen through the second half of the year. Overall, from an operating margin perspective, what I say that, look, we have a medium-term guidance out there to consistently grow operating profit ahead of net sales. And that is what we're reaffirming our medium-term guidance.

Our next question comes from Edward Mundy of Jefferies.

Two questions from me. The first is just a really sort of big picture question. You set out medium-term guidance range to grow sort of 5% to 7%. And I know that's a medium-term range, but you've clearly delivered growth in excess of that after a couple of really big years, you're aging about 8% since pre-pandemic levels. How confident are you that you can grow off this higher base? Or do we need to go through a period of digestion given these significant gains and the very, very strong momentum after the last couple of years? And then the second question is sort of what evidence are you seeing of weakening consumer spending power so far some of the volumes amongst certain consumers? Is it certain countries? Are you seeing the down trading? And how are you really adapting your business and getting ready for a potential weakening environment?

Sure. So I'd say -- to the first part of your question, we are confident in the 5% to 7% top line growth. And I think the way to think about it, Ed, is TBA worldwide has very positive trends, right? You've got premiumization that's strong. You look at the emerging markets and penetration is still low. You've got 600 million new consumers coming into the market, you take places like Latin America and India, Southeast Asia. In the developed world, we feel really good about the continued gains of spirits from TBA are performing beer and wine. So we pressure test this all the time, right? We're not just sitting here. So we do -- our strategy teams kind of run through a very rigorous kind of modeling of world economies, consumer behavior, sensitivities to shifts. And putting that all together, we do feel confident in the . On the big -- so we've got market dynamics. I mean we've got tough markets, right? Nigeria is a tough market. Africa, as you can see, is a bit slower in growth at 6%. We put the focus there on margin improvement and not chasing the lower end of the portfolio. So we've got different dynamics at different places. But by and large, the trend of premiumization is strong and intact. Our Super Premium Plus business, I think it was in my presentation, every region grew double digits in the first half. So we're not seeing a weakening of the premiumization trend. I mean, really anywhere, Latin America, Asia, India and certainly in the developed world. But we have the portfolio. I mean, I think what you see in these numbers is Diageo's footprint is a real advantage, the brands, the categories, the price points and the geographies. And at any point in time, when certain parts of the world are going through corrections or markets have slowed down, et cetera, we've got the ability to deliver this resilient performance and consistent performance. And that's very much. So of course, we've got challenges and in certain geographies, but we can offset it with outperformance in others. And that's where I believe the culture of our whole approach to this is being very agile operating as one Diageo. Debra and in her role, overseeing the markets, the supply chain and marketing. We're making very quick decisions as we see shifts in end markets. that enabled us to sustain this quality growth.

Our next question comes from Mitch Collett of Deutsche Bank.

Going back to the U.S., you said you're holding share of TBA in the U.S. and that Spirit is gaining, which, I guess, implies that you're currently losing share of spirits despite the strength of tequila. And if I look at NABCO/Nielsen, the big difference appears to be prepared cocktails, which, as a category, is growing something like 50%. And I think you're ready to drink in the U.S., which I appreciate may not be all prepared cocktails is about plus 18%. Can you maybe comment on what you're doing to close that gap and whether that's going to be a strong driver of growth for you in the U.S. going forward? And then just to come back on margins for the group. Obviously, you've got marketing to sales being a drag in the second half having been a tailwind in the first half. Lavanya, I think you said input cost pressures are likely to persist. Can you therefore comment on where you think margins in the second half are likely to be up or down year-on-year?

Sure. So I'll take the first part of the question, Mitch. Firstly, you are right. The acceleration in RTD spirits has been the important piece of the spirits market growth. Our strategy there is, we're not chasing RTD growth. We want to be in the premium end of premium convenience is the way we look at the opportunity. So we're very focused on building a sustainable quality premium business in this space. And there's a lot of growth right now happening in RTDs, which is we're not interested in. The second thing I would say is actually, if you look at our share performance within bottle spirits, it is strong. We're gaining share. So -- and we absolutely believe having a healthy core spirits business is fundamental to our long-term health and outperformance in the U.S. So I'm really pleased with that. So that's to your question, and I'll turn it to Lavanya.

Yes, on -- so, Mitch, on your question on margins in the second half. I mean we're not giving guidance here for the short term at reiterate our medium-term guidance of growing operating profit ahead of net sales on a consistent basis. But as I said, I mean, like there's many leverage that we have in the portfolio. that helped us to grow margins. Yes, input cost inflation is -- we're not seeing it coming off. But as I also said, we are hedged -- and that does protect us. We have taken pricing in. We will continue to do so in the second half. Some of the work that the teams have been doing on revenue growth management, which is really helping to move the mix to more premium end to Johnnie Walker Black Label and above, it's a strong driver of margin improvement for us. And we're seeing this happen across all regions. You see our scotch growth in -- even in Africa, in Latin America and APAC Scotch in total has grown 19% and contributed to 50% of the growth of Diageo. Scotch is a highly profitable category. So there are many levers to get to -- that we are working on all simultaneously, including productivity. And so I feel confident about our ability to deliver a consistent, healthy shape of the P&L.

Our next question comes from Lawrence Whyatt of Barclays.

A couple for me, please. Firstly, on the U.S. business, you've -- your tequila performance continues to be very strong, but perhaps there was quite significant weakness across Crown Royal, Vodka and the Scotch portfolio, with the expectation of getting back to that sort of mid-single-digit level if tequila -- I think it's reasonable to assume that Secular performance still outperforms the wider spirits category, but that then assumes that you're comfortable with slightly lower growth, particularly in those three major categories for you. Is that the case? And is there anything you can do about those three categories, in particular, to accelerate the growth and get them back into positive territory? And then secondly, on LAC, the Slide 15 shows your CAGRs over the past few years. And generally speaking, most geographies were around sort of 7% to 8%. And lack was the standout at around 15%, and you've highlighted the improved margin performance in that market as well. Over the past few years, that market has had a bit of benefit from government stimulus checks. And is there any other reason why you expect the LAC market to continue at these sort of levels? Is it reasonable to continue to see LAC drive double-digit growth on accelerated margins? Or is that something we should expect to slow down over the next few years?

Sure. So why don't I take the U.S. and Lavanya, you can [indiscernible]. The U.S., we're playing a total portfolio game, right? We are very happy with the quality of our portfolio. When you look at the disposals of the brands we made a few years ago, -- and then obviously, the additions of tequila and aviation in and some of the smaller whiskeys we're adding now. So tequila still has a long runway, as we've talked many times before, whiskey we're very excited about. And bullet in these numbers, you can see bullet has performed strongly, growing double digit. [indiscernible], our depletions growth is positive. What you're seeing in the sales numbers is what Lavanya talked about earlier, just the lapping effects and our sell-out orientation on keeping the shipment to depletion profile right. But we're growing share. Scotch, actually, both Johnnie Walker and Buchanan's are growing share of the scotch category in consumer offtake terms. So whiskey for us remains very attractive. We're investing strongly behind it. Crown Royal, Bulleit, Johnnie Walker, Buchanan's, malls -- where if you remember, we've always underperformed in malls. I'm really happy to see mall performance now come come through strongly. I think in the U.S., we were up 60% in our single mall business. So whiskey will be an engine. On vodka, I think if you -- there's one factor which is consumer-led, Ciroc has clearly has more pressure with the urban multicultural consumer. But Ketel One is solid. I mean, if you -- we were -- and Smirnoff is solid. So -- and Ciroc, I believe, will come back. So we do see the Ciroc business stabilizing over time. And then we've got other brands like Baileys and captain and our new additions to the portfolio, gins with aviation. So when you plot the entire North American portfolio, we play a portfolio game to deliver the total outcome. It's not counting on tequila.

So Laurence, I'll take your question on Latin America. Indeed, a standout performance in Latin America, 3-year compounded annual average growth rate of 15%. And in fact, if you even go back before this, you look at fiscal '17, fiscal '18, fiscal '19, high single-digit growth in the Latin American business. And what we're seeing happen in Latin America is we've been growing the business the right way with strong A&P investment driving taking price driving premiumization, it's really the flywheel in action. I mean, I think this is one of our -- it's a great example of where that -- how that flywheel works in pretty much every geography around the world. And if you -- our business in Latin America is predominantly scotch. We are growing the premium end of in Latin America strongly. The work that the team has been doing in Latin America in terms of on digital on consumer-centric advertising, bringing our brands to be front and center of a very dynamic, young consumer base who is really interested in brands that are part of culture has been really fantastic. And really, the single biggest thing that I would say has driven this great performance, consistent great performance over several years has been our approach to looking at the market from a lens of total beverage alcohol. And we are a very small player and last from a total beverage alcohol perspective. And what the team has been extremely successful in doing is recruiting out of premium beer into premium spirits. And that's what has driven the growth in margins, the growth in share and the consistent growth of our top line. And you mentioned stimulus checks. I mean, look, this is growth that the business has delivered over the last 3-plus years and 3-plus years before that. So it's anchored in fundamentally good business delivery versus any short-term tailwinds that may have existed.

Our final question of today comes from Andrea Pistacchi of Bank of America.

Two, please. earlier, you were talking about the good momentum you're seeing across the business exiting the half year period and the trends in January were also looking encouraging. You referred to December having been good, I think, in the U.S., more broadly in other regions? What sort of momentum are you seeing as go into the second half. Everybody thinks about the inflection point, which doesn't seem to have happened yet in Europe. So in particular, on Europe where you had another strong half year. How do you see those markets like Ireland Southern Europe, which continue to be good, but there's a -- you have a large on-trade exposure there. And then if I may, my second question is just on Ciroc, which you mentioned that earlier, Ciroc was down substantially in the half because you said distributors were were destocking the brand. I think it knocked about points of your total U.S. growth. Has this destock been completed? Should we see an improvement already in the second half?

Sure. I'll deal with the first one and ask Lavanya to comment on the Ciroc. The -- we have seen as we said in my statement. I mean, January has started well pretty much around the world, including Europe, Andrea. So I'm really pleased to see the consistency of consumer momentum for our brands and our category continue in Europe. And we -- obviously, we track it very closely. One of the things we've learned through the COVID years is you've got to be extremely agile, and we have also the consumer to really see if any shifts happen, we will adjust. But what has been really encouraging, I would say, through the last 6 months of, as I mentioned earlier, in Europe, is we've seen the cocktail culture really thrived and premium brands within that do really well. And so we expect the momentum to that underlying consumer case preferences as well as orientation to socialize and celebrate coming out of probed is solid across Europe. So I'm feeling good about our ability to deliver a solid second half. Obviously, there's uncertainty out there, but we focus on just making sure we emerge stronger and continue to keep the share momentum there. And as I talked about earlier, Guinness is in really healthy shape. So feeling good about the Guinness business in Europe too.

On Ciroc specifically, Andrea, yes, we have seen a slowdown in consumption on Ciroc and shipments were lower than depletions on Ciroc as the slowdown has resulted in distributed. And with our allowed culture, wanting to make sure that we have the right levels of inventory, healthy levels of inventory in trade. In terms of -- and if I kind of look back at the brand itself, I mean the brand has performed really well over the last 3 years. I mean what you're seeing over here is a bit of an impact on what's happening with multicultural consumers in urban imports, but it's also the growth of tequila, the growth of U.S. whiskey, I mean, these categories don't -- it's not like people are drinking so much more, but you're getting that growth of tequila is the shift happening from one part of spirits to another. I mean that is a large part of what's contributing to that. And so Ciroc is impacted by that to a resin extent, but we -- our focus would be to be where the consumer is with the interest -- with whatever the consumer is most interested in. We have a very broad portfolio across price points, and we moved back quickly to win with the consumer. .

Is that the last question?

Yes.

Okay. Well, thank you, everyone. Really appreciate you taking the time. And the questions, Lavanya and I will be out on the road show next week, so look forward to meeting with many of you. Thanks very much for your interest in the company and belated, but happy new year to all.

Ladies and gentlemen, this concludes today's call. Thank you for attending. You may now disconnect your lines.