Welcome. I am Andy Robertson. I have been with Diageo for 15 years now in a number of roles: sales, general management and strategy in the US and

Transcription

1 Welcome. I am Andy Robertson. I have been with Diageo for 15 years now in a number of roles: sales, general management and strategy in the US and Asia. Now I am the Global Route to Consumer Director, and I have been leading Diageo s Route to Consumer work for the last 18 months. Today we are going to give you an update on our Route to Consumer, or RtC programme which as you know is one of Diageo s six priority areas. Our first RtC webcast was in September We also included a presentation on RtC at our investor day last November, and there have of course been regular updates through our President s calls and results presentations. Therefore, while I will provide a brief reminder of what we mean by Route to Consumer, I am going to spend the bulk of the time today updating you on what we have achieved so far by sharing examples of the changes we have made and discussing the impact on our business. 1

2 First the reminder. Our RtC work will deliver more influence, greater penetration and greater distribution. This chart, which we have previously shared, illustrates where and how we are going to achieve this. The right hand side of the chart looks at the two outcomes that we want from RtC which are; distribution, with Diageo brands available in more places, and rate of sale, as we increase the rotation of our brands in each outlet where they are present. The maths says it all sales equals distribution, multiplied by rate of sale. This is the bullseye in RtC and you can link everything we do in sales and marketing at Diageo to influencing one or both of these outcomes. Let me walk you through this slide. At the top of the pyramid we have outlets that we and our distributors already call on. The primary opportunity here is rate of sale. In the second tier are outlets, which carry at least one of our brands but which don t currently receive a sales call. Here we can build distribution and rate of sale by calling on the account where it is profitable to do so. And finally in outlets which don t stock our brands today, and which are uneconomic to serve directly, there are some distribution opportunities through wholesalers. However, beyond the natural rate of sale for our brands, we are not focusing our investment on driving additional rate of sale. 2

3 In Diageo, RtC is the way in which we increase distribution and rate of sale and we deliver it through: Being in the right places for example being in the right cities, channels, outlets and price points Doing the right job merchandising, and influencing the influencers such as bartenders With the right skills so that we can have impact In the most efficient way so that our trade spend gets us the greatest return, and so that we optimise our logistics costs Allowing for sustainable advantage to generate a structural advantage for Diageo, so that we will be able to call profitably on smaller outlets than anyone else, and to generate sustainable and improving returns for us and our distributors And doing all of this in a systematic, repeatable way through our global approach to RtC 3

4 We are making significant progress on our RtC work and the goals that we have set. You may remember this slide, it highlights the ten wave 1 markets that we initially focused on and which represent around 4 billion of net sales for Diageo. These wave 1 markets have already moved from design into implementation at various points during the first half of this calendar year. Further changes are being made over the course of F15 and I expect our coverage across these markets in total to increase by around a third. This additional coverage is on top of the significant increases that already took place in F14. The markets are tracking their progress, and I am tracking the progress of each of them, against the business cases that were signed off. Today I will share an example of our RtC work from each of these wave 1 markets. Wave 2 markets which are also highlighted on the slide are moving into implementation over the course of F15 and their work will begin to have some impact in this fiscal year. While the rest of our markets have not been called out specifically, and are not receiving direct support from my central team, they are taking the learnings that are being shared to drive further improvements in their local approach. We will hear an example of this today, from our global travel business. We expect Route to Consumer to accelerate our performance across the individual countries, channels and customers where we are making changes. We started in F14 and at the close of the year the GMs of wave 1 markets could each point to their incremental net sales delivery from RtC. We will see additional incremental sales delivery in F15, with a full year from wave 1 markets, and now with other markets contributing. We forecast continued incremental annual gains through to F18 with the greatest 4

5 annual increment coming through in F17. While we are not forecasting the impact of this work beyond this period, my expectation is that as we get better at doing this we will find opportunities to generate additional growth from RtC. For example, if you look at companies who are world class at this, they constantly find lower cost ways to serve additional outlets, something I m confident we will also crack. Looking at margins, we like the returns profile from our investment in RtC. Generally the first full year of delivery in individual market plans is operating margin neutral at worst, with margin enhancement thereafter. While our approach to RtC is global, the solution to strengthen our RtC is very different across geographies. As such the pace of change and the results profile in each market will be different. 4

6 Let me start with an example from Ghana which not only gives you an idea of some of the work that we have been doing but also highlights how our investment is impacting the P&L. We have previously talked about our RtC work in Ghana. Let s hear more from our local General Manager, Peter Ndegwa. Peter Ndegwa The Route to Consumer transformation in Ghana has been focused on three key outcomes: Significantly increasing our coverage across all channels Building the capabilities of our sales team to ensure a move to more active selling Defining and executing segment standards The outlet census showed that our distribution partners only called on around 25% of the relevant outlet universe. The opportunity to grow distribution and rate of sale through greater coverage was substantial.. The single biggest intervention we made was the hiring of 140 new sales people. We deliberately focused recruitment on university graduates who while less experienced are keen to learn, determined to succeed and motivated to build a career. The new team was on board from April this year with considerable time spent on staff training and selling skills. We have also implemented a new incentive scheme with a 50% variable component based on depletions from distributors to embed a performance culture and ensure a focus on sales drivers. Through this work: We are increasing our coverage and so far have increased the number of outlets 5

7 we call on by 20% We are calling on 500 new wholesalers and have delivered sales uplift of 25 percentage points through these outlets We have established 50 new micro distributors in the off trade who are now covering 3,000 new smaller outlets The investment behind increasing our salesforce is already paying back with the incremental gross margin generated so far exceeding the headcount investment. While our journey has only started and there is more work to do, the business is already in a stronger place as a result of the changes we have made. And the investments we have made will continue to drive benefits for the long term. The work that we have done in Ghana touches on a number of the key RtC principles that we have codified and are applying across markets 5

8 These are: Maximise Diageo and distributor dedicated, profitable coverage Allocate resources to profitable, growing customers and channels Measure and reward distribution and rate of sale Optimise trading terms and cost to serve, including supply chain; and finally, Create a sell out culture These key principles are neither new nor complex, and most if not all of them are being put into practice already by many of our CPG peers. But our industry is not as advanced, and there is plenty of opportunity for Diageo to build a best in class RtC where we don t already have one, and to extend our advantage where we do. Let me illustrate each principle using examples of the work that we have done so far and the impact of these changes. 6

9 First maximise Diageo and partner dedicated profitable coverage. The outcome here is to maximise the number of outlets where we can influence consumer and shopper experiences directly and profitably, either through our own salesforce or through dedicated resources within our distributors or other partners. Maximising profitable coverage requires fact based selling. The first task is to know the outlet universe. The starting point is where our categories are sold. Not just Diageo brands there may be outlets that don t carry our brands today that are still attractive when looking at the category. 7

10 I am going to use the work our team has done in Nigeria. There we surveyed 8 states across the south of the country. Before we did the survey we knew that we and our distributors called on 8 thousand outlets in these states, but we didn t know the universe. The survey told us that there are 45 thousand outlets selling beer. So we only call on roughly one in six outlets that sell beer in these states. Is 8 thousand the right number of outlets to be calling on? No, it s undoubtedly too low, given the scale of our business in Nigeria. So how does the local sales team arrive at the right number to call on? 8

11 The answer is by estimating the revenue potential and cost to serve for outlets to give some idea of profit potential. From this we can make choices about whether or not to send someone to call on the outlet and how frequently. From our survey work we have estimates for each outlet of their total size and our market share in each category. We are also able to identify the differential, in market share, between outlets that are already called on by someone representing Diageo s brands and those that are not. This information is used to estimate revenue potential. The share differential is commercially sensitive information and of course varies by market, by outlet type and by category. But the upside can be substantial. In one market I have evidence that calling on an outlet in a specific segment can be worth up to 17 ppts of additional share. Next we consider cost to serve. Simply stated, if the incremental gross profit from a call is greater than the incremental cost to serve the outlet, then the outlet is worth a call. In Nigeria we have started to identify new outlets that can be called on profitably, and we are planning to bring on additional sales headcount in F15 to support our coverage expansion plans. 9

12 Let me move on to another example in Africa, a short video from Kenya which illustrates one of the approaches we have taken to extend our influence at the point of purchase through additional coverage, and to drive deeper distribution. 10

13 While in African markets we are generally increasing our salesforce to gain additional coverage, in a number of other markets we are making more effective use of our existing salesforce, rather than increasing it. In Ireland we have been able to increase our sales calls in the independent on trade from an average of 5 a day to over 9 by prioritising a focused set of sales objectives, building salesforce capability, and increasing our use of technology. We are well on our way to doubling our direct coverage to 5 thousand outlets without increasing overhead. In South Korea, a detailed territory mapping exercise led to a re allocation of salespeople to territories with higher category sales. The number of salespeople was reduced by 13% and yet weighted coverage improved by 10 percentage points which contributed to the 1.2 percentage point share gain in whisky that South Korea delivered in F14. 11

14 Moving on. The second key principle is to allocate resources to profitable, growing customers and channels Knowing the outlet universe gives us an ability to segment outlets, grouping them together based on similar characteristics. This in turn allows us to more effectively allocate resources across channels. It also allows us to set standards across channels which I will return to later, but I ll cover resource allocation now. Diageo and our distributors make a wide range of investment decisions such as salesforce time, discounts and activation materials. When we plan that investment, we want to maximise the odds of getting the best return, so we focus our resource on channels and customers with the highest combination of profitability and growth. While this concept of channel and customer profitability isn t new for us, we are now doing the calculations in many more markets, and we are also estimating channel profitability for our distributors, often working directly with their teams on an openbook basis, to make sure that increases in coverage are sustainable for both of us. 12

15 A number of markets are currently seeing strong growth across convenience stores. One such market is Mexico and this is my next example. Despite the growth in the convenience channel, the rate of sale for our brands was lower than we wanted. The Mexico team looked to other markets for insights on how to invest to improve this. Two interesting insights came to light on product display and price signposting. The team in GB was clear that getting product in front of the shopper in convenience stores is a key driver for rate of sale. If the shoppers can t browse the range they are less likely to buy. This was an issue in Mexico as our brands were often behind the counter to protect against theft. The Thailand team had demonstrated that clear price signposting led to increased rate of sale. Retail prices in the convenience channel are usually higher than in other channels, and the assumption had been that displaying these higher prices prominently would be a turn off for shoppers, but this was not the case in Thailand. Taking these two insights and taking into account the concerns regarding theft, the Mexico team designed a virtual product display unit to get our brands in front of the 10m people who visit convenience stores every day in Mexico. The display uses postcards carrying product shots, so that shoppers can see what is available and browse the range. It is a two dimensional board which is highly space efficient, a key requirement in a busy, small store environment. We also prioritised high traffic areas of the store for the display, typically around beer, ice, and chips. 13

16 Shoppers attention is captured by the display, they can browse the clearly priced options and can take a postcard to the cash register where it is exchanged for the product. In F14, we implemented this in over thirteen hundred stores at low cost. These stores grew our business 10 percentage points faster than the control set. While this initiative won us considerable share, the key for the customer is that this represented new growth for the category, and not simply brand switching. We also know there is an opportunity to improve on these results by implementing other sales driving activity in combination with the display, such as co promotions with ice, and additional merchandising. And while we are on the subject of our Mexico business I m looking forward to working with the team there on how the transfer of Smirnoff and Don Julio to Diageo Mexico will help strengthen our Route to Consumer, in particular giving us additional profitable coverage opportunities with Smirnoff, and giving us a much stronger range of Reserve brands for top end accounts. 14

17 In South Africa, insights from their trade census indicated significant opportunity for growth in the fragmented on trade universe in townships and rural areas the Tavern universe. While already covered by our sales people they received relatively low levels of service. The local team believed there was an opportunity to invest for additional profitable growth. A successful pilot scheme took place in F14 to provide a full service model to these outlets, ensuring improved credit terms, greater investment in outlet activation, more frequent deliveries and dedicated sales support. For those outlets included in the pilot, whiskey and white spirits volume grew 8% and 16% respectively, significantly ahead of the performance of other outlets in the segment in the same area. 15

18 We do look for opportunities to deliver profitable growth for Diageo but we design the proposition to work well for the outlets, and we ensure the economics also work for our distributor. I would now like to share a short video from Brazil which illustrates the advantages of working with our partners to invest in profitable channels. The team focused on the profit potential from the lower end of the Modern On Trade segment. These bronze tier outlets historically received little attention or investment from Diageo or our distributors. The relationship was purely transactional. Project Nitro was implemented to work together with our distributors to establish broader, business building relationships with these outlets, and to invest in activation activities. In the video we hear feedback on the project both from our distributor and from the outlets themselves. 16

19 So in summary, once we have maximised profitable, direct coverage within our covered universe, we focus our resource allocation disproportionately on profitable and growing channels and customers. 17

20 The third key principle is to measure and reward the two outcomes we are looking to drive, distribution and rate of sale. 18

21 First, distribution, by which I mean that a brand is present in an outlet: Johnnie Walker Red Label is in distribution if there is any bottle on shelf or in the bar But Johnnie Walker Red Label is also in distribution if not only the 75cl, but also the 20cl and 1 Litre bottles are present. We refer to this as points of distribution It is important that we measure the drivers of distribution as well as the outcome, as it is the drivers that we can influence. These are: Salesforce coverage. It is much harder to influence distribution if a salesperson isn t tasked to call on the account, which is why we are so focussed on coverage as part of RtC Salesforce efficiency metrics such as Calls per day Productive call ratio in how many of the calls is an order actually taken Average order size Adherence to journey plans New outlet openings is the salesperson prospecting for new outlets that meet our criteria for direct coverage These are all salesforce efficiency metrics which, if they are increasing, will increase distribution. And finally out of stocks which we track very closely, as every instance reduces distribution, and risks a lost sale 19

22 The Brazil team has focused on the drivers of distribution to grow their business. The team recognised that in the fragmented trade, calling on an outlet is the primary driver of distribution. Having established the outlet universe and estimated profit potential, the team set coverage targets for each distributor We could have relied solely on the data provided by the distributor sales team to track the impact of this initiative but we are not huge fans of rewarding people based on their self reported achievement vs targets So the Brazil team commissioned a third party survey to track distribution each month in a statistically significant sample of outlets in each distributor territory Each month the team can look at how coverage is growing, based on the distributor data and also at how distribution is growing, from the third party data. Looking at this data, both Diageo and our distributor can see the strong correlation between coverage, distribution and sales. 20

23 This chart shows data for one of our top distributors. Amongst the smaller outlets which were prioritised for improved distribution only, sales grew over 80% in F14. We ll come back later to our growth in stores prioritised for distribution and rate of sale. 21

24 Distribution is only half the answer. It is no good having product sitting on shelf as a result of a distribution drive, but gathering dust because the rate of sale is low. Activation, the execution of display and other merchandising programmes is an important driver of rate of sale. In the off premise, activation metrics include the number of display cases on the floor, number of secondary displays outside the spirits aisle, share of shelf, and the number of retailer advertisements in which our brands feature. Let s take share of shelf as an example: the bottom right image shows part of a shelf set for Whisky. In one Russian city, the team surveyed over 17 hundred outlets and established the relationship between share of shelf and share of category for different store sizes. On average, every 1 percentage point of share of shelf within a category was worth around 0.8 percentage points of additional share of sales in that category. In our three priority cities, additional coverage, additional share of shelf and improvements in other activation metrics drove an increase in market share of between 5 and 8 percentage points for each of the brands, Bells, White Horse, Johnnie Walker Red Label and Captain Morgan, over a 6 month period in F14. 22

25 In the on premise we look at metrics such as the number of cocktail menu placements, number of back bar placements, number of brands with pouring status, number of bar staff trained, and the number of brands with branded glassware in the outlet. 23

26 I want to also mention a couple of important global activation programmes we run for the on premise; World Class and The Bar Academy. 15k bartenders across more than 50 countries have participated in the World Class competition so far. Our Bar Academy programme continues to provide excellent on the job training for the next tier of bartenders, and we trained over 80k bar tenders in F14 alone. Both programmes deliver a multiplier effect for distribution and rate of sale. For example, we typically see a 20% sales uplift on our brands in outlets where the staff have gone through the Bar Academy 24

27 I mentioned earlier how understanding the outlet universe allows you to segment outlets. We are very clear on the standards we expect for each off and on trade segment in each market in terms of both target brand range and target activation Target brand range is the set of brands we expect to be in distribution in the outlet type. For example, in a nightclub we may focus on Ciroc but a brand like Guinness would typically not be part of the target range. Target activation is what you should expect to see and experience in an outlet in that segment. For example Tusker branded tables in a bar in Kenya, or Buchanan s on the drinks menu at a restaurant in Mexico City. On this slide you can see an example from Great Britain, laying out for the Social Hub segment the brands we expect to be in distribution, which brands should have pouring status, and some of the activation to put in place on quality of serve. 25

28 West LAC is another good example. Standards have been set at a country level and an example of this for one country is shown in the slide. It shows the target portfolio to have in distribution, plus different elements of activation, for three different tiers of accounts. To give you some idea of impact, in F14, West LAC set out standards by segment and executed these standards in 21,000 outlets across 10 countries, as well as training more than 6,000 bar staff with The Bar Academy. This focus on activation standards accelerated sell out performance in the outlets measured by 27 percentage points versus a control set. 26

29 Going back to the Brazil example I used earlier, recall that our distributor grew revenue on our brands by over 80% in smaller outlets that were prioritised for distribution improvements only. 27

30 The same distributor in larger outlets increased not only distribution, but also activation to drive rate of sale, and together the uplift was even more significant at over 200%. 28

31 Designing incentive schemes to reward improvements in distribution and rate of sale is a key lever of performance, and delivering these positive results with the distributor would not have been possible without also offering the right incentives. In Brazil, our distributor pay for performance scheme was previously driven by total sell out volume and a coverage target against the entire outlet universe. In the new scheme the emphasis is now on rewarding activation and brand distribution in clearly defined territories. Performance against these metrics is externally audited by a third party, ensuring we can hold our distributors to account. Incentive schemes also allow us to change the relative emphasis on brands allowing us to upweight focus on, for example, brands that generate higher profit, or innovation brand, which needs additional focus in the first year or two after launch. So far I have talked about incentive schemes for distributors. However, in an ideal world, the focus on distribution and activation is pushed as close as possible to the point of purchase. My view is that Diageo is relatively strong at designing incentives for retailers we call on directly, but we have not historically spent a lot of time or money designing and implementing incentive schemes through our distributors that they will pay out to outlets that they call on. We are increasingly focused on these indirect schemes for two reasons. First, because we now have a much better fact based understanding of the linkages between distribution, activation and sales. And second, because we believe that distribution and rate of sale gains where the retailer participates in the upside, are more sustainable. 29

32 One place where we have recently put a distributor served retailer incentive scheme in place is Colombia While the scheme has been put in place by our distributors, it was co designed in partnership with Diageo. It already covers fifteen hundred outlets. Retailers are set monthly targets across a range of metrics from brand activation and visibility requirements, to staff training and delivery of the agreed promotional calendar. Full delivery against each of these sales drivers can earn them additional margin on their sales. As in Brazil, an external agency has been recruited to validate the execution activities and ensure delivery before any payments are made. The best way to sum up this section on measuring and rewarding the drivers of distribution and rate of sale is to comment on the interest shown by our General Managers. It has become very clear from our wave 1 RtC markets that there is a strong linkage between deploying this principle and improving financial performance. As a result I am constantly seeing our GMs take best practice from other markets to apply in theirs. 30

33 The fourth key principle is to optimise trading terms and cost to serve, including supply chain. By trading terms I mean the commercial agreements between us and direct customers, which are typically: the big retailers like Tesco, Carrefour and WalMart;, and distributors Trading terms usually cover agreements on discounts, product range, promotions and in outlet activity. It is important to structure trading terms that are conditional, and which incentivise mutually profitable customer relationships. By conditional trading terms I mean that, in return for granting something of value to the retailer we receive something in return which we know benefits our business. And by mutually profitable customer relationships I mean a relationship where both parties grow sales and profits, preferably by growing categories, not just our share within categories. 31

34 There are a number of ways to incentivise the growth of both the customer s business and ours through trade terms. Agreeing joint business and activity plans can ensure growth of our business at margins which are attractive for both parties. We know what activities work, so we can lock these programmes in with our customers. This could be additional floor displays or multi buy discounts at Christmas, or in store sampling in support of an innovation. We also seek to grow categories with our customers. An example here is our scotch activation around Whisky Festivals and Father s Day which benefits the scotch category as a whole rather than just Diageo brands. In both cases we designed the programme centrally and rolled it out locally, often as part of our trading terms. Encouraging efficiency through menu pricing to influence customer order patterns is another good example. Ideally we would like our customers to order in patterns which are efficient for our manufacturing and logistics network, such as full container loads. We can incentivise this behaviour by identifying the benefits that would arise if order patterns were more efficient, and by designing trading terms that share the benefits of more efficient behaviour. And at the other end of the pricing menu we can ensure that, for customers that genuinely need to order in patterns that are less efficient for us, we price accordingly so that we share the cost. 32

35 Optimising the supply chain is the other component in delivering efficient routes to consumer, supporting profitable growth through greater forecast accuracy, reduced inventories and lower logistics costs per unit. For example, across Western Europe we have reduced inventory levels by 28% in the last 24 months driven by an improved planning process and clear target setting as well as more agile production runs. 33

36 You will recall that logistics costs savings featured heavily in our announcement of the 200m cost savings programme we announced in January. The team tasked with identifying and tracking the delivery of the benefits reports to me, given the interdependencies with Route to Consumer. I ll share two examples from their work so far: In Brazil we have eliminated 5m of costs by using a new technology platform to optimise all deliveries, improving truck utilisation from 58% to 92%. We have also created world class visibility of transport costs. 34

37 In Australia, analysis of our warehouse network highlighted inefficiencies in stock movements and duplication of activities. We are now building a new high rise warehouse, with automated storage and retrieval technology, that will allow us to reduce total warehousing costs by over 40%. We will deliver annual cost savings of over 3m through simplification of our network. In completing the logistics diagnosis work across nine markets, including our International Supply Centre, we are confident that these types of opportunities exist in many countries. We have identified almost 90% of the savings that we have committed to deliver by F17. 35

38 For Diageo to demonstrate a sustainable competitive advantage through RtC, an ability to win, and to keep on winning, I believe that creating a sell out culture is essential. This is our final key principle. 36

39 Across Diageo there has been an increased focus on sell out since the start of F14. Some examples of this are: More time is spent tracking sell out data. In the monthly performance delivery calls that Ivan holds with the 21 general managers, both sell out, what our customers are selling, and sell in to customers, are reviewed. More time is spent tracking the drivers of sell out. On a quarterly basis Ivan and the 21 General Managers now review salesforce coverage and brand distribution data in around 40 countries, versus target, versus prior quarter and versus prior year And each of our General Managers has a clear Route to Consumer objective for their market. This is one of only three [non financial] objectives which together determine [part of]each GM s annual bonus. This increased focus on selling or helping to sell is certainly driving different behaviours. This is evidenced through the conversations I see every day on Yammer, our internal social network, where employees are actively sharing best practice and asking for support. This is all based on the belief that, pick any commercial topic, and somewhere in the world we are great at it. 37

40 Let s hear now from the General Manager of our Global Travel and Middle East business Doug Bagley. He has created a very strong sell out culture across his business. I particularly like how Doug has built all of the RtC principles into the monthly rhythm of the business Doug Bagley In GTME we have spent the last months working on embedding the key Route to Consumer principles across our business. We now have a much deeper understanding of our customer businesses across the key airport locations around the world. Our new third party audit measures give us a level of insight we did not previously have and we are continually working to identify opportunities in terms of store level distribution, space allocation and activation standards. Throughout F15, this new level of insight will also enable us to realign our trade terms model to ensure that more of our investment with customers is aligned behind the core activation metrics that we know drive sales. From July, we realigned our regional teams, clearly defining individual roles and aligning our resources more directly against our key customers rather than against our brands or categories. We have also set up a commercial planning and activation team who will lead the focus on customer planning both at a strategic level and in terms of activity. We have already refocused part of the incentive scheme for our customer teams from basic sell in performance metrics at a total business level to a more activation focused, sell out model which rewards market share performance in our key customers and at key locations around the world. Reviewing performance against our 38

41 new targets is now at the heart of our monthly performance management conversations. Our Route to Consumer work is ongoing but it has already had an impact and was an important driver in delivering around 1ppt of share gains for Diageo GTME in the last year. 38

42 Overall, we have made huge strides over the last year in creating a sell out culture which will help ensure our Route to Consumer gains are sustainable. 39

43 This brings me to the final point that I want to leave you with today. Our commitment to strengthen our Route to Consumer is ultimately about building a sustainable advantage for Diageo. Just as our breadth of market leading brands, and our expertise in innovation give us a competitive advantage today, and will continue to do so over the long term, so too will the Route to Consumer footprint that we are building and extending. While we have a global approach and global principles, the local solution across markets and channels can be different but in general this sustainable advantage comes from: influencing more outlets with dedicated resources than other suppliers partnering with the strongest distributors through a combination of how we select them, and how we work with them on their capabilities developing an information advantage on what is going on at point of purchase; and building long lasting customer relationships through industry leading programmes such as World Class and Bar Academy, and through trade terms that lead to mutually profitable relationships. Building this sustainable advantage is our priority. We will see some RtC changes which have immediate impact, but equally our focus is on those Route to Consumer changes which will drive the greatest long term benefits. We know what success looks like, the General Managers are already delivering incremental performance from RtC, and we have strong plans in place for additional performance impact in the balance of F15 and beyond. Thank you all for your time today. 40

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