Jef U_ China Spirits Expert Call — Gan Bei Hour

Summary of the Conference Call on China Spirits Industry Industry Overview - The discussion focuses on the spirits industry in China, highlighting trends and long-term drivers for Western-style spirits [1][2]. Key Participants - Frédéric Noyere, Managing Director at Jebsen Beverages, a leading distributor and brand owner in China, with over 30 years of experience in the region [1][2]. Relevant Companies - The call mentions several key players in the spirits market: - Diageo - Pernod Ricard - Rémy Cointreau - Davide Campari [1][3]. Core Discussion Points 1. Consumer Trends: - Concerns regarding the economy and property market are influencing consumer behavior, leading to a "trade up vs trade down" scenario [5]. 2. Channel and Regional Differences: - Identification of robust consumer environments and pockets of weakness across different channels and regions [5]. 3. Channel Evolution: - The impact of restrictions on conspicuous consumption, particularly in gifting, and the growth of livehouses compared to large format nightlife venues [5]. 4. Inventory Levels: - Discussion on excess inventory levels at wholesalers, retailers, and end consumers [5]. 5. Cognac Outlook: - Concerns about downtrading risks and whether new generations are as committed to cognac as previous ones, including current consumption trends [5]. 6. Scotch Outlook: - Exploration of recruitment into the Scotch category, its appeal, and its relationship with cognac, including potential benefits from consumers trading down from cognac to Scotch [5]. 7. Baijiu Outlook: - Potential rejuvenation of the Baijiu category through innovations such as lower ABV products, new recipes, and fresh packaging [5]. 8. Other Imports in China: - Outlook for wine and champagne, as well as other Western-style spirits, particularly in the context of a growing cocktail culture [5]. 9. Competitive Environment: - Analysis of which companies are best positioned to succeed in China, differences in business models among Diageo, Pernod Ricard, and Rémy Cointreau, and the performance of other Western-style spirits companies [5]. 10. Industry Regulation and Risks: - Discussion on risks stemming from common prosperity initiatives and clampdowns on public sector consumption [5]. Company-Specific Risks and Valuations - Davide Campari: Risks include integration, macroeconomic factors, and tax & regulation [9]. - Diageo: Risks include macroeconomic conditions, foreign exchange rates, and excise/regulation [10]. - Pernod Ricard: Risks include macroeconomic factors, excise, foreign exchange, and regulation [11]. - Rémy Cointreau: Risks include macroeconomic conditions, inventory volatility, and exposure to the Chinese market [12]. Additional Insights - Frédéric Noyere's extensive background includes significant roles at Moët-Hennessy, providing him with deep insights into competitive positioning and distribution channels for major brands in the China market [6][7]. Conclusion - The call provides a comprehensive overview of the current state and future outlook of the spirits industry in China, emphasizing consumer behavior, competitive dynamics, and regulatory risks that could impact investment opportunities in this sector.