Excluding Global Travel Retail, Pernod would have grown organic sales by 1% in H1 (vs the -3.9% the company reported). The sequential improvement from -5.6% in Q1 to -2.4% in Q2 despite increased restrictions around the world is reassuring – and reflects better trends in China and India, but the overall performance is still considerably weaker than Diageo reported. Pernod gained or held share across the markets of W. Europe, but it lost share in the US due to its exposure to the on-trade, which is higher for the company than the industry average. Hence why Pernod reported just 5% organic sales growth in the US over H1, while Diageo reported +15% in its US Spirits business. Pernod management commented that the US on-trade channel is tracking down 20-40% below the year ago level of sales. The outlook remains uncertain in light of the continuing on-trade restrictions across many of Pernod’s markets. The company is guiding for growth in organic sales over FY21, but margin expansion is likely to be limited given channel mix headwinds and rising A&P expenditure. Longer term, management expects to resume delivering 40-60bps of operating margin expansion each year. In the current quarter, we are concerned about the level of demand over Chinese New Year. Citizens are being discouraged from travelling home over the holidays by the government, and companies are paying employees to stay in cities. It is unclear if people will still celebrate in the same way as usual while being located far apart from their families; there may be a negative impact on Spirits sales. The sell-in to Chinese New Year has been good, both Diageo and Pernod confirmed, but the sell-in happened in November and December, according to Pernod, before most of the measures were announced.