United Spirits Limited (NSE:MCDOWELL-N) Q1 FY23 Earnings Concall dated Jul. 27, 2022
Corporate Participants:
Hina Nagarajan — Managing Director and Chief Executive Officer
Pradeep Jain — Chief Financial Officer
Analysts:
Jaykumar Doshi — Kotak Securities — Analyst
Percy Panthaki — IIFL Securities — Analyst
Avi Mehta — Macquarie Group Limited — Analyst
Harit Kapoor — Investec India — Analyst
Krishnan Sambamoorthy — Motilal Oswal Financial Services Limited — Analyst
Himanshu Shah — Dolat Capital Market Private Limited — Analyst
Alok Shah — Ambit Capital Private Limited — Analyst
Tejas Shah — Spark Capital Advisors (India) Private Limited — Analyst
Prakash Kapadia — Anived Portfolio Managers Private Limited — Analyst
Chinmay Gandre — Reliance Nippon Life Insurance — Analyst
Latika Chopra — JPMorgan Chase & Co. — Analyst
Abneesh Roy — Edelweiss Financial Services Limited — Analyst
Presentation:
Operator
[Technical Issues]. Conference call. [Operator Instructions].
I now hand the conference over to Ms. Hina Nagarajan, Managing Director and Chief Executive Officer, and Mr. Pradeep Jain, Chief Financial Officer from United Spirits Limited. Thank you, and over to you.
Hina Nagarajan — Managing Director and Chief Executive Officer
Thank you very much. Good evening, ladies and gentlemen. Thank you for joining us on the Q1 earnings call of United Spirits Limited. As always, it’s a pleasure to interact with all of you. I’m joined by Richa, our Investor Relations Head, and Pradeep, our CFO. Let me provide a context on the results that we announced Tuesday evening, and then we can open it up for Q&A.
As a headline, we delivered a growth of 34% in the first lapping softer comparators in the prior year. Our price mix was 16.4%. The strategic focus on premiumization reflects in our numbers. On trade saliency was back to pre-COVID levels and we have seen sequential gains in the innovation, renovation bets placed in the market over the previous year. On EBITDA, double-digit inflation, limitations in Scotch supplies in select markets, as well as a one-time special grants to all employees in extremely challenging times impacted EBITDA margin delivery.
Let me talk you through our progress on the pillars of our strategy and I will come back to the financials. Our portfolio reshape strategy through innovation and renovation is on track. We have put a lot in the market, mostly in the second half of last year and are confident of ramping up the same in the current year based on the sequential gains we have seen in the launch markets. To jog your memory once again, our recent innovations, renovations are impactful, inclusive and sustainable. Godawan, India’s first single craft malt with sustainability credentials has already been launched in Rajasthan, Delhi and the UAE. We’ve also showcased Godawan along with Epitome Reserve at the Cannes Film festival in partnership with an NSDC. Response from consumers has been heartwarming.
Black Dog renovation, we launched a new campaign, “Savour The Pause” with global icon, Keira Knightley, and we have continued to scale up media reach on the campaign in this quarter, helping reappraise the brand and dialing up aspiration. The brand is performing extremely competitively in the market.
Black & White continues to see great traction amongst consumers and the quarter saw enhancement of the brand’s association with superstar chef Heston Blumenthal on social media. Royal Challenge American Pride is now rolling out, already available in seven states, and along with the signature brand end-to-end renovation of the consumer bundle, we are sequentially improving our position with these delightful liquids in the upper Prestige segment. We are going strong on Royal Challenge, with accelerated momentum from states where we have renovated or had routes to market unlock and the Yaari Cheers and the purpose campaign on our flagship brand, MsDowell’s No. 1 reached over 65 million people during the IPL, with the brand performing very competitively during the last 15 months or so, actually more than that, since the time of renovation.
Touching upon the pillar of building an organization of the future, elaborating on our digital initiatives first, our website inthebar.com is a one-stop place to help people celebrate and create memorable moment for celebration. The bar is present as both the website, as well as on social media on both Instagram and Facebook. The site has been in beta mode for the last few months and have got very good initial response with 1.1 million total visits to the site and very good organic traffic every month. We also have Precision factory, our powerful digital initiative that is focusing on media, data analytics and content, helping us target consumers with the right content in the right occasions and improving the effectiveness and efficiency of our digital marketing spend. Both these are going to be continue to be scaled up as we progress in the year. We are continuously improving investing in our tools, capability and talent and as we improve, we are creating a virtuous circle that brings us closer to consumers, towards more efficient and effective engagement and fuels growth.
On the third pillar, one of the most important pillars Society 2030 goals. We continue to make progress in delivering our Society 2030 goals. We have been shaping drinking attitude towards moderation through sustained programmatic interventions. Two of our flagship global programs continue to expand their reach in India. First one, Wrong Side of the Road, our drink-drive program reaching 64,000 people, while Act Smart India educated 12,000 young people on dangers of underage drinking. We continued supporting customers and communities by conducting Learning for Life and hospitality skills training program with 72% women participation. Under our water stewardship work, we created capacity to replenish almost 5 lakh cubic meters of water in stressed areas like Nanded and Nasik in Maharashtra and Kumbalgodu in Karnataka.
We are working towards net-zero carbon by 2025. The Black & White whisky brand is using 100% biodegradable and recyclable hipster pack now and we will be rolling this to our other premium scotch hipster portfolio over the next few months. We’ve also rolled out a blockchain based track and trace system with Godawan, Signature and Royal Challenge whiskey and will scale it up for our other key brands. This now enables us to trace back the product journey from blends to finished goods, providing auditable sustainability data, again another significant step towards our commitments to sustainability.
Coming now back to the financial performance and key highlights, which you would have already seen in the press release. But let me again call out some of the salient points. Our reported revenue increased 34.3%. P&A grew by almost 44%, while Popular grew by 13%, lapping a soft prior-year comparator, but growth also driven by resilient consumer demand in the off-trade and recovery of on-premises operating fully with footfalls back to pre-COVID levels. The P&A growth also reflects the ongoing premiumization trend. Growth has been partly offset by constraints in Diageo supplies in select markets on account of ongoing price deliberations with the government. Gross margin was 40.9%, down 366 basis points. This reflects the adverse impact of high commodity inflation. Continued management focus on favorable product mix and a culture of everyday efficiency has partially offset the inflation.
Our marketing investment rate was 6.5%, up 128 basis points. We continue to strengthen the equity of our brands and premiumize the portfolio. Staff cost includes a one-time special recognition grants to employees for their outstanding contributions and commitments in an extraordinarily challenging operating environment for the last two years and now aggravated by macro volatility and high cost of living inflation. Our underlying EBITDA margin was 13.8% for the quarter, up 346 bps, primarily driven by operating leverage and PAT was at INR210 crore in the quarter, up 204%.
We are on track to close the transaction with Inbrew beverages as per schedule. We had mentioned that we will close this by end September. We are on track to do that. Our outlook on inflation, we are seeing inflationary pressure to continue in the near-term. In our assessments, inflation is a combination of some permanent reset and some temporary pressure. However, in the near-term, the combination of material cost increases and external economic challenges will drive double-digit inflation for our portfolio.
In conclusion, all I want to say that we are confident of the resilience of our business and our ability to navigate headwinds as our team has demonstrated over the last couple of years. We remain focused on our strategy of reshaping the portfolio, driving commercial excellence in store and in on-trade, revenue growth management and everyday efficiency. We are confident in our ability to deliver sustainable long-term growth and stakeholder value.
With this, we can now open the lines for Q&A.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. First question is from the line of Abneesh Roy from Edelweiss. Please go ahead.
Abneesh Roy — Edelweiss Financial Services Limited — Analyst
Yeah. Thanks for the opportunity. My first question is on marketing spend. So if I see quarter-on-quarter because YoY may not make too much of a sense, quarter-on-quarter sales is down 10% while marketing spends are up 7%. I understand there is a seasonality in marketing investment. My question is because of the gross margin pressure of the 366 bps which must be there for you and the industry also, will the industry see much lower ad spend than the normative year? So in the normal years, your ad spends have been more like 8% to 9%. Currently, it is only 6.5%. So, wanted to understand, has the competition also cut down versus the normal years?
Hina Nagarajan — Managing Director and Chief Executive Officer
Hi Abneesh. First of all, good to have you back on the call. We missed you last time. Look, I think on the question, I’m not in a position to say what industry will do, but at Diageo we believe that particularly in more difficult times, we should be investing behind our brands. We are playing the game for the longer term. We are a brand building company, and we will not be pulling down our brand investments, but we will rather be using these more effectively, more efficiently to drive the top line growth objectives that we have, and we have very aggressive topline growth objectives. So we would like to support that by investing into the brand equity.
Abneesh Roy — Edelweiss Financial Services Limited — Analyst
And one follow-up on that, for FMCG companies digital ad spend is around 25% to 35% of the total. So, traditional is now 65% to 75%. What could be the number for you and any sense what it was say five years back?
Pradeep Jain — Chief Financial Officer
The digital mix of the advertising spend.
Hina Nagarajan — Managing Director and Chief Executive Officer
We have been increasing, Abneesh for a very long time now for the last few years, and I would say that we are on some, I mean this differs from brand to brand, right. On some brands nearly 65%, 70% of our spend is on digital whereas on others, there is more focus on in-store etc. So overall I would say that more than 50% of our spend is on digital.
Pradeep Jain — Chief Financial Officer
Yeah. About 50% would be the right weighted average number, Abneesh across the portfolio.
Abneesh Roy — Edelweiss Financial Services Limited — Analyst
So, thanks. That’s useful. My last question is coming back to the sales number. So when I see historically, quarter-on-quarter the dip is always there in Q1 in most of the year, but that 10% to 11% dip seen in quarter-on-quarter this time seems to be slightly higher. Is it because of the beer regaining some market share because very harsh summer was there? Or if you could comment in spirits, how has been your sense in terms of market share? Any sense you have got on how things would have changed say quarter-on-quarter?
Hina Nagarajan — Managing Director and Chief Executive Officer
So, Abneesh, I would say that if I just break this down to P&A first, so our performance at the book ends of our portfolio write, scotch has performed extremely competitively, despite the limitation on supplies. I would say, No. 1 continues to perform extremely competitively for the second year in a row after renovation and in the middle, on mid and upper Prestige, basically our renovations and innovations, I was just calling that out, that actually they started rolling out in the second half of last year and we are seeing sequential improvement in our position in these segments as well. Right. There have been some impact of the limited scotch supplies and that explains the little bit of delta that you’re seeing here. Other than that, there is no unusual sort of impact on our sales.
Abneesh Roy — Edelweiss Financial Services Limited — Analyst
Could you elaborate on the cost supply constraint? When do you see fully resolving and how much was the impact in Q1, if it is possible to share?
Hina Nagarajan — Managing Director and Chief Executive Officer
Okay. So basically, look, I mean, just to give everyone a perspective, scotch as you know is a very scarce and limited commodity, right, and this year, scotch is seeing a high level of inflation and we need pricing for sustained supplies. So we have been proactively engaging to get the right pricing with a few state governments and commence supply once we close the discussion. In the quarter, we have had an impact of about INR60 crore to INR70 crore and this would be about, on our P&A portfolio, about 6 percentage points of growth. Right.
Now we are hopeful that in this quarter, we will be able to come to the right closure on this. And therefore, I mean, we do see impact for this quarter. Right. But we are quite hopeful that by the end of this quarter, we would have reached the right win-win situation for both sides.
Abneesh Roy — Edelweiss Financial Services Limited — Analyst
Sure. Thanks. That’s all from my side. Thank you.
Hina Nagarajan — Managing Director and Chief Executive Officer
Thanks Abneesh.
Operator
Thank you. The next question is from the line of Jay Kumar Doshi from Kotak. Please go ahead.
Jaykumar Doshi — Kotak Securities — Analyst
Hi, good evening, and thanks for the opportunity. Am I audible?
Pradeep Jain — Chief Financial Officer
Yes, you are.
Hina Nagarajan — Managing Director and Chief Executive Officer
Hi, Jay. Yes.
Jaykumar Doshi — Kotak Securities — Analyst
Sure. Hi. My question is somewhat connected to what Abneesh asked earlier. See, when I see, 2017, 2018-2019 calendar years, the usual seasonality was that from March quarter to June quarter, you would see about 0.2 million cases of decline in P&A volumes. I mean this quarter, March, this year March was impacted by Omicron wave and June was a normal quarter, and yet, we’ve seen 0.9 million cases of decline. So is there some change in seasonality or if you could comment on, broadly…? And again, when I look at June, ’22 versus June ’19, P&A volumes have declined. Now, I am aware about route to market change of AP, but adjusted for that also, it has been modest growth, whereas in the previous two quarters versus respective quarters of 2019, you were tracking at a very high— significantly higher growth, volume growth number, I’m unable to understand this. At least to me it seems like this quarter is weaker than what I would have expected at the beginning of the fiscal year or quarter. If you could comment on this please?
Pradeep Jain — Chief Financial Officer
So Jay, let me attempt to take that. So two points. You asked the seasonality question. I think the way I would look at it is that when COVID wave one happened, there was a bit of an inflection point there, right. So if you look at the last three years, I think there is absolutely no change in the quarter-on-quarter seasonality, barring a little bit here and there. Right. But if you compare the Q4, the April-June seasonality versus pre-COVID, yes, you would see a little bit of a shift, right. So, that was a bit of an inflection point, to answer your question, that the seasonality has changed a little bit. Right. So there was a one-time inventory correction that all of us did when COVID wave one happened, etc., and then we’ve just stuck to that. It just helps us to kind of….So, that is the first part of your question.
And second part, if you look at it, one is you’ve answered it yourself. There is an Andhra adjustment. That was a large business for us. Right. Large business, not just in topline, even in bottom line from the franchise part, right. So, excluding that, we are in the positive zone on a three-year zone also. And as Hina has already responded to Abneesh’s question earlier, we lost about INR70 crores of NSV, right. in the top end of our P&A segment. So, once you factor that in, I think we are by and large in the same zone, right. I mean that’s broadly what our assessment is.
Jaykumar Doshi — Kotak Securities — Analyst
Understood. Second question is, you had articulated your aspiration for double-digit sales growth last year and then now with Popular business being divested, I’m assuming that aspiration should have moved up a inch, given Popular was anyway not growing. If you could share your revised aspirations for the business and more importantly, what is the growth constraints that we should think of in terms of contribution of volume and contribution of pricing plus mix in this 10% or 10% plus growth aspirations?
Hina Nagarajan — Managing Director and Chief Executive Officer
Yeah. Thanks Jay for the question. So I mean, as we have said, since the time of launch of strategy, that in one way we had already factored the going away of Popular, when we said we want to target strong double-digit top line growth and we are still sticking with that aspiration of double-digit top line growth. Right. So basically that’s it. I think we, in a year, which is so volatile etc., I mean we are not in a position to change that guidance right away. Right. I mean it had a very difficult macroeconomic environment, and we will stay with the guidance that we’ve given, right.
Jaykumar Doshi — Kotak Securities — Analyst
Sure. Sure. No, my question is different, Hina. I understand. I’m not asking about near-term. It’s essentially in the medium-term or maybe next year if things are normal. If you were to sort of pencil in 10% revenue growth, will it be 5% volume in….
Hina Nagarajan — Managing Director and Chief Executive Officer
I am coming to that. I’m sorry. I’m coming to the price mix and the volume question. So, look on the price mix, we have had because of the COVID base effects, right, so our price mix and of scotch growth, we have had a price mix, which is quite high. And we have said that on a normalized basis, we would see about 7% to 8% price mix on a steady state basis. Right.
Pradeep Jain — Chief Financial Officer
That should be it. So, just building on that, Jay, broadly, if you are saying that as a portfolio if you’re looking at double-digit growth, right.
Jaykumar Doshi — Kotak Securities — Analyst
Yes.
Pradeep Jain — Chief Financial Officer
Our price mix would be in the 7% to 8% rate, consistent premiumization of the portfolio and volume will be in the 3% to 4%. That’s the broad math.
Jaykumar Doshi — Kotak Securities — Analyst
That’s very helpful. Final bookkeeping Pradeep, if I may. This quarter employee cost had some ballpark INR25 crore, INR26 crore of one-time grant. So, what should be the normalized employee cost that we should sort of model going forward and if you can give us an idea of how it would be, once the divestment of Popular business is complete, concluded?
Pradeep Jain — Chief Financial Officer
So, Jay, I don’t want to comment on post the divestment, we will come back. I mean, you will pretty much start seeing the P&L. Once we close the transaction on September 30th, right, you will start seeing the real excluded P&Ls. But I think the staff cost is about INR167 crore currently, right. You knock off INR26 crore out of that. That’s broadly the organic run rate that we can look at.
Jaykumar Doshi — Kotak Securities — Analyst
Understood. Thank you so much. That’s it from my side.
Hina Nagarajan — Managing Director and Chief Executive Officer
Thanks, Jay.
Pradeep Jain — Chief Financial Officer
Thank you.
Operator
Thank you. The next question is from the line of Percy Panthaki from IIFL. Please go ahead.
Percy Panthaki — IIFL Securities — Analyst
Good evening, everyone. My first question is on the P&A growth. So, while some people have looked at it sequentially, what I’m looking at is on a three-year CAGR basis after adjusting this INR65 crore of scotch issue, which has happened this quarter and if I, even after adjusting that, the three-year value CAGR is only 4%. And I mean, this is a completely normal quarter after adjusting the INR65 crore. The base quarter which is Q1 FY’20 is also a completely normal quarter and therefore, whatever happened in COVID times or didn’t happen, plus-minus, it’s really irrelevant at that, on this three-year sort of comparison. So what is the reason that the growth is so low, only 4% and our target is the double-digit? So, what really will need to change for the growth to accelerate from 4% to 10%, 11%, whatever that number is?
Pradeep Jain — Chief Financial Officer
Yeah. So Percy, you’re right. I mean adjusted that, but I think what you have probably not excluded is the the Andhra offsetting in the three-year ago base, right. Now, that was a large P&A business and that was a large franchise royalty business. So, I’m not talking about the bottom line here, we have absorbed all that, right. We have recouped all that, etc., and our margins are kind of come back to the pre-COVID levels. But the top line, if you adjust for Andhra, that 4% move to 7.5%, 7% to 7.5% broadly, right. So yeah. And then if you look at P&A performance, Jay, don’t look at one quarter, look at it on a four-quarter basis. Have we picked up momentum versus our historical run rate? The answer is an emphatic yes, right. Yes. One quarter, maybe a little short of the double-digit etc., but if you look at our four-quarter rolling number, etc., we are significantly ahead of the of the double-digit.
Hina Nagarajan — Managing Director and Chief Executive Officer
And Percy, I would say that our strategy that we announced a year ago is exactly about this. This is exactly what’s changing. We are breaking out growth on Luxury and strengthening our presence in upper Prestige and reshaping our value proposition in mid-Prestige and lower Prestige and all the renovation, innovation work that I called out a couple of times, all that has happened to strengthen our participation in these segments and it is giving a sequential gains and we are rolling this out. And you know the renovation and innovations in our industry takes time because of the registration, label registration state by state, etc. So, we have confidence that these are working and that we will be able to scale them up in this year.
Percy Panthaki — IIFL Securities — Analyst
Sure. I was also little surprised on your volume guidance of about 3% to 4% in the medium-term, 3% to 4% and this is, now, we are going to be only a P&A company. So, this would imply that the overall sort of industry volume growth, which includes the regular segment, which we will not participate, would be even lower than this 3%, 4%. So, then are we saying that basically the spirits business is a business which is likely to grow even below overall FMCG industry in volume terms? That doesn’t seem intuitively right.
Pradeep Jain — Chief Financial Officer
Yeah. So Percy, I think what I did respond to is on our Atlas [Phonetic] portfolio, which has a huge negative on account of Popular right now. Once our, post the Atlas — sorry, post the divestiture, right, our portfolio will become 85% weighted towards P&A. Obviously the mix is going to change a little, right. So we will be, as Hina and I have mentioned in the last quarter, we want a little bit of peace starting to revert, before we come and discuss what our go-forward guidance will be. Right now in this extremely volatile conditions, we don’t want to discuss the guidance. Right. But we’ll be happy to discuss that once a little more stability is back.
Percy Panthaki — IIFL Securities — Analyst
Sure. And my last question is on the margins. You have done 12.5% this quarter. Even adjusted for these one-offs in the scotch portfolio and the extra employee cost etc., you would be close to 13.5% or maximum 14%, versus the last three quarter average of 17%. So, and now this is very clear that it’s because of higher input cost and you also mentioned that this double-digit input cost inflation will last for a few quarters more. So, in this kind of a scenario, this adjusted margin of 13.5% to 14% that we’re seeing right now, is there any reason that in the next two to three quarters, the margin will improve from that level? And if so, what would be the drivers for it to improve further above the 14% mark?
Pradeep Jain — Chief Financial Officer
Yeah. So, Percy, let me take the first part of your question. So, I mean we’ve already stated in our press release, our underlying margin adjusted for the one-time employee grant is about 13.8%. Hina has already spoken about the range of the revenue loss that we have had. Right. So that broadly would be another 70 bps to 80 bps probably, right. So, that’s broadly where we are right now. Two things, I mean, all I can say is, yes, inflationary trends will continue. So therefore margins will be under pressure in the next — in the current quarter as well as the next quarter also, it will be under pressure. And we continue to, I mean some of the stronger actions that we’ve taken on the pricing front, which we are talking about, right, and we continue to advocate and we continue to build and expand our productivity pipeline, right, which are the things under our influence. And last, but not the least, the big one that we are banking on Percy is mix, right. What is reassuring is that our renovations and innovations that we kind of rolled out in the last year are beginning to pick up momentum in the markets. We are seeing sequential gains. And if we can continue that momentum, I think mix will be a big, big driver of our call it, inflation mitigation or call it our margin holding strategy over the next two to three quarters. And if Hina wants to add anything?
Hina Nagarajan — Managing Director and Chief Executive Officer
No, I mean the thing is that we are hopeful that we will get pricing as we go along. Yeah.
Pradeep Jain — Chief Financial Officer
Absolutely. Right. And then the last thing, which is that Q4, I mean the April-June quarter is our lowest sales quarter. So we will get operating leverage also. Right. We will be upwards of INR2,500 crore, hopefully in the next three quarters.
Percy Panthaki — IIFL Securities — Analyst
So what kind of pricing should we sort of pencil into our models over the next four to six quarters in total?
Pradeep Jain — Chief Financial Officer
Percy, that’s very difficult for me to say. I mean, I honestly if you ask me, and I’ve been in a free pricing category, right, I am seeing enough CPG reports etc., inflation becomes an opportunity to enhance margin actually, right, because because your price ahead of inflation, and then inflation unwinds a little, you don’t obviously price back. So, that’s a difficult one for me to say in this category. Right. Our desire will be that in a normal ongoing business, we should get at least two-thirds from pricing. But this category is very different. Right. So all I can say is that Hina and my aspiration, the kind of efforts we are making is, we are trying to beat what we have achieved in the last five years. Right. And if we can achieve that then we would want to build from there on.
Operator
Thank you, Mr. Panthaki. May we request that you return to the question queue for follow-up questions. Thank you. [Operator Instructions].
The next question is from the line of Avi Mehta from Macquarie Group. Please go ahead.
Avi Mehta — Macquarie Group Limited — Analyst
Hi.
Pradeep Jain — Chief Financial Officer
Hi, Avi.
Avi Mehta — Macquarie Group Limited — Analyst
Hi, Pradeep. Just had wanted to last… last, first have we received any hikes in this, any pricing actions in this quarter or company large state or any state?
Hina Nagarajan — Managing Director and Chief Executive Officer
Yeah. We have seen pricing — fresh pricing from UP and Haryana in the quarter gone by and prior to that, we’ve had pricing from several other states. So, we had some states like MP, Rajasthan, Punjab. So yes, the answer is yes. We have received pricing and we have received fresh pricing from the DHR, Haryana.
Avi Mehta — Macquarie Group Limited — Analyst
Any rough quantum of what kind of ranges are these in? Is this like to offset in that particular geography, the inflation, double-digit inflation to some extent or how it contributes to…
Hina Nagarajan — Managing Director and Chief Executive Officer
To some extent.
Pradeep Jain — Chief Financial Officer
Yes, Avi. Right. But clearly, I mean the inflation of double-digit, the percent is much lower. Right. So like I said earlier, we’re really counting on mix. I mean, obviously we are not leaving any stone unturned, right, on pricing, but we would want to dial-up the mix factor, which is our interventions of Signature, Royal Challenge American Pride and the renovation of Royal Challenge.
Avi Mehta — Macquarie Group Limited — Analyst
Okay.Perfect. And just lastly, on the input inflation or input cost environment. You had earlier highlighted that P&L is transient, it’s what you felt. But in this comment, at least our team is arguing that some of it is structural, some of it is transient. Could you clarify what did you mean by that? And is it fair to extend what you said, argue that 1Q is probably the bottom on the gross margin, because mix will steadily improve, more or less inflation is behind us? Is that the right way to look at things or no?
Pradeep Jain — Chief Financial Officer
So, Avi, inflation is certainly not behind us. Like, I mean we would want to be candid on that. We do expect this double-digit inflation to continue at least for the next two quarters, right, which is July-September and December. And once we start lapping, probably, the inflation versus prior year will reduce. So, inflation will continue. Right. What we meant by part of it is, we believe that some part of the inflation is also on account of the geopolitical factors. Let’s say, what’s happening in Ukraine, big player in green, etc. So that’s impacting the sentiments etc. So some part of that would hopefully unwind and some part of it is probably more longer-term, right. Whatever the Indian government is doing on account of the ethanol blending etc. will probably is more. So that’s what we meant, that it’s a combination of two. We will have to wait for the next, at least four to six months to see how much of it unwinds after that and how much of it stays in the P&L.
Operator
Thank you, Mr. Mehta. May we request that you return to the question queue for follow-up questions. Thank you. The next question is from the line of Bhakti Thacker from Investec. Please go ahead. Bhakti Thacker, you are on mute.
Harit Kapoor — Investec India — Analyst
Hi, can you hear me?
Hina Nagarajan — Managing Director and Chief Executive Officer
Yes. Hi. We can.
Pradeep Jain — Chief Financial Officer
Yeah.
Harit Kapoor — Investec India — Analyst
Yeah. Hi. This is Harit here from Investec. So I just had two questions. Firstly on the pricing side, so I think in the quarter four call, you mentioned that you’re hopeful of getting a [Indecipherable] 2% kind of weight in a weighted average price hike. I just wanted to know what’s your confidence level on that? Is there probably increased outlook given the multiple states that are giving you a pricing or you kind of still hold that broad range?
Hina Nagarajan — Managing Director and Chief Executive Officer
So, I would just say that our pipeline of initiatives and the advocacy efforts are all to try and get that done. Right. And our pipeline is actually a little bit bigger than that, right. But I mean, basically we are pushing for this and we are hopeful that in the quarter, we will be able to get the BIO pricing etc. realized and come close to that aspiration. So I mean there is no guarantee in this one, right, because it’s not in our sphere of direct control. But yes, I think there are enough and more conversations happening to try and get there.
Pradeep Jain — Chief Financial Officer
Yeah. And also, Harit, you look at, again if I look at the last six to eight months, there are 9 to 10 states which have given us pricing. So that’s reassuring. That’s reassuring. Right. But what I do also want to say is that there is a little bit of a negative carry forward also, right, when the bio-prices got adjusted last year in Maharashtra etc., the industry, I mean the regulators did kind of also make the industry participate in the reduction of the consumer price. So, there is a little bit of negative carry forward also that we are carrying into the P&L in FY’23. Right. And that’s why it makes it a little more challenging. But I think what is reassuring for us is, that we are seeing a lot of fresh pricing coming from the state.
Harit Kapoor — Investec India — Analyst
Okay. And my second question is on the rollout for some of the initiatives that you’ve taken. If can you just give a sense on where, you didn’t mention the multiple states that have already rolled out some of the initiatives. Just give a sense of how long will it take for national rollout for some of these going forward over the next two, three quarters?
Pradeep Jain — Chief Financial Officer
Yeah. So maybe, yeah. Hina will be closer to this but but Royal Challenge American Pride is, Hina, in five states right now?
Hina Nagarajan — Managing Director and Chief Executive Officer
It is almost in seven states now. So another quarter or two we will be…
Pradeep Jain — Chief Financial Officer
Another four to five months. I think we should have — we should reach about 75% of is NSV premium.
Hina Nagarajan — Managing Director and Chief Executive Officer
Premium. Yes.
Pradeep Jain — Chief Financial Officer
Signature rollout is pretty much national. Godawan is early, and anyway, that’s, that’s a category that will take a little bit of time. Right. It’s a very, very high-end premium category. We launched in two states and the UAE, etc. So, anyway that if a much longer gestation period.
Harit Kapoor — Investec India — Analyst
And just a follow up on this. Given that, given that it’s a fairly volatile environment, with a focus on the current year, just to kind of see through some of the things which you have done in the second half of last year and probably new initiatives that will only come post, is that a better way to think about it or am I getting it wrong?
Hina Nagarajan — Managing Director and Chief Executive Officer
See, our first priority is definitely to start building up and scaling up what we’ve rolled out in the second half of last year, and that will be first priority, But that doesn’t stop us from looking at new innovation and renovation initiative. But it would be fair to assume that in the first five, six months, we will be focusing on leveraging what we’ve done from the previous year.
Harit Kapoor — Investec India — Analyst
Alright. That’s it from me. Thank you.
Hina Nagarajan — Managing Director and Chief Executive Officer
Thank you so much.
Pradeep Jain — Chief Financial Officer
Thanks. Thanks, Harit.
Operator
Thank you. The next question is from the line of Krishnan Sambamoorthy from Motilal Oswal Institutional Equities. Please go ahead.
Krishnan Sambamoorthy — Motilal Oswal Financial Services Limited — Analyst
Yeah, hi.
Pradeep Jain — Chief Financial Officer
Hi.
Hina Nagarajan — Managing Director and Chief Executive Officer
Hi.
Krishnan Sambamoorthy — Motilal Oswal Financial Services Limited — Analyst
Hi. In the last couple of years, you would have seen some benefit coming from duty paid sales, but rather than duty-free sales which get booked as a part of Diageo’s books. How significant was that and would that present a bit of a barrier, particularly in FY’23 over the base of FY’21 and ’22?
Hina Nagarajan — Managing Director and Chief Executive Officer
So actually, we find that there has been a fundamental change in this COVID period, where basically the duty free sales, because of the pricing of our BIO coming down due to state positive developments on the sort of route-to-market changes that have come in Delhi, Maharashtra etc., the prices have kind of evened out, right. So we don’t see any fundamental shift back to duty-free and any sort of incremental cannibalization of domestic sales because of that so far. I mean we basically activate in our stores as fantastically as duty-free stores activate in there. So, at this point in time, we don’t see a significant shift taking away sales from the domestic market.
Krishnan Sambamoorthy — Motilal Oswal Financial Services Limited — Analyst
This is true even as people have started traveling internationally and therefore, even there you’ve not seen any evidence of that slowing down?
Hina Nagarajan — Managing Director and Chief Executive Officer
Not really.
Pradeep Jain — Chief Financial Officer
Yeah, I think Krishnan, there would be some impact without doubt. Right. But the reality is, I think the larger point Hina is making is, I don’t think it’ll be material enough to change our aspiration from what we do in the domestic market. I think the lines are completely blurred, driven by the combination of reduced price arbitrage, between duty-free and duty paid right, obviously, driven by the reduction of taxes locally and the fact that all the industry players are doing a phenomenally good job of activating, what we call the modern off-trade right. Let’s say, the top 2,500, 3,000 stores out of that 65,000 base etc., which is, I mean the shopping experiences are delightful.
Krishnan Sambamoorthy — Motilal Oswal Financial Services Limited — Analyst
Sure. My next question is on the, Hina, you mentioned, particularly on Godawan and Black & White, you have a blockchain based tracking system. Can you just elaborate a bit on that? How does that, how exactly does that benefit you particularly over the medium to longer-term period?
Hina Nagarajan — Managing Director and Chief Executive Officer
Yeah. So, I think the track and trace system is particularly, I mean, as we stated our ambition on sustainability. Right. We’ve talked about sort of going net zero on Scope 1 and 2 by 2025 and going net zero on carbon footprint on Scope 3 by ’30. So, basically how it helps us to track from grain to end of life cycle, our carbon footprint and we are getting more transparency of data and we are building this database to be able to rigorously track as we take our carbon footprint reduction initiatives. We’re able to audit the data, measure it and then to report it very transparently, right. So, the whole idea is across the value chain to have that visibility from the time of sourcing to making to the consumer, etc., and be able to keep ourselves personally accountable and then reporting this transparently outside. So, that’s how the track and trace system helps us. And it’s actually a first of a kind in the industry and I would say that first of a kind perhaps even amongst broader CPG, and we are quite proud of the fact that we are taking the significant step to get to our goals.
Operator
Thank you, Mr. Sambamoorthy. May we request that you return to the question queue for follow-up questions. The next question is from the line of Himanshu Shah from Dolat Capital.
Himanshu Shah — Dolat Capital Market Private Limited — Analyst
Yeah. Thank you. Thanks for the opportunity. Hello. Couple of questions. One, can you just elaborate more on this scotch issue? Basically, are we looking for renegotiation of prices with the government, local government because of the inflationary pressure and therefore, we have reduced our supply or there has been more open import issue of scotch because of this Russia-Ukraine?
Hina Nagarajan — Managing Director and Chief Executive Officer
The former. So we are asking for price increases from the government to in line with the inflation that’s happening on scotch and therefore, we have reduced supply.
Himanshu Shah — Dolat Capital Market Private Limited — Analyst
Okay. So this has been more from our end. We have deliberately reduced the sales.
Hina Nagarajan — Managing Director and Chief Executive Officer
Yeah. While we are doing the discussions with the government, we have had measured supply, so that we can get the price increases and get a more sustainable pricing and supply system established with the government.
Himanshu Shah — Dolat Capital Market Private Limited — Analyst
Sure. Secondly, in our annual report, Pradeep, if you can help, the rates and taxes cost line item has gone down from INR150 crore run rate to INR40 crore in FY’22. So, what is driving this reduction? And is this permanent one or it shall come back in FY’23?
Pradeep Jain — Chief Financial Officer
I mean, I will have to request Richa to get back to you. If you could just be in touch with Richa, that’s what, I mean, Richa will have to help you with that. I don’t have a line wise Annual Report account recorded in my mind. But we will definitely answer that. There could be a change of own manufacturing to the third-party manufacturing, which leads to a change in the accounting lines of capture. That’s only calculated kind of response that I can give, but please be in touch with Richa. Se will provide a very comprehensive response to that.
Himanshu Shah — Dolat Capital Market Private Limited — Analyst
Sure. No issues. And then just couple of more questions. Can you help me with the share of volume of BIA and BIO in FY’22? What could be the volume share of BIA and BIO of our total volumes?
Pradeep Jain — Chief Financial Officer
It’s about 50%, 50% broadly.
Himanshu Shah — Dolat Capital Market Private Limited — Analyst
No I’m asking for BIA plus BIO put together as a percentage of total volumes of ours?
Pradeep Jain — Chief Financial Officer
Volume. Well, I have the value mix blocked in my mind, it’s about 20% BIA plus BIO total. It’s about 23%. Right. Volume will be significantly lesser because of the per unit value difference. I would probably — I’m taking a completely a rough guess. Again, Richa could help you with that. I’m assuming volume would be about 8% to 10% probably.
Himanshu Shah — Dolat Capital Market Private Limited — Analyst
Okay. And just one more. If the BIO volumes grew at a much faster pace than the overall company average, will that pull down our margin? Can you confirm on that, because of the distribution arrangement with, that we have with Diageo plc?
Pradeep Jain — Chief Financial Officer
Yeah. So again, I think I would want to respond it the other way, right. Yes. First of all, mathematically, if you say that BIO will continue to gain salience right, it will mathematically reduce our margins, right, because we make a 10% EBITDA, right. But the 10% EBITDA is after a very, very healthy A&P spend, and after a full absorption of all the overhead, the entire overhead structure that we have put in place to kind of execute our BIO business. Right. So, that is one. I just want to provide that assurance to you.
The second thing I will say, that the renovation interventions that Hina has talked about for the last two, three quarters this significantly uplift the USL mix advantage. Right. So if you see the kind of interventions we have made in upper Prestige and then mid Prestige and the Godawans of the world and the investments that we’ve made in the Nao Spirits of the world, etc., they are all geared towards premiumizing the standalone USL portfolio also, right. So therefore, our role as the USL management is two-fold. Right. We have to work on our Diageo global brands also. That obviously is a huge premiumization opportunity and simultaneously, we are also ensuring that we are building the USl portfolio also towards for premiumization.
So we’ll have to balance the multiple parts. Right. And that’s why our guidance remains in the longer term, the mid to high teens. And yeah, we should be able to balance all that with these competing process.
Operator
Thank you, Mr. Shah. May we request that you return to the question queue for follow-up questions. The next question is from the line of Alok Shah from Ambit Capital. Please go ahead.
Alok Shah — Ambit Capital Private Limited — Analyst
Yeah. Hi. Thanks for the opportunity. Hina and Pradeep, my first question was on the renovation and innovation. So this time around, are there any initiatives that are being considered from a sales incentive or distribution side, specifically to the on-trade channel, especially now that on-trade is coming back after sort of a distressed period? Do you see that as an opportunity to outspend vis-a-vis competition in that channel? That’s my first question.
Hina Nagarajan — Managing Director and Chief Executive Officer
I mean on-trade is back, and therefore our spend is now back in terms of the split of spend on on-trade activation and off-trade, right. So, during COVID it was only off-trade. So, all our activations were being done in the off-trade. Now that on-trade is back, I mean, traditionally our split of on-trade and off-trade is about 30%, 70%. So, 30% on-trade and 70% off-trade and we are back with the bang, activating with on-trade in that split of spend. And we have taken the opportunity, as on-trade has opened up, I mean I talked a few couple of quarters ago about Johnnie Walker, Revibe the Night, which is a very, very big initiative on Johnnie Walker in the on-trade, welcoming people back and celebrating the after hours. And Black & White has table for all, sharing and food pairing activation that we do.
So certainly, I mean as on-trade has opened, we have taken that opportunity and we are back very strong on the activation on on-trade.
Alok Shah — Ambit Capital Private Limited — Analyst
Yeah. So, my question was, do you believe, basis your internal data points that you could be outspending competition or it’s broadly in line with your shares, etc.?
Pradeep Jain — Chief Financial Officer
We don’t track that right. I mean, honestly we don’t track it channel by channel spending of competition, etc. We have a commercial calendar right that we created the beginning of the year and we try and stick to our commercial calendar.
Hina Nagarajan — Managing Director and Chief Executive Officer
And we do what is right for the brand activation. For the brand activations and the consumers. So we take a consumer backed lens for what makes sense and spend, and we think we are well spent in the on-trade.
Operator
Thank you, Mr. Shah. May we request that you return to the question queue for follow-up questions. The next question is from the line of Tejas Shah from Spark Capital.
Tejas Shah — Spark Capital Advisors (India) Private Limited — Analyst
Hi. Thanks for the opportunity. Couple of questions. First, Hina you spoke about in the earlier calls that Vodka and white spirit will be our focus area in the coming years. So, any update on the same?
Hina Nagarajan — Managing Director and Chief Executive Officer
So, I mean on gin, we have, we see white as a full category. Right. So we don’t see it separately and and why on the white, we have been activating our two brands, Tanqueray and Gordon’s, which have been growing very, very healthily, strong double-digit growth there. And then our investment in Nao spirits which is working well. I mean Nao has done extremely well in the quarter gone by. I think they’ve tripled their volumes vis-a-vis the same period last year. So, our activations remain very strong in white and Smirnoff we launched, our vodka brand, we launched the hip pocket scotch, pocket scotch format, the same hipster format, we launched in Smirnoff which is doing very well. So, we remain committed to strong activation in these categories and we continue to see growth in these categories.
Tejas Shah — Spark Capital Advisors (India) Private Limited — Analyst
Sure. And the second question pertains to the overall guidance that we have given. Now, you spoke about that, you need some stable environment for us to actually follow-up on that guidance. Now stability has been elusive in global economy and local economy for a while now and looking at geopolitical scenario, nothing points out that situation will go back to stability in coming years also. So keeping that as a backdrop, double-digit guidance, is the current quarter just an aberration or you believe that many more things need to fall in place at a macro level for us to follow up on that guidance?
Hina Nagarajan — Managing Director and Chief Executive Officer
So, I would say that I mean we have factored the macro instability and volatility in our plans, and we are still committed to the double-digit growth guidance and we are fundamentally working on the strategic pillars, which we think are validated and are working for our business. So we will continue to invest behind these and continue to drive to that aspiration and ambition. Now, look, I can’t predict the future. I mean if something goes absolutely wrong in the macroeconomic environment and we never imagined war, right. Nobody could have imagined a war scenario after so many years. Now, if something again happens like that, we will have to review it. But at the moment, I think we are still committed to that guidance.
Operator
Thank you. Mr. Shah, may we request that you return to the question queue for follow-up questions. The next question is from the line of Prakash Kapadia from Anived Portfolio managers. Please go ahead.
Prakash Kapadia — Anived Portfolio Managers Private Limited — Analyst
Yeah. Thanks. I have two questions. If I look at the last few years, five, six years, around 38% of our raw material costs have been packaging related costs. As we move towards more premiumization, how will these packaging costs shape up? And also, if you could give some color, the current gross margin fall of 370 bps, how much of it is packaging related, how much of it is crude based derivatives or some color on that, that’d be helpful?
Pradeep Jain — Chief Financial Officer
Yeah. Okay. I don’t know whether I will answer your question completely or not. Right. Broadly, if you look at our COGS or material cost, right, glass is the big one that gets counted as packaging cost. And the neutral alcohol spirit is counted as the raw material. So, between these two materials, 65% to 70% of our COGS is covered, and the rest is largely kind of which is, which will be the crude based derivatives, right, which is the PT, the carton, in the paper, etc., etc. Right. So that’s broadly what the landscape of our of our COGS portfolio is.
And to answer the latter part of your question, both the critical commodities which is the neutral alcohol spirit, as well as glass, is inflating close to double-digit, more than double digit right now. So that is what has led to the gross margin dilution.
Hina Nagarajan — Managing Director and Chief Executive Officer
But I would make slightly separate point. I mean as we premiumize our portfolio, I think I would say as we premiumize our portfolio and work towards more sustainability, I think we are going to look at what we can do on packaging, not just from the cost point of view, but from the alternate formats point of view. You may be aware, we have already announced that on our premium portfolio, we’re going to remove the outer cartons in a phased manner over the next year, and this is primarily on account of sustainability, but it helps us on cost as well. Right. Similarly on glass. We have been working on light-weighting loss because of the carbon footprint that glass contributes to. So we are looking at trend lining initiative, market bottle use. so where it makes sense. So, we would probably see light-weighting of packaging for sustainability and therefore some benefits on cost as we go forward.
Prakash Kapadia — Anived Portfolio Managers Private Limited — Analyst
Sure. Sure. That is helpful. And lastly, Pradeep, on interest cost, it’s a non-debt expense. What is that? Can you explain that in the P&L?
Pradeep Jain — Chief Financial Officer
Principally, NDS requires your leased assets and the lease rentals that you paid to be accounted for of interest. So, that’s the larger component of it and then there are some old litigations, etc., on which we have to accrue interest. Right. So, which we are accruing on a quarter-on-quarter basis. So, that also comes and sits in this line.
Operator
Thank you, Mr Kapadia. May we request that you return to the question queue for follow-up questions. The next question is from the line of Chinmay Gandre from Reliance Nippon Life Insurance. Please go ahead.
Chinmay Gandre — Reliance Nippon Life Insurance — Analyst
Yeah. Thank you for taking the question. I just wanted to understand your comment on, I mean, you did mention that ex of AP, maybe, I mean the sales pre-COVID on a three-year basis with respect to Prestige has grown at 7.5%. But my understanding was, so AP used to contribute, maybe 4% to 5% in terms of our volume mix in Prestige. So if I give that adjustment also, I mean the CAGR will not increase more than 5%. So I just wanted to get this thing sorted.
Pradeep Jain — Chief Financial Officer
We haven’t done the number so accurately. I mean if I — broadly, if I say that, if we layer on the BIO phase impact that Hina mentioned and Andhra, we will be upwards of 5%. That we are very, very sure of. Yes, it could be off a little bit here and there.
Chinmay Gandre — Reliance Nippon Life Insurance — Analyst
Sure. And secondly, so I mean, just on the raw material. So I mean, we did see some kind of a softening of accruals from the high levels to maybe near hundredish now. So any of our raw materials, are we seeing some kind of relief or especially with respect to your discussions with glass. Can you throw some light on this?
Pradeep Jain — Chief Financial Officer
So, I mean there is a typically there is about a two to three-month lag. I think the reassuring part is, crude has come down much below 100 recently. So hopefully, yes, I mean, even though it’s a small part of our portfolio, but it should hopefully provide us the relief over the next two to three months, right. But I think what is very, very critical for us is the neutral alcohol spirit and the glass. Right now, both of them are kind of on a boil.
Operator
Thank you, Mr. Gandre. May we request that you return to the question queue for follow-up questions. The next question is from the line of Latika Chopra from JP Morgan. Please go ahead.
Latika Chopra — JPMorgan Chase & Co. — Analyst
Yeah. Hi, Pradeep.
Pradeep Jain — Chief Financial Officer
Hi, Latika.
Hina Nagarajan — Managing Director and Chief Executive Officer
Hi, Latika.
Latika Chopra — JPMorgan Chase & Co. — Analyst
Yeah. Thank you for the opportunity. I just have extension to the comments that you made on margins and another one on revenue. So just to start with margins, because we just talked about it. Could you give us some sense on both G&A and glass inflation? Is it worsening as you exited the quarter? And clearly, we will see price and mix impact sequentially. So does it, is it fair to say that gross margins bottomed out in Q1 for you?
Pradeep Jain — Chief Financial Officer
Yeah. So Latika, like I said, right now, both the commodities are on a boil. We are not seeing any respite. We are not seeing any respite. So as Hina mentioned in her opening comments also, we do expect inflation to continue. Right. And therefore the next two quarters are very, very critical. But yes, we do expect inflation to continue. But having said that, as kind of months pass, the negative carry forward of the pricing that I mentioned to etc., will wear down and our fresh pricing will kind of stand start contributing to the P&L, one. And the second thing that will happen is, that the sequential momentum that I talked about on, that Hina talked about on the innovation, the renovation in the portfolio, that would also start contributing in higher sales.
Latika Chopra — JPMorgan Chase & Co. — Analyst
All right. Thanks for that. Second…
Hina Nagarajan — Managing Director and Chief Executive Officer
Sorry, Latika. Just to add to that, I think also the productivity as mentioned that we are going for two to five times the productivity of a usual year. We also see some scaling up of initiatives as we go through the year. Right. So we see the might of all these two, three things helping us on the gross margin.
Latika Chopra — JPMorgan Chase & Co. — Analyst
Very clear. Thanks. The second one was on demand and I know about various parts disruption, supply disruptions, you talked about Andhra Pradesh. But I wanted to get a broader flavor on your assessment, how has seen consumer behavior towards spirits consumption and it’s the broader inflationary pressures on consumer wallets, are you sensing that the lower Prestige is facing some kind of demand concerns? And another aspect, I wanted to check with you was that during the whole pandemic period, stay-at-home, it seemed that spirits consumption definitely benefited right probably, say versus there versus here. Now with the reopening thing, do you sense there is some bit of a pull back on off-trade even though on-trade has normalized? Any broad thoughts here?
Thank you.
Hina Nagarajan — Managing Director and Chief Executive Officer
Yeah, so I mean on the broader demand question I think, look, I mean let’s see the top end and the premium and we are seeing absolutely no stoppage. Right. So we are still seeing very strong demand at the top end and the upper end of the portfolio. Right. So there is no demand gap there. I would say no slowdown and that’s to be expected, I guess. At the lower end, Latika, it’s very difficult for me to say, because I mean if I look at the pre-COVID and post-COVID and if I look at the two-year period, actually, the market was just about leveled off in terms of where we were pre-COVID levels, if I look at industry as a whole.
Now, how this will grow as we go forward is very difficult to tell right now. I do not have a trend to tell me that. All I can say is that, yes, on Popular end, the lower end, we do see a little bit of slowdown. We do see a little bit of slowdown. Again, I expect that would be the case. Right. So how much of a slowdown, very difficult for me to say, but we don’t have enough data, consistent data without the funny effects of the basis of previous years, to be able to say that I’m actually seeing a big slowdown or a smaller slowdown. So this is an area of watch for us.
Latika Chopra — JPMorgan Chase & Co. — Analyst
Sure. Thank you so much, Hina.
Operator
Thank you. Ladies and gentlemen…
Pradeep Jain — Chief Financial Officer
I think we should pretty much wrap up the call now. It’s already past 6.30.
Operator
Sure. Ladies and gentlemen, that was the last question for today. Please reach out to IR Head,Richa for any other queries. I now hand the conference over to Ms. Hina Nagarajan for closing comments.
Hina Nagarajan — Managing Director and Chief Executive Officer
Thank you. I think I would just like to say again, thank you very much for for continuing to engage with us and discussing our business and your commitments to our business. And I do want to lead by saying that we remain confident in the resilience of our business and industry despite the short-term challenges, and we are committed to delivering long-term value to our stakeholders and we are pressing on with our strategy. So, thanks again for joining us, and I look forward to meeting again next quarter. Thank you. Bye-bye.
Operator
[Operator Closing Remarks]