The Campari Group reported its half year revenue and profits this week.
Campari posted net sales of €1.52bn ($1.63bn), up 3.8% organically and 4.5% on a consolidated basis for the six months ended 30 June. Gross profit was up 2.9% to €897.5m and 4.5% on an organic basis, while the group reported an adjusted EBITDA for the period of €418.8m, up 3.5% organically.
Bucking US trends, Campari sales in the US were up 3.5% to €423.8m, driven by the group’s Espolòn, Aperol and Grand Marnier brands.
In December, the Italy-based spirits group revealed its intent to pay up to $1.32bn to buy Courvoisier from Suntory Global Spirits, a deal set to be the Aperol owner’s biggest acquisition once finalised.
Campari CEO Matteo Fantacchiotti took over the top role at Campari earlier this year, replacing Bob Kunze-Concewitz.
Following the group’s results, Fantacchiotti sat down with Just Drinks to discuss the company’s US sales and its recent acquisition of Courvoisier.
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By GlobalDataConor Reynolds (CR): How do you view US consumer confidence at the moment?
Matteo Fantacchiotti (MF): US consumer confidence is definitely not great. We know and we hear from people on the ground and from our partners that discretionary spending is under pressure. This is obviously due to the compound effect of inflation over the years and interest rate cuts that are not happening yet.
Consumer discretionary spending, especially for [the] mid and low spending consumer, is obviously under pressure. But equally, retailers are very prudent in their stock levels, because they don’t want to tie up capital invested in stock and they can see that there is consumer softness.
CR: Why do you think Campari performed well in the US in the last six months?
MF: There are a couple of things that are happening in our case that are making our performance overall in the US better than [others in] the industry. One is that we didn’t have any destocking exercise to do, vis à vis the other suppliers.
We have seen the same recently in the Courvoisier data, which was not our brand then, but we bought it. We obviously had a look at the shipment versus depletions and basically shipments are lagging depletions now since March, April 2023, so you can see that there is this effect.
We don’t have that across any of the other brands, some readjustments in-between quarters, especially for Grand Marnier and a bit of Aperol, but that’s it.
The second element is that there are two categories that are really growing in the US. Some are a bit flattish and some are declining. Obviously, Cognac and vodka has been declining. Others are flattish and the ones that are growing are apéritif and Tequila. We have basically the best performing brand in apéritif. We have the best of the top three performing brands in Tequila.
CR: You mentioned Courvoisier, what are your plans for the brand? You have previously said you think the price point is too low.
MF: Price point, yes, the view is the same. Of course, the key question is when and how are we going to adjust prices and when and how we’re going to be able to also improve the mix, because there is very little VSOP and almost no XO, which is a shame because liquid wise [it] is by far one of the best Cognac houses in the market.
The team at the moment is going into each and every one of the key markets. They’re discussing with the local team. They’re finding out more information for the brands, they are spending half of their time at the distillery… going into the heritage, talking to the master distillers, looking into the brand archives and the plan is that, basically, we’ll have an answer of how and when and what we’re going to do by end of this year.
When it comes to Q3 and Q4 this year, the plan is basically status quo. So, we’re going to change very little. We’re going to look at what the market is, we’re going to take the order. We’re trying to stay consistent with the previous trading terms as much as we can not to create disruption before we know exactly how to support.
CR: In the results you said the ability to expand margins this year would be impacted by temporary headwinds. Can you give an example of that?
MF: On one side, we were banking on margin accretion in Q2 largely driven by mix, because we had poor weather also last year and we thought this year we’re going to sell much more apéritif, which is by far the category for us with a higher margin. Q2 in Europe has been very rainy, and therefore, we didn’t have the margin accretion we wanted in Q2.
We’re going to benefit from some agave cost improvements, like everyone in the industry, the thing is, part of the contracts have been renegotiated already with lower comps. Part of the contract is a bit longer to renegotiate because those negotiation[s] in Mexico are not that easy. And basically, until we close the contracts, we don’t want to project the new cogs into our cogs, because obviously it would be too soon and we want to ensure the contract is formalised. That has been delayed a bit and is another headwind, but other than that there are no other factors. That’s why we call them temporary headwinds, because for the medium term we see a positive output but bad weather and this delay in the negotiation gave us two that [are] not what we wanted mix and margin wise.
Fingers crossed the balance of the year will go back as per plan, but we won’t recover margin-wise what we lost in June.
CR: Asia Pacific sales were down 10%, what’s the outlook there and how do you plan to address this?
MF: It annoys me that Asia Pacific is down because that’s my former region. We knew a couple of things. We knew we [were] going to change [the] route-to-market in China. Then in the second half of last year, we realised we needed a change in India as well.
Now China is going according to plan… and it’s growing already in Q2.
India, as it is often the case in India, is taking longer due to local registration administration issues and elections. During the elections everything stopped in India, they got in the way. So, it’s going to take a bit longer.
Australia, overall, the industry has been quite under pressure. If you look at all the big competitors they are actually marginally losing share in Australia. We’re holding share actually, but still our performance is not good because Bourbon is declining. Apéritifs are growing but Bourbon RTDs are declining. Bourbon is our big business there.
In the second half of the year, I expect Asia to go back to double-digit growth, so we’re discounting those effects. Australia is turning around, China is done. It was more of a transition period but the fundamentals of Asia are still there. We expect that region to continue to grow double-digits for the foreseeable future and be a bigger part of our business.
CR: You have recently taken over the top role at Campari, what changes have you seen or done in that time?
MF: The change has been done very much in consistency with our long-term strategies. In Campari we are very consistent, very disciplined. We do things with a lot of patience.
I wouldn’t say we’re going to have big changes but I will say probably we’re just going to have some further acceleration in things that we started already. First of all, acceleration in our effort in the US and also in Asia, to broaden our geographic footprint, and secondly, some acceleration and a bit of chang[e] in our marketing overall when it comes to becoming even more digitally advanced.
