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Sunday 23 November 2014

Gruppo Campari rallies after tough start

5th August, 2014 by Gabriel Stone

A pick up in aperitif sales has helped Gruppo Campari to climb back from a weak start to its year as the company announced its first half results.

Gruppo Campari CEO Bob Kunze-Concewitz. Photo credit: Alessia Pierdomenico

Gruppo Campari CEO Bob Kunze-Concewitz. Photo credit: Alessia Pierdomenico

Group sales during the period remained -1.8% down on 2013, reaching a total of €686.1 million. Despite seeing pre-tax profits slump by 47% during its first quarter, these rallied to achieve first half pre-tax profits of €91.3m, just -0.5% down on a year ago.

A combination of exchange rate challenges and what CEO Bob Kunze-Concewitz described as “temporary phasing issues” meant that Gruppo Campari saw its sales to the Americas, which accounted for 40.1% of total sales, fall by -11.5%.

However, within this regional performance there were pockets of positive news. Brazil saw organic growth of 14.8%, while Argentina grew by 39.1%, with the Campari and Skyy brands enjoying significant uplifts in both markets.

There was also positive news from Gruppo Campari’s domestic Italian market, which represented 28.3% of total sales and recorded an increase of 8.2%, led by 12.5% growth for the Aperol brand.

Sales for the rest of Europe rose by 2.9%, thanks largely to the group’s distribution deal with William Grant & Sons in Germany, although Russia bounced back significantly in the second quarter due to strong sales of Campari, Aperol and the Cinzano sparkling wine range.

Sales for the rest of the world, which includes global travel retail were also positive, increasing by 6.6% overall. Although Japan and New Zealand posted “weak results”, these were offset by particularly strong performances from South Africa, which achieved a 15% increase, Nigeria, which grew by 111.5% and global travel retail, in each case driven by Campari, Skyy and Aperol.

Among the star performers in the group’s brand portfolio were Campari, which enjoyed overall sales growth of 12.5%; while Aperol grew by 14.6%. There were weaker results from Skyy, where “soft shipment” in the US pushed total organic sales down by -2.6%, despite strong sales in other key markets.

Similarly, strong growth in Russia was unable to keep Cinzano figures positive as sales for its sparkling wine fell by -10.1%, driven largely by Germany, and the brand’s vermouth business fell by -7.6%.

Commenting on the results from this first half, Kunze-Concewitz, remarked: “On the back of a weak first quarter impacted by Easter timing, the expected robust recovery in organic sales in most key brand market combinations led to positive full first half 2014 results.”

Highlighting issues during this period including “weak shipments” and “phasing issues causes by production and route to market start-ups”, he noted: “the positive effect of the sales mix improvement achieved in the first half was more than offset by these start-ups’ overlapping costs.”

In summary, he predicted: “Whilst these headwinds are likely to have a lag effect on the full year results, we are confident that the overall positive organic sales trend will consolidate in the second half year thanks to the normalisation of shipment trends across key markets.

“Looking forward, we expect to continue improving the momentum of our key brand market combinations thanks to our strengthened route to market as well as impactful marketing initiatives, including restylings, innovation and premiumisation.”

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