Campari Group’s near-4% sales rise in the first half of this year represents one of the better performances of the listed beverage alcohol brand owners. Earlier this week, Global Drinks Intel‘s Joe Bates spoke to CEO Matteo Fantacchiotti to hear more about the company’s performance.
Global Drinks Intel: Campari Group did quite well in the Americas in the first six months of this year, at a time when other spirits brand owners have been struggling there. What’s your view of the challenges and opportunities presented by the US at the moment?
Campari Group CEO Matteo Fantacchiotti: There’s definitely an opportunity there, although it’s a challenging trading environment. In terms of portfolio, we’re very well positioned to continue to outperform the market. When you look at the big [spirits] categories, there are two that are really growing: aperitifs and tequila. Then, there are others that are flatish, depending on the month, which is basically whisky/whiskey and bourbon. There are also categories that have been penalised a bit recently, which is cognac and vodka.
We participate in aperitifs and tequila with two brands that are growing very fast: Aperol is the fastest growing brand in aperitifs and Espolòn is in the top three growing brands in tequila. In bourbon, we’re pretty flattish in the short term with Wild Turkey, but medium term I think our prospects are good.
We’re seeing soft positive signs in cognac and whether the category restarts or not, which we believe can be the case, especially from 2025, when we’ll have an opportunity to gain share. Vodka is declining and so is Skyy – within that mix, however, we are outgrowing the category.
The US has been difficult for most competitors – and has been more challenging than it should be – because of destocking. That’s been less for us, because we didn’t have destocking and we’ve been gaining share. We hope what will happen is that consumer confidence and discretionary spending improve – maybe in Q3 or Q4, or even in Q1 next year.
When we’re talking to the most exposed people to the US market, including very senior people at (distributor) Southern Glazer’s Spirits & Wine, they’re quite vague on when that could be. At the moment, there is polarised consumption and choices in categories. Our brands are in that bucket that can deliver growth.
Overall, I’d say our US outlook is generally positive. We’re keeping our fingers crossed that consumption growth will resume, because we have ambitions for the US. We want H2 to be better than H1 and we need a bit of a kick for that to happen.
GDI: Espolòn is growing well in the US as well as internationally. Where do you currently see the most potential to grow the tequila brand outside of North America?
MF: Because of the good performance in the US, Espolòn in the last few years was not launched – or on very strict allocation – in every other market. Now that we’ve started, the energy is there but it’s a bit difficult. Canada, of course, is going really well, so is Australia. Espolòn was growing market share massively until a couple of years ago, then went on strict allocation, so, we needed to increase the price, at least to try to get the most value. Now, they have the volumes back to growth, so we’re not reducing price but we’re backing growing share.
We’ve also launched Espolòn RTDs, which is important because RTDs enable your brand to increase penetration and favour market share indirectly. We’re confident on Italy. The paloma is a serve that’s growing in popularity in Italy and Espolòn has always been about the paloma. Also, we obviously have a strong organisation in the country.
Global travel retail didn’t have Espolòn, but I believe it’s the perfect brand for duty free. It’s at the right price point, it’s easy to understand, it’s a great liquid, so great value for money with packaging that’s eye-catching. We’re increasing distribution massively in GTR for Espolòn.
GDI: You said in the results that the integration of Courvoisier is going well. But, how much of a challenge will it be to rebuild Courvoisier in key markets like the US, but also in China, which is just getting over Covid?
MF: It’s not an easy answer at the moment. What we’ve learned so far is that the brand is a jewel, the liquid is unbelievable. Courvoisier’s heritage and assets are amazing and it’s been really undervalued as a brand so the opportunities are there, big time. Now, it’s about how difficult and how fast it’s going to be. In China, we need a lot of patience because the brand has been mismanaged. The US is going to be a bit easier, because the brand was mostly a VS game and probably a bit too low in price. In terms of trading conditions, it was okay. The brand hasn’t been overly discounted nor has it pushed internal stock, unlike in China. It’s a similar situation in the UK.
In GTR, they (former owner Suntory Global Spirits) did a good job in the past. Courvoisier has an opportunity in GTR, as soon as we have the full set of new positioning and assets to relaunch. Then, we can leverage the channel in terms of distribution.
We’re very optimistic, but I’m not hiding that we’ll need patience. It’s not going to be something we’re going to deliver in one year.
GDI: The H1 results highlighted the impact of the bad summer weather on sales in markets such as Italy, France and the UK. In Europe, we’re starting to see extreme weather every summer. How is this impacting your forward thinking for brands like Aperol, Campari and Crodino? Do you need to concentrate on pushing the aperitif brands at other times of the year?
MF: We know that climate change-related weather activity is visible now. Is it going to be every summer? We don’t know. Are we going to have warmer Septembers? Maybe.
We have three parts to our strategy. One is we’re trying to deseasonalise and increase activations out of the summer season. Second is that places like the US and Asia Pacific are less seasonal because they’re less reliant on social, on-premise consumption, which is typically the case in Italy and France. Even if the weather isn’t great in these markets, when consumers stay at home, they will still get a few friends together. Even if they’re alone, they’re going to make themselves a cocktail – this isn’t something they do in Italy. That will help to balance our geographical footprint a little bit.
Thirdly, we’re building the second, third, and fourth legs of our business with tequila, bourbon and cognac. At the moment, aperitifs are still 40% of our group sales and a big part of those come from Europe. So, it’s also about strengthening other pillars of growth so we can even out when the weather isn’t great in Europe.
GDI: What sort of potential does the global travel retail channel offer Campari Group, going forward?
MF: Coming from Asia Pacific (Fantacchiotti was the region’s MD prior to becoming CEO earlier this year), I was pretty clear that travel retail has been a little bit under-served in our case, coming from a portfolio footprint that was more focused on aperitifs and more focused on Europe and the US, where GTR is not necessarily the most important channel.
Now that we have a bigger focus on Asia, we also have a bigger focus on some of the brown spirits categories – GTR is a channel where you build brands and therefore it has a much more strategic importance for us now.
We’re looking into how we can allocate more volumes to GTR, and how we can leverage the channel to build brands like Espolòn, Appleton Estate and our other brown spirits. We’re also looking at how we can create innovation that, especially in Asia’s GTR, is needed to compete in the channel.
It’s not something we can deliver in six months, but over time you’ll see that GTR will become more important for us.
