Campari reaps Wild Turkey rewards

Does a global name open doors? Ask Davide Campari-Milano and the answer would undoubtedly be yes.

While good across the board, the Italian group’s results for the first half of this year show the impact of buying Wild Turkey bourbon for $575 million last year.

The first-half net profit rose 15.2% as sales increased 16.7% to €515.7m. Like all other international groups, Campari suffered from the consumer downturn and destocking in the early part of 2009, so the latest figures in part reflect that, but nonetheless they are impressive and the group is comparatively optimistic.

"While volatility might impact trading across coming quarters, we remain reasonably optimistic about our full-year prospects," chief executive Bob Kunze-Concewitz said.

He forecasts that solid consumption across key brands and markets would help to offset the higher cost of goods and a seasonally weaker sales mix.

But not everything was down to buying Wild Turkey, which did not figure in the first half results last year.

This time organic sales growth was 8.7% ahead and penetration of key markets increased. Spirits sales (three quarters of the total) grew by 24.2%, but they also showed organic growth of 13.9%.

Campari’s brand sales were 13.3% ahead and Skyy vodka gained 8.5%, both boosted by positive exchange rate movements. Sales of wines, including Cinzano, which grew by 3.3%, had a more difficult time, falling 1.3%.

And while the group remains heavily dependent on Italy, which accounts for just less than 40% of sales, that proportion is diminishing. The Americas now account for 34% of sales, compared with 27% in the same period last year.

Impressively, the region achieved a 46% growth rate, with organic sales in the US rising by 24% and by a massive 61.3% in Brazil – a key market for the group.

The lesson of purchasing Wild Turkey has been learned quickly. It has transformed the group’s portfolio and increased the ability to “coat tail” sales of other products; and now that integration of the bourbon is complete, Campari is quietly preparing the ground for further acquisitions as and when opportunities arise.

It has negotiated more flexible terms with holders of its US debt and Kunze-Concewitz said that Campari has more than €300m in cash to use for an acquisition. He has previously said he would prefer to buy a brand in a spirits market where Campari has a presence.

Before buying Wild Turkey, Campari had been touted as a possible purchaser of Pernod Ricard’s Plymouth Gin brand and the French group is still looking to offload some non-core brands as part of its debt reduction programme. However, Kunze-Concewitz said this week that he had no firm target in his sights.

Finance on Friday, 06.08.2010