Profits slide at Gruppo Campari

Wild Turkey showed signs of struggling to capitalise on the current Bourbon boom, as owner Gruppo Campari announced a pre-tax profit fall of -15.7% in its end of year results.

The Italian-based group, whose key brands include Campari, Aperol, Skyy, Wild Turkey, Cinzano and Appleton Estate, reported €1,560 million in sales for its 2014 financial year, representing reported growth of 2.4%.

Despite evidence of recent rapid growth in the Bourbon sector, Wild Turkey sales in its key US market were flat. Although sales of premium expressions saw double digit growth here, the brand’s flavoured expression American Honey saw a -7.7% decline in its core US and Australian markets, which the company attributed to “increasing competitiveness in the flavoured whisky category”.

In addition to the “very unfavourable impact” of exchange rates, which added up to a -4.1% effect on total sales, Campari’s results were also affected by several one-off expenses, most notably its acquisition of Canadian whisky producer Forty Creek Distillery for €120.5m and Italian bitters company Fratelli Averna for €103.75m.

The group’s key Americas market, which accounts for 38.8% of total sales, saw a reported sales decline of -2.9%, a slide driven in particular by unfavourable exchange rates and “soft” shipments of Skyy vodka and Wild Turkey.

It was a brighter picture in Europe, where Gruppo Campari’s domestic Italian market – accounting for 26.4% of total sales – recorded a 9.4% uplift, thanks largely to the boost provided by Averna joining its portfolio.

Sales in the rest of Europe rose by a more modest 3.7%, with Russia overcoming political tensions to post organic growth of 11%, a rise driven by sales of Cinzano sparkling wine.

However it was the group’s Campari and Aperol brands that showed the strongest performance in markets around the world, thanks to the wider cocktail and aperitif trends.

Campari saw total sales rise by 9.8%, with triple digit growth in Argentina, double digit growth in Brazil, France, Nigeria and Global Travel Retail, and high single digit growth in the US.

Meanwhile Aperol rode high on the success of its signature serve the Aperol Spritz to enjoy overall growth of 7%. The brand saw a 5.4% sales increase in its native Italy, triple digit growth in Russia and France and double digit growth in Argentina.

Commenting on these results, Bob Kunze-Concewitz,CEO of Gruppo Campari, said: “Key performance indicators in 2014 were in line with expectations. The organic sales performance was solid, with acceleration in the fourth quarter, and doubled comparing to the previous year.”

He painted a cautious outlook for this year, observing: “Looking forward, we expect that the volatility in some emerging markets and the price competition in some core regions for the group will continue also in 2015, thus limiting the visibility at this stage.”

Despite this caveat, Kunze-Concewitz added: “we expect the business overall and margins to be positively impacted by the positive performance of the top 5 spirit franchises, in particular the aperitifs business, the rum portfolio and the American whiskies, also thanks to the positive contribution from acceleration in innovation.”

With Gruppo Campari having stepped up its investment last year in advertising and promotion, as well as developing new routes to market, he concluded: “we believe that the business overall and margins will benefit from the expected return on recent route-to-market initiatives and production investments, more favourable trends in input costs and a positive contribution from forex.”