The just-drinks interview – Bob Kunze-Concewitz, Campari
Having not made a major acquisition for a couple of years, Campari was back in the spotlight last month when it acquired Wild Turkey Bourbon from Pernod Ricard. Campari CEO Bob Kunze-Concewitz spoke with Olly Wehring about the acquisition, the progress of other brands, including Skyy Vodka and Glen Grant Scotch whisky, and the impact of the recession.
In recent years, Gruppo Campari has been operating a little below the radar when it comes to the global drinks industry. With the exception of its acquisition of Tequila brand Cabo Wabo from rock star Sammy Hagar two years ago, the Italy-based company has been one of no alarms and no surprises. For proof, witness Campari's latest full-year results, released in March this year - a 1.1% lift in net profits and a 1.6% dip in sales for the period suggests this is a pretty steady ship.
Last month, however, Campari grabbed a share of the spotlight when it acquired Wild Turkey Bourbon from Pernod Ricard for US$575m. According to IWSR, Wild Turkey is the top-selling premium Kentucky Bourbon brand, with sales of 835,000 nine-litre cases in 2007, ahead of second-placed Maker's Mark, with 778,000.
Since taking the helm at Campari two years ago, CEO Bob Kunze-Concewitz has been charged with running a two-pronged growth strategy, through acquisition and organic growth. In light of the company's most recent full-year results and the Wild Turkey purchase, then, it is understandable to hear Kunze-Concewitz sound really rather pleased with his lot.
"We've been very consistent throughout the years," he says. "We've always said that we're interested in hidden gems. There are two types of hidden gems, either brands which are established but haven't expressed their full potential because they're not getting the necessary priority, or brands which are new to the world, which are growing very fast but have not yet appeared the radar screen.
"Our first priority has been to acquire assets and brands to add to our existing distribution platform so that we can drive synergies forward. Our next priority has been to look for brands and assets which can give us critical mass in the new markets, where we can then develop our own distribution platform.
"If you look at the Wild Turkey acquisition," he adds, "you can tick all four boxes, so it's really a perfect fit from a strategy standpoint."
Considering the current economic climate, however, and the lack of credit available in particular, any acquisition in the drinks industry has made front page news of late. Kunze-Concewitz maintains that $575m was a fair price to pay. "If you look at it in terms of EBITDA for the 12 months going forward, it's a multiple of 12 (times contribution)," he says. "Overall, this acquisition is accretive already in year one, both in terms of earnings per share and in improving our marginality. Last, but not least, this is a very high-quality asset - there aren't that many Bourbons for sale, especially such a premium Bourbon at such a size, with such an upside."
Looking more closely at Campari's full-year results, Kunze-Concewitz notes a hindrance that has carried on into the company's first quarter. "Our organic sales grew quite strongly in the first nine months of the year, where we were 5.8% ahead," he says. "But then, like all the players in our industry, we were hit by significant de-stocking. We were the first ones to come out and be very transparent about this de-stocking."
Campari's namesake brand aside, the company's most high profile brands of late have been Skyy vodka and Glen Grant Scotch whisky. The two had differing fortunes in 2008, with Skyy registering a sales lift of 4.1% on 2007, while Glen Grant slipped by 4.8%. Kunze-Concewitz believes Skyy is well placed in its main market - the US - despite the move away from the on-trade and its associated cocktail scene. "People are entertaining more at home," he concedes, "but vodka is very versatile and relatively easy to use. Skyy has been historically very strong in the off-premise and we're actually benefiting from that trend."
Bob Kunze-Concewitz, Gruppo Campari CEO
And what of Glen Grant? "From a financial basis, Glen Grant is delivering according to plan, so we're very happy with that. There have been some issues in its main market of Italy, but that was more to do with the market than the brand, because the brand is actually gaining market share. Overall, the whisky category is suffering in Italy, but we're busy trying to compensate for that in other markets." Kunze-Concewitz highlights China as an important developing market for the brand. "We're starting to get a nice grip on a small scale, but I think it will lead us to interesting paths in China," he says.
Going forward, Kunze-Concewitz seems confident that Campari is well placed to weather the storm. The biggest impact, he says, will come from a consumer migration from ultra-premium brands to super-premium ones. "That will affect the mix," he concedes, "but if I look at our portfolio, we are well positioned for that. In the short term, I think there will be some issues in emerging markets but given a few years, they will return to growth."
When asked if the company has room for non-core divestments, Kunze-Concewitz suggests that while nothing is actually for sale, some of Campari's carbonated soft drinks portfolio, which includes LemonSoda, OranSoda and PelmoSoda, could become available, but only if the price were right. "We're starting off from a relatively comfortable net debt to equity situation," he notes. "We don't really need to make any divestitures. However, should anyone come with a large cheque for our soft drinks business, we would surely consider it, but it's not something we'll do proactively."
After two years leading Campari, then, how has Kunze-Concewitz enjoyed his time at the tiller? "I'm definitely not looking younger," he laughs, "but I'm quite satisfied here and I get up feeling very excited in the mornings."
With growing brands like Skyy vodka and Cabo Wabo lined up behind Wild Turkey, it would seem that Gruppo Campari looks set, at worst, to continue its quiet progress through the storm.
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