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Gruppo Campari acquired the Grand Marnier brand last year |
The impressive contribution to Gruppo Campari of the Grand Marnier brand in the first nine months of 2016 took many industry observers by surprise. Having only taken over the liqueur's global distribution in July last year, the group will consider Grand Marnier to be "key in 2017", according to one analyst.
"We see the delivery of Grand Marnier as the major swing factor for earnings/share price performance in 2017," writes Kenny Lam at Barclays in a client note this week. "Management is targeting a return to sales growth and a flat margin for the brand."
In the notes that followed the release of Campari's full-year results this week, analysts ran the rule over the importance of Grand Marnier. "The integration of Grand Marnier is on track," says Barclays. "The group is now moving on to the execution phase of its strategic plans.
"The brand should benefit from a step-up in on-trade investment and a new distribution agreement with Southern Glazer's Wine & Spirits in the US, and sharpened focus after the recent disposal of the non-core still wines business."
However, Barclays flags concerns in Europe. "While we are confident of an improved performance in the US, we note the brand still derives circa 30% of sales from Europe, where it suffers from a weaker competitive position and a lack of pricing discipline across markets.
"This is likely to be a drag on the good progress in the US."
In addition, Lam believes that Grand Marnier's margin is "expected to be flat in (estimated) 2017 as the need for reinvestment in H1 will offset any expected synergies in H2."
Elsewhere, analysts enjoyed speculating this week over what shape Campari's approach to acquisitions will take post-Marnier-Lapostolle. "M&A is an integral part of Campari's strategy and has been a key part of the investment thesis," notes Edward Mundy at Jefferies. "The company has a strong track record of buying unloved, dusty brands and creating value."
But, going forward, Mundy expects a break in the near term. "Whilst we believe that Campari will remain an active consolidator over the medium term," he says, "we would expect a pause for breath following the Grand Marnier transaction.
"Given the long-term potential of the Grand Marnier brand, we see the company prioritising investment and focus behind the successful integration of the business rather than picking up new assets."
Much as Campari has had a lively start to 2017 in the M&A arena, can we expect Bulldog Gin to be the group's last 'in' for the time being?
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