Gruppo Campari chief eyes more drinks buys

Gruppo Campari chief eyes more drinks buys

Gruppo Campari has begun to shed its image as the hermit of the drinks industry's upper echelons and is thirsty for more acquisitions.

Gruppo Campari's CEO, Bob Kunze-Concewitz, has proved himself popular with much of the media thanks to his willingness to talk relatively openly about the company's plans.

We saw more of this yesterday (11 November) as Kunze-Concewitz bluntly told reporters on a conference call that the group is on the lookout for potential acquisitions in the EUR300m-EUR400 range - in other words, roughly similar in size and shape to Wild Turkey Bourbon, which the group purchased from Pernod Ricard in April 2009.  

Campari's net debt to EBITDA ratio is 2.5x and its covenant is 4.5x, which shows that it has the headspace for another acquisition in the near future, should the right asset come along. It recently followed up the Wild Turkey buy with the purchase of Frangelico, Irish Mist and Carolans liqueurs, previously owned by C&C Group and briefly held by William Grant & Sons.

The acquisitions, together with Kunze-Concewitz's comfortable style and also a run of strong trading numbers, has begun to change attitudes towards this somewhat mysterious Italian drinks firm.    

"Campari is like a guerilla fighter that has come down from the mountains for Wild Turkey and will now probably go into its cave for the time being," said John Wakely, an independent industry analyst with The Angels Share and an ex-investment banker with Lehman Brothers, at the World Whiskies Conference in 2009. His comments underline the hermit-like image that family-owned Campari has built up over the years.

But, this image is fading. The group is in acquisitive mood and has impressed analysts with a run of good results. Campari reported yesterday (11 November) net sales for the nine months to the end of September rose by 14%, to EUR794.9m (US$1.1bn). Like-for-like sales, excluding exchange rate gains, rose by 11% on the same period of 2009. Pre-tax profits for the nine-month period rose by 17% to EUR156.3m, including a 4% gain from favourable exchange rates.

Kunze-Concewitz said that he is confident on the group's near-term prospects and analysts agreed. "Today's results confirm the resilience of Campari's operating model," said Evolution Securities in a note. He said that the results would likely lift analysts' like-for-like earnings guidance for Campari for 2010, although currency rates are unlikely to remain quite so favourable in the fourth quarter.

Campari's dyed-red, namesake drink may not be to everyone's taste, but the company has certainly attracted a few more admirers in the last couple of years.