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Campari Group CEO Bob Kunze-Concewitz on vodka's US problem, Forty Creek's upcoming expansion and cannabis hurdles

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Yesterday, Campari Group released its first-half 2018 results, with organic growth coming from all regions. just-drinks spoke to CEO Bob Kunze-Concewitz after the announcement to discuss the challenging US vodka market, a European roll-out for Canadian whisky Forty Creek and why we probably shouldn't expect Campari to dive into the cannabis category any time soon. 

Camparis CEO Bob Kunze-Concewitz said vodka remains a tough category to play in

Campari's CEO Bob Kunze-Concewitz said vodka remains a tough category to play in

just-drinks: It was a solid overall performance for Campari, with organic sales up 5%. What pleased you the most from the results?

Campari CEO Bob Kunze-Concewitz: We have a lot of strength both in our aperitifs - Aperol, Campari - as well as in our brown spirits, particularly in Bourbon.

j-d: In terms of disappointments, however, Skyy vodka continued to show weakness, down 11% across the world. Do you see this turning around?

B K-C: With Skyy, I need to give you more of a perspective. What is happening with Skyy is that the underlying consumption and depletion trends are much better than our shipment trends. Shipments were down about 11% whereas our depletions are running at about -5%. And if you look at our consumption, Nielsen has us at -8%, -9% but NABCA (the National Alcohol Beverage Control Association) has us as positive. So potentially what we're doing - because the brand slowed down last year and the beginning of this year - we are destocking. The underlying trends are better than it seems.

Having said that, though, we expect vodka to remain a very challenging category. We are trying to tackle that challenge with a new campaign [called Proudly American]. We just kicked it off at the beginning of June, but the feedback is very positive.

j-d: How long before the destocking balances itself out?

B K-C: We're doing it gradually over the full year, so probably by the end of the year.

j-d: In Diageo's full-year results last week, Smirinoff was also in decline. What is the problem with big brand vodka?

B K-C: If you look at vodka you have to look at the US, that's where the value is. And in the US there is one brand that is growing at the expense of everybody else.

j-d: And is that Tito's?

B K-C: Yes. You have Tito's on the one hand, which is the big winner, and you have [E&J Gallo's] New Amsterdam on the bottom and [Heaven Hill's] Deep Eddy Vodka in flavours. A lot of brands, when confronted with that, try to gain volumes back by discounting aggressively and that creates a lot of tension in the category.

j-d: With the new campaign, are you repositioning Skyy slightly?

B K-C: We're not changing our pricing, if that's what you mean by repositioning. It's much more about brand story telling and telling what we stand for.

j-d: You said Bourbon is growing strongly. Is Wild Turkey likely to be affected by tariffs imposed by a number of regions in retaliation to US president Donald Trump's steel and aluminium levies?

B K-C: Not really because if you look at the sales of Wild Turkey, roughly 90% of them are in three markets - the US, Australia and Japan. The tariffs have been imposed by Europe - we have a small portion of brand sales in Europe because we are still at the seeding stage. So it's not going to impact us as a company. Having said that, whatever the tariff is will reflect, once stocks clear out, in the final price. But it is more of an issue with some of our peers than for us.

j-d: Do the tariffs threaten the recent strong growth for the Bourbon category?

B K-C: First of all, I don't think tariffs are good for the consumer in general. They end up being a lose-lose situation. We stand for free trade because we believe that is the best for consumers. Having said that, putting tariffs on Bourbon doesn't do any European consumer any service. What will happen is you get tit-for-tat and a whole escalation back and forth.

j-d: Canadian whisky Forty Creek was down in the US, against a backdrop of strong growth for the category in the country.

B K-C: Be careful what you call Canadian whisky in the US. If you look at Forty Creek, it's performing very well in it's home market of Canada. If you look at Canadian category in the US, what's driving it is essentially flavour extensions for one brand [Diageo's Crown Royal Apple], and another one that has had a meteoric rise as a shooter [Sazerac's Fireball Cinnamon Whisky].

If you look at what I would call real Canadian brands, you would see that the category isn't in such robust health.

j-d: Is Canada then your main focus for Forty Creek?

B K-C: We are starting to seed it internationally and in the US. This is something we are going to tackle. In the US it took longer, because of existing stock, for the new packaging [unveiled in October last year] to arrive on shelf. It is seeding as we speak and we think that will help us.

j-d: What international markets will it go to?

B K-C: Mostly we will look at Europe and GTR.

j-d: Has that started yet?

B K-C: Not yet because we were waiting to have enough stock to expand the brand.

j-d: Are you happy with stock situation now?

B K-C: Yes.

j-d: There is a lot of talk around cannabis beverages at the moment. Is it something Campari is keeping tabs on?

B K-C: Anybody in the alcohol beverage industry needs to have a look and stay close to what is happening in that area. Our core business is spirits and we're very happy with the brands we have. 

j-d: Constellation has made a big investment in cannabis and it has spoken about bringing out a non-alcoholic cannabis gin. Do you see cannabis beverages having a place in alcohol companies' portfolios? Or is is a completely separate category?

B K-C: I don't have a crystal ball at this stage. I think there is a lot of excitement about it, but I wonder what the use is of introducing it to the beverage space because the primary use [smoking] will dominate, and people will have another beverage to accompany whatever they are doing when they are smoking.

Diageo CEO Ivan Menezes on the future of gin, the growth of no-alcohol and the plan to kick-start vodka


Sectors: Spirits

Companies: Gruppo Campari

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