Update: Campari share price dips after Courvoisier buy but CEO “bullish” about Cognac potential

Campari has today (14 December) announced a deal to buy the Cognac brand Courvoisier from Beam Suntory.

The Italy-based spirits group said it plans to pay up to $1.32bn for Courvoisier, which Campari’s outgoing CEO Bob Kunze-Concewitz described as “a top four historical Cognac house”.

Courvoiser’s position in the Beam Suntory stable dates back to the carve-up of UK spirits group Allied Domecq in 2005.

Greg Hughes, Beam Suntory’s president and CEO, said the sale of Courvoisier will “allow us to further focus our portfolio on our core areas of strength as we accelerate our global growth ambitions”.

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By GlobalData

Campari said this afternoon Milan time it had “entered into exclusive negotiations” with Beam Suntory and had been granted a put option to buy Beam Holding France, which houses Courvoisier.

The structure of the transaction – which is set to be Campari’s biggest acquisition, beating its 2016 move for Grand Marnier – will see the company put up $1.2bn, with an additional payment of a maximum of $120m expected to be made in 2029. Publicly-listed Campari said that gave Courvoisier an enterprise value multiple of “circa 17 times the contribution after A&P” the brand generated last year.

Citing data from Beam Suntory, Campari said the Courvoisier business, which also includes the Salignac brand, made net sales of $249m in 2022. The asset’s contribution after A&P was $78m, Campari added.

The Aperol owner also provided data for the first ten months of 2023. The Courvoisier business’ net sales in the period to 31 October fell 33% year on year to $148m. Contribution after A&P was $37m, though Campari did not disclose a comparable figure for the ten months to 31 October 2022.

“This performance is impacted by recent market-driven trends such as normalising consumption in the US after peak post-Covid sales and destocking at wholesaler level, in-line with the wider Cognac industry,” Campari said in its statement, adding the US, China and travel retail account for around 75% of the total category.

Outlook: India bright spot in outlook for aged spirits in 2024

Cognac markets in the US and China have come under pressure in recent quarters. Demand has slumped in the US while, in China, a depressed real estate sector and stuttering economic growth are hitting spending on high-end consumer goods.

In October, Rémy Martin owner Rémy Cointreau reported a 30% fall in its revenue from Cognac in the six months to the end of September. Sales in the Americas halved.

According to Beam Suntory data provided by Campari, the US accounted for around 60% of Courvoisier’s net sales in the 2022 fiscal period. Combined, Campari noted, the UK and China generated around a quarter of the brand’s net sales. Just over 3% of Courvoisier’s net sales are made through travel retail, it added.

There has been some speculation in the investment community in recent years that Campari might be prepared to make a significant acquisition. The issue resurfaced earlier this year thanks to a change in the company’s voting structure, which prompted market chatter the group could issue a large amount of equity without sacrificing family control.

The deal for Courvoisier is set to be funded via a bridge loan of €1.2bn ($1.32bn). Campari said today it is “also constantly evaluating various alternatives, in the context of evolving market conditions, to potentially fund the transaction with a mix of debt, cash and equity or equity-like instruments, with timing and amounts yet to be determined”.

Kunze-Concewitz, who is set to step down as Campari CEO in April, said the deal “primed Cognac to become Campari Group’s fourth major leg along with aperitifs, Bourbon and Tequila”.

He added: “The addition of Courvoisier Cognac to our portfolio of global priorities is a rare and unique opportunity to expand our premium spirits portfolio and Cognac offering.”

Hughes has been Beam Suntory’s president and CEO since October, having spent more than eight years at the Maker’s Mark brand owner.

In a post on LinkedIn, Hughes said the sale of Courvoisier was part of the distiller’s “intentional steps to sharpen our focus on our areas of strength and our must-win brands and categories”.

He added: “Our team has thoughtfully built this brand with care, craftsmanship and quality and we know Courvoisier will continue to thrive under Campari Group’s skilled ownership.”