Campari Group reported positive sales growth in the first half of 2024, but warned that temporary headwinds will impact its gross margins during its H1 2024 earnings call yesterday.
Here’s the overview:
- The maker of Aperol saw sales rise +3.8% in H1 to $1.64 billion, with revenue picking up in the second quarter.
- Group net profit rose by +1.3% to $238 million.
- Advertising and promotion expenses were up by +2.7%.
- The group cautioned that it may not recover margin-wise this year from “temporary headwinds” including bad weather in Europe and a delay in agave contract renewals.
In the U.S., the group’s largest market, sales fared better (+3.5%) than its competitors, largely thanks to sales of Aperol and double-digit growth in Espolòn. The group also reported positive performance from Grand Marnier stateside. The Wild Turkey portfolio was stable but SKYY showed ongoing weakness.
Globally, positive results were driven by its aperitifs, Campari and Aperol, but those libations took a hit from bad weather in Europe, the Middle East and Africa (EMEA). The region accounts for 49% of the company’s sales, and while it saw +3.3% growth, the UK (-7.2%), France (-0.2%), and its homebase of Italy (-5.2%) were all down.
As for brands, the spritz and other aperitif cocktails continue to boost Campari (+9.3%) and Aperol (+4.7%) while Espolòn was up +22.2%, illustrating Americans’ growing thirst for more affordable blanco tequilas.
On a negative note, SKYY Vodka was down -11.9%, attributed to vodka’s slowdown in the U.S. Sales of the regional priority portfolio dipped by -3.4% with phasing and tough comparison bases in Magnum Tonic and The Glen Grant offsetting “good momentum” for the group’s sparkling wines, champagne and RTD Aperol Spritz. RTDs suffered as well, including negative sales for Wild Turkey ready-to-drink, Campari Soda due to very poor weather in its core market of Italy, and SKYY RTD due to the “highly competitive” Mexican market.
Missing peak weather season for high-margin aperitifs is expected to impair gross margin expansion; delayed renewals of agave supply contracts will also shift “some of the related expected benefits into next year.” Agave prices have finally dropped this year, which would typically be a windfall for brands that outsource agave supply like Espolón but the group stressed that it can’t project cost of goods until new contracts are negotiated. After contracts are finalized, Matteo Fantacchiotti, chief executive officer, said Espolón aims for its margins to be in more line with the group’s gross margin average and expects they’ll “get there in 2025.”
After completing the purchase of cognac brand Courvoisier earlier this year, the group is expected to share a relaunch plan for 2025 at the end of 2024.
“We are not going to change anything so far because it would be premature,” said Fantacchiotti, adding that the group hired a new managing director of the brand in June who will support getting clarity on the brand’s future.
Campari has hinted in the past that it is still looking for M&A opportunities that would expand its premiumization journey in the U.S. and Asia.