CPR: The Spritz Playbook

(BIT:CPR) Campari Milano H1 FY24 Results

Earlier this year I highlighted ‘How Aperol Made a Splash in the Campari Portfolio’. This write-up included context for Campari’s history, brand portfolio, and how the acquisition of Aperol in 2003 resulted in the orange aperitif blossoming under Campari’s leadership. From 2003 to 2023, Aperol's annual sales grew from €30 million to €700 million and the brand now counts for ~26% of the group’s revenue. Not bad for a €150 million acquisition.

The alcohol industry has been under pressure this year. Product mix has shifted as consumers cut discretionary spending or trade down to lower-quality brands. There are also voices suggesting that alcohol is in the early stage of a structural decline. Something about young people not drinking as much as prior generations.

In the midst of all of this, Campari Group decided to indulge in the sizeable acquisition of Courvoisier Cognac; a subcategory that has had a torrid three years. The rationale was as follows; (a) Courvoisier will strengthen Campari’s exposure to cognac and China, (b) they had an opportunity to acquire a never-sell, top 10 brand, (c) the business’ gross margin is at least 10% to 20% below where it could be, and (d) they don’t feel cognac demand has disappeared permanently. Outgoing CEO, Robert Kunze-Concewitz, explained to the Financial Times in December 2023 that people have short memories and this acquisition was a long-term decision:

“This year cognac players have a problem because there was scarcity during the pandemic, so distributors built stock . . . inflation and interest rates rose and players increased the prices, the macro scenario crisis affected consumption and distributors ended up with large stocks. But people have a short memory . . . cognac in the US is now a lot more popular than it was before the pandemic, in spite of the [current decline in sales].