Campari Group reports sales in the U.S., its largest market, grew organically 6% in the first nine months. All brands were strong, the company said, but Skyy and Grand Marnier, as well as Jamaica, which register3e 17.3% growth, thanks to the rum portfolio.
On a global basis, net sales were up 8.6% (6.9% organic). EBITDA rose 13.5% (12.2% organic). The company did not report GAAP earnings.
Bob Kunze-Concewitz, CEO, said: ‘In the first nine months 2019 we achieved strong organic sales growth, despite the tough comparable base and poor weather across Northern Europe, driven by the positive underlying sales momentum in the core developed markets, particularly the aperitifs business.
“Key underlying profitability indicators grew ahead of organic sales development, thanks to a very positive sales mix, which helped offset the dilutive impact generated by the agave cost and the emerging markets sales recovery, as well as favorable phasing effects in the third quarter.
“The outlook remains unchanged and fairly balanced in terms of risks and opportunities on a full year basis. We remain confident in delivering a positive performance across all key underlying business indicators.”
Looking at the company’s performance by brand:
Global Priorities (59% of total Group sales) registered strong organic growth (+8.2%), despite a low-single digit decline in SKYY due to persistent competitive pressure in the U.S. market and the continued destocking mainly affecting flavors which are down double-digit, and in Grand Marnier, due to phasing in Q3 in the core U.S. market, despite positive sellout trends.
The positive performance was driven by Aperol (+21.8%), thanks to a double digit growth in its three largest markets (Italy, Germany and the US) as well as across all the other high potential markets, a solid performance of Campari (+5.0%), largely driven by core geographies, Wild Turkey (+6.7%), thanks to core U.S. and Australian markets, and the Jamaican rums (+6.2%), thanks to core Wray & Nephew Overproof.
Regional Priorities (15% of total Group sales) grew organically by 5.3%, thanks to a very positive performance from Espolòn (+24.9%), despite the negative shipment phasing in the third quarter in the core US market, expected to reverse in the fourth quarter. Sell-out trends remain at strong double-digits, continuing to outpace the category.
A solid growth in Riccadonna was more than offset by weakness in GlenGrant, which reflects the long-term strategic refocus into the superpremium and high margin aged variants, and Cinzano.
– Local Priorities (12% of total Group sales) registered a positive organic performance of +5.2%, with growth across the whole portfolio, especially the single serve aperitifs Campari Soda (+6.7%), benefitting from a new marketing campaign.
Analyst Comments
Noting the third quarter was expected to be the toughest for Campari, Berenberg Beverages analysts said the company was “still able to deliver solid Q3 organic sales growth of 4.9%. “Both the recent Nielsen and NABCA data suggest that Grand Marnier depletions in the US are growing currently at around 5% and tequila Espolon at c25%”, lead analyst Javier Gonzalez Lastra said, adding:
“Campari continues to trade at a premium to its peers (on 27.5x). However, we believe this is justified as Campari’s top-line growth rate keeps improving (+6.7% in FY19E versus 5.3% in FY18) and the positive mix generated by its brand portfolio remains the most attractive in the sector.”