Campari can win back drinkers with marketing binge
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Aimee Donnellan
LONDON, Sept 18 (Reuters Breakingviews) -Campari CPRI.MI can recover from the hangover caused by the shock departure of its CEO. On Wednesday, the $10 billion maker of Aperol and Courvoisier cognac announced Matteo Fantacchiotti’s resignation for “personal reasons”. The next leader’s best defence is to ramp up marketing spend to protect sales in challenging markets and position the group for better times.
Fantacchiotti was only in the job for five months, but investors may not be too upset about the end of his short tenure. His downfall began last Friday when several traders and analysts said the CEO had described the current quarter as “still quite soft” for the industry at a virtual conference hosted by Bank of America BAC.N. Campari’s shares dropped nearly 6% on the day and a further 2% on Monday. Since Fantacchiotti’s appointment in April the company’s stock has fallen 21%, massively underperforming Italy’s FTSE MIB Index .FTMIB.
To be fair, the shares of rivals like Diageo DGE.L and Pernod Ricard PERP.PA are also under pressure as consumers in China, Latin America and the all-important U.S. market are either trading down to cheaper drinks like beer or reducing their splurges on expensive spirits. Stingy drinkers are putting pressure on margins. For the year ahead, Campari’s operating margin is expected to decline to 20.6% from the 22% it delivered before the pandemic, as per forecasts compiled by LSEG data.
Whoever takes over at the Italian group will have three, unpalatable, choices. They can pull back on spending and try and protect margins. Or they could raise prices in the hope that loyal customers will spend more. The risk is that these strategies will drive consumers away and erode Campari’s market share. Another alternative would be to spend more on marketing and promotions and target the company's top-selling brands like Aperol, Campari and its Espolòn tequila. These brands delivered average sales growth of around 12% in the first six months of the year versus the same period in 2023 compared to less than 5% growth for Campari as a whole.
Campari already spends nearly 17% of its net sales promoting its tipples but that's less than Diageo which spent over 18% last year. Topping up these marketing costs may erode margins, potentially unnerving investors. And the interim CEOs are the company’s finance chief and its general counsel – two roles rooted in penny-pinching and risk aversion. But to ensure Campari enjoys the next drinks party, their best bet is to put their cards behind the marketing bar.
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CONTEXT NEWS
Campari CEO Matteo Fantacchiotti abruptly stepped down on Sept.18 after only five months at the helm of the Italian spirits group, with the company citing personal reasons for his departure.
Fantacchiotti took the role in April and succeeded Bob Kunze-Concewitz, who had been in charge since 2007 and has since remained on the board. Fantacchiotti had previously served as Campari's managing director of Asia Pacific before being promoted to deputy CEO in 2023.
Campari shares fell nearly 6% on Sept. 13. Traders said the fall had been sparked by comments by Fantacchiotti at a financial conference about the sector's ongoing weakness. The shares lost a further 2.6% on Sept.16.
Kunze-Concewitz will chair a leadership transition committee including Chief Financial and Operating Officer Paolo Marchesini and the group's General Counsel and Business Development Officer Fabio Di Fede, who have been named interim co-CEOs.
Shares in Campari were down 5% by 0854 GMT on Sept.18.
Global weakness is weighing on big drink makers’ stocks https://reut.rs/47z2cpO
Editing by Francesco Guerrera and Streisand Neto
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