Campari's Growth Cocktail Mixes Acquisition, Sales

By: Colleen Barry
By: Colleen Barry

CANALE D'ALBA, Italy (AP) -- The recipe for Campari, the bright-red aperitif of literary and movie fame from Hemingway to Bond, has been a tightly held secret for almost 150 years. Two people know the blend of herbs - and one must attend anytime a batch is brewed.

But the tradition-laden infusion invented by Gaspari Campari in 1860 is no longer the earnings driver for the family-owned business, which has expanded into new spirit lines on a decade-long, $1.55 billion expansion drive.

Chief Executive Bob Kunze-Concewitz said the company's cocktail for growth is equal parts acquisitions and clever marketing of its brands and image.

"Campari has 148 years of history - it is unique," said the 41-year old Turkish-born Austrian chief executive who this month marks his first anniversary - and is not one of the two recipe keepers.

But the company's targets are ambitious and "to double in growth every two years is not easy," he said. So Campari is constantly shopping.

Kunze-Concewitz said the company has its eyes on some of the brands owned by Swedish state-owned Vin & Spirits, the maker of Absolut vodka that is being purchased by Pernod for $9.24 billion. While not wanting to be specific about targets, he said he would be interested in adding gin to the company's spirits list.

That fits with analysts' forecasts tagging Vin & Spirits' Plymouth gin as a possible acquisition.

"We are interested in an acquisition of parts of Pernod. ... Let's give them some time to catch their breath and then see. Everyone knows we are interested," Kunze-Concewitz said in a recent interview at Campari's Enrico Serafino winery in the town of Canale d'Alba amid the green, gently sloping vineyards of the Roero district in northern Italy. "We have cash, and we don't have problems acting quickly."

Over the last dozen years, the family-controlled business has been on a global shopping spree - spending nearly 1 billion ($1.55 billion) to buy 12 companies and expanding into new spirit lines from fast-growing vodka and tequila segments, with Skyy vodka and Cabo Wabo, to Scotch whiskey with the purchase of Old Eight, Dreher and Drury's brands from Pernod Ricard in 2005.

The Campari Group has more than doubled in size and quadrupled its sales to 958 million euros ($1.5 billion) in 10 years with a portfolio of 40 brands of spirits, wines and soft drinks. At the same time, Campari has also been seeking to expand its global footprint, particularly in the United States but also in Brazil, Germany and Austria, without sacrificing its market leadership position in Italy, which comprises about 40 percent of sales.

The sixth largest spirits maker in the world, Campari is unlikely to overcome giants Diageo and Pernod Ricard - and isn't trying.

"I think they are quite happy to be a niche player," said Dennis Weber, an analyst at Dresdner Kleinwort.

The Campari family grasped the importance of image early on, commissioning futuristic painter and sculptor Fortunato Depero in 1932 to design the distinctive Campari soda bottle still in production.

Hemingway and some of his characters drank it, sometimes mixed with gin. Author Ian Fleming's James Bond character would order a Negroni, or a Campari with gin and vermouth.

The group spends an impressive 18 percent of sales on its marketing, including a fresh advertising campaign featuring a sultry starlet every two years - most recently Salma Hayak - and a heavily promoted annual calendar.

Soon Sarah Jessica Parker will be drinking Skyy vodka in "Sex and the City," a product placement that Campari hopes will propel vodka sales in the United States. U.S. group sales contribute one-quarter of Campari's revenues, but Campari has just 2 percent of the market share, which analysts note leaves lots of room for growth.

Skyy will be critical to Campari's U.S. ambitions, with UBS investment research estimating that the brand represents 12 percent of group and 40 percent of U.S. sales for Campari. Last year, Skyy and Campari were neck-and-neck the group's top-selling brands at 12 percent and 13 percent, respectively.

While Europeans may still enjoy a medium-alcohol aperitif before meals, Americans are more cocktail-oriented.

"There's a large trend toward the cocktail culture that was born in the 1990s and is continuing to grow. There is no longer a simple bartender. There's a mixologist," Kunze-Concewitz said. "This has moved to other Anglo-Saxon countries and is expanding elsewhere."

Take Aperol, an aperitif sold mostly in northeastern Italy when Campari bought it four years ago. It's marketed in Austria as the ingredient in a Spritz - white wine with Aperol and soda water - and onward into Germany as an Aperol Sour. But there's homework to be done before crossing the Atlantic.

"We're experimenting with a cocktail for the United States," Kunze-Concewitz said.

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