Campari Faces Tough First Half

FILED AUGUST 1, 2009

Dear Client:

Grupo Campari finished integrating Wild Turkey in its first half, with overall results turning out better than expected. However, UBS analyst Melissa Earlam noted spirits sales “decline[d] slightly worse than expected.” Organic sales were down a whopping -15.1% in the U.S. through subsidiary Skyy Spirits, offset by a positive exchange rate of 12.4% and positive perimeter effect of 4.3%.

These declines were partially due to Skyy Vodka sales, which grew 0.5% at constant exchange rates (+13.2% at actual exchange rates). This performance was negatively affected by tough comps in the US due to the re-launch of Skyy and launch of Skyy Infusions in the second quarter of 2008, said the company.

Meanwhile, distributors everywhere continued to reduce stock in the first half, but the second quarter saw improvement in certain key markets. Campari didn’t specify regions.

“The reduction of destocking pressure in key developed markets gives us confidence that the latter’s performance will mirror more closely the positive consumption trend of our key brands going forward. Nonetheless, we will remain vigilant, maintaining our focus on cost containment, working capital and cash generation throughout the year. Thanks to the successful integration of all newly acquired businesses, we will be able to more fully exploit their potential in the second half,” said chief Bob Kunze-Concewitz.

Glen Grant declined by -3.2% overall at constant exchange, which the company “entirely” blamed on a declining Scotch whisky category in Italy.

Campari’s Wines, which accounted for 13.5% of total sales, registered a decrease of 0.4%, due to the combination of negative organic performance of 3.7%, a positive exchange rate of 0.1% and a positive perimeter effect of 3.2%. The segment’s negative performance was mainly driven by Cizano vermouth, while Cinzano sparkling wines did well overall, said Campari.

FOLEY FAMILY WINES ENTERS NEW ZEALAND

News broke yesterday that Bill Foley of Foley Family Wines has made yet another acquisition: New Zealand Wine Trust, which produces almost 300,000 cases a year. Terms of the deal were not disclosed, but it’s expected to close in the next 2-3 months, says The Press Democrat. Some of Wine Trust’s brands include Vavasour, Goldwater, Clifford Bay, Boatshed Bay, Dashwood and Redwood Pass. With the wine brands come almost 250 vineyards that predominantly specialize in the oh-so-hot sauvignon blanc category.

In the four weeks to June 27, sauvignon blanc was by far the fastest growing white wine according to Nielsen scan data. Dollar sales grew 10.7%, while volume increased 0.2% (which was great for the period).

In a statement, Foley president Tim Matz noted that the company is “extremely enthusiastic about the possibilities of this acquisition...in recent years New Zealand has been brought to the forefront of our industry and is now considered one of the great regions in the world to grow world-class wine.”

Foley also recently acquired Sebastiani, Firestone, Three Rivers and Kuleto Estates.

FRANZIA FAMILY LAUNCHES “HIP” WINE COMPANY

The Franzia family has continued a recent trend in the wine business by launching Panther Rock Wine Company, which focuses on wines that appeal to Millennials and those from Gen X. Cousins and siblings from the fourth generation of the Franzia family started the company, with Joey Franzia, Damon Franzia and Brian Franzia acting as managing partners. They launched three new wine brands on July 1, which includes Masked Rider ($9.99 750ml), Motos Liberty ($8.99) and Wild Hare ($6.99). So how do these brands appeal to Gen X and Gen Y? According to the company, they’re hoping to grab attention on shelves through certain features such as “convenient grip handles” on wine cases, tear tabs with “fun quotes” on Masked Rider, screw caps for Motos Liberty and neon colors on the Wild Hare label.

WSD BRIEFS:

BACARDI TESTS NICHE RUM. Bacardi is testing Seven Tiki spiced rum in Florida and California. The Fiji-made rum provides an “alternative to common, mass-produced spiced rums,” and retails for about $20 a 750ml bottle.

PHILIPPINE LIQUOR CO LOOKS FOR FOREIGN INVESTORS. Philippines conglomerate San Miguel Corp is reportedly in talks with foreign companies to sell a “substantial” stake in its subsidiary Ginebra San Miguel, the largest liquor company in the country. The question is: who’s buying these days? No potential suitors were named in the report.


Until tomorrow, Megan

“Everything you can imagine is real.”
Pablo Picasso

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