Campari Sees M&A Opportunities Arising From Coronavirus Crisis
The coronavirus crisis could create acquisition opportunities for Campari, including in the growing market for tequila, the chief executive of the Italian drinks group told Reuters.
"There are a whole series of companies and brands that are suffering from on-premise closures ... You never know, they might be interested in considering alliances with a player like us to reduce the risk," CEO Bob Kunze-Concewitz said after Campari reported an unexpectedly bigger sales drop in the fourth quarter.
He also said the group could consider a merger with a rival.
"Campari is very solid, very healthy with good prospects ... clearly there is a slowdown in on-premise business, but if you run your business with a long-term view, as we are doing, it would not be a bad time for a transformational deal," Kunze-Concewitz said.
The Milan-based group moved its registered office to the Netherlands last July and introduced an enhanced loyalty share scheme, which Kunze-Concewitz said opened the way to fund a potential big acquisition with both cash and paper. Campari could also increase debt to fund smaller deals, he said.
"It takes two to tango," Kunze-Concewitz said, adding that the group had been considering a transformational deal for years.
Expanding Campari's share of the tequila market through an acquisition is possible, the CEO said, pointing to a surge in consumption for the agave-based spirit in North America.
"Tequila category is the hottest one in the US. We have two brands that are doing extremely well and we would be interested in an additional premium brand," he said.
Sales for Espolon, one of Campari's tequila brands, rose almost 30% last year, though that was not enough to compensate for the weak performance of the group's aperitif brands, which include red bitter Campari and Aperol.
The consumption of the aperitifs, normally the group's growth engine, was dented by COVID-19 closures and restrictions for bars and restaurants that make up the on-premise category.
Campari reported a 4.1% fall in like-for-like sales in 2020.
Like-for-like sales, which strip out currency swings and any acquisitions or sales of assets, were down 7% in the fourth quarter, disappointing analysts.
Adjusted earnings before interest and taxes (EBIT) fell 21.1% on a year-on-year basis to €322 million ($388.40 million). EBIT margin on sales, which is an indicator of profitability, came in at 18.2%, down from 22.1% in 2019.