Half Year 2025 Davide Campari-Milano NV Earnings Call
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Good evening. This is the conference operator. Welcome and thank you for joining the Campari group. First of 2025 results conference call.
As a reminder, all participants are in listen-only mode.
After the presentation, there will be an opportunity to ask questions.
Should anyone need assistance during the conference call, please call domestic now and press star 0 on their telephone.
At this time, I would like to turn the conference over to Simon Hunt, CEO, and Paolo Marchesini, CFO, of Campari. Please go ahead.
Thank you very much. Good evening. Good afternoon to everyone, thank you for joining us to go through our 2025, half year results, and the perspectives for the remainder of the year,
As always, Poe is here with me along with our team, Kiara and Go See. Happy to connect after the call to further deep dive with all of you in the upcoming days as necessary.
Now, a short summary of our results, you can see that the progress is in line with what we told you last time.
Our outperformance in sellout is continuing on track across most geographies, with further improvements in Q2 supported by a positive start to the peak season.
The better weather has played a role but at the same time, how increased focus on execution and brand building Investments are also starting to pay off.
Topline trend is on track with growth in Q2 and has guided.
And we'll dive into details later on.
Profitability is on track driven by initial Savings in sgna.
And gross margin accretion while A&P remains diluted due to the front loading of peak season Investments as expected.
Cash generation is on track with positive free cash flow, despite the continuation of our extraordinary capex program.
And a few details on our key Focus areas where we are progressing in line with our expectations.
On cost, there's a visible deceleration in SG&A trends.
As we previously guided, the majority of the benefits will be released in a second half to reach out, 50 bits secretion Targets on a like, for like, basis in 2025.
On brand building Investments. We're not making any compromises, instead. We're using this period where the sector is under. Pressure to accelerate Investments with a focus on effective, spend
On capex. We're on track to complete our extraordinary program for production capacity expansion by the end of this year.
As I've already mentioned in the past, balance sheet discipline is critical for us. The improvements in our leverage ratio are on track.
The closing of the Chin's ano disposal, which represents a significant advancement in portfolio's. Streamlining will lead to further reduction of net debt
And additional slight improvement in the ratio.
And at the same time, we are maintaining our polls on m&a.
In terms of portfolio, geographic expansion of our brands is on track.
Utilizing our existing footprint of 27 market companies, we keep growing.
For example, in Q2, more than 13 of our markets recorded double-digit growth.
While growing, we continue to focus on the quality of our commercial execution and maintaining pricing discipline despite the challenging backdrop.
Our aim is to ensure consistency, and these set of results are a testament to this.
Now, let's look at our top-line performance and drivers.
In H1, we delivered a resilient performance with flat organic topline growth.
There was a marked improvement in Q2 across almost all houses and main regions, with a total organic growth of plus 3.5%, of which plus 2% was underlying.
The main drivers of Q2 Topline which due to a positive start to the peak season to spite the ongoing challenging backdrop, has seen in our sellout data outperformance.
We had the recovery of the 10 million Easter timing impact from q1.
We had the recovery of a portion of the $11 million USD logistics delay impact from Q1, with the rest to be recovered in the remainder of the year.
We also had the inclusion of Kovaz into organic, as of May.
Is in the first half and expected to be another 6 million in the second half.
Perimeter and FX impact, largely offset each other in the first half to lead to a total reported Topline growth of Plus 0.3%.
Now, moving on to sellout data, which is ultimately the main focus, our outperformance continued across almost all markets, with acceleration at the start of peak season in Q2.
In the U.S., our outperformance accelerated in the strategic on-premise channel in Q2, with 5% growth versus the sector of negative 2%.
In Q2, Nabkha was plus 1 compared to -3 in the sector.
On the off-premise, while our brands continue to grow positively, the rest of the portfolio, which has a higher weight in this channel, impacted our total growth.
In general across channels, our key Focus Brands espolon and the Aeries drove solid growth ahead of the market.
In a Mia. We also outperformed or in line across all markets with our total Performance Plus 1% versus a market market of negative -2 again with acceleration in Q2.
The UK France and Italy also acceleration.
In Germany where the overall Market is under pressure. We also have the impact of the delisting that I mentioned earlier.
But we have some brands like Sassy, Rosa Cadino, and Aperol Spritz, which continued to grow strongly and bring in new consumers into our franchise, especially in new occasions.
Let's now, look at the Topline growth by regions starting with the Americas.
The organic change in the Americas was minus 1% in the first time with an improving trend of Q2 of plus 4% driven by the US and across other countries.
In the U.S., following the impacts in Q1, we had a positive performance in Q2 of plus 3%, growth on steady days of inventory.
You 2 was driven by double digit growth in both espolon at plus 11% and the app peris at plus 10%.
And this was partially offset by persisting challenges in sky.
And a high base, Ingram Manu.
Jamaica recorded a negative change of -2 in the first half, with a negative -8 in Q2, impacted by a high comparison base of +32% last year.
At the same time, the local market dynamics are very positive and supportive of the core Wray, nephew overproof rum and Magnum tonic wine.
And thanks for the completion of the dunder water treatment facility within 2025.
We expect to have increased capacity and increased resilience against potential weather events starting from 2026.
the rest of the Americas, which makes up the 11% of our group sales continued at solid performance, especially in Q2 with plus 12% growth mainly driven by apperal Sky and the Brazilian brands
Now, moving on to a meal, we recorded a plus 1% growth, outperforming the market.
Mainly driven by our core apparatus business in the UK, France, and the rest of the MIA.
In Italy, we had a resilient performance with a negative 1% change in Q2, reflecting a challenging market with consumers remaining conservative in terms of discretionary spending.
Our all and Campari had a flat Trend while Cino aperol. Spritz and starti Rosa grew, benefiting from convenience Trends and our portfolio approach.
The brand health bar portfolio remains strong and we continue to reinforce the franchise in Italy with increased activations as we'll show you in the rest of the presentation.
In Germany, we saw a moderation in performance with a Q2 change of minus 2%.
here we recognize the market backdrop is challenging, we have a high comparison base as well, plus as I said during the European Alliance negotiations while overall very successful
We did have to forgo 1 retailer to hold the line on pricing.
Excluding this impact, Q2 growth would have been plus 4%, and the first half would have been negative 1%, with most of the impact coming from Aperol.
On a positive note, 30 Roser is now contributing 9% of sales, and it continues to grow very strongly.
This brand, which has only been in Germany until this year, is now being rolled out to other countries like Italy following strong pilot tests. We will share more about this in the future as part of our broader apparatus play.
You too, mainly driven by parties.
The UK performance remains solid, we registered double-digit, underlying growth driven, mainly by aperol, and aperol sprits, as well as kuwasi benefiting, from a new marketing campaign that I'm sure many of you will have seen in London.
Any other countries in air which contribute 16% of our overall sales, there's an acceleration to double-digit growth in Q2 driven by almost all countries.
Especially Global Travel retail, Greece and Belgium.
and the bulk of growth is coming from imperatives and Co
Moving on to our growth, we had a plus 4% growth in the first half in Australia. We experienced a plus 10% growth in the first half, driven by market outperformance in our apparatus, with an ongoing focus on accelerating on-premise activations, as well as the Espolín bottle and RTD, which is now the number one among tequila RTDs.
Wild Turkey, bottle and RCD also contributed to an easy comparison base, and you don't see it on the page.
But also, the sell-out data confirms the trends with solid growth, especially driven by apparel, which grew 24% in the first half.
In the rest of APAC. We saw resilient Trends in Japan, South Korea, China. And New Zealand benefiting from increased focus on Direct markets.
Offset by negative trends in other markets, where we don't have a direct presence.
This is a region where we've recently made Roots Market investments, as you know, and we will progressively see the benefits in the upcoming periods.
Okay, so let's move to looking at the houses and let's start with the house of a priorities.
Here we recorded a 2% growth, marking the first time we have seen an improving trend heading into the peak season.
Apple recorded an improving trend in Q2, supported by growth in both the Americas and Amir.
And if we look at H1 growth, it was mainly driven by the Americas at plus 8%. With a small positive in the US and strong Trend in the rest of the region.
In Amia there was a stable Trend. Italy was flat while Germany got impacted by The Deele listing.
The rest of the mere recorded, plus a 3% growth, is mainly due to the UK, Greece, and other markets.
For Campari, the trend was impacted by the high comparison base in Brazil, despite an 8% growth in the U.S. and a 1% growth in Amir.
Italy remained flat, with recovery in Q2, while Germany was again impacted. However, the rest of the market trended positively, with a growth of 6%, driven by the acceleration of the Spritz trend.
For the remainder of the apparatus portfolio, there was solid acceleration increda with resilient performances across a mere including Italy.
Aperol Spritz has started to gain traction on the back of convenience trends, as consumers expand their consumption into new occasions.
Other apparatus Brands, especially Sati, Rosa continue to grow nicely, and support our leadership position in the operative category.
We also wanted to quickly share the sellout performance of our Parole in this period.
In the US, the strong trajectory is continuing in the Strategic on premise, as well, as in Napa.
Also in the UK and France, we have a strong outperformance with plus 13% and plus 17% growth, respectively, in Q2 in a muted market backdrop.
Italy is growing in line with the category of a higher base, and with encouraging performance in the early peak season.
In Germany. The decline is higher than the category but off a very high comparison base with the prior year and for the reasons I've already explained.
Overall we're encouraged by the improving Trend in early peak season. The weather has been far more supportive this year and it seems to be continuing in Q3 so far.
As I mentioned before we continue to see double-digit growth in smaller markets across the world, giving us confidence in the geographic expansion opportunities.
Okay, in whiskey, the ongoing soft Trend in the core us offset the resilient performance in APAC, especially in court, Australia and South Korea.
As well as are off a small base.
Russell's Reserve has been impacted by product shortages, due to the strong Demand on selected premium variants in this period as its popularity continues.
The positive trend in Jamaican runs continued in Q2 with a plus 5% growth, despite the high comparison base as we cycle through the volatility that the hurricane caused last year.
Line momentum.
Having just seen the business on the ground in Jamaica and talked to many counterparts in government. And in the trade it's clear that this brand is truly part of the DNA of the country.
In the house of agave, there was an improving trend in Espolon in its core U.S. market.
Including recovery of the Q1 logistics delay, the impact led to a solid plus 12% growth in Q2.
Growth was supported by Blanco plus 4 and especially by repo a plus 4 in the first time.
And seating markets also continued to grow off a small base in line with our international expansion plans.
Within the house of Cognac and champagne. The ongoing negative performance in gramegna was driven by The Core US market offer. High comparison base. We are plus 20% for the first half last year.
And it was impacted by q1d stocking and our focus on pricing in a highly competitive market to protect brand equity.
The on-premise, which is core for the brand, has been especially challenging with increased competition.
Good recorded. 62 million euro sales in the first half and was included in our organic growth. As of May,
We've started to support the brand and key markets, like the UK and the US, with interim marketing campaigns. As I mentioned before,
These are being done with a test and learn approach in a challenging category backdrop.
On APAC, the brand strategy is still underway given the volatile external environments. And let me reiterate that it is important to consider this acquisition for the long term. As a category, we are still witnessing challenges, including the impact of significant pricing and promotional competition.
For the rest. I won't comment too much. Just to note that 21% of our overall portfolio is classified as local Brands giving their Geographic concentration.
Sky remains an important part of our portfolio, and Q2 trends are encouraging, with ongoing growth in regions like the Americas and APAC.
As always, I want to also share some of the highlights of our activations, and given the fact that we're entering the peak season, the key focus for us has been purity in this period.
So, let's start with Apple. Some of you will have already seen this, I'm sure.
And, but in mid-May, we launched a new Apple Global campaign, and I wanted to show you the short video here.
It was 1 of our biggest over the last few years, with a launch across 30 countries and immediate budget of over 27 million euros of which about 60% has been spent so far in the season.
despite the short time since its launch in key markets such as Italy in Germany,
We see positive initial signals of consumer traction and impact on brand image.
So we haven't tried this before. We're going to see if this works. So please bear with us. But let's see if we can run the app. Roll video.
Okay, hopefully, that worked. We didn't get to see it, so I'm really hoping it did. Um, Great Piece of campaign and it's been very well received
So on the next page we want to share with you 1 of our more Innovative activations at the beginning of this month. We held an apple serve summer stunts in New York with a fleet of waiters carrying trays of aperol Spritz across Manhattan and Brooklyn to 40 bars with a high engagement rate. This was Amplified online through an influence of partnership with Charlie XCX.
And we didn't stop there.
As always liquid to lips, activations are critical. You don't see it on this page, but we're activating 130 music festivals of Mia which is a 35% increase versus last year. In fact, 5, out of the top, 10 festivals are new additions this year.
In Italy alone, the increases are also significant.
We will activate at 31 music festivals this year compared to only 6 last year.
In the U.S., we continued our partnership with Coachella for the third consecutive year, garnering 88 million social impressions.
That's some of these events. Also testing some new serving solutions to better cater to our customers' needs.
For Campari instead, 2 main highlights of the quarter.
Was our partnership with can film festival for the fourth year in a row.
At the Campari Lounge in the heart of the Paleo Festival, we welcomed over 70 top talents. And while on the beach we hosted exclusive A-list After parties, for the film's premiering during the festival,
The pinnacle of the event was the world premiere of Mad Negroni, Mickelson's reinterpretation of the iconic Negroni.
and you see him in a video on the screen.
The event was amplified online across regions through PR influencers and media activities. The earned media was three times.
What was achieved last year?
The second activation was the Bartender of the Year Awards in Milan.
This event was held at the newly restored, Toto velasca 1 of Milan's, most iconic landmarks, as a tribute to the city's creative spirit.
In the weeks leading up to the event over 50 of Italy's best bars creates exclusive cocktails and gave consumers, a chance to join the celebration and win access to this unique experience with a reach of more than 13 million and extensive media coverage with over 110 articles. This reconfirms our established leadership in the on-premise
Lastly on Cino, our non-alcoholic Spritz. We are ramping up the activations and for the first time ever, cadina went on tour bring its iconic non-alcoholic, Spritz and Italian summer Vibes to consumers in Switzerland. UK Belgium and Austria through its new kiosk format.
Over 20,000 Cino non-alcohol Spritz were served, and the events were further amplified by digital media influencer campaigns and on-premise activations.
On top of this, we launched Cino for the first time in the US during the quarter.
We'll give you updates in the upcoming period also on this. It's still early days, but we're already seeing some positive traction.
So before handing over to Paolo for the P&L and balance sheet section, I'd like to give you an update on our key strategic priorities.
We will hold a strategy session in person on the 6th and 7th of November in Milan, which I hope many of you will be able to attend.
Given the market uncertainty, we've chosen these dates after the Q3 results, where we'll have higher visibility for the upcoming year.
Moving to Cost Containment. You can see that in Q2.
There is a visible slowdown in the pace of SGNA growth.
And we expect the declining trend to start as of Q3.
Therefore, we are on track to achieve our target of 50 basis points benefit on sales in 2025 and a 200 basis points benefit in 3 years.
On portfolio streamlining, we've achieved significant progress with the announced sale of the Chinzo vermouth and sparkling wine business, which made up 2% of our sales and was margin-diluted.
The sale is for $100 million. And on top of this, we have a transition production and distribution agreement, following the close, which will contribute to our perimeter for a period of time.
This sale together with the previously announced disposal of the bottling plant in Australia, and the streamlining of our agency Brands means that we have so far divested. Circa, 3% of our sales, which are at lower profitability.
As a result, the local Brands portfolio share of the total group sales decreased from 25% to 22% on a pro forma basis.
And any additional potential disposals will be based on optimizing the potential proceeds. And I can say that more conversations are ongoing
Okay, I'm going to hand it over to Paulo. Now, Paulo.
Many, thanks, Simon, and hi to everyone. Let's start by looking at our ebit margin Dynamics. In the first half of this year, we recorded a resilient gloss margin, while our discipline approach to structure cost was broadly offset by brand building Investments as we had planned in Q2,
In terms of gross margin, H1 was up 40 basis points, with an acceleration in the second quarter of positive 70 basis points.
This was mainly due to the phasing of input costs and especially agave.
In fact is now above 55%.
Overall, we maintain our guidance for inputs cost benefit of 20 million euro for the year, but the benefits have faced faster into the second quarter of this year.
Our figures now incorporate the first impact of the tariff starting from April of €2 million.
Million euros, assuming EU tariffs are lifted and Canada and Mexico exemptions are maintained, to a maximum of €45 million in fiscal year 2025.
On AMC, we had a step up ahead of the pics season, and we amped to reach 18.8% in Q2.
As Simon mentioned before, this was mainly focused on operative with significant acceleration compared to past years.
Also benefiting from better weather conditions.
The first half figure is a 16.6%. As we continue to invest behind our brains, our full year. Guidance says that 17 to 17.5%
As you all know, our Cost Containment efforts are continuing and becoming more and more visible. In the second quarter we had less than 1% organic as genetic growth in H2. We will start to see a declining Trend in absolute terms. And we confirm our 50 basis point at Christian guidance, on a full year, organic basis.
As a reminder, the full plan sees a 200 basis point improvement over 3 years.
Accordingly. It adjusted was realized that 351.8 million euros in first half.
Within this, there was a positive contribution from perimeter of €1.8 million driven by Poise until April, neck of agency Brands, and an FX impact of €10 million.
which was mainly supported by the devaluation of the Mexican pesos.
Given the current revolution of the currency, we foresee that the negative impact of the weakening of the US dollar in H2 will be around €5 million at the EBIT level.
Let's move on to look at our overall P&L with a few comments.
So far this year, operating adjustments are contained at €10.8 million, mainly driven by the impact of the Australian remote plan disposal in the first quarter of this year that we have already mentioned in the past.
In Q2, the operating adjustments were only €3.8 million.
On financial expenses, we record the 50 million euro uh in the first half and this is on track with our power expectation of 105 to 110 for the full year.
The increased versus for staff. 2024 was driven by the higher average. Net debt of 2.4 billion versus 1.9 billion last year.
For the average cost of net debt, which is at 4.3% versus 3.7% in the first half of last year, we need to remember that last year's figure was artificially low, given cash at 10 ahead of the closing.
Uh, cash coming from the rights issue.
Adjusted. The first half, 2024 would have been 4%, which indicates a relatively flat Trend in financial expenses and and coupon.
The recurring tax rate is relatively stable at 29.2%, with a decline of 10 basis points versus the first half of 2024.
Whilst the recurring cash tax tax rate is at 26.9%.
On cash flow. The positive trend remains in place also positively impacted
By a bit, the growth was 5% on a reported basis and 2% recurring.
Recurring cash flows from operating activities before operating working capital organic change is stable at €397 million.
This means that conversion before operating working capital change is at 71%. So, it's a very high conversion rate.
In the same period, recurring free cash flow is at $113 million, down only $18 million versus the previous task. For 2024, recurring free cash flow conversion is at 27%.
on the reported free cash flow. We are at 35 million positive versus a negative 60 million. In first half last year, this figure includes extraordinary. Capitals of 39 million million related to the capacity expansion program and ESG initiatives.
I will mention more on this on the next page.
Therefore, you can see that we maintain our cash generative profile as we guided in past calls, operating working, capital trend has stabilized and will continue to be relatively stable.
I will finish this page to summarize the evolution of our balance sheet key indicators.
Capital as a percentage of net sales down from 59% in first half last year, to 51% this year.
Here. Seasonal trends are important to remember, given operating working capital buildup for peak season amounting to €187 million this year.
Last year, there was also the impact of the safety stock buildup ahead of the opening of the novel League's plans for expansion.
Compared to the end of 2024, we see some increase which is related to the buildup of finished goods, Safety stock in the US ahead of tariffs.
On capex, maintenance capex is at 3% of sales, relatively in line with the envisaged run rate of 4% for the full year.
On Extraordinary Complex, our capacity expansion plan is continuing but will end at the end of this year, with a tail of €160 million in the second half of this year.
And reaching a total of $200 million in the full year. The 2025 last year base was higher, mainly due to the one-off acquisition of that quarter building.
I mentioned already cash flow, so I will not go into details here. Instead on Leverage. We are at 3.2 times versus 3.5 times after the closing of the acquisition in May last year,
As we progress, our Target is to improve this ratio further.
Net financial debt is at $2.4 billion, which is relatively stable versus December last year.
And with that, I will hand back over to Simon for the guidance.
Great. Thanks very much Paulo.
Um I started this year by saying it was going to be a transition year and this was based on our view that cyclical pressures would persist. In fact our crystal ball seemed to be bang on
And the environment is one of the most complex that any of us has gone through in certainly recent memory, and there is still very low visibility.
It's early days, but we do see some encouraging signs with improvement in sellout in almost all of our key markets and our continuing outperformance versus the sector and our peers.
For us, the Q3 peak season, performance will be fundamental for clearer visibility for the full year.
How am I putting all the necessary measures in place to make sure that we're well positioned?
As a result, we continue to remain prudent with focus on what we can control. And as you've seen, we are delivering against what we told you, we would
For the full year, how previously provided guidance remains the same?
This means moderate organic Topline growth and flattish ebit adjusted margin before tariff impact.
As a reminder, currently in the first half, we have flat top lines and negative 130 basis points EBIT, adjusted margin.
Recognizing the benefits, we expect to flow through in the second half. We see no reason to change our guidance.
The potential impacts from tariffs are not included in the guidance. I just mentioned, in fact, on tariffs, there is still uncertainty, as there has been for the last four months.
And the expected negative EBITDA impact in the 2025 year ranges, as you've heard, is from approximately $4 million up to, depending on the assumptions, $45 million.
And that is, if Europe is set at 15% and the exemption of Mexico is removed.
So we recognize it is difficult to forecast this, but we respond as quickly as we get the information that you do.
Regarding FX, The weakening of the US dollar may post some potential additional negative impact for the second half of the Year. While perimeter impact is expected to be negligible
Regarding the medium- to long-term outlook, we confirm our previous guidance. We are confident about the future.
As I mentioned before, we will come back to the market with more details at the beginning of November in a dedicated session after we get through Q3.
So to summarize the first half where maintaining our guidance?
Uh, for the year why we progress as plan in the key areas?
We've got continued relative outperformance. In sellout, we continue to manage the de-lever trends. We continue the deceleration in SG&A growth. Focus on commercial excellence and pricing discipline, and we continue to streamline the portfolio.
So, let's close there. Now we'll open the floor up to any questions. Thank you.
So, session, anyone who wishes to ask a question may press *1 on the touch tone telephone.
To remove yourself from the question queue, please press star and 2.
Questions.
Anyone who has a question may press star. At this time, we will pause for a moment as participants are joining the queue.
First question is from Sandra Aila, UBS.
Hey, Simon. Paulo, a couple of questions from me, please. Um, firstly on the U.S. Can you just talk a little bit more about where you are on inventory levels? I think you called out destocking on Gramin. Are there any other brands in the portfolio where you feel inventory levels are out of sync with the current rate of sellout? And, just on that, would you expect selling out to be aligned in the U.S. as we look into the second half of the year?
Uh, my second question is on Italy. Can you just talk a little bit more about what you're seeing in the on-trade channels, specifically? I think you highlighted very well the off-trade channel trends, but I would love to get your take on the on-trade, what you see in there in Q2 and at the start of Q3, please. And just maybe a broader comment on the on-trade channel in the rest of Europe. Thank you.
Hi Sandy. Yeah, I'm very happy to um, look in terms of the dois in in the US, uh, have a podcast on this is we're staying flat. We didn't increase any inventory. I know some of our peers did uh, in our first half, our numbers are are broadly flat on on where we finish out the year. I think on growman, to be honest with you, we've got some challenging trends at the moment, so we're probably going to be a little heavier, but we're not building. Lots of inventory on that.
Uh, our focus is really just executing in the on-premise, really getting behind the Grand Margarita during this season and driving the hell out of it.
Um, more generally in terms of our forecasts and the way we look at it is that you know, ultimately ships and dips, uh are aligned is the forecasting that we look at. So from that point of view, we don't want to be building wholesaler inventories. You know, we want to a consistent uh, performance flowing through uh, flowing through the whole value chain.
I think in Italy on the entrée.
Um, we possibly encouraged by what we're seeing in the on trade.
A couple of things. And this is maybe, it's we're seeing it in Italy, but we're seeing it more generally across both the U.S. and across America.
As the teams are out in the entree, they're hearing, that traffic numbers are actually quite positive. There's some research that's been done. That says 21% of people are encouraged to go out more whereas only 9% want to go out less. So there's a positive swing in that for what we are finding is why people are going out and traffic numbers are up that they are definitely uh affected by the economic situation in a number of these countries. If you take the savings rate across Europe, we're seeing less disposable income going into into the entree as people moderate their spend in the cycle that we're in.
And so as part of that, if you imagine, you know, if you go out and you have 2 drinks instead of 3, that may not sound like very much, but when you roll that into a demand signal for a business like ours in Italy, it's a fairly big shift, just simply based on someone saying, you know, I'm only going to spend money on 2 drinks instead of 3. So I don't believe there's any on the brand side or fundamental on it. This is purely around economics and I think we will come out the other side of it.
Very good. Thank you.
Next question is from Simon Hills.
Ah, thank you. Uh, good evening, Simon. Hi Paulo. Um, so just a couple for me, please. Um, sorry, can I just sort of follow up on some of your comments? Generally about the accelerating Trends? I think we saw in many markets in Q2, particularly as you referenced in Italy and the us, could you just provide a little bit more color, perhaps to how the quarter developed itself. But if you could talk to maybe some of the exit rates, what you saw in June, when we were seeing some of that better weather finally uh, sort of picking up in Europe and how is that translated uh in those sort of directly into the early July positive trading uh you sort of referenced? Uh and then just secondly just to just a quick 1 on the US Logistics issue which obviously hit q1 and you got back most of it. I think you said in in Q2 uh, how much is left to sort of flow through in Q3 please.
Sure. Hi Simon. Um,
I mean, I think, in terms of the, the overall uh, Improvement in Trends. I mean the key thing for me is the, is the outperformance. We all know, it's a tricky Market. We know consumers are are being cautious on how they're spending.
Confidence heading, uh, heading to a Q2. In addition to that, as I said in the uh, in the prepared remarks, we've got, you know, over 13 countries that are growing double digit. And to be honest, I don't see many of our competitors doing that at the moment. So gives me a lot of confidence in terms of what we've got and how we're executing.
I think, in terms of the shape of the, uh, development through Q2. Um, clearly June was a big peak, we saw the weather improved, we saw the launch of the new campaign and a lot of our A&P that Paro was talking about that up to really kicks in, in June. So I think through June and then, you know, I I think that was at the, the start of some positive Trends and we've seen those positive Trends continuing into the beginning of Q3.
um,
What's the second one on logistics? I believe, uh, yeah, I'm in logistics. Yeah, I mean, in terms of there's some delay that we had inverted. Now, looking at how do we recover that in the second half? We think we've got about, you know, five or six foot back in the first half, and we need to recover the same again. In some cases, I think I mentioned, we had some glass supply on American Honey, where we did actually hit out of stocks. So that's more difficult for us to recover. But on the other ones, I'm confident that we'll be covering that in the second half.
Got it. Thank you.
question is from,
Bank of America.
Yes. Um, hi. Hi Simon and Paulo.
So firstly, just a broad question on how you see sort of the next next few months? I mean, um, Q2 was, I mean, very solid. Um, even when you exclude the technical effects including visibility is still poor, you said you'll have better visibility at the end of of Q3. But when you, um, yes, when you think geographically, what are you more or less, less confident on, I mean, in Italy, you've got an easy comp. Now, in Q3 given also the, the the, the stocking. And how are sort of wholesalers feeling in Italy after what happened last last year? When they were caught out, there was a lot of dinging in, in queue, in Q3 last year. So, regionally, where is your level of confidence? Then I just wanted to ask something please to to power or about, um, about tariffs and potential mitigation, if we take the probably the main tower if uh, us to us to Europe. Assuming that 15%, I think um, I think you said 20 million
An impact we would be seeing for this year, and then a $35 million annualized that is before any mitigation. How much do you reckon you could potentially mitigate of this? And if I may squeeze in another quick one, please, it's on S. Rosa, which you're rolling out more. So how are you thinking about the timing of going into new markets, the pace of that, and how you're sort of positioning it? Is it more of a female skew? How is it different from the rest? Thank you.
So, in terms of the conference from a geographic point of view, as you've seen in this first half, we've seen some good growth across most of our major markets, and our performance across most of our markets.
we're hoping the support for the brand, they're seeing that they're seeing a new TV campaign and I think, you know, just with their encouraged by what they're seeing in terms of the execution and the on-premise
I think if we jump over to the other side of the Atlantic, look, it's...
It's still highly volatile. Um, you know, we all are trying to predict what's going to be next. So let's be honest it's uh it's pretty difficult to do that.
So, the impact that has on consumer behavior in that uncertain environment. Again, as I said in the on premise is still, I think people are going out, but there may be going out a little less as a result of the concern around employment, the impact of tariffs inflation coming through and just for the geopolitical impact. So it's I wouldn't say there's a a region. I'm more confident or less confident on what I'm looking at is really what the consumers are doing and making sure that we're executing brilliantly. So when they are out, their first choice is 1 of Our Brands
to pilate, do you have to be a? Yeah. Yeah, you know, the 15%, you know, the number is correct is, uh, you know, if confirmed, you know, because it seems that there are ongoing ongoing negotiations, still, for this year is 20 million and, uh, you know, 75 million for a, for next year. So basically the potential of sites might be just, you know, 2 of them 1 is, uh, you know, production Deo in the US. But, you know, in a in a very, you know, volatile, uh, you know, environment where when every other day there is a new news on on tariffs, you will not planning, you know, any any movement
That respect, which would in any case take you, you know, you know,
Time to be implemented. Why say, you know, the second measure, you know, might be a price increase, but given, you know, the current, you know, environment in the U.S. of, you know, relatively low consumer confidence and, uh, and uh, contained disposable income, we’re not, you know, uh,
Thinking at this stage to, uh, take, you know, a price in a meaningful manner, in your 2025, then 2026 will see,
Okay, so yeah, sorry. No, just finish on that. So those numbers that you're giving in the short term, they are, I mean, the gross numbers. But that would probably not be far away from the impact you get in the short term if those terrorists are concerned, then.
yeah, in the short term the impact is is as big as you know, the the amount of the targets that we have highlighted
Thanks and 1 1 of the areas on that. And I think it's this is quite important is actually the tariffs is only 1 part of the story from a consumer point of view. But the current devaluation of the dollar means that if you're running out of 10 or 15 or 20% or or whatever, the Tariff range is you've then got a negative FX impact on it as well, which means that the ability to offset some of this is quite Limited.
Um, yeah. But in answering your question on SI, we're really encouraged by what we're seeing at the moment. It is at a premium price. Um, you know, it is a fantastic exotic liquid in terms of passion fruit and blood orange, and, of course, it's bright pink. Um, so it's not skewed towards, uh, females; it's skewed towards the people that enjoy the exotic taste of Sati with a brand that, increasingly, we're building more and more relevance with. So, we're in Italy, we're in Germany, we're in France, we're in the UK. Uh, and you know, we're just getting going with it. But so far, it's pretty encouraging because it is absolutely incremental to what we're seeing within that Spritz segment.
Great. Thank you.
Next question is from Mitch Colette, Deutsche Bank.
Thanks. Uh,
Hi Simon, hi Paulo. Uh, at the 4-year results, um,
Way back at the start of the, I think you had a line in your guidance about an improving trend.
In the second half of the year. And I, I don't think that's in today. So, I just wondered is that because the 1 H was, was a bit better than you thought or or perhaps is there, you know, because of limited visibility tough market conditions. Are there reasons why maybe you're a bit more cautious now than than you were then? Uh, and then, I guess, I hear a bit in the industry press about, um, the spaghetti. Uh, and I wondered what your thoughts were on that. It's not a new cocktail, but is that a good way for people to consume apple? Is that some
Then you're optimistic about going forward, or is it broadly irrelevant? Thank you.
Sure. I mean, I think in terms of the Improvement in the second half I think look generally I think you know the entire industry is hopeful for that. Given the fact it's been a pretty bumpy, uh, 12 months for the whole industry. I think, in terms of our guidance, I think it's in there. We still believe that we'll see an improvement in the second, half driven by some of the margin accretion that will come through the sgna savings. We've already indicated
As well, we have our core range that works really, really well. Um, you know, one of the things on this is that the bartenders get behind it; they support it because they see what we do and then continue to experiment. So that's one of several different versions that we've seen. And, uh, you know, we'll see how it develops.
Great, thank you very much.
Next question is from.
Elder.
Jeffries.
Evening Simon Paulo. Um I've got 3 brand questions, if that's okay. Um the first is on April, with your new campaign, I was hoping to sort of get a bit more context and sort of what you're hoping to achieve through it. What type of sort of fresh thinking? Are you hoping to bring to the brand? You know, clearly Apple's got very strong brand Equity. What is it that you're sort of hoping to achieve, um, you know, through that campaign. Um, the second is on K, we saw some growth within the UK, uh, with the new marketing campaign. You know, again, what's behind that. Is that a brand, refresh is a packaging. What what are the sort of attributes? You're trying to get, um, behind that Simon. And then the third 1, um, is on cadino and this other apparatus category that's seeing very strong growth could have some pick sort of, which, um, you know what your growth rates within that. Is it or cadino? Is it sat in Rossa? Or is it the, the RTD, um, Apple Spritz? What what is it? That's really driving that growth?
Sure. I mean, starting off with a new campaign, this is the first time that I think we've gone out and really used the campaign to show the occasion. So, this is about driving relevance frequency, and really championing the occasion that is uniquely Italian, but aspirational, even if you're not Italian, and I think that was the key message. We were trying to get through the, we put in some new rigorous testing, uh, now on all of our advertising, and this ad tested extremely well in terms of relevance, uh, and in terms of brand fit. So from that point of view, we're very confident, which is why we doubled down on, on 27 million spend behind it, which let's be honest, it's not an insignificant amount of money.
Um, so, I think from that point of view, it's very keen on it. The key thing on this is, we'll then see what we learned from it. As we finish the campaign through the peak season, but as I said in my comments, I think you know the response to it has been very positive and on certainly on some of our social media tracking, we've seen some good good, uh uh support for it coming through on that side.
Um, secondly on was he in the UK? As we said that when we acquired the brand and my comments, back at the beginning of the year, you know, this is something that's going to take some time. We are operating in a category that has seen its 2, biggest markets us and, uh, and China have an extremely tough time. And so we are testing some different interim, marketing campaigns. So we have 1 in the US at a slightly different than we, we're testing in, in the UK. And but what it is giving us is, it's giving us some, some noise and support for the brand that the brand really hasn't had very much and
And as a result I think we're seeing some positive response and just enthusiasm for what is a much-loved brand in the UK? Getting some attention again? So I think that is what is really helping their
And we'll take the learnings from those 2 campaigns as we shape the broader reset that we're still working on given how Dynamic the category is. And also making sure what we come up with is truly ownable by the brand and different from the category.
Um, I think the final one is in terms of the growth on the other properties.
There are 3. Uh,
Oh, three brands that are really driving it. Now, um, number one is Driving a Darty. It's now 9% of our sales in Germany and continues to see double and triple-digit growth in many of the markets it's in.
We've seen a positive response behind Apperal Spritz, where we've noticed a shift towards that convenient format, opening up new occasions. I think the latest numbers, off the top of my head, are running at plus 18%. To give you an idea, you're seeing a bit of a switch. Another angle to the overall brand is playing in occasions where we haven't been able to compete in that convenience space. The third aspect has been Cordino, where we've seen a positive response in Italy to some of the TV campaigns we've been running there, as well as a positive response to the launch into new markets, where the non-alcoholic Spritz and the unique liquid that we have with Cordino are starting to build traction.
Thank you.
Next question is from Trevor Sterling benstein.
Hi Simon and Paulo my detailed questions have been answered because everyone overall question, Simon. They're compared to 3 months ago when you last talked to us, um, what has gone better than you expected of the last 3 months. And what's gone worse? What's disappointed? You
Better targeted and executing better than as I understand it. We've ever done before and I think that's what really gives me some enthusiasm behind it. It's also, I think
Realizing the potential that we have with this portfolio and actually seeing how, when we start getting other consumers introduced to it—whether that's in Australia with a plus 24% growth, or in Thailand, or in South Africa, or in Argentina—you’re seeing a universal appeal for what it is we do. And that, for me, is really pretty exciting.
And that's particularly on apparel when you refer to that.
Yes, it would be but also as, as I said, the growth that we've seen on SI on cadino on the apperal Spritz as well. And also on Campari, I mean, I think so. From that side, I think it's been very positive. I think the fact that we're holding pricing discipline on espolon on repo is important, um, it would be very easy to follow some other people down on that and we don't think that's the right way to go. We are a company that wants to take a long-term View and and really it takes a long time to get those prices up. And so, we want to hold that pricing as long as we can in a very competitive environment.
Um, I think the worst thing at the moment would probably be the volatility that we're still seeing because of the result of geopolitical events and also the impact it has on consumer confidence and people getting out. I think we are seeing people going out, but it's, as I said earlier, it's just seeing a more discretionary spend when they are out. And we're hearing this from the entry, we're hearing this from Russ.
Restaurants, uh, and as a result, that it's just a bit different.
Super, thank you very much. Sorry. It's also the uncertainty of terrorists trouble, which again keeps going up and down as I know all of you will be modeling this, you know, every week, something changes. So I think, uh, hopefully we are, we're starting to get to something that uh, eventually we all know what it is and we can then plan around. But it's it is quite disruptive
Super. Thanks very much Simon.
Thanks.
Next question is from Javier Gonzalez, Lastra Bamberg.
Yeah, good evening. Um, I had one question on agave. I was hoping you could help us understand better how much of the benefits from lower agave prices are already in the base and how much is still to come as supply contracts continue to roll over.
And uh link to that, um, are you are you reassessing your self-sufficiency ratios? Now that I got the prices have come down and I guess the value of land is probably reflecting that. Thank you.
Yeah. On the yeah, on the Agave price with, you know, originally gathered the market towards, you know, potential uh you know, till end effect of, you know, 20 million euros for year 2025, you know, due to
Uh, uh, the, you know, the I have a spot price coming down below well below, you know, the 10 pesos per kilo. Uh, you know, the, you know the point, uh, you know, I made is, you know, the phasing of that benefit that is more, you know, front loaded that we thought. And we've seen that in the in the gross margin expansion of uh of the second quarter of this year. Uh but you know that said you know, we we confirm, you know, the original guidance of that of those, you know. Uh uh 20 uh 20 million euros uh with you know, clearly you know, on the other end uh you know a risk there is more than a risk due to, you know, the dies, which now it seems uh being you know, defined at 15% on on EU Imports and and Mexican Canada to be to be understood.
And uh, and the other thing is that, you know, clearly, you know the third quarter of of the year is still a quarter. That is extremely important for the operatives, which, you know, has, you know, opportunities and risks uh, in sitting in that this Aid, the sales mix. So uh, you know, uh, so basically, the point is that there's no, um, there's no, uh, change in Guidance with a V, what we've announced 3 months ago,
Um, you know, price, you know, stays, you know, very, very low. Uh, for the coming year, there might be, you know, a minor, you know, tail end effect of that. Uh, but we need to, to, to understand how, you know, the current negotiations with, with, with the local suppliers, uh, you know, would, uh, would end up by our end. There will be, you know, more precise with the 2026.
yeah, and the the second part of the question,
On the self-sufficiency ratio.
On on the line. We're, uh, you know, we're, uh, we're, uh, we're in a good spot. I mean, it's I think it's, uh, it's a buyer's market. So, you know, it's, uh, it's a market where, uh, you know, we have access to
To what we need.
Thank you.
Next question.
From Lauren.
Barklay.
Good evening Simon and Paula. Thanks very much for the question a couple from me if that's okay. Uh I remember historically in Italy, Whenever there was a sort of economic weakness and consumers felt somewhat weak. Um, it was it was often said that Aero would benefit because people would use the sort of apparatus moment to have Tapas. And that was almost a affordable way to getting some food without having to go to a restaurant. I, I suppose at the moment, we don't seem to be seeing that effect with sales, in Italy, still relatively weak. Um, despite that economic circumstances, I'm just wondering if you you think that's a story still holds. Do you think apple or in Italy is the beneficiary in Economic Times for that reason? Or do you think that's probably perhaps a little bit old now?
Uh, and then secondly just on Chinanu, just wondering your rationale for selling that brand. Of course, it can be used as a key ingredient in one of your core cocktails. I'm just thinking about if there are any other brands or how you're considering disposals going forward. What would the criteria be for any future disposals? Thank you.
Sure Lawrence, I mean I think you look in terms of Italy, I'm not sure. I I quite see the the the a driving Trend in terms of, you know, tough economic environments and our problem. And tap us, I think some people will do that without a doubt that there be some people that are doing it. But I don't think that's going to be 1 of the driving trends of the performance of seeing an app role. But, um, I'm sure there is some of that behavior going on. Um, in terms of your question around shinano, look as a set up front, look the priority on this is that. Yeah, we want to deliver and we want to streamline the portfolio. So by going down to the disposal route, we allowed allows us to do both things that and not only is it in terms of the the cash contribution that by streamlining. We can, we can get that our leverage down. It's also the sheer complexity that we have with a portfolio that most of the brands that we're looking at how significantly margins are eluted.
In terms of having a brand that is one of the key ingredients in a spritz, there are also a lot of other brands that we work with in different markets around the world. So we didn't see that as a key reason to keep the brand for a geographic expansion point of view.
You got some coal markets on it, that didn't really help us with some of our other Ambitions and we found a great home for the brand with someone who are passionately, build it, uh, and take it forward. So we think it's actually a really good fit and ultimately on this while it's got an impact on the top line, it was significantly margined diluted as well.
So in terms of looking at the other brands, there are Brands out portfolio that would have similar uh, roles. And unless we can see real Global potential margin accretion or development of margin increasing or a strategic role for the brand. Then we're looking at it saying, okay? Some of the brands that we've acquired in the past were bought for a particular reason to give us strength in route to Market or something like that and as the group has grown and it's just those who become less important in terms of the role that they play. And so, that's really what we're looking at. Chenzo is absolutely an example of that where it was bought as a route to Market Enabler for the rest of the portfolio way back. Um, and so really, it's looking at Brands like that and saying, which ones are potentially do better in someone else's portfolio.
That's really clear. Simon, thank you very much.
Peter Redbarn.
Yeah, thank you, Simon, and Pallet, and questions on Call Vier and how that's playing out through the business. If I look at the disclosure on the House of Conac and champagne,
Yeah, I think I'll hand over to Paula in a second in terms of the specific question, but I think look ultimately on K. We got to recognize, this is a brand that has not had a whole lot of attention in nearly 20 years and so where we are starting to do stuff. We see a positive reaction to it. It's a brand that has got fantastic liquid. It's, you know, got a great Providence and but a lot of the, uh, consumers don't know that much about it. And so we've got work to do on it. So Paula, do you want to um do you want to take the uh the question around? How much was in the first half and and second half?
Yes. Yeah. I mean the organic growth due to grow is €1,450 million.
uh, you know, clearly, you know, based on on a very low base, as you know, last year, uh, you know, the the first time consolidation of of, of was
you know, led to a very soft start to
Uh, to the year. Uh,
In H2, you know, I think, uh, I mean, we're not planning, you know, passive, you know, organic growth on, on Burr, was it?
Um,
And then there is, I think a question V, you know, that the business model of, of houses of of cognac, which is, you know, quite intensive in terms of capital, uh, needs. I mean this is, you know, structural to the to the house. Yeah. Clearly as we
You know, we we, we finalized the strategy on on and we will better Define, uh, with you know, long-term forecasting. The the needs for the brand we will uh, uh, we took an adjust, the, you know, the the Aging liquid profile. Uh, you know, that said we do not Envision at this stage, you know, significant changes. Uh, Visa V, you know, uh,
Aging liquid inventory on on.
We said, Chris, I mean, ultimately, on this, this is a long-term play. You know this is going to take time. It has not had a whole lot of attention, and so on. On one side, you could see it getting a lift pretty quickly. But this is a category that is also pretty tricky at the moment, particularly if we consider what's going on with some of the pricing and some of the key markets.
Um and so I think in in answering your question, what am I what am I working on? Um yes that's part of it a big area of focus for the last 3 months has been looking at the portfolio understanding they're into relationship between the brands.
Uh, working with the team to develop a new strategy, which would, you know, be keen to take you through more in November. Uh, looking at the geographic expansion opportunities, the penetration opportunities in major markets. Now, looking at the team and then also looking at the culture, which is for me, one of the big things that really does make Campari unique. We have an amazing team of Camparistas who are passionate in a way I haven't seen in the four other companies I've worked at in this industry. So, what's taking my time in the world is putting all that together to say, alright, how are we going to win?
What does it look like? And where are we going?
Thank you.
Hi, good evening, Simon Dean powder. Just 1 question from me. Um you just talked about your strong um, competitive performance um in the US but obviously the industry is still um quite challenging. So I just wondering if you could, um,
Talk us through what you're seeing from uh, competitive and promotional dynamic in the in the, in the market. Um, have you seen any significant change sequentially versus q1? Thank you.
Hi John. Um, I think ultimately on this.
It is a very competitive environment at the moment, as you know, as you will have heard from our competitors. You know, whether the market is not growing and it's flat or slightly declining, then everyone's having to. It's it's a market share fight. And as a result, you're going to see people that are taking very short-term decisions, around aggressively going after volume and people like us that are going to be more balanced. In terms of saying, we will promote when we need to promote for our consumers. But ultimately on this, we don't want to simply try and hit the volume Target. We want to keep the the value in the brands that the team has successfully built up over many years.
So I think, look, if I take an example, let's say tequila in the U.S. at the moment, we're seeing a pretty aggressive pricing going on in Blanco. Um, and you're seeing a number of people get very aggressive. We are not; we're dipping in where we need to in certain states and certain channels. But we're also holding pricing discipline in repo, and we're still holding, and we're still getting the volume growth. So with all these things, I think there's always a bit of a balance. Um, but I think the thing that price separates, what we're doing is I think the benefit of our shareholder structure is we take a long-term view. It's taken a long time for us to get to some of these price points, and we're not going to give it up just because it's a cyclical impact that's economically driven in the U.S.
next question is from Paola Carboni, equita Sim
Yes. Hello. Good afternoon everybody. Um, I have a couple of question, the first 1 is about codino. Uh, if you can elaborate a little bit more on your uh expansion strategy and particular the format uh you are proposing on the different Market. I mean, from an Italian uh base. Let's say I keep seeing the small, the small format but I was wondering uh uh What uh is embracing the other markets and if anything is going to to change in Italy as well and also what's your strategy for the US market? Um how have your position, the brand? And whether uh you're going to follow something similar to the uh 3 stages, penetration of Apple, for example or focusing just on uh uh specific cities and so on. And the second question is instead on your um,
Encouraging messages about the start of the big season, um, with the parative, uh uh especially in Na and in Italy. Um just I mean to um a bit more color of uh I mean what you are seeing in terms of selling but also sell out and whether um you feel trade is building up inventory because of uh good weather, because of uh uh I mean of of of fully uh a better season.
And then, in the last couple of years, there has also been, let's say, a good start to the season in terms of sellout. Thank you very much.
Uh ba uh, yeah, I mean, I think look with Cino what we're doing at this stage is we're learning. Uh, what we've seen is the fact that the uh the brand has this amazing Heritage, you know, longer than pretty much. Any other non-alcoholic product by a long way with 1965 and it's amazing. Uh, Italian Heritage that we know as aspirational. And so we've been building on that and learning what is the right way for us to take this out of it, home markets, uh, and really start expanding it. So, we've seen some positive Trends in the UK. We've also, as we've recently launched, as I said this quarter into the US, um, it's a 17.5 size as we as what we've run with and really, we're testing and small stages and we're learning. Um, so we don't have a full growth model like we do on April yet. Um, but that's something that we're going to continue to learn from as as uh, as we roll the brand out.
The non-alcoholic space, as you know, is a learning curve for everyone. As a result, we're seeing how this fits in, what are the occasions consumers are looking for, and what we need to do to really leverage what is a truly unique equity within the non-alcoholic space. No one has anything like this, and so we think it's got legs for the long term.
Um I think the second question around uh peak season selling versus sellout. I mean as I said earlier the the uh performance in Italy for Campari group generally is plus 3% uh in a sector that was flat to declining. So we continue to outperform and we're seeing that really pull through uh in into the important on premise. Um so I think for a sell and sell out we're seeing matching, I'm not going to comment on July. Um but certainly through June, uh there were the trends that we saw.
Thank you very much.
For any further questions, please press *N1 on your telephone.
Mr. Hunt, Mr. Magazine, there are no more questions registered at this time.
Okay, fantastic. Well, thank you very much for all your time. Uh, we hope that we'll be able to see many of you in November. Um, but in the meantime, have any other follow-up questions. Please get in touch with the our team directly. Um but thank you for your time.
Bye.
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