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Tough Vodka Market Weighs On Campari's Q1 Sales

By Dave Simpson

A tough market for vodka and weak demand in Brazil hit Campari's sales in the first quarter although it benefited from the growing popularity of its Aperol liqueur.

Aperol, once a niche product sold mostly in northern Italy, is now the Italian drinks' group's best performer, enjoying strong demand in Europe and rising sales in the United States.

The world's sixth largest spirits company also reported solid sales of its eponymous red bitter, Grand Marnier liqueur and Wild Turkey bourbon. But a difficult market for its SKYY vodka brand globally amid tough competition from New Amsterdam and Tito's brands in the United States, as well as weak demand in Russia for sparkling wines and Cinzano, meant its total sales rose just 2.2% in January-March, excluding forex swings and M&A activity.

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That marked a slowdown from a 5.7% increase in the same period last year.

Soft demand in Brazil also dented sales of Sagabita cachaca.

"Negative impacts were magnified by a small first quarter, which accounts for only 20 percent of yearly sales," CEO Bob Kunze-Concewitz told analysts on a post-results conference call on Tuesday.

On a reported basis, first-quarter sales fell 8.2% to €336 million, slightly below a Reuters SmartEstimate of €341 million.

"Looking into 2018, our outlook remains fairly unchanged and balanced in a still uncertain macroeconomic scenario for some emerging markets," Kunze-Concewitz said.

The group confirmed its expectation that its gross profit margin would grow by around 60 basis points this year, half the margin expansion seen over the next few years and partly dented by an increase in the prices of agave syrup, a key ingredient for tequila.

"A gross margin expansion of 120 basis points can be considered as a cruise speed for coming years," Chief Financial Officer Paolo Marchesini told analysts.

Marchesini also underlined a reduction in debt, to €939 million from €982 million at the end of 2017, which could open the way for new M&A activity in the future.

News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition. 

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