Campari – Equity Research (Initial Coverage)

Introduction to Campari

Campari is the sixth-largest player worldwide in the global premium spirits industry. Among its more than 20 brands, Campari, SKYY Vodka, Grand Marnier, Courvoisier or the emerging Espolón tequila or its star brand, Aperol, stand out.

Since its IPO in 2001 it has managed to multiply its revenues and EBITDA 6x (Revenues 494 to €3Bn, EBITDA 105 to €0.65Bn) as a result of a strategy that has combined the acquisition of more than 30 companies since 1995 and its organic growth with brands such as Aperol going from a turnover of just €25 million in 2003 (acquisition) to more than €700MM today. or Tequila Espolón, which since 2009 (acquisition) has gone from invoicing just €10MM to almost €300MM today.

However, Campari’s last 18 months have been very complicated, not only with the contraction in demand that the entire sector is suffering but also with the farewell to its emblematic CEO (Kunze-Concewitz) who had been in his position since 2007 (and who, as we will see later, together with the founder of Campari and his son Davide, had become the third most important in the history of this brand), with the resignation of his successor (just 6 months after starting in office), with the acquisition of Courvoisier for almost €1.3Bn (which today, seems clearly surpassed) or with some scandals surrounding the Family Office of its Chairman, Luca Garavoglia (who is taking advantage of the situation by buying millions of shares)

All this has led to a 60% drop in the share price in this period of time, leaving it at a price of 14x EV/EBITDA, something that has not happened since 2015. This multiple represents a slight premium over its peers Diageo, Pernod Ricard… will present worse numbers than in 2023, while Campari thanks in large part to its Aperol and Espolón brands) continues to grow in sales in 2024 and maintain its EBITDA compared to 2023.

Today we present one of our most in-depth analysis in which we have been working since November. Our objective is to identify if we are facing a historic investment opportunity or if the fall and rerating is justified based on aspects that are not seen at first glance.

We cover:

• Explanation of the Beverage producing business and the distinctions between the processes and economics of the different types of alcohol.
• Detailed analysis of Campari’s main brands, strategy, and business model (Marketing, distribution, M&A,…)
• Comparative analysis (for each beverage brand) with its main competitors (Diageo, Pernod Ricard,…) in terms of growth, economics,…
• Detailed analysis of its finances, debt, and capital allocation.
• Valuation and Spreadsheet with all the information used in this analysis (tons of data, not only of Campari but its peers)

Honestly, a masterpiece.