Gruppo Campari CEO: rum lacks ‘SWA’ equivalent

Gruppo Campari CEO Bob Kunze-Concewitz discusses deseasonalising Aperol, the staying power of the classic cocktail and the lack of a “Caribbean rum authority”.

Gruppo Campari CEO Bob Kunze-Concewitz

*This article was published in the August 2016 edition of The Spirits Business

“Oh, that’s looking back, I usually look forward,” asserts Bob Kunze-Concewitz, Gruppo Campari CEO, early on in our interview. I’d just asked him about the company’s 2015/16 fiscal year results, which, released on 1 March, now feel like a lifetime ago.

Since then, the world’s sixth-largest premium spirits company has moved to acquire the parent company of Grand Marnier, Société des Produits Marnier Lapostolle (SPML), and released a swathe of new product development, including a brand new spiced rum. With that pace of change, it’s no surprise the straight-talking, thoroughly modern CEO, who regularly checks in with bartenders and uses Instagram to track trends, is reluctant to unnecessarily dwell on the past.

Kunze-Concewitz joined the Italian spirits group in 2005; the then-local firm was stalking the luxury goods and prestige fragrances arena for a CMO to come aboard and spearhead growth. After 15 years as marketing director for the beauty care division at Procter & Gamble, Kunze-Concewitz fit the bill and made the move into spirits.

He was named CEO in May 2007, and it’s clear that Gruppo Campari’s transformation is directly attributable to his vision. Sales have bloomed from the consolidated €957.5 million reported for the 2007 calendar year to €1.66bn in fiscal 2015/16.

It’s not just sales – Kunze-Concewitz has driven efficiency too. A restructure played out over the past seven years has seen the company’s architecture shift from five in-market countries to 19. One of the more recent pieces of that puzzle was the set-up of Gruppo Campari UK, formerly Wray & Nephew UK, a division now resident in London skyscraper The Shard.

Global priorities

Universally it’s the Global Priority brands – Campari and Aperol bitters, Skyy vodka, Wild Turkey Bourbon and the Jamaican rums portfolio, including Appleton Estate – that are propelling growth. “They are outperforming the rest of the group – and that for us is very important because these are the brands in the group with quite a high marginality,” Kunze-Concewitz attests.

While emerging markets – Russia, Nigeria, China and Argentina most notably – have slowed for the group, led by the Global Priorities the company mustered growth of 14.3% in the Americas last year, spearheaded by the US – often considered a stagnant market.

“Well, it is mature, but quite frankly our portfolio is positioned across the right categories and the exciting categories,” Kunze-Concewitz rebuffs. While Skyy is “a little bit challenged” but still moving “in line” with the category, “Wild Turkey has been an excellent acquisition for us, both for the core as well as the flavours side”. The 2009 acquisition Espolòn Tequila is “probably the fastest growing Tequila in the US for years” while Campari and Aperol continue their double-digit charge.

Gruppo Campari’s growth in the region looks set to continue, near-guaranteed by the SPML acquisition, within which key brand Grand Marnier rakes in 75% of its sales from the US and Canadian markets. Kunze-Concewitz confirms the “friendly takeover” is progressing well, with the company delisted from the Euronext Paris stock exchange on 14 July, the day before we speak.

“We took over distribution globally from 1 July, so [it is] very much in line with our timetable. And now it’s going to be really about focusing on the core brand, Grand Marnier Cordon Rouge, as well as the higher-end expressions which we believe have been underexploited.”

The grand plan for the French Cognac liqueur is to “bring back… a little bit more energy”, especially in Europe, and in other parts of the world that did not benefit from the “dynamic” market in the US, where half of consumption is neat, he says.

“The rest of the world… was banking much more on gastronomy, and while we think that’s a good business and the brand has a role to play there, we’d like to see more of it in glasses.”
The acquisition will immediately prove lucrative, too. “The company we acquired had a pro-forma full-year EBITDA of €31m, Just by incorporating the distribution we’re able to boost that profitability to €47m,” he continues.

“And contrary to the previous distributor, Grand Marnier is actually very, very relevant to each one of our organisations because it is sizeable in each one of those markets – also not being a third-party brand any more, it… will get the focus it deserves.”

Key to building the brand will be establishing a “very clear” drinking strategy, Kunze-Concewitz declares. This could take a similar format to the three serves pushed for Wild Turkey – the Old Fashioned, the Boulevardier and neat – or it could be implementing a strategy to drive growth the same way as the Spritz has done for Aperol.

“We’re launching our in-depth quantitative and qualitative marketing research with consumers as well as mixologists as we speak, so it’s going to probably take us four to six months before we make a decision,” he confirms.

‘Italian summer in a glass’

Readers would need to have taken up residence underneath a stone to miss the orange revolution taking over towns and cities around the world in the past couple of years. Take a summertime stroll past pavement bars and terraces and tables will be laden with vibrant serves.

The libation of the season has become Aperol Spritz – and talk of its prevalence is “like music to my ears”, says Kunze-Concewitz. Where has this domination built from, and how has it seemingly so quickly taken hold in the front of consumers’ minds?

“You know, Aperol is not an overnight flash. To be honest we bought the brand at the end of 2003, and at that stage it was only a regional brand in Italy.” Just three cities – Venice, Padua and Treviso – accounted for 80% of the brand’s sales, he recalls. After 18 months or so, Gruppo Campari realised the apéritif’s appeal could extend nationally.

“We did some twists, most importantly with a clear focus on the Spritz as a drink, putting it into a more glamorous and refined and elegant wine glass, and found the right price positioning and the right model to build the brand.”

Thus the Aperol Spritz was born. After testing in Italy, Gruppo Campari rolled the concept out to Germany, Austria and Switzerland, then after four years looked to the rest of Europe, Americas and Oceania. “And now we’re pushing it everywhere.”

According to Kunze-Concewitz, it’s the Aperol Spritz’s lower abv – a serve weighs in at around 8% alcohol – and its vibrant hue which continue to appeal to consumers.

“What we found out in all of our markets when we got into them is that the source of business for Aperol is two-thirds beer and one-third wine and sparkling wine, so the opportunity is absolutely huge.” But is he concerned that consumers will only view the vivid apéritif in the context of an Aperol Spritz? Might it limit the brand?

Kunze-Concewitz refutes the concept: “Well, you know, in Italy Aperol is an Aperol Spritz. And since we bought the brand we’ve grown it five times. So no – I’m not that concerned.”
The key now to ensuring growth, he says, is deseasonalising the brand. Aperol Spritz was initially launched as a spring and summer libation, so extending its appeal throughout the calendar year is crucial.

“In years seven and eight onwards you start working on fall/winter, skiing resorts,” he explains. “For example, in Italy, we’ve deseasonalised the brand; you start moving into different drinking occasions, meal occasions, lunches, brunches…”

I wonder if the same super-long, refreshing format has winter appeal. “If you think again that the source of business is beer, people drink beer all year round. So why should you be surprised that people actually drink Aperol Spritz all year round?” he counters.

Rum is another category proving profitable for the business. Gruppo Campari acquired the J Wray & Nephew business in 2012, and has particularly pushed the aged, dark rums under the Appleton Estate umbrella.

“This is really a quality story,” Kunze-Concewitz says. “In Jamaica, legislation is very clear: you cannot use the solera method.” This ensures any age statement on the bottles his company produces is minimum age, rather than an average. And it would seem the discrepancies across the category prove frustrating: “Much of the other dark rums frankly use the solera method; if it has ‘23’ written on [the bottle] you might have a drop of 23-year-old.”

For Kunze-Concewitz, it’s “a shame there is no Caribbean rum authority that is the equivalent of the Scotch Whisky Association”. That said, he believes education can circumvent lingering consumer confusion – of which there is much – especially as today’s drinkers are “very curious”.

The conversation shifts to what indeed is holding the category back from full, meaningful premiumisation – and here he is outspoken. “The problem of rum is that there’s one gigantic brand which has been performing very poorly for a long time which has been dragging down the whole category. You know, if you take that out of the numbers and you particularly look at aged rums, you’ll see they are doing quite nicely.” The way to address this is, again, education, he says.
Another category clearly of interest to Gruppo Campari is gin. In 2013 the company took on the distribution and inked an agreement to acquire the Bulldog Gin brand in 2019 if certain conditions were met. Is this still the plan?

“Yeah. We’re doing very nicely in many markets, and particularly in global travel retail.” He declines to detail exactly what criteria he is measuring the brand’s success against, except to note he is tracking the brand “outperforming the gin market wherever it is. So we’re happy to keep building on that”. If growth continues, will he move to acquire the brand early? “We’ll see.”

But it is clear that Kunze-Concewitz remains in an acquisitive mood. While the focus for the next few months is integrating the SPML business, he says that “once 2017 hits, we could be particularly active again”.

“We’re quite transparent. We have a stated strategy of generating half of our growth via acquisitions so that remains unchanged, and you know, we’re constantly looking at things.”
Although he stops short of specifying exactly what type of brands might be on his buying wish list – “the world is beautiful because it offers so many options” – a vermouth brand could well feature.

Later in the interview he predicts a resurgence of the category as trends change and evolve over the next five to 10 years. Despite noting that some larger brands could be viewed as “my parents’ drink”, “if you go to interesting markets in the US and Canada, you start to see a lot of craft action in the category”.

But is this development something Gruppo Campari is keeping an eye on? “We’re following it, yes – with interest,” he answers.

Two categories unlikely to rank as targets, however, are Cognac and Irish whiskey. In Cognac, “the top brands are already in safe hands”, but despite the recent boom in the latter, its infancy is off-putting.

Early days

“I think I’d like to see that there’s a category first and it’s not brand-driven,” he says, adding that for him the sector comprises “one-and-a-half brands” and that development will take some time. “There has been a lot of activity in creating new start-ups, so I don’t know what that’s going to mean in 10 years’ time.”

Would he describe this approach as reserved? “Often we’re contrary,” he says, recalling a time at an investor conference when the company was queried for not being more aggressive in emerging markets, especially Asia. “We had a very clear reason for not being over-exposed there. And I think these past few years have proven us right.” In which case, could it be described as a ‘cautious’ mindset?

“Yes, it’s a cautious mindset. But if you bear in mind that since the global financial crisis we’ve invested €2.3bn into the business, significantly expanding the brand portfolio, route to market, completely revamping the supply chain as well, IT, I wouldn’t necessarily call that a cautious mindset.”

He rejects the suggestion that Gruppo Campari may be too reliant on the classic cocktail trend – “We have the apéritifs, clearly we have all the ingredients for classic cocktails, but we also have all of the key brands for some of the top long drinks” – and he confirms his confidence that classics like the Negroni and Old Fashioned will prevail for the next “five to 10 years”.

Brexit-proof?

In fact, not even the spectre of Brexit seems enough to dent his confidence in the company’s performance.

“The UK is a democracy and people voted so I am not going to comment on that. If you look at Brexit and what it did for the exchange rate, actually it doesn’t affect us because we export out of the UK as much as we import in. We have to see what Brexit means for the overall Western European economy. Having said that, as I keep saying to our people, whatever happens in the external world is no excuse for not performing.”

And perform is exactly what Gruppo Campari is doing. The resurgence of interest in cocktails and high-end spirits excites Kunze-Concewitz and he believes “we’re only at the beginning”.