Campari makes strong start to year, sees U.S. demand holding up

By Federico Maccioni

MILAN (Reuters) -Campari expects demand to hold up in its main U.S. market despite reports of weakness from some rivals, the Italian drinks group said on Tuesday, as strong sales of its Aperol bitter and tequila liquor in particular boosted first-quarter results.

The company reported a 19.6% jump in like-for-like sales to 667.9 million euros ($732.8 million) in the first three months of the year, thanks to price increases and temporary effects such as some shipment phasing and an earlier Easter.

First-quarter adjusted operating profit margins rose to 23.9% from 21.4%.

The results marked a "strong start" to the year, Jefferies analysts said in a note.

Sales in the United States, which typically account for almost half Campari's total turnover, jumped 23%. Last week, peer Remy Cointreau predicted flat organic sales in financial 2023-2024, citing weak U.S. demand.

Campari's first-quarter U.S. sales were lifted by triple-digit growth from Aperol, its best-selling product and the key ingredient in Spritz cocktail, as well as tequila brand Espolòn.

"Tequila is starting to become, I think, a global phenomenon," CEO Bob Kunze-Concewitz told analysts.

The company said investments put in place to double production across all of its key products were starting to bear fruit as - after reaching full capacity last year - it now has capacity to improve the availability of tequila.

Campari said it expected to launch an international expansion campaign for its tequila brands in 2024 and it is getting more access to liquids and agave pinas, from which the liquor is distilled.

The group confirmed its 2023 guidance for a flat adjusted earnings before interest and taxes (EBIT) margin of 21.1%, given a volatile macro-economic environment.

Kunze-Concewitz said the unwinding of temporary shipping effects would have a negative impact of around 30 million euros on second quarter results.

Milan-listed shares in the group closed up 2.7% on Tuesday, outperforming a 1.7% drop in Milan's blue chip index.

($1 = 0.9114 euros)

(Reporting by Federico Maccioni Editing by Alvise Armellini and Mark Potter)