On 14 December, Campari Group announced its commitment to acquire 100% of Courvoisier cognac from Beam Suntory. The deal, worth $1.32bn, was handedly the largest in the group’s 164-year history but it wasn’t without its detractors. Within days of the announcement, shares had slumped 6% with concerns emerging that the Milan-based group may have overpaid.
However, Campari chief executive Bob Kunze-Concewitz has been bullish about the deal, at the time declaring that “Christmas came early for Campari this year”. The company’s chequebook affirms that optimism, but Courvoisier, under the stewardship of Beam Suntory, has gone off the boil in recent years as the traditional big four houses have increasingly become Hennessy and the rest.
According to Campari, sales of Courvoisier had declined by 33% in the 10 months to 31 October 2023 but Campari is a historic drinks group with a track record of revitalising brands that have slipped from the spotlight.
Prior to its €433m purchase of Wild Turkey in 2009, at the time the group’s largest acquisition, the brand was selling 800,000 nine-litre cases a year. By 2010, according to Drinks International’s Millionaires’ Club it had cracked a million and by 2022 had almost doubled that figure to 1.9 million cases sold. In 2012, the group took a controlling stake in Appleton Estate and in 2020 gave the brand a premium refresh. The results have been well received and in the 2024 edition of Drinks International’s Brands Report the Jamaican rum was the fifth bestselling in the world’s best bars.
Courvoisier cuts a similar figure to both of these brands. Undeniable in its quality and the importance of its history but a brand that has fallen out of the conversation when compared to its closest competition – in that same edition of the Brands Report, Courvoisier ranked fifth behind Hennessy, Rémy Martin, Martell, and Ferrand Cognac.
“Things are going to get worse before they get better,” said Alliance Bernstein analyst Trevor Stirling in a note to clients, but shares in some of Kunze-Concewitz’s optimism, adding: “We like the deal as we believe Cognac is a structurally attractive category… In Courvoisier, Campari is acquiring the fourth global house in an industry that benefits from attractive growth prospects, high margins and barriers to entry. Campari has a strong track record of growing its brands and has the ingredients to do their magic on Courvoisier.”
Drinks International reached out to Gruppo Campari for comment on the drivers behind the company’s decision to purchase Courvoisier and were told that it was too early to reveal specifics, but speaking at the time, Kunze-Concewitz went some way to explain why Campari’s decision makers felt that it was their billion-quid brand.
“By leveraging our heavy cognac expertise at board and executive team level, Campari Group has a fantastic opportunity to reinforce this brand’s credentials as a global icon of luxury, priming cognac to become Campari Group’s fourth major leg along with aperitifs, bourbon and tequila. Concomitantly, we are looking forward to accelerating our premiumisation journey, further enriching our RARE portfolio, the division created to unlock and accelerate the growth potential of a select range of high-end individual expressions in our core premium spirits markets.”
It’s not the first time that Campari has taken on a historic French brand with a view to premiumisation. In 2016, the group purchased Cognac-based liqueur Grand Marnier for €684m, and two years later the brand underwent a visual overhaul and joined the group’s Prestige Challenger portfolio as part of the group’s strategy to premiumise its brands. In 2017, Campari purchased Bisquit Cognac from Distell Group for €52.5m. Four years later, in 2021, the brand was returned to its origins, renamed Bisquit & Dubouché and also was placed in the Prestige Challenger portfolio.
Whether Courvoisier can expect a facelift is yet to be seen, but what’s clear is that Campari believes there’s space to grow above the brand’s current positioning.
To call the category a two-horse race is a bit reductive but goes some way to explaining the Courvoisier deal. According to the IWSR, by volume share the US accounts for 45% of global cognac sales, in second place is China with 21% and for third place it’s a long drop to the global duty free market with a 6% share. If a brand can get it right in China and the US, it gets it right in two-thirds of the category, but neither market has been without its difficulties.
China
Campari will be looking with great interest at China if it’s to successfully premiumise Courvoisier at scale. At present, the brand doesn’t have a huge footprint in the region but, according to the IWSR, China accounts for 44% of global VSOP and above cognac sales by volume and 48% by value.
Campari has been hard at work strengthening ties in the region too. In November, the group signed a memorandum of understanding with Chinese group Sichuan Yibin Wuliangye to “collaborate in areas such as new product co-creation, channel expansion, strengthening marketing cooperation, and promoting brand culture to support the joint development of both parties in domestic China and the international spirits market,” according to a joint statement.
But mere weeks after the announcement of the Courvoisier deal, China’s ministry of commerce launched an anti-dumping investigation into brand imports from the European Union which could put a dent in the country’s enthusiasm for the category.
The complaint was made on behalf of the country’s domestic brandy producers and the Bureau National Interprofessionnel du Cognac (BNIC) insists there’s been no wrongdoing. Speaking to Drinks International, Mélie Lamblin the institute’s global press and influence manager states: “We are confident that our products and commercial practices fully comply with Chinese and international regulations and that the EU & China will find a constructive way to resolve any bilateral disputes, as has happened in the past over other matters.
“Technical cooperation in the spirit sector is excellent and historic between the two trading partners. This cooperation will be further strengthened in 2024 and will contribute to the good level of dialogue between the EU and China. Cognac producers will fully cooperate with Chinese authorities to address any concern they would have.”
The move is considered to be a retaliation by Beijing for an EU investigation into whether state subsidies were allowing Chinese manufacturers to flood global markets with cheaper electric cars, and while the BNIC is confident that any anti-dumping investigation will clear its producers, the reality is that falling out of favour with the Chinese government is bad news for cognac.
The US
The US offers a different set of opportunities. As it stands, the country accounts for about 60% of Courvoisier’s, sales so while Campari may be able to use its standing to improve Courvoisier sales in China, the reverse may be true of the US. In a statement, the company said the purchase gave Campari the “opportunity to build leverage in one of the most relevant spirit categories in the US”.
But, like China, it’s not a straightforward landscape for cognac. After the pandemic triggered a 26% boom in volumes in the US between 2019 and 2020 according to the IWSR, 2022 saw a 20% decline as American consumers increasingly turn to agave spirits.
“Tequila has a number of inherent advantages over cognac in terms of its scale, diversity and versatility,” says Jose Luis Hermoso, research director at IWSR. “Tequila boasts a wide variety of styles and price points versus the relatively narrow – and expensive – range of products available in cognac. Tequila also has more versatility in terms of consumption occasions, including shots, cocktails and – increasingly, in the upper price tiers – as a sipping spirit.”
Campari needs look no further than the success of its very own Espolòn to know what it's up against –according to Millionaires’ Club data the brand passed a million cases in 2021 and grew again by 18% in 2022 to pass 1.3 million cases.
Campari Group’s record-breaking purchase of Courvoisier represents the most interesting type of deal within the industry. Sure, the risks are multiple and Courvoisier itself isn’t the most fashionable proposition, but it’s the kind of assignment that Campari excels at. Remember, this is the company that turned the Aperol Spritz from a forgotten relic of aperitivo culture to perhaps the most viral cocktail of the modern era.
With the purchase of Napoleon’s favourite cognac, Campari Group has bought itself another brand where it will need to box clever to realise its potential, but as the man himself said: “If you want a thing done well, do it yourself.”
