Campari has announced a deal to acquire the Cognac brand Courvoisier from Beam Suntory.
The Italian spirits group stated its intention to pay a sum of up to $1.32 billion for Courvoisier. Campari’s departing CEO, Bob Kunze-Concewitz, characterized Courvoisier as “a leading historical Cognac house, ranking among the top four.”
Courvoisier’s placement within the Beam Suntory portfolio traces its origins to the division of the UK spirits group Allied Domecq in 2005.
Greg Hughes, President and CEO of Beam Suntory, mentioned that the divestiture of Courvoisier will enable the company to concentrate more on its core areas of expertise, supporting the acceleration of its global growth aspirations.
Campari has stated that it is in the process of “engaging in exclusive negotiations” with Beam Suntory and has obtained a put option to purchase Beam Holding France, the entity that encompasses Courvoisier.
The arrangement of the deal, poised to become Campari’s most significant acquisition surpassing the 2016 Grand Marnier acquisition, involves an initial payment of $1.2 billion. An additional sum, capped at $120 million, is anticipated to be disbursed in 2029. According to publicly-listed Campari, this valuation results in an enterprise value multiple of approximately 17 times the brand’s contribution after A&P (Advertising and Promotion) from the previous year.
Citing data from Beam Suntory, Campari said the Courvoisier business, which also includes the Salignac brand, made net sales of $249m in 2022. The asset’s contribution after A&P was $78m, Campari added.
The owner of Aperol also furnished data for the initial ten months of 2023. During this period, the net sales of the Courvoisier business experienced a year-on-year decline of 33%, amounting to $148 million by October 31. The contribution after Advertising and Promotion (A&P) for the same period was $37 million. However, Campari did not disclose a corresponding figure for the ten months leading up to October 31, 2022.
In its statement, Campari explained, “This performance is influenced by recent market-driven trends, including the normalization of consumption in the US after peak post-Covid sales and destocking at the wholesaler level, aligning with broader trends in the Cognac industry.” Campari further noted that the United States, China, and travel retail collectively contribute to approximately 75% of the total category.
The Cognac markets in both the United States and China have faced challenges in recent quarters. Demand has declined in the US, and in China, the combination of a sluggish real estate sector and faltering economic growth is impacting expenditures on high-end consumer goods.
In October, Rémy Cointreau, the owner of Rémy Martin, reported a 30% fall in its Cognac revenue for the six months ending in September. Sales in the Americas halved during this period.
Based on Beam Suntory data presented by Campari, the United States represented approximately 60% of Courvoisier’s net sales in the fiscal year 2022. Campari highlighted that, collectively, the UK and China contributed to about a quarter of the brand’s net sales. Additionally, travel retail accounted for just over 3% of Courvoisier’s total net sales, as per Campari’s information.
In recent years, there has been speculation within the investment community that Campari might be inclined to undertake a substantial acquisition. This speculation gained renewed attention earlier this year due to a shift in the company’s voting structure, leading to market discussions suggesting the possibility of the group issuing a significant amount of equity without compromising family control.
The acquisition of Courvoisier is slated to be financed through a bridge loan of €1.2 billion ($1.32 billion). Campari stated today that it is consistently exploring different options, considering the evolving market conditions, to potentially fund the transaction using a combination of debt, cash, and equity or equity-like instruments. The timing and amounts for these alternatives are yet to be determined.
Kunze-Concewitz, who is set to step down as Campari CEO in April, said the deal “primed Cognac to become Campari Group’s fourth major leg along with aperitifs, Bourbon and Tequila”.
He added, “The addition of Courvoisier Cognac to our portfolio of global priorities is a rare and unique opportunity to expand our premium spirits portfolio and Cognac offering.”
Hughes has been Beam Suntory’s president and CEO since October, having spent more than eight years at the Maker’s Mark brand owner.
In a post on LinkedIn, Hughes said the sale of Courvoisier was part of the distiller’s “intentional steps to sharpen our focus on our areas of strength and our must-win brands and categories”.
He added, “Our team has thoughtfully built this brand with care, craftsmanship and quality and we know Courvoisier will continue to thrive under Campari Group’s skilled ownership.”
