Gruppo Campari’s share price rose today by +8% on news that the company is taking an 81.4% stake in Lascelles deMercado (LdM), the Jamaica holding company that owns the Appleton rum brand. The acquisition price is US$414.8 million (€330m).
The move – through the purchase of the shares of CL Financial Limited in LdM [expected to complete in Q4 2012-Ed] – gives the Italian drinks house its first foothold in the rum business, and will also extend its international footprint, principally in the Caribbean, Mexico and North America – as well as the duty free and travel retail channel.
The acquired operations consist of LdM’s spirits business led by its rum range including Appleton Estate, Appleton Special/White, Wray & Nephew and Coruba; the related upstream supply chain as well as a local distribution company; but excludes certain non-core LdM assets, primarily insurance, transportation and investments.
In 2011 (year ending September), LdM’s spirits turned over US$ 204.2 m and the distribution/supply side, US$ 61.2 m. About 50% of sales are international with Appleton Estate and Appleton Special making up 51.2% of the overseas business.
RATIONALE FOR RUM ENTRY
Italy still forms 34.4% of Gruppo Campari’s H1 sales of €618.3 m, released today, while the rest of Europe accounts for 22.2%. However, these regions produced poor organic growth of +1.1% and -3.2% respectively.
By comparison, the Americas (33.7% of group sales) grew by +7.2% and the Rest of the World plus Global Travel Retail (with a 9.7% share of group sales) grew by +15% (see table below).
Between 2006 and 2011, rum has become the third biggest category by volume for global premium brands, with a CAGR of +2.8%, bettered only by the leader, vodka, at +6.9% among the top five (source: IWSR).
Entering the rum category now will help Campari build further critical mass in the Americas; give it a leading position in Jamaica, a major tourist destination; and boost the internationalisation of the company outside Italy, as well as strengthening its largest and most profitable spirits segment, now 79.9% of group sales (see table below).
Campari’s key spirits with more than a 10% share of sales in H1 2012 are Aperol (12%), Skyy Vodka (12%), Campari (11%) and Wild Turkey (10%).