On the 14th December 2023, Italian spirits group Campari announced their acquisition of renowned cognac producer Courvoisier Cognac from US-Japanese spirits group Beam Suntory. Campari Group were advised by Goldman Sachs, and Courvoisier Cognac were advised by Morgan Stanley, culminating in a deal valued at $1.32 billion. Campari Group has raised the required capital by selling new shares and debt that can be converted into equity. These new shares were sold at 9.33 Euros each, at a 6% discount from their previous closing price.
The deal comes at a time where cognac has reported a slump in global sales amid lessening global demand, yet Campari has viewed this as the perfect opportunity to strike a relatively good deal for a top Cognac producer. In fact, Courvoisier is one of the top 4 cognac brands, of which the other 3 are all owned by luxury conglomerate LVMH. Sales at Courvoisier had declined by 33% in the 10 months to October 2023 compared to that of the previous year, justified by the slowing US sales following post-COVID peaks and the excessive filling of their warehouses following destocking by wholesalers. Campari, however, has described their outlook on cognac’s downturn as “temporary” and are “bullish on the medium- and long-term prospects of the brand”. They argue that cognac in the US is a lot more popular now than pre-COVID, simply due to it being the drink of choice for many American households across 2020.
The Italian Group Campari has indicated a shift in preferences towards acquisition-based growth, as their Chief Executive Bob Kunze-Concewitz has steered the conglomerate through a large list of deals. Campari’s deal volume ramped up significantly in 2022, allowing for both product and geographic diversification among their portfolio of acquired companies. Through this most recent acquisition, Campari aims to compete against giants in the spirits space such as Diageo and Pernod Ricard. The acquisition of Courvioisier holds a lot of potential for greater captured market share. For instance, their presence in the US will be solidified as this region accounts for 55% of Courvoisier’s sales with a loyal customer base. Also, both the Asia Pacific region and the UK prove to be a promising long-term goal due to their growing demand in the cognac market in spite of overarching global market trends. Campari are likely to replicate the template they have used for their other acquisitions, transforming Courvoisier’s marketing model and strategic growth strategy. They expect Courvoisier to lift their earnings per share by 2%.
In the short term, markets are still skeptical regarding proposed outcomes, due to the current global position of cognac. Drinkers globally have been seen to cut back on spending amid the deteriorating macroeconomic outlook. Yet, if Campari are able to leverage Courvoisier’s strengths effectively, the deal does demonstrate vast potential for growth.
Written by: Siddh Patel
Sources: FT, Reuters
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