Campari's chief is taking a breather before returning to the M&A trail

Having forked out a cool $2bn (&pound;1.2bn) on 16 separate acquisitions over the past 15 years, it is no wonder that Campari &ndash; the world&rsquo;s sixth largest drinks firm &ndash; is now calling for a temporary halt to the spending. Its chief executive, Bob Kunze-Concewitz, recently struck a cautious note due to the downturn that has hit the industry hard. <br /><br />&ldquo;One of the key things we will do over the next 12 to 15 months is to pay down debt,&rdquo; says Kunze-Concewitz, a short youthful looking 42-year-old with a measured tone. &ldquo;We will want to reduce our debt from 2.6 times earnings to 2.1 to 2.2 times.&rdquo;<br /><br />The firm, which owns over 40 brands with sales in 190 countries, owes &euro;674.8m (&pound;616m) after recent purchases, which is not that high but nevertheless worth more than a third of its market capitalisation. <br /><br />A relaxed Kunze-Concewitz is sitting, perched on the end of a table, in a functional training room in the newest of the firm&rsquo;s 13 worldwide plants. The Novi Ligure factory, which cost &euro;52m and began production in 2004, is an hour to the west of the firm&rsquo;s Milan headquarters. The hugely mechanized 50,000-square metre site, which only employs 135 staff, produces 160m bottles a year, divided among many of the group&rsquo;s spirits and sparkling wines. At full tilt, the plant can produce no fewer than 18,000 bottles of Campari an hour.<br /><br />Less than 24 hours earlier, Kunze-Concewitz was in a much more glamorous setting: the launch party for Campari&rsquo;s 2010 calendar at its new and stylish &euro;50m steel and glass headquarters in the Milanese Sesto San Giovanni suburb.<br /><br />There, dressed in a sleek sliver grey suit, he spent much of the night swapping pleasantries in front of the world&rsquo;s press,&nbsp; accompanied by the Russian model-turned-actress Olga Kurylenko, the Bond girl in last year&rsquo;s Quantum of Solace who features in the limited edition calendar the firm gives out to its key customers and suppliers.<br /><br />It was anybody&rsquo;s guess in which tongue the pair swapped bon mots in &ndash; Kurylenko speaks several languages, and Kunze-Concewitz &ndash; an Austrian citizen who was born in Turkey, was taught in French schools in Germany, took his first degree in America, and completed his MBA in Manchester &ndash; speaks five.<br /><br />But away from the world&rsquo;s fashion press, and back at the Novi Ligure production plant, Kunze-Concewitz is keen to talk about the current strategy of his firm, which has a market value of &euro;1.8bn (&pound;1.6bn) and employs 2,200 staff worldwide.<br /><br />He says that although the firm&rsquo;s priority is to restructure its finances, it will remain opportunistic, partly because of the fragmented nature of the drinks industry.<br />He points out that of the world&rsquo;s top 100 brands only 14 per cent of them by volume and 20 per cent by value are owned by the top five drinks companies.<br /><br />Campari was launched in 1860 by Gaspare Campari, but since 1995 the firm has been expanding aggressively and now owns such international brands as Glen Grant, Skyy Vodka and Cinzano. However, analysts say the firm still lacks a killer international brand like Diageo&rsquo;s Johnnie Walker or Pernod Ricard&rsquo;s Chivas Regal. <br /><br />However, Kunze-Concewitz says: &ldquo;Our industry is very fragmented and there is plenty of room for consolidation.&rdquo; He adds: &ldquo;In the next 12 to 15 months a window will open up for us to go shopping again. However, you have to be flexible and seize opportunities as they arise. But our predisposition is not to do anything until this time period is up.&rdquo; <br /><br />Kunze-Concewitz&rsquo;s impulse buys should be taken seriously. Campari surprised a declining market when it announced a deal to buy US bourbon Wild Turkey for $575m to expand its presence in America from number two player Pernod Ricard in April. Kunze-Concewitz says Wild Turkey is being successfully integrated into the group and will add to profits by the full year.<br /><br />However, it has been a tough year for the industry overall, as the downturn has hit sales as consumers buy less and trade down to cheaper brands.<br /><br />In August, Campari said its net profits for the first six months of the year edged up 0.5 per cent to &euro;60.1m on the same period last year. Sales rose a slightly healthier 2.5 per cent to &euro;441.8m. <br /><br />Kunze-Concewitz explains: &ldquo;Consumption of our brands remains strong and is positive. To a certain extend we managed to decouple ourselves from the general market trend.&rdquo;<br /><br />He says that in the US, and many other parts of the Western world, consumers are drinking at home in increasing numbers, but that his brands are not being hurt.<br /><br />In 2008, Campari, which celebrates its 150th anniversary next year, posted a net profit of &euro;126.5m on sales of &euro;942.3m. The firm said 70.5 per cent of its sales come from its spirits, while 41 per cent of revenues come from Italy, its largest market, and 21.6 per cent from the US. Campari, the bitter red aperitif the firm is named after, accounts for 14 per cent of the group&rsquo;s overall sales. <br /><br />By contrast, Britain&rsquo;s Diageo, the world&rsquo;s biggest player &ndash; and the owner of famous brands such as Smirnoff vodka, Captain Morgan rum and Guinness beer &ndash; posted a sharper-than-expected six per cent fall in its first quarter sales earlier this month. <br /><br />In a bid to control costs and reduce its dependence on the banks, Campari launched a seven-year &euro;350m Eurobond paying an annual fixed coupon of 5.375 per cent earlier this month. It was nine times oversubscribed and sold mostly to institutional investors in Italy, the UK, France and Germany. Kunze-Concewitz says: &ldquo;Credit is very short term in the markets right now. So we took the chance to replace three-year bank credit with a seven-year bond.&rdquo; The firm says it will use the cash to refinance debt and as working capital. <br /><br />Kunze-Concewitz says he expects to see a recovery across world markets next year, but he expects this to be tentative, and he will make no sales forecasts for 2010.<br /><br />He says: &ldquo;I am not a economist. But the world economy was stuck in a traffic jam last year. It has started moving again. But there could well be more roadworks along the way.&rdquo;<br /><br />Kunze-Concewitz has launched joint venture to sell many of its brands in India. But he is less sure about China. &ldquo;In China 98 per cent of alcohol is local. I have tried the white spirit Baijiu, which one of their biggest sellers. It smells like Swiss cheese and taste like turpentine. They often add green tea to it as a mixer. <br /><br />Tastes are obviously very different there. We will wait a few years to see if there is more of a market in the cities for our brands.&rdquo;<br /><br />He adds: &ldquo;It is also very expensive to do business in China. It can cost you $1m to get pouring rights in one bar in Shanghai. Then a rival can come along a year later, offers 10 per cent more and you have lost any headway you were making in that area. Our pockets are not that deep. And even if they were we would prefer to spend it in other ways.&rdquo;&nbsp; <br /><br />Although Campari was floated on the Italian stock exchange in 2001, the Garavoglia family still own a controlling 51 per cent stake in the firm. One of the family, Luca Garavoglia, is Campari&rsquo;s chairman.&nbsp; The firm&rsquo;s second largest shareholder is the London-based long-only investment firm Cedar Rock Capital, which holds a 9.8 per cent stake.<br /><br />Kunze-Concewitz says that working for what remains effectively a family business is not a drawback for a professional manager. He says: &ldquo;It gives us the best of both worlds. It gives us a stable shareholder base and that means we can plan for the long-term. But there are other shareholders who we have to be disciplined enough to provide returns for.&rdquo;<br /><br />Kunze-Concewitz may be busy getting the firm in financial shape with its Eurobond and other cost cutting measures over the next year. But be in no doubt that&nbsp; another dizzying round of acquisitions will be on the cards as soon as the recession ends for good. For one thing is sure: Campari remains in growth mode.<br /><strong><br />CV BOB KUNZE-CONCEWITZ</strong><br /><strong>Age:</strong> 42<br /><strong><br />Work:</strong> Joined Procter &amp; Gamble as a marketing executive based in Rome. Worked in a variety of roles for the consumer goods firm and left after 12 years as corporate marketing director in its Global Prestige Products unit in Geneva. <br />Joined Campari as group marketing director in 2005. Appointed chief executive in 2007. <br /><br /><strong>Education:</strong> Hamilton College, New York State; MBA, Manchester Business School.<br /><br /><strong>Family:</strong> Married with two children<br /><br /><strong>Hobbies:</strong> Skiing and sailing<br />