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Campari Fills Another Gap in its Portfolio with Appleton Rum Acquisition

September 5th, 2012

Campari’s acquisition of a controlling stake in Lascelles deMercado from CL Financial, and the Appleton rum brand accordingly, for US$415 million is a continuation of Campari’s aggressive growth through acquisition strategy. The acquisition will offer strategic benefits but also challenges with a brand that has struggled for growth in recent years.

Campari will face the challenge that in a number of its key markets, the Appleton brand is mature, notably in its two largest markets, Canada and Mexico, as well as its next biggest US and Jamaica which combined, according to Euromonitor International data, account for over 75% of Appleton Rum’s 8 million litres sold in 2011.
The company will hope that with its greater financial, and in the case of the US, distributional strength, it will be able to leverage growth for the brand in these markets. The brand has head room for growth in all these markets but it will face very tough competition from larger competitors such as Diageo and Bacardi.

Opportunities abound

However, it will be Appleton’s strength in both Mexico and Canada that will be its greater asset. In Canada, the brand will more than double Campari’s strength to a 3% share of the market based on 2011 volumes, while in Mexico Campari’s share will go from negligible to over 1% of the market. This should provide a platform for driving growth of its existing portfolio, in particular its Skyy and Wild Turkey brands.

Campari is likely to have better luck by developing Appleton in the company’s core markets, especially Italy and Germany, where the brand has a negligible presence, and the US, where Campari’s greater distribution strength than Appleton’s current third party distributor should boost volumes.

Nevertheless, with Campari’s track record of developing brands, as witnessed by the current success of Aperol in the moribund bitters markets of Italy and Germany, it will be no surprise if the company manages to enhance the growth prospects of Appleton and enhance its position as one of the leading international spirits companies.

 

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Jeremy Cunnington

Jeremy Cunnington is a senior analyst for alcoholic drinks. He has researched and analysed global alcoholic drinks since2006. He focuses on global spirits but is interested in analysing corporate strategies throughout the category. Jeremy manages the research side of the alcoholic drinks project including developing a new value shares model.

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