Campari Halts M&A Strategy to Focus on Brand Growth

MILAN (Reuters) – In a bold move, Italian spirits group Campari has announced a significant shift in its investment strategy, opting to pause mergers and acquisitions (M&A) to concentrate on enhancing its most promising brands. This decision comes as the company faces challenges posed by U.S. tariffs, according to Simon Hunt, the new chief executive who took the helm in January.

Strategic Shift in Investment Focus

The decision to effectively halt acquisitions marks a pivotal change for Campari, which previously aimed for 50% of its growth to be driven by deals. Hunt emphasized the need to prioritize the company’s financial health, stating, “The main reason I’ve decided to pause M&A for now is our net debt… we need to continue to get that down.” This strategic pivot underscores the company’s commitment to strengthening its core portfolio and optimizing existing brands.

Deleveraging and Brand Optimization

Hunt elaborated on the company’s new direction, indicating that the focus for the next few years will be on deleveraging and maximizing the potential of its current brand portfolio. “I wouldn’t say never, but I’d say for the next couple of years, few years, (the priorities) I see are deleverage, focus on our core portfolio and really optimize the brands that we have already acquired,” he explained.

As part of this strategy, Campari is currently evaluating its brand lineup to determine which brands may be divested and which have the potential for expansion into new markets. Hunt noted that the company possesses brands that are already strong in certain markets but have significant potential for growth in other regions.

Impact of U.S. Tariffs on Growth Strategy

On Tuesday, Campari issued a warning regarding the potential impact of U.S. tariffs, describing the upcoming year as a “transitional year” under Hunt’s leadership. This comes after the abrupt departure of his predecessor, who left just months into the role. The uncertainty surrounding how much of the price increase resulting from tariffs will be passed on to consumers remains a concern for the company. Hunt stated, “It is still not clear how much of the price increase will be transferred to the end customer, because the price elasticity depends much on what their competitors will do.”

Balancing Heritage and Market Changes

Hunt further emphasized the delicate balance between respecting Campari’s heritage and adapting to the evolving market environment. He remarked, “And so there’s always a balance with respecting our heritage and then seeing how the environment has changed… What’s the best way for us to get them there (to U.S. consumers) at the right price, at the right quality?” This reflects the company’s commitment to maintaining its brand integrity while navigating the complexities of the current market landscape.

Looking Ahead: Campari’s Future

As Campari embarks on this new chapter, the focus on brand growth and optimization is expected to shape its future trajectory. By prioritizing its core portfolio and carefully assessing its brand strategy, the company aims to navigate the challenges posed by U.S. tariffs while positioning itself for sustainable growth in the long term. The decision to pause M&A reflects a strategic recalibration that could ultimately strengthen Campari’s market presence and enhance its brand value.

For more details on Campari’s strategic shift, you can read the original article here.