Davide Campari-Milano N.V. (CPR.MI) Q2 2026 Earnings Call Transcript

Operator: Good evening. This is the Chorus Call conference operator. Welcome, and thank you for joining the Campari Group Nine Months 2026 Financial Results Conference Call. As a reminder, all participants are in listen only mode, and after the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. Today's call will be hosted by Mr. Simon Hunt, Chief Executive Officer, and Mr. Francesco Mele, Chief Financial Officer. At this time, I would like to turn the conference over to Mr. Simon Hunt. Please go ahead, sir.

Simon Hunt: Great. Thank you very much. Good afternoon, everyone. It's a pleasure to be here again with you all. Francesco is here with me, as you heard, and as always, our IR team will be available after the call for any follow-ups. A quick note before we begin. As you know, we present top line only in Q1 and Q3, so they're focused on the houses and the regions. In Q4, we will present all the countries and the brand details as always. All growth figures you'll see on the slides relate to organic performance over the first nine months of the year, unless otherwise specified. You can find the Q3 details in the annex. With that, let's get into results. Q3 marks our sixth consecutive quarter of top-line growth. At the same time, we continue to outperform and gain share across all of our key markets in sell-outs, showing that the over-investment we are putting behind our brands is delivering. This is a clear indication that our strategy is working, and we are on track towards our mid to high single digit midterm growth ambition. We believe our portfolio is uniquely positioned to win in the sector despite the challenging market context. In the nine months, we recorded +2.9% growth, with quarter three at +3.4%, driven primarily by Europe, while North America was impacted by Jamaica and the U.S., where our strong performance in aperitifs and tequila was offset by challenging trends in other categories. This means we're doing a bit better in Europe, while North America is a little bit softer. On balance, we are confirming our full year guidance. During this period, the growth was broad based across most brand houses and regions. In fact, we were growing mid to single digit to double digit in 44 markets. In aperitifs, two-thirds of our growth in the first nine months came from solid momentum in our bottle business, with all brands growing. The remaining one-third was driven by the launch of our convenient formats in only a few initial markets. This not only shows the encouraging initial response, but more importantly, the significant geographic expansion potential ahead for us. I repeat it at every call, but it's important to reiterate that we are doing exactly what we told you in November last year at our Capital Markets Day. Focus on our five growth drivers. First, sharper portfolio choices. We are doubling down and investing more behind fewer, bigger bets. The results on the sellout are clear, with ongoing solid share gains across the regions, and especially in the strategic on-premise. Additionally, over the last 18 months, we disposed of more than 10 brands or businesses, thereby decreasing the complexity and increasing focus. By the end of 2026, we will have finalized the bulk of our portfolio streamlining efforts, with full focus on execution going forward. Second, winning the first shared drink every day, everywhere. This means being available in incremental occasions with convenience new formats of our key brands. In this area, we are seeing solid early results with encouraging velocity and distribution gains across the initial launch markets. For this, some initial European countries have been our pilot markets, and we are happy to see the strong initial results, which make us more confident that we can replicate this in other markets. I will dive into this later in the presentation. Third, geographic expansion. This strategy has two levers. First, growing faster in more markets, leveraging our new regional structure. In fact, 44 countries are growing mid-single to double digit in the nine months, as I mentioned. Second, expanding our product range into new geographies. The recent Sarti Rosa launch in the U.S. is a good example of this with more to come going forward. We will discuss this later in the presentation. On the last two drivers, we will give you more details in Q4. However, it is important to note that we have everything in place to grow. With also our extraordinary CapEx program nearing finalization, which will support future cash flow conversion. We also continue to drive efficiency across all lines of the P&L, with strong control on structure costs, allowing us to make bold investments behind our brands, which we believe is absolutely the right thing to do in this market context. Let us move to the next slide. As you can see in the nine months, organic top-line growth of +2.9% was broad based across most regions and houses. We will go one by one, but first, let us look at sellout, which as you all know, is the critical indicator. In the nine months, we are outperforming again and gaining share across all of our key markets, driven by our aperitifs and tequila. In the U.S., we are outperforming in all channels. While the off-premise remains the largest and most challenging for the industry, and candidly for us, we are growing +5% in our key categories of aperitifs and tequila. In NABCA and the strategic on-premise, we are in growth with our overall portfolio, and in these categories at +9% and +11%, respectively. Our performance in this period has also been complemented by the launch of Sarti Rosa. The sellout data for the U.S. shows that our fewer bigger bet strategy is working as we invest behind our most profitable brands where we have unique advantages. However, weak category trends are impacting our performance in vodka, whiskey, and cognac, as well as Grand Marnier across the total company performance in these channels. In Europe, we also reported outperformance across the board. In total Europe sellout data, which includes 12 countries, we are outgrowing the spirit sector by 5 points, with +4% growth in the nine months, driven primarily by the core aperitif bottle business. The momentum during the peak season was supported by innovations in Italy and the progressive rollout of Sarti Rosa, primarily in the U.K. Europe delivered +3.8% growth in the nine months, driven primarily by Italy and the U.K., with all, I repeat, all other countries also in growth. This solid performance was supported by excellent execution across the summer period, leading to mid-single digit growth momentum in aperitifs, with contribution from all brands and formats in the nine months. Germany remains impacted by consumer pressure, but with some limited support from innovations in the third quarter. We have seen encouraging early results from our innovations over the summer in our initial pilot European markets. Going to the last part of the year, this will be the first time we can unleash Aperol on Tap in the winter season. Let us see the results and how this can support our de-seasonalization efforts, and we will touch more on this on the aperitifs in the upcoming slides. Moving to North America, we recorded a positive +1% organic growth, with all markets contributing. In the U.S., we are making solid progress in aperitifs and tequila, while the challenging operating context is impacting the rest of the portfolio. Overall, the U.S. business has seen sell-in and sell-out broadly aligned in the nine months with no extraordinary stock movements. We are going to dive into the U.S. on the next page in more detail. In Jamaica, the underlying trends remain solid, but our nine-month performance is largely impacted by the high base effect of quarter three. Just to remind you all, we had +52% growth last year. Barring any new weather related events, this will reverse in the final quarter and support our regional performance. On the next page, we want to give you some additional insight into the U.S. market so far this year, and we recorded a strong performance on 50% of our business covering aperitifs and tequila. Instead, on the rest of the portfolio, we continue to be impacted by the negative market trends as I mentioned, as well as Russell's Reserve supply constraints and a high comparison base in rum. The house for aperitifs has been the largest contributor to growth so far this year, driven by Aperol and by Sarti Rosa. Aperol is benefiting from the bold brand investments, including activations like the Hilary Duff concert tour partnership, Coachella, and the Lollapalooza, among others. The expansion of Sarti Rosa into the U.S. also created solid early traction with ongoing rollout across channels. The official launch party was on September 12th in New York, while social media interest meant that we were already sold out before then and had to ship in new product just for the launch event. In fact, Sarti Rosa has become the second most mentioned and searched for spritz in quarter three after Aperol, helping to grow the visibility of the entire spritz category. The +21 new brand activators we put into the on-premise across four states towards the beginning of the year also continue to contribute positively, not just for Aperol, but now also for the whole portfolio, including Sarti Rosa. Espolòn is also a solid contributor so far this year, recording high single digit top-line growth. In sellout, it is growing across all channels and significantly outperforming the category. Small size and variant expansions that we launched last quarter are already contributing positively, driving 20% of the nine-month growth. The solid positioning of the brand, our commercial efforts, and the new launches are supporting our performance, and we are not seeing a direct impact from the price repositioning from our competitors in our data. The rest of our U.S. portfolio has been impacted by three main areas. Vodka, the biggest spirits category, remains the most pressured by the ongoing macroeconomic challenges, and that is impacting SKYY. Whiskey also remains challenged due to the supply pressures and heightened competition in the category impacting Wild Turkey. Conversely, Russell's Reserve, we continue to be impacted by the constrained supply despite high demand. One last impact is the high comparison base in rum due to the quarterly volatility created by the hurricanes over the last few years. For the balance of the year, we see these impacts continuing to weigh on our overall performance. In addition, we will be cycling a high comparison base in Courvoisier and Grand Marnier in the final quarter. While the market conditions remain challenging, we are taking action. You might have seen that we announced the Courvoisier relaunch last week, and I will talk more about that in just a second. On Russell's Reserve, our supply will come back online in time for Q1 next year. At the same time, strategy work is underway in the other brands to better define the future growth platforms required in these challenging categories. These actions are fully aligned with the strategy we consistently outlined, making sharper portfolio choices and concentrating resources behind fewer, bigger, and more profitable bets. To give you an idea, the left side of the page, the 50% of Aperitifs and Tequila, is significantly more profitable than the right, and we are focusing on driving growth in these highly profitable categories. On the next slide, you can see that in the developing markets, we recorded solid momentum with +9.3% growth in the nine months, benefiting from the regional structure that we set up at the beginning of the year. In fact, despite challenging trends in some markets, our geographic expansion strategy is working, with 17 seeding countries in growth, some mid-single, some double digit. Brazil is the highest contributor to growth, driven by the expansion of Aperol and ongoing solid trend in Campari. Remember that Brazil is the second biggest market for Campari after Italy, and it continues to perform strongly. Argentina is also contributing well, although with some moderation due to the higher comparison base in SKYY Cosmic as expected. In mid-September, we launched a second variant, SKYY Jungle, and we are monitoring its early progress. During this period, performance was also supported by positive trend in Courvoisier, local brands, as well as the early contribution of Sarti Rosa rollout in Eastern European markets. For APAC and Global Travel Retail, or GTR, we registered a slight decline of 0.4% in the nine months. Australia continues to have a solid momentum driven by double-digit growth in both Aperol and Espolòn, and here we continue to focus in the on-premise and activating strongly. Wild Turkey, including the bottle and the RTD, which contributes more than 50% of Australia's top line, also recorded a positive trend in the nine months, benefiting from some easier Q3 comps. In GTR, performance is being supported by strong European execution and encouraging momentum in Espolòn. In the rest of the APAC region, we will have completed our market reset by the end of the year, paving the way for return to growth in 2027. In fact, I was just with our distributors in Southeast Asia, and they are very excited about this significant opportunity to accelerate the growth of our brands. In the meantime, we continue to focus on opportunities for geographic expansion, such as the launch of Espolòn in India, which is a fast growing tequila market. Now moving on to the Spritz. I'm sure many of you are curious about the evolution of our House of Aperitifs, given the significant innovation and the strategic actions we've been taking, especially over the summer period in our initial pilot European markets. Therefore, we wanted to show you the nine-month trends and the potential. Now many of you have heard me talk about our aim to take a category approach in this area, and we've been doing just that with a progressive rollout across six initial markets. We have a portfolio that no one else can offer, ranging from the sweeter, fruity, more floral offerings of Sarti Rosa and Mondoro, to the iconic Aperol Spritz, to our non-alcoholic option with Crodino, and the more bold and bitter Campari and Cynar Spritz. As you can see in the pictures, in the off-premise, we are making this approach much more visible on shelves. While in the on-premise, we are starting to create a separate section of the menu dedicated to our Spritz offerings. This category approach, led by Aperol, also allows us to leverage the strength of all of our Aperitif brands, aligned with the macro consumer trends that we shared with you at the CMD. Now looking at our most established brands of Aperol and Campari, we are present with a bottle in more than 150 markets, but only 11 markets are driving the majority of the top line. In the nine months, seven of these 11 markets grew at least high single digit, and another 28 smaller markets grew double digit. This shows the potential still ahead for the core bottle business of these brands. Plus, our new category approach offers even more geographic expansion opportunities as we lead the category. As you can see, the other brands are in fact only available in very few markets. A big opportunity for us to go after. Now on top of the ongoing growth of the bottle business you just saw, our new convenient formats have also started contributing off a small base in new incremental occasions. As of the nine months, a third of the Aperitifs growth is coming from these new formats, equating to nearly 60 million incremental serves. And just to put that in context, that's nearly an additional quarter of a million serves every single day. Four new formats in only a few initial markets have contributed to this performance in the nine months, namely Aperol and Campari Ready to Serve, Aperol on Tap, and the Aperol To Go can. Based on this success, we are actively assessing accelerating the pace of expansion of these formats into new markets. Our most recent launch, just last week, is the Aperol To Go bottle in Brazil, and we are excited about the opportunities this product can unlock in every market which currently lacks adequate Prosecco availability. We are now able to play in new incremental occasions and channels, which of course cover sports events and festivals, but also high velocity year-round on-premise locations where previously we were not able to compete effectively due to the time required to make a spritz. Just to give you a perspective regarding the potential, we have already reached 1.6% market share of premium beer with our innovations in Italy, primarily driven by Aperol on Tap. Italy was prioritized for the tap launch for several reasons. First, the demand of tap was very high there, and second, we also have a strong footprint ready to distribute nationwide. Going forward, reaching just a small portion of the success of Italy and a few other markets can bring a significant additional top-line growth opportunity for us in the coming years as we source from a much bigger profit pool. We are also excited to share another recent development. Since the acquisition, the house has been patiently building the vision for Courvoisier with a disciplined, decisive, and disruptive strategy that we believe will start laying the foundations for the brand's trajectory going forward. This includes a global campaign, a new drink strategy, investments in specific target markets. We will share more at the next update. But for now, we want to show you the brand's first global campaign in 20 years, in case you have not seen it. Rebuilding Courvoisier will of course take time, as I have said on multiple occasions. But we have got strong confidence in the brand and in its potential, and this is the first step in the right direction. With that, let us pass the Courvoisier.

Speaker 2: I am in a room with the famous faces. Hey, Romeo, pass the Courvoisier. Yeah, feel just like a movie. I am in a room with some fake friends. Looking around for some yes friends. Oh, this shit is like a movie. Oh, this shit is like a movie. Oh, this shit is like a movie. Oh, about to make a movie. Hey, doo, doo. Yeah. Oh, this shit is like a movie. Yeah, yeah, yeah. Oh, about to make a movie. About to make a movie. Woo. Hey, pass the Courvoisier.

Simon Hunt: Okay, a great nod to the past success on the brand. Now let's turn to our guidance. We are confirming our full year guidance of circa 3% organic top-line growth. In terms of the main drivers, we want to share some additional visibility with you this quarter. So far, we are seeing the fruits of our strategy in Europe with stronger growth driven by both our core business as well as the incremental benefit of innovations. On the other hand, in North America, we are still growing, just to be clear, but the overall growth trajectory for this year is being impacted by the U.S. Here we are seeing that despite strong aperitif and tequila growth, soft H2 trends in the specific categories I mentioned earlier and a high comparison base in Q4 are more than offsetting that growth, hence leading to a marginal top-line decline on a full year basis for the U.S. On the other regions, developing markets is performing well, leveraging the new regional structure. In APAC, we are finalizing our reset, and we will be in a better position as of next year to start to benefit from the changes we have put in place this year. Having said all this, it's important to stress that we will deliver what we said we would deliver with circa 3% organic growth this year, with Europe slightly better and North America slightly softer, but gaining share with significant market outperformance across the regions. On EBIT adjusted margin, we also confirm our previous guidance. We have collected the EUR 15 million tariff refund that we had flagged in the first half. This amount is being partly reinvested and partly offsetting COGS pressure in H2. One last update. Immediately following our year-end 2026 results release on March 3, 2027, we plan to host an investor day on March 4 in our London office. Our aim is to give you a closer look at how we are formulating our winning the first shared drink strategy and where we see the potential. This will be an opportunity for us to share with you some of the developments regarding our brands in more detail, especially focusing on our aperitifs global strategy and Courvoisier. Please put a placeholder in your calendars, and we'll share more details in the upcoming weeks. We look forward to welcoming many of you there. In terms of summing up, I think it's important that overall, we are encouraged by the progress we've made so far in 2026, with top-line growth in six consecutive quarters now, and we are continuing to grow in a very difficult market. This means we are firmly on track towards our midterm ambition of cash generative and margin accretive growth, leveraging our five growth drivers with focus on execution and delivery. That said, we're now happy to answer any questions and open it up to the floor.

Operator: Sorry, are you ready for questions?

Simon Hunt: Yes, please. We are ready for questions.

Operator: Thank you. This is the Chorus Call Conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove yourself from the question queue, please press star and two. We kindly ask you to use the handset when asking questions. First question is from Andrea Pistacchi, Bank of America.

Andrea Pistacchi: Yes. Hi, Simon. Hi, Francesco. I have a couple of questions, please. On the Aperol new formats, you have obviously had a strong start. You have spoken quite extensively about the performance of tap. Maybe you could give an update or share any data points on the Aperol Spritz To Go. How is that progressing versus your expectations? On the formats, given the strong early traction you are seeing from the new Aperol formats, can you share some thoughts on how you are thinking about potentially further scaling the opportunity as we go into next year? Are you considering maybe distribution agreements, partnerships to go deeper? Any color on additional geographies? That is my first question. Sorry, slightly elaborate. The second one on the U.S. Strong performance in tequila and aperitifs is being held back, as you are saying, by the other 50% of the portfolio. Now, the market environment's been challenging for a while. In vodka, whiskey, Cognac, these categories where it's more difficult, are you seeing any change in your sort of relative performance versus the category? With the plans you have in place here, what confidence do you have on improving the performance as we go into next year?

Simon Hunt: Great. Hi, Andrea. How are you doing? Look, in terms of the Aperol formats, the first thing is you saw positive or encouraging performance by Aperol on Tap, and on the ready to drink, probably the best market and our largest market has been into the U.K., where we have seen the U.K. already take a number one position in Sainsbury's, for example. It's the number one RTD in the U.K. in Sainsbury's. We've just gone live into the Sainsbury's Supers. We've gone into Co-op in September, so it's still relatively early. But in terms of performance, the original velocity that we're seeing per point of distribution is two to three times our original forecast, and we have significantly had to increase the forecast from where we started. So initial response in the biggest market, very positive. The second part I think of that question is as we look to expand those formats, we are having a look at what's the best way for us to be able to reach the consumers in those incremental occasions. In a market like Italy, as you know, we have the reach, we can do it ourselves. We are having a look at whether or not we're better off partnering with some people to potentially that have access to taps, that have the coverage we need in the on-premise. As a result, we'll continue those conversations and try and balance it where we can do it ourself, we'll do it. If not, we'll find a partner that we think we can help us to accelerate it. I think in terms of your question on the U.S., it's absolutely the right summary. Look, we've got a really good split of the portfolio where we're growing very well. I'm really pleased. We've got another side where we've seen the competition increasing, particularly in vodka and also in American whiskey. American whiskey partly driven by the supply situation, where you're seeing a lot of brands that were on allocation are now on floor stacks at retail. So it's creating a more crowded category than it was before. In answering your question, I think the brands I talked about, on Courvoisier, we're at the start of a reset. On Grand Marnier, we're quite a long way down the strategy. We're now working out how we want to execute that in the market we see. On Wild Turkey, we've got a good ad campaign. We've got to get past that into a more compelling proposition at the point of retail. And I think in terms of the performance of SKYY, we've got a team now looking at the balance between the long-term potential for SKYY in the U.S., balanced with the commercial realities of a very competitive marketplace. So in answering your questions, there's not one answer. It is really on a brand-by-brand basis. But the key thing I want you to take away is we know what we need to do, we're clear on the actions, and we're already working on it.

Andrea Pistacchi: Perfect. Thank you.

Operator: Next question is from Laurence Whyatt, Barclays.

Laurence Whyatt: Hi. Afternoon, Simon and Francesco. Thanks very much for the questions. A couple from me as well, please. Starting with Europe, of course, the performance was very strong, and I just want to understand, there's been some really good weather across Europe over the summer, so how much has that contributed to the good growth? But then also, if you could do any sort of split out between how much of the growth came from innovation and how much from the changed execution that you're now doing, and if it's largely the latter, it'd be great if you could just give some examples of that changes in execution that you're putting through to get the better performance. And then secondly, on Aperol on Tap, I just want to confirm and get your views on whether the growth in this format is really only incremental to the brand. Are there any issues you are seeing of your customers replacing Perfect Serve with using the Aperol on Tap in ways that you would not really want, not optimal, and how you are dealing with that? What is stopping you rolling out the Aperol on Tap more widely? Are there any target markets that you really want to put that one into? I suppose if I could just put in one more. What is really stopping you from launching the Ready to Serve or the can in the U.S.A.? Is there any constraints in that? Are you considering it? Thank you.

Simon Hunt: Hi, Laurence. Good questions as always. Thank you. I think, look, starting off with the question, there was a bit of a Someone asked me this last week, which was, are you doing well purely because the sun is shining? I think, look, if you look at some of the brewer results, the answer to that would be no. This is not about the sun shining. This is about our brand proposition and meeting consumers when they are out. We do not think that is a big driver. What we think is a bigger driver this year is the quality of the execution we put into more festivals than we have ever done before, getting out, really getting as close to the consumer as possible across our markets. Of course, if the sun is shining, it helps, but we do not rely on that. In terms of the overall thing, yeah, I think this is not a weather-led performance, I think would be the key takeaway. In terms of your specific question on what is the split, as I said, the encouraging thing on this on bottle, if I take Campari, sorry, Aperol in Italy, and you look at how much of that is the, or the growth has been split between the different formats. Basically, about two-thirds of the growth has come through on the core business and about a third on innovations. From that point of view, it is contributing. The interesting thing on this is if it is incremental, and when I was having this conversation with some of the team last week. Their view is that while Aperol on a bottle basis has been a bit more challenged in terms of growth over the last few years, the overall performance is actually better as a result of these incremental offerings because we are building the whole franchise. If we can meet someone in a beer occasion and they would prefer to have an Aperol Spritz, the Italian team think this is contributing to a mining pill, the fantastic drink you have when you are out. I think we are seeing actually more of a benefit at a total franchise level than actually a swap out of existing business. I think the second thing in terms of what we have seen with tap. Tap has allowed us just get into places we just could not get in. I think when I was caught up with your team recently, I was telling a story about the Formula One at Monza, where we had over 100,000 Aperol Spritz in three days. We just couldn't have done that before. It's opening up occasions. In certain markets where we didn't have that, and we had some me-too products, we've replaced most of those now as consumers would much rather have an Aperol Spritz being actually an Aperol Spritz. That has given us some incremental business. The key thing is, we're looking at is we feel like we're just getting started. We've got access into occasions we couldn't compete in before, and this completely unlocks them. In terms of the other question on that on tap, are we looking at rollouts? Yes. Which markets? We're not saying. Could we launch it in the U.S.? Tap, RTS, and RTD? Yes, but we're not saying. Sorry, I can't be a bit more helpful on that without indicating too much to other people in the market.

Laurence Whyatt: No, that's really helpful, Simon. Thank you very much for the color.

Operator: Next question is from Sanjeet Aujla, UBS.

Sanjeet Aujla: Hey, Simon. Francesco, two from me, as well, please. Firstly, on the Sarti launch in the U.S., clearly it's been quite strong, perhaps stronger than what you expected. But what are you seeing, in terms of cannibalization, if any, on the rest of the Aperitif portfolio? Or do you think this is entirely incremental, and sourcing from other spirits brands? That's my first question. My second question, I appreciate it's a sales call, but just on gross margin and some of the revised comments on the outlook you made there. I think at H1, the commentary around the gross margin outlook for H2 was a little bit cautious. I think what we've seen in Q3 is a clear acceleration of the Aperitif portfolio, which is, as we know anecdotally is very gross margin accretive. You've also got the benefit, I guess, from the tariff refund. So, are you confirming today if the gross margin outlook for H2 is perhaps a little bit better than where we were at H1? Thanks.

Simon Hunt: Great. Thanks, Sanjeet. The gross margin I'll pass to Francesco in just a second. But on the Sarti launch, look, yeah, it has. We've been very pleased with the initial launch into the U.S. As I said, look, the launch party was three weeks ago, so it's still very, very early days. So I don't think I'm really in a position to give you a point of view on what's happening with the U.S. consumer. All I can say is, if you look at the social media response to this, it seems to be a real phenomenal and extremely viral. So against those early days, what can we say? Well, two things. One is, even if it is cannibalizing, it's actually at a higher price point than Aperol, is one thing. So again, that's less of a concern than the alternative. But perhaps the biggest thing is why Germany is not the U.S., and I recognize that. Germany is the most developed market we have. And what we found with Sarti is there are a bunch of people that love the idea of a Spritz, love the idea of the Italian identity, but they don't like the bitterness. And as a result, we have found that Sarti recruits in from sparkling wine, sweeter mixed drinks and spirit-based drinks, and also still wine, and some beer as well, funnily enough. So we see actually it comes from something, we haven't seen that cannibalization in its most developed market. As I said, it's early days in the U.S., but look, knowing the market pretty well, great tasting products that are highly sessionable normally will do pretty well in the U.S. I don't see that necessarily being a barrier for bringing people in from other categories that we can only source from ourselves. I think it will be a broader recruitment than that. Early days, if you look at the social media spread, the consumers are doing it. It is a very widespread appeal. Francesco, maybe you want to take the-

Francesco Mele: Sanjeet, on the gross margin, we confirm what we said during the first half result. We actually see an accretion for the year, but you need to consider that H2 will be lower. Yes, you are right, that the mix is favorable in terms of Aperitif, but within the mix of the Aperitif, you need to consider the innovation are at group average in terms of gross margin. Clearly, there is room for improvement when we scale them, but it is clearly early stages. There is a bit of, let's say, dilution in the mix, within the mix of a positive Aperitif acceleration. On the other side, we can confirm that we are seeing some headwinds in terms of input cost and logistic that is sure and they are still there. We remain positive in terms of gross margin accretion, but conservative in the full year number.

Simon Hunt: Maybe just to add something there, Sanjeet, as well, just the other part on this, you have got to remember, in a number of these things, we are getting into occasions where we were not before. Yes, we have got to look at the percentage. We have also got to look at the cash margin of actually getting into a category that we would normally not be in.

Francesco Mele: Maybe let me also add that last year in the second half, there was a high base. We had 150 basis points in the second half. It is also another hurdle to be taken into consideration.

Simon Hunt: Yeah, good point.

Sanjeet Aujla: Great. Thank you, guys.

Operator: Next question is from Richard Withagen, Kepler Cheuvreux.

Richard Withagen: Yeah, good afternoon, Simon and Francesco. Two from me, please. First on the U.S., on the underperforming brands. How much patience do you have to turn them around? Then the second question is on the consumer environment over the next one to two years. We see accelerating inflation again. How does this change your commercial priorities?

Simon Hunt: Great. Hi, Richard Withagen. Look, patience, as some of you know me quite well, I am not the most patient person in the world, to be totally honest with you. Building sustaining brands and sustaining cash flow takes time, and in some cases, if you take Courvoisier, we have got an amazing asset. We have got the world's most awarded cognac. We have got a great rich heritage, but we have taken time to actually get the right strategy to build this for the long term. As I said, that is going to take time. That is going to take time to get right. As I have said on multiple occasions, this is the type of acquisition you look at and you look back in 10 years and say, "That was a great buy." On that one, that is going to take a bit longer. I think there are some more specific commercial opportunities we have to be able to get into the marketplace and be more aggressive, not on price, but on making sure we are executing brilliantly at the point of purchase on SKYY and on Wild Turkey. They are more immediate in terms of doing it. As I said, with Grand Marnier, we have got a really good platform with Grand Marnier and the Grand Margarita, or the Grandma, as it is called. We have got to continue to drive that and execute that. One of the things that we have talked about internally is it is very hard to grow everything. While we have been focused on getting the Aperitifs going and really driving the performance on one side, we probably need to give the other brands a bit more attention to make sure we are executing in the right way. I think in answering your questions, I am not particularly patient, but it takes time to build these brands the way we need to. There are some short-term fixes, but I think some longer-term strategies that we have still got to land. I think your second question on the consumer, and maybe if I just take a wide swipe at this one. I think if you look at what is happening across the markets, with mortgage rates in the U.S. hitting 7%, you have got gas prices going up, you have got food inflation coming through. It is a tough environment from the consumer. As a result, there are some opportunities there for us to make sure that when the consumer is spending, either in the on-premise or in the off-premise, we have the right format at the right price, and that the consumer sees value in the choice that they are making. Not value cheap, but value in return for the money they are spending. You have heard me say before, on Espolòn, it is a great value tequila. It is still a premium tequila, but it is a great value, and the consumer sees that. If you look at our portfolio, we are reasonably well positioned to be able to meet the consumer at the right price point with that value for money proposition. I think if you look in some other markets, in Germany, look, everyone is having a tough time in Germany. You know that from the other companies. The German consumer is under huge pressure. The inflation, you are seeing some of these reports of 15,000 people made unemployed every month. This is going to have an impact on it. That is where actually having different formats is really important because consumers still want to participate in our brand with our brand franchise, but their entry point might be different. That might be through a Campari Spritz ready-to-drink in Germany, or it might be through an Aperol To Go can. As a result, we think we can leverage formats to meet where the consumer is. So when they make that decision, they are coming into the category, we want to win that first shared drink.

Richard Withagen: Thanks, Simon.

Operator: Next question is from Trevor Stirling, Bernstein.

Trevor Stirling: Hi, Simon and Francesco. So a few questions, maybe one more for you, Simon, and a couple for Francesco. As I look at the U.S., and clearly it is that non-Aperitif, non-Tequila portfolio where the challenges lie. It sounds like you are pretty advanced on Courvoisier. On Wild Turkey, you say you have got a good strategy and an ad, but the compelling proposition at retail is lacking. So that sounds like maybe close to it, but appreciate what you mean by compelling proposition at retail. Grand Marnier, the strategy is not working, and for SKYY, sounds like it is all up for grabs. Is that the fair way to look at it in terms of how far advanced you are in terms of resolving the issues on these brands? Then, so two more technical questions for Francesco. You have told us about the 2025 tariff refund and what you are going to do with that. The 2026 negative impact, if that is refunded, what is your thinking about what might happen to that? The final question would be around FX. You are saying that FX is still expected to be negative, but presumably the weakness of the EUR and the strength of the dollar means that FX negative will be a bit less than we might have thought a month or 2 ago.

Simon Hunt: Okay. Hi, Trevor. Thanks for your question. I think, look, in terms of the summary, I probably see it slightly differently, and the reason being, it links a little bit to my previous answer. If you take Courvoisier, yes, I am comfortable that we are heading in the right direction with that brand. We have got a clear strategy. We have got the assets. We are moving forward. But the category is still trending negative 10. As a result, we are realistic on the fact that this is going to take some time to rebuild the Courvoisier franchise in America. That is where I think there will be a longer-term play in terms of that, and that is why I do not expect next quarter we are suddenly +5% on this brand. It is going to take some time to rebuild it. I think on Wild Turkey, I think we have got a good proposition. We have got great liquid. We have got a great value for money proposition as well, particularly on 101. I think what we have not managed to do yet is turn our campaign and our concept into an execution at retail, and really making sure that we are doing that successfully and making sure that the entire Wild Turkey portfolio is standing out very well in what is a very crowded space is where we have opportunities. Connected to that, it is getting competitive out there in terms of promotional pricing. We have been holding price. I think we can have a look at pulsing price, not taking it down, just to be clear, but also making sure we are getting the most value out of the promotional pricing activity we have. Linked to that is feature and display drives it. We are going to get display. We have got to make sure our brand is coming to life at the point of purchase, at the right price, when that consumer is turning up. Grand Marnier, I think is a slightly different one. It is an on-premise challenge where we need to, I think, reinvigorate the mixability and the versatility of Grand Marnier. As we have been focusing on so many other brands, we have probably taken a bit of the focus off that, and we need to get that back on. Then finally, in SKYY, Trevor, you know the U.S. vodka market is incredibly competitive at the moment. A lot of the investment behind the brand has pulled back. We have not been dipping down as aggressively as other people, but we need to put our gloves on a bit, particularly at retail, at the right time of year to make sure that we are competitive. Sometimes I think we are missing that incremental vodka consumer. The second part is we have got some great stuff to talk about at SKYY. We have got an iconic pack. We have got a great liquid story. I do not think we have done a great job at the point of purchase of telling that. Across the four brands, there are kind of different stages of what I think we can do to meet the challenges that we see. With all this, it is all kind of balanced with, at the same time, we have got a great growth story on highly profitable brands on the other side of that 50%. It is just finding that balance at the point of execution. Francesco.

Francesco Mele: Yes. On the tariff, clearly, at the moment, we receive the refund for the tariff up until February 2026. You know that, for instance, there is a second investigation that still needs to be finalized in order to assess whether this 10% that we are paying is confirmed, whether it is actually reconfirmed as part of the trade agreement where it was 15%. For the time being, we are not building any expectation. To be fair, we will look into that as soon as we have more visibility on that. Clearly, it will be in line with what we expect for the year, which is EUR 20 million additional benefit that for the time being, clearly, we are not factoring into any expectation. FX, you are very much right. If you look at the nine-month result, the impact was minus 0.4, so a very limited number, even in Q3, where even a little bit positive. For the year, we are expecting a very low number in terms of top line. It is a single-digit number. It is a double-digit number in terms of EBIT, because clearly it is not just the dollar. We have the Mexican peso, for instance, where we produce Espolòn that has been moving a little bit. In Brazil, I have to say, given the volatility in the last few days, we are pretty hedged, so we do not see any major headache coming from that. Still, I think the picture is definitely more positive. We know when looking at the dollar at 111, clearly, with a very different picture from the one we were expecting at the beginning of the year.

Trevor Stirling: Super. Thank you. Thank you both. Sorry, Francesco, just to follow up on that. I guess if the dollar sticks at 111, then potentially there would be benefits in 2027.

Francesco Mele: Yeah, absolutely.

Trevor Stirling: Thank you.

Operator: Last question is from Chris Pitcher, Rothschild & Co Redburn.

Chris Pitcher: Thanks very much, Simon and Francesco. Sorry for carrying on about the questions around the U.S. being a tale of two sides. You mentioned that the Aperitif and Tequila are considerably more profitable than the rest of the portfolio. Is that on a gross margin and a brand contribution margin basis? I am just interested in how much of the marketing and direct brand activation those brands are getting, and whether to affect the turnaround on the other side of the portfolio that you need more people out there supporting the Courvoisiers, et cetera, in the world. Then just to confirm, I think, Francesco, you said that the innovations were margin dilutive. Is that the RTD Spritz innovations, or is Aperol on Tap gross margin dilutive as well? Apologies for not knowing. Thank you.

Simon Hunt: Hi there, Chris. Yeah, I think let me just get the right thing here. A couple of things. Make sure I have got your question. I think in terms of the performance of the Aperol Spritz and Espolòn Tequila, that side of it, they are margin accretive at both a gross profit basis and at an EBIT basis. So they are more profitable than the other side. Part of that is a function of the price points, partly a function of the cost of goods and the GP that runs through. So it is a balance between the two. We are, as I said, we have been backing the most profitable side of the portfolio, and I think we probably just need to get that balance a bit better. It does not mean significant change in strategy or anything at all. It just means maybe a bit more attention, a bit more focus, a bit more A&P on that side of the portfolio, just balancing that out. In terms of do we need more people to do it? No, we do not. I think we can achieve a lot of this with the synergies of the infrastructure we already have. So yes, there are some different parts we need to execute, but one of the things that I am really proud of at Campari is we have a very strong on-premise capability. As you have seen, consistently quarter after quarter after quarter, we are outperforming. As a result, a number of these brands, there is no reason why we cannot get Wild Turkey growing in more bars, why we cannot get Grand Marnier activated again, why we cannot get Courvoisier listed. So I think it is about driving the synergies on the people side, rather than saying we need incremental resources to do that. So maybe Francesco, you want to take the performance?

Francesco Mele: Yeah, on the gross margin, in general, as we said, the innovation is at the group level. If you look at the bottle, clearly the margin is lower compared to the bottle. I would say that is pretty much valid for most of them. Consider that we are in co-manufacturing agreement at the moment, so there is really limited efficiency that we are actually extracting from this activity. I have to say that if you look at innovation on a per se basis, the gross margin is better than the bottle, as we explained also in previous presentation.

Chris Pitcher: Thank you very much.

Operator: Gentlemen, the floor is yours for any closing remarks.

Simon Hunt: Yeah, just look, thanks very much, everyone, for your time today. Please do follow up with the team. As I said, I am really pleased that this is our sixth consecutive quarter of growth. We are doing what we told you we were going to do. We have confirmed guidance. We have got a bit of a mix, slight change between U.S. and Europe in terms of the overall delivery. As you can see in the U.S., hope we have been as clear as we can about where we see the softness in certain categories, like everyone in the industry, just to be clear, versus the areas where we have been investing and we have real competitive advantages to make carve out a different path. So we are confident in the full year guidance and also confident that this is the next step on the way to our midterm guidance. Thanks very much for your time.

Operator: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.