Davide Campari-Milano N.V.

Good evening, this is the Chorus Call Conference Operator. Welcome and thank you for joining the Compati Group Full Year 2024 Results Conference Call. As a reminder, all participants are in listen-only mode. 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. Paolo Marchesini, Chief Financial and Operating Officer. I will now hand you over to Mr. Marchesini. Please go ahead, sir.

Good evening, good afternoon to everybody. I am pleased to be here again with all of you to review our 2024 results and give you our initial perspective for fiscal year 2025. But more than that, I'm happy to be joined here by Simon, whom I'll leave the floor to in a few seconds. I wanted to highlight that we have intentionally tried to keep this presentation as short as possible to leave ample room for questions. Of course, and as always, Chiara and the whole IR team, they are happy to connect after our call to further deep dive with all of you in the upcoming days if needed. Simon, the floor is yours.

Fantastic. Thanks, Paolo. I'm very happy to be here with you today. As I'm sure you all know, this is my second month in this role, and it's been a busy but exciting period. I've had the chance to meet with many of our colleagues around the world already and deepen my understanding of Campari's business. And Campari has impressive competitive advantages, including its culture and people, shareholder structure, and enviable brands. And I believe I can bring in different optics to support in extracting its full potential. And I'm very much looking forward to meeting many of you in the next weeks or months in person and sharing more regarding our roadmap ahead towards the summer, where we'll be in a position to give you deeper perspectives. Now a short summary of how we see the environment and our positioning. As all of you know, 2024 was a tough year, marked by significant macroeconomic and geopolitical volatility, some of which remains today. And this created pressure on our sector across all regions in different forms, leading to an impact on consumption patterns as well as significant destocking across the trade. On top of this, we were faced with very poor weather conditions, especially in Europe, a tough mix of events to manage. All of this created a challenging backdrop and low visibility during the year. But despite this, we delivered positive results with plus 2.4% organic top line and plus 5.2% total growth with ongoing outperformance versus the sector. I understand the expectations for 24 at the beginning of last year were higher, but looking back at everything that happened, this is, in my opinion, a solid result and really shows the resilience of our teams, our brands and our capabilities. During the year, we executed the planned investments to further strengthen our frontline, our systems and our supply chain capabilities, which clearly had an impact on profitability. given the more muted than expected top-line growth. At the same time, this period gave us the impetus to look internally, to evolve how we work and focus on increasing efficiency and reinforcing our focus on our priority brands for the future. The solid performance in Q4, both in terms of top-line at plus 3.4%, as well as gross margin at 40 basis points, was driven by better trends in Europe and aperitifs following the weak peak season, which also supported by the positive impact of COS, especially due to the agave costs. Current low visibility on how long these cyclical headwinds will last means we view 2025 as a transition year. This means ongoing soft and top-line growth while we continue our full focus on efficiency and execution. We are doing this without compromising our growth investments, both in terms of the commercial teams as well as brand building, while focusing on operating deleverage and effectively managing our balance sheet. To summarize, this has been a challenging and will continue to be a challenging year in 2025, but we operate in a highly profitable and attractive sector, and our unique positioning makes us very confident for the future. We'll execute strategic actions to deliver long-term sustainable market outperformance with our existing unique brand portfolio. This means digesting our acquisitions and growing the brands we have and easing off M&A for now. We're going to remain focused on what we can control, like efficiencies, cost control, execution, and take actions to mitigate impacts for what is beyond our control, like tariffs, which we'll comment on. more on later. Before deep diving into 24, we want to start by giving you a bigger picture. We've been able to record strong top line growth for the last 20 years through evolving market conditions. And this has been achieved via a focused approach, leveraging a strong brand portfolio. Just to highlight here that of course, Apparecy is this critical part of that story and it will continue to be. But in the meantime, we have diversified and strengthened our portfolio. For example, the story of Espelon starting with almost nothing and now being a significant contributor to the group's performance and an accelerator of growth. Totally these last five years have been disruptive for the sector, but at the same time, on aggregate, it allowed us to reach bigger scale than our normal run rate pre-COVID rate would have. Our top line reached 3.1 billion. For us, it's level 20 years ago. Our pre-COVID run rate of plus 5% would have meant 2.5 billion. That's an additional 600 million we have added to our scale in this period. Following a transition period in 2025, we believe our growth story and potential to gain market share is solid for the medium term. We still have low penetration across many geographies. We have an enviable brand portfolio that is aligned with where consumer trends are moving, combining power icons in aperitifs and distinctive brands in high potential categories like Espelon. With the investments we've made to enlarge our routes and market footprints and build capabilities with our new house of brands model, we are now positioned well to benefit from the evolution of consumer trends in our sector in the upcoming period. So now let's have a look at 24 trends in more detail. Overall, we record a resilient performance with 2.4% organic and 5.2% total growth. The latter mainly due to the additional contribution of Courvoisier with limited FX impact. In terms of regions, we've seen resilient growth in both of our main regions, the Americas and EMEA. And moving to the brands, first to state you'll see a different composition of brands here than in the past, and for the rest of the document, as we've now transitioned to the previously announced house of brands structure. The main growth drivers have been the houses of Aperities and Agave with plus 6% and plus 10% growth respectively, as well as the house of Cognac and Champagne with plus 2%, of course excluding Courvoisier since it's in perimeter until May this year. In terms of sell-out versus sell-in, we have recorded balance trends across our major regions, with solid ongoing performance driven by our key accelerator brands, including the Aperites and Espelon. In the US, we outperformed across all channels in sell-out, plus 2% outperformance in off-premise, plus 4% points in NABCA and plus 6 points in a strategic on-premise in the world's most profitable market. And we did this while maintaining pricing discipline despite the market pressures. In EMEA, Germany has been the strongest market, while Italy and France had a challenging peak season due to the poor weather. The UK was positive on sell-out despite the impact of the Jamaican rum supply shortages, mainly driven by the aperitifs. But focusing on the Americas, of the total organic growth of plus 4%, the US was stable, impacted by the subdued market context. In particular, Q4 had a tough comp with a base of plus 13% last year, leading to a negative Q4 on a year-on-year basis. while Apple and Esplan saw solid growth, plus 12 and plus 11 respectively. Overall growth was brought down by pressure on sky and some softness and wild turkey. In Jamaica, Q4 saw a return to growth after the impact of the hurricane on production and also on local consumption in Q2 and Q3. The plus 1% annual growth we recorded would have been mid-teens without this impact. Production is now back to normal as of February, and our environmental investment, the Dunder Water Treatment Facility, will be finished in Q2, or make us more resilient to future potential climatic shocks. The rest of America has continued its solid performance in Q4 and closed the year with plus 14%, mainly driven by the Brazilian brands Campari and Apple. And this clearly shows the potential of our brand is truly widespread across the Americas. Now moving on to EMEA, we recorded plus 3% organic growth for the year with a catch up in Q4 following a challenging peak season. All countries were positive in Q4 except for the UK, which was flat. And focusing in on Italy, we've already explained the three key reasons for the performance in 24. But just to recap, we have a commercial dispute in Q3 around 10 million impact. We had destocking in the trade due to subdued consumption patterns and the cost capital. And finally, we had poor weather conditions in the peak season, as you know. As we stand today, the first is resolved. Stock in the trade is at healthy levels, although there are still some macroeconomic pressures. And as for the weather, we'll see how the season develops this year. In any case, the brand health and strength of our portfolio remains strong. And one other important point is that the other countries in Europe, which contribute 15% of our overall sales, continue to grow strongly with plus 12% organic growth in 2024. The biggest drivers are GTR in Greece, but also other countries like Spain and the Netherlands, further reinforcing the market expansion opportunities for our portfolio across EMEA. Okay, I'm moving on to APAC. And so 24 was marked by both external challenges, like the challenging operating environment in Australia and China, as well as negative impact of some of our own actions, like the route to market changes we've implemented. Overall, we recorded minus six organic growth in our smallest region, but with Q4 returning to growth with plus four. Australia in particular was impacted also by our decision to decrease co-packing activities excluding which our four-year performance would have been flat with growth driven by the apparatus offsetting some of the pressure on the wild turkey rtd that we've seen from white spirit rtds and to benefit from this trend we've launched our own espalon rtd which is small but growing nicely off a small base in the rest of apac china and india are contributing positively in q4 following route to market changes which weighed on performance previously and brand spirits, including both bottle and RTD formats, performing well across Japan, China, of a small base. As I previously mentioned, we've transitioned to the House of Brands structure as of 2025, and this is a structure that I believe is very conducive to more focused and structured growth among our categories, while also creating efficiencies. This way, the MDs of the houses will champion their brands, while the regents will champion their markets. creating a healthy tension between the two and also allowing us to better leverage geographic expansion opportunities while optimising brand building investments. To first look at the house of aperitifs, we had a solid performance in Q4, which pulled the full-year organic growth to a solid plus 6%, hoping to offset some of the impact of the weather challenge peak seasons. Aperol had double-digit growth in Q4, driven especially by the US, Germany and Italy, its top three markets, indicating that its brand health is strong and healthy. We'll dive more to this in the next page. Campari closed the year with plus 9% growth driven by the Americas, as well as some of the priority markets in EMEA. This showed that the Negroni trend and the progressively increasing Campari Spritz trend is continuing. And Credeno, our non-ALC, continues to grow off a small base, but will focus more here in the future. The rest of our aperitifs are also growing nicely, supporting our leadership position in the aperitif category globally. To give you a more holistic perspective on the positioning of Aperol and the potential for growth going forward, we included on this page a few additional details. In the first chart, you can see the increasing diversification of APROL over the last 10 years. From being largely Italy-heavy, the composition has become more balanced over the years, with the US and new geographies becoming more important. However, the top six markets still contribute 70% of the total. And while we believe there's still a significant opportunity to grow in those six markets, we are also just starting to leverage the route-to-market capabilities around the world in new markets. On the next chart, you can see that we still have a significant opportunity to drive awareness and trial, especially in the U.S., the biggest market. But even in parts of the country where we've been activating for longer, the awareness of the brand is still very low. One in two U.S. consumers have never heard of Apple, which is a massive opportunity for us. Another important indicator is per capita consumption, especially compared to our most mature market, Italy. Since 2019, there is a solid evolution and improvement in per capita consumption across the largest six markets. But the levels are still low. Again, focusing in on the US, you can see that overall it's very low. And also in the 10 strategic states where we've been focusing, the per capita consumption is still below 10%, 10% of the per capita consumption of Italy. Just to put it in context, if the US was to get from the 4% that it is today to 20% of Italy's Aperol per capita consumption, the additional volume generated would mean net sales of Aperol globally would be between 45% to 50% higher just on achieving this in the US alone, let alone all the opportunities we have in other markets around the world. But with that said, of course, in the challenging 24 period, Aperol also got impacted to a certain extent. But the brand health is in place. The profit pool is huge, including not only spirits, but also wine, beer, and RTDs. And it hits perfectly in the consumption occasions, which are becoming more and more important, in line with consumption trends. So when you look at the potential coming out from market diversification, awareness, penetration, and the digital presence of the brand, the medium and long-term opportunity to replicate the success that we've had in Italy across other markets is crystal clear. In terms of our performance in whiskey, there was the impact of the challenging category trends and competition in 24, while Turkey has been especially impacted in its core market, Australia. However, there have been some positive trends in other markets and in Russell Reserve. For the Jamaican rums, the main impact have been supply constraints and the impact of the hurricane on local consumption in Jamaica. Now that that is resolved, we expect more stabilised trends going forward, and the underlying brand health of the portfolio remains strong in its core Jamaican market. In the House of Agave, clearly our focus is on Espolon, which grew plus 14% this year, despite the impact of normalization of wholesaler inventories in Q4. So let's move on to the next page to deep dive into Espolon a bit further. Espolon has been a meaningful success story in a rapidly growing and crowded tequila category. growing from almost nothing 10 years ago and gaining 12 points of rank to become the number seven largest tequila, with significant outperformance of the category in the U.S., its core market. It is uniquely positioned at the right price point and right quality profile, and the brand power also remains strong as it's perceived as cool and innovative. At the same time, it's got about a 4% volume market share, so it's still relatively small compared to the larger brands in the category, signifying potential room for further growth. You can also see from this page that the share of other markets in total is still very limited, at about 9% of total Esplanade sales. But they've started to grow very fast in a recent period, with increased attention on tequila in other markets, such as UK, Canada, and australia as well as you as well as european markets like italy for example recently there's more and more focus on tequila and the paloma in italian articles which fits very well with a refreshing highball alternative in the growing consumption occasions and we're going to be focusing on being one of the front runners to lead this trend internationally lastly on the varying composition the increasing relevance of the brand is also evident from the increasing share of the more premium and higher-margin SKUs, like Reposado and Anejo in total, up from 30% in 2019 to 41% today. For Gramania, we saw subdued growth in a competitive and muted market backdrop as we started to position the brand more effectively among its main consumer pool in the U.S. which recorded plus 3% growth during the year via partnerships, including a new one with Grammy award-winning rapper Future. Courvoisier, which, as you know, is still in perimeter given its consolidation as of May 24, will be included in our organic growth in May this year. The Konya market remained challenging across its main markets, the US and China, in 2024, and right now we are planning to phase in our launch plans given the market backdrop. In the meantime, we've created a structure and brought in important experts into our team. Our new MD of this house has extensive experience in one of the other important brands in the category. Our CMO and head of strategy, the same in the other important brand. And we also have the strongest bench of Cognac experts on our board. For us, Kavozia has a clear rationale. If we want to be in this category, and we do, we have to acquire one of the scarce brands, and that has a cost. This is an acquisition for the long term in a category that we believe in, and it would take time to turn around, but we have strong experience, and we believe we can do it. For the rest, I won't comment too much, just to say that 25% of our overall portfolio is currently classified as local portfolio, given their geographic concentration. which, by the way, includes also agency brands, co-packing, and bulk activities, which make up 15% of local portfolio and corresponds to about 4% of group sales. We've already shared with you our intention for some portfolio streamlining in the upcoming period, and we'll share more on that when we can. Sky remains an important part of our portfolio as we redefine its positioning. So now I'm going to hand back to Paolo to go through the financial review.