Davide Campari-Milano N.V.

Good evening. This is the Chorus Call Conference Operator. Welcome, and thank you for joining the Campari Group's first quarter 2026 financial 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 Simon Hunt, Chief Executive Officer, and Francesco Medli, Chief Financial Officer. At this time, I would like to turn the conference over to Mr. Hunt. Please go ahead, sir.

Great. Thanks very much. Good afternoon, everyone, and thank you for joining us. Today, we're going to go through our quarter one 2026 net sales in this new format and also cover the outlook for the balance of the year. Francesco is here with me, and as always, our IR team is available after the call for any follow-ups. So let's start with a summary. In our smallest quarter, we continue to gain share in almost all of our markets, and we recorded plus 2.9% organic growth in line with our full year expectations. And this reflects the resilience of our business and the effectiveness of our strategy. And we achieved this against a challenging operating backdrop that we continue to view as largely cyclical, including additional recent impacts like increasing gas prices and further economic pressure on consumers. A key indicator for us is the moving annual total growth covering a 12-month rolling period. As the charge shows, our performance has improved consistently over the last year. And we remain one of the only spirits companies delivering sustained growth against this challenging backdrop. Now, this growth is, in fact, fully aligned with our strategy that we announced at our C&D last year with five key drivers. First, sharper portfolio choices with fewer bigger bets. In fact, you'll clearly see in our sellout data that we are growing exactly in the brands and categories that we've identified across the regions and especially in the on-premise. Second, winning the first shared drink with new formats for new occasions. The innovation pipeline is accelerating rapidly to ensure we tap into occasions where we were not able to play in the past. For example, with the Campari Spritz ready to serve small bottle launch in Italy, Austria and Germany towards the end of Q1. And the Aperol ready to drink can launch in the UK, Belgium, Switzerland and Austria in Q2 so far, with more countries to come in the upcoming weeks and months. Third, accelerating our geographic expansion. Supported by our new regional setup, we are progressing with a clear playbook and already making good progress. In fact, in quarter one, we had broad-based growth across our houses and regions with 18 countries all in growth. Fourth, continuing to leverage our investments to work harder against our new strategy. And fifth, driving our efficiencies across each line of the P&L to allow us to invest more behind our brands, which means that while we contain SG&A, we are able to accelerate our investments in A&P as we told you. in a period that is the most cost-effective moment to gain market share. In fact, in Q1, we continued to activate heavily to de-seasonalize and expand further. In Q1, we also took the opportunity to carry out some targeted inventory optimization in the U.S., together with our partners on our non-priority brands, and this is supported by the very strong performance of our key brands like Aperol. This amount, which is around 10 million euros, will not be recovered, and we may potentially be doing some more in Q2, depending on the performance of our priority brands. Clearly, it impacts the quarterly figures, but it's a rounding error, considering our full-year top line of circa a billion dollars in the US. What is important is that we confirm our trajectory to reach our full-year guidance. of circa plus 3% growth as we head into the peak season and execute exactly what we told you. We've had a bunch of questions on the AppRoll2Go launch, so I want to share some early visuals regarding this launch. On this page, you can see some of the initial marketing and placement of our new offering. The AppRoll2Go can, which has now been launched in selected European markets, as I already mentioned, and we'll share more with you as our rollout progresses. but I can say the initial reactions are very positive, with excitement from the trade and on social media. So now let's dive into the details, which I was already anticipating during the full year results, and only at a net sales level. Of course, further details will be provided in the half and the full year results. As you can see, the top line growth of plus 2.9% that I mentioned was broad-based across all regions and most houses. The House of Whiskey has been impacted by the fact we continue to have demand-led supply constraints on Russell's Reserve, which will be strategically managed going forward in order to have a more consistent aging liquid profile over the coming years. The rest of the brands in the House continue to grow nicely. In terms of FX, the main impact is coming from the U.S. and Jamaican dollar. while the perimeter impact is in line with what we previously told you, mainly regarding the disposals of Ginzano and our Australian plant. So now let's have a look at sellout. Our outperformance and share gains continued in most markets. In the US, we are outperforming across all channels, with robust growth in our key of heritage and tequila brands. The performance in the on-premise especially shows the marked outperformance versus the sector, which is exactly what we aim for, to build awareness and trial. More broadly, the fact that the on-premise is growing faster than the off-premise, but with smaller ticket sizes, solidifies our belief that social interaction and the role of alcohol in consumers' lives is still very much relevant, and the current pressure is cyclical. Accordingly, we are investing for the long term, as we execute our strategy to ensure that we are strongly positioned for when the environment improves, and it makes sense to do that now. In Europe, we are outperforming across most markets with significant growth in our priorities portfolio. Germany has been impacted by some promotional phasing on non-priority brands, but our priorities continue to perform extremely well. This is fully aligned with our focus on fewer bigger bets, and a clear sign that our strategy is working. Let's now start looking at the top-line growth by regions, starting first with Europe. Europe delivered plus 1.9% organic growth in Q1, led by continued strength in the UK, positive performance in our core markets of Italy and Germany. In fact, all of our key markets were in growth except for France, which was impacted by a high comparison base due to the relisting of Campari a year ago. Aperol and sparkling wines continue to grow nicely in France, which clearly confirms the spritz trend is accelerating. If we look at what drove this growth in terms of houses and brands, aperitifs and sparkling wines were solid contributors. For Aperol, while the bottle remains in growth, there were also early encouraging performances from the availability of the ready-to-serve in new markets and the expansion of Aperol on tap. Credino benefited from campaigns, especially during dry January, with 12 countries growing at more than 20%. And at the same time, Esplon and Courvoisier also contributed to the growth. During Q1, while Easter phasing positively impacted, about with some shift into Q2, we didn't achieve a full execution with European retailers during negotiations while we held the line on pricing. Since then, European alliance negotiations have closed successfully. Although the environment remains challenging and we're monitoring consumer confidence closely, especially in light of rising energy and fuel prices. Looking at the MAT growth, we see a positive momentum over the last year. Now moving on to North America, we recorded plus 2.2% organic growth driven by solid underlying trends in the U.S., and recovery in Jamaica. Although the performance in the U.S. was impacted by the targeted inventory optimization, as I said before, the Aperol franchise recorded very solid growth, and Esplan continued to grow positively in a competitive market. Now, before I move on, I'm sure many of you are wondering how the additional investment we're putting behind Aperol in the U.S. is developing, and we're doing exactly what we said we would. The additional 21 people have been deployed as brand activators since February across four key states. And we are already seeing encouraging early progress on velocity and distribution. In fact, it's early days, but based on eight weeks' worth of data, we are seeing velocity at nearly three times the rest of the market in those target accounts. And having met with the teams there, the enthusiasm from the trade is fantastic. and they really appreciate our commitment to the on-trade in these tricky times. Now, we also started deploying additional A&P ahead of the peak season, and as we have updates, we'll share them in upcoming calls. In Jamaica, the recovery following the hurricane at the end of October, October 2025, is on track, and our brands benefited with mid-single-digit growth, especially driven by Ray and Nephew. For the rest of the region, there was growth across all countries, except for Mexico, due to some minor shipment timings that affected the quarter. Now to discuss our newest region, developing markets. As most of you know, we formed this region at the beginning of the year in order to become more agile and benefit from a repeatable playbook across some of our seeding markets. It's early days, but we're already seeing some of the benefits of this increase focused. Overall, the region recorded plus 12.7% organic growth, a bit of an easy comparison base of negative four, and especially driven by the two largest countries in the region, Brazil and Argentina, but also with widespread growth across most of the other countries. Brazil was positively impacted by increasing apparel penetration, with more innovation to come. while Argentina continues to perform positively due to the ongoing popularity of Sky Cosmic. The main driver of growth in the rest of the countries was April, once again demonstrating the power of the brand and the benefit of our increased focus on fewer bigger bets. On the next page, you can see that APAC registered a 1.6% negative organic change, but this was entirely driven by GTR, travel retail, shall I say, with a decline of 13.5%. The rest of the region grew by positive 1.9%. Australia was positive, supported by double-digit growth in both the Apple franchise, as well as Esplanade TV and Bottle, while Wild Turkey Ready to Drink offset some of the gains as preferences continue to move towards white spirit ready to drinks. We also recorded decent growth in China, India and other partnership markets. And in the rest of the region, we have fully set up the new management teams and finalized the acquisition of our distribution companies in Japan and South Korea to ensure we are well positioned for future growth. We are confident of the potential of our brands in this region. To base our performance so far and our perspective for the peak season, we are confirming our 2026 guidance despite the challenging operating backdrop. Not much time has passed since we originally provided this guidance on the 4th of March, but at the same time, there continues to be a lot of major developments in the global geopolitical and operating backdrop, which remains very volatile. We're focusing on what we can control and executing the strategy that we shared with you during our CMD. and that means focusing on fewer bigger bets, focusing on the launch of new formats for new occasions, and focusing on the acceleration of our geographic expansion. You saw clearly our outperformance in the sellout in Q1, and the data continues to trend positively in Q2. Top-line growth guidance of circa 3% for the entire year incorporates the impact of the inventory optimization, and the quarterly movements that we have seen and may continue to see in the upcoming quarters as we navigate the volatile backdrop and the evolution of the weather conditions. What is important for us is to progress on our path towards the mid-term targets and deliver what we promised. On the P&L side, we are again focusing on what we can control while continuing our investments at full pace as we previously guided. The direct impact for us of the volatility in the operating environment remains limited for now, but we are monitoring it closely, especially with the evolution of potential additional increases in costs like energy, logistics, and insurance. So I won't go through the rest of the lines on this page as they essentially remain the same, but I'm happy now to open up the floor for any questions you may have on our Q1 performance.

Thank you, sir. This is the course called Conference Operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. To remove your question from the question queue, please press star and 2. We kindly ask you to use handsets when asking questions. The first question comes from Trevor Sterling of Bernstein.