Cowan, a 30-year-old Londoner who works in retail marketing, had her first Aperol Spritz last month when friends ordered the drink on a night out in Soho, one of the trendy areas Campari has targeted. Despite its cachet, the bitter concoction -- a mélange of Campari’s herbal Aperol, sparkling prosecco, and soda -- wasn’t to her taste.
“Maybe it’s a drink I would like if I was more sophisticated, or had a yacht on the Amalfi coast,” she said.
Cowan’s Aperol aversion shows the difficulty Campari faces in making the spritz Europe’s go-to drink this summer to offset turmoil in the Milan-based company’s home market.
Aperol has accounted for more than a third of growth at the maker of Skyy vodka and Wild Turkey bourbon since Campari acquired the brand a decade ago. Last year sales of Aperol fell for the first time in at least five years amid Italy’s economic slump and a pricing dispute with a big German retailer that took Aperol off shelves.
“Aperol’s been by far the biggest contributor to Campari of any brand,” said Jamie Isenwater, an analyst at Deutsche Bank in London. “Its recovery is dependent on how effectively they can win back consumers in Germany. In the longer term, it’s also about rolling it out to new territories.”
Aperol comprises 11 percent of Campari’s revenue of 1.3 billion euros ($1.8 billion), and its decline has dragged down the shares, which have lagged behind those of Diageo Plc (DGE), Pernod-Ricard SA (RI) and Remy Cointreau (RCO) over the past 12 months.
Campari slid 8 cents, or 1.4 percent, to 5.47 euros at 10:35 a.m. in Milan, extending this year’s drop to 5.4 percent.
The distiller now trades at a 16 percent discount on a price-to-earnings basis to the FTSE MIB (FTSEMIB), Italy’s benchmark stock index, after commanding a premium of as much as 160 percent over the past three years.
Campari has responded by ramping up advertising in its main markets of Germany, Italy and Austria. In new regions like Britain and Spain, the company is working with bartenders to introduce drinkers to Aperol and has plastered both countries with billboards that illustrate the right way to make the flagship cocktail.
While most of Europe is just getting introduced to Aperol, it’s been a northern Italian staple since its creation in the city of Padua in 1919. It’s usually consumed as an aperitif of three parts prosecco, two of Aperol and a splash of soda over ice with a slice of orange. The spritz’s low alcohol content, slightly less than a glass of wine, makes it an alternative to beer.
“The drink is extremely social,” said Campari Group marketing director Andrea Conzonato. “It’s about getting together in the piazza before dinner.”
Italy’s taste for spritzes is a legacy of Austria’s influence over the north of the country, Conzonato says. The word “spritzer” comes from the German verb “spritzen,” to squirt, and consumers in the region adopted their northern neighbors’ habit of blending bitter spirits with local sparkling wines. The drink’s strong flavor, though, makes it a tough sell outside central Europe, said Trevor Stirling, an analyst at Sanford C. Bernstein in London.
Sales fell 16 percent in Germany last year after Aperol was pulled from the shelves of a retailer, said by Deutsche Bank to be discounter Lidl. The retailer refused to go along with a price increase that Campari wanted. While Aperol is now back in some Lidl stores, cheaper alternatives that sell for 30 percent to 40 percent less than Aperol’s 10-euro price tag have taken market share. Campari confirmed the details of the dispute without naming the retailer. Lidl didn’t respond to an e-mail seeking comment.
One bright spot for Aperol is Japan, Conzonato said. Sales there and in other secondary markets like Australia and the U.K. increased 45 percent last year, versus a 7 percent decline in Italy, Germany and Austria. Campari is also eyeing Brazil, Australia and Argentina. The U.S., the world’s most profitable spirits market, will take longer, as spritzes aren’t a popular pre-dinner libation.
Those new markets will help stop the bleeding, yet Aperol won’t ever get back to its previous growth rates, according to Barclays Plc. Analysts there expect sales to rise 10 percent to 12 percent a year.
Nick Robinson, 36, a marketing manager in London, couldn’t help but stumble across the Aperol Spritz while on holiday last year in Venice, where the drink offered a refreshing alternative to his usual Negroni -- a gin, vermouth and Campari cocktail.
“I love a Negroni,” he said, “but they’re pretty fierce and you can’t drink many.”
Campari should have luck pitching Aperol to drinkers like Robinson who are in the mood for a slice of Italy. At Polpo, which sells Venetian food in three London locations, sales of Aperol now top Campari, Aperol’s better-known cousin, according to managing director Luke Bishop.
The restaurant trains its bartenders to make the spritz and features it on menus. At its Covent Garden location, Polpo has a dedicated Aperol bar with exposed lightbulbs and framed Campari ads. It even puts its own spin on the cocktail, serving it Venetian-style with an olive and lemon rather than an orange slice.
“It’s a very nice effect seeing it in the restaurants,” Bishop said. “You sell one or two, and then every table starts looking and asking, ‘What’s that orange drink?’ ”
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