Premiumization And Mixology Trends Will Expand Global Spirits Markets

Key Takeaways

• Streamlined operations, premiumization, and strategic divestments are set to boost margins, cash flow, and earnings resilience as Campari sheds low-margin brands and prioritizes efficiency.
  
• Rapid geographic expansion, strong brand marketing, and early moves in low
• and no-alcohol segments position Campari for sustained organic growth and market share gains.
  
• Shifting consumer preferences, rising regulation, brand concentration, integration risk from acquisitions, and increased competition threaten revenue growth, profit margins, and long-term stability.

Catalysts

Davide Campari-Milano N.V., together with its subsidiaries, markets and distributes alcoholic and non-alcoholic beverages in the Americas, the Middle East, Africa, Europe, and the Asia-Pacific.

• While analyst consensus sees cost discipline and efficiency improvements supporting margin expansion, the scale and speed of Campari's SG&A and portfolio streamlining could drive substantially faster EBIT margin accretion and free cash flow generation, particularly as divestments disproportionately shed low-margin brands and SG&A is explicitly guided to drop by 200 basis points over three years.
  
• Analysts broadly expect geographic expansion to unlock revenue upside, but Campari's current double-digit growth in over 13 markets, combined with deepening on-trade penetration in the U.S. and rapid scaling of brands like Aperol and Espolòn, signals the potential for a multi-year acceleration in organic sales well above sector averages, materially boosting top-line growth.
  
• Accelerating premiumization across the portfolio, as evidenced by high gross margins on flagship brands like Espolòn (above 55 percent) and resilience in premium SKUs despite pricing discipline, positions Campari to outperform in gross margin and earnings as global demand for high-quality spirits rises.
  
• The group's outsized and innovative brand investments, including campaigns like Aperol's €27 million, festival partnerships, and influencer-driven experiential marketing, are uniquely syncing with the global consumer shift toward experiential spending and social mixology, laying the groundwork for sustained brand equity gains that can translate into market share and pricing power.
  
• Expanding in the rapidly growing low
• and no-alcohol segment with brands like Crodino and Aperol Spritz RTD gives Campari a first-mover advantage in a category with secular growth tailwinds, supporting incremental revenues and a broadening customer base-creating a new, high-margin growth pillar for the long term.

Davide Campari-Milano Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Davide Campari-Milano compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Davide Campari-Milano's revenue will grow by 5.8% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 6.1% today to 15.2% in 3 years time.
• The bullish analysts expect earnings to reach €554.7 million (and earnings per share of €0.5) by about August 2028, up from €188.3 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 25.7x on those 2028 earnings, down from 42.2x today. This future PE is greater than the current PE for the GB Beverage industry at 25.4x.
• Analysts expect the number of shares outstanding to decline by 0.12% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.83%, as per the Simply Wall St company report.

Davide Campari-Milano Future Earnings Per Share Growth

Risks

• The accelerating global health and wellness movement is likely to put long-term downward pressure on alcohol consumption, particularly among younger consumers, which may soften demand for Davide Campari-Milano's key spirit brands and weigh on overall revenue growth.
  
• Rising regulatory scrutiny, including the threat of new tariffs, increased alcohol taxes, and stricter advertising limitations across key markets, introduces significant cost pressures and uncertainty, as evidenced by management's guidance that tariff impacts could cut EBIT by up to 45 million euros, directly eroding future profits and margins.
  
• Continued brand concentration risk exists as core earnings remain heavily reliant on flagship products such as Aperol, Campari, and Espolòn; should consumer preferences shift or market conditions for these brands deteriorate, revenues and earnings stability would be materially impacted.
  
• The company's M&A activity, particularly recent investments like Courvoisier, brings significant integration risk, higher leverage-net financial debt stands at 2.4 billion euros with a leverage ratio of 3.2 times-and potential for margin dilution if acquired brands underperform or require unexpected strategic investment.
  
• The increasingly competitive landscape, with the industry seeing both premiumization by global players and the emergence of low/no-alcohol alternatives, heightens marketing and promotional spend (as evidenced by A&P rising to over 18 percent of sales in peak season), threatening Campari's ability to maintain pricing power and protect net margins long-term.

Valuation

• The assumed bullish price target for Davide Campari-Milano is €9.24, which represents two standard deviations above the consensus price target of €6.76. This valuation is based on what can be assumed as the expectations of Davide Campari-Milano's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €10.0, and the most bearish reporting a price target of just €4.2.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be €3.6 billion, earnings will come to €554.7 million, and it would be trading on a PE ratio of 25.7x, assuming you use a discount rate of 8.8%.
  
• Given the current share price of €6.61, the bullish analyst price target of €9.24 is 28.4% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.