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10th European Academic Conference on Internal Audit and Corporate Governance

Business Sustainability,

A Must In Crisis Times

20th April 2012

Verona

Antonio Zucchetti

Head of Internal Audit

Campari Group

Agenda

About Campari Group

Business Sustainability

Internal Auditing and Business Sustainability

Findings and Recommendations

Takeaway from these experiences

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About Gruppo

Campari2011 Full Year Results - Highlights

Founded in 1860

Listed at Italian

Stock Exchenge

FTSE-MIB

since 2001

Headcount: 2.278

- executives 137

- white c. 1.316

- blue c. 825

About Gruppo

Campari2011 - Sales breakdown by region and segment

FY 2011 consolidated net sales : € 1,274.2 million

Breakdown by region Breakdown by segment

(1) Includes:

USA 19.8% (22.3% in FY 2010)

Brazil 8.3% (8.4% in FY 2010)

Argentina & others 5.4% (4.1% in FY 2010)

(2) Includes:

Germany 13.0% (11.4% in FY 2010)

Russia 3.0% (2.2% in FY 2010)

(3) Includes:

Australia 5.1% (3.3% in FY 2010)

Italy31.6%

Rest of Europe (2)

25.7%

Americas (1)

33.5%

RoW (3) andDuty Free

9.2%

(34.2% in FY 2010)

(7.2% in FY 2010)

(34.8% in FY 2010)

(23.8% in FY 2010)

Spirits

76.6%

Wines14.5%

Soft DrinksOther

1.2%

(8.5% in FY 2010)

(75.4% in FY 2010)

(15.0% in FY 2010)

(1.1% in FY 2010)7.7%

45 brands

Sales in 180

Countries

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About Gruppo

CampariA Track Record of Successful Acquisitions

18 acquisitions

in 17 years

Acquisitions made

in 9 countries

Key Words Related To This ConceptBusiness

Sustainability

Enterprise

BusinessProfit

CSR

saving natural resources

saving energy

waste reduction

good things for the Planet

ROI

Trendy

a Marketing tool

a new profession

converting the business

competitive advantage

opportunities for Internal Auditing

and Company DNA

Act as entepreneur:

do not wait for the

crisis to step in

A natural process

sparked by

innovation

A simple paradigm:

be connected with

your era and

follow the profit

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Business

Sustainability

24 hrs /17 days of

intensive operations

plus 9 months of

storage at 0° C

Cinzano – grape crushing «fueled» by the sun

Saving money

and reducing

the environmental

impact

17.000 s.q.m. of solar cells

2.7 M Kw/year

3 times our yearly need

Technology made in Italy

Roof surface

saving land

Business

Sustainability

3 year project

together with Asti

Consorzio

Cinzano – Muscat grapes pesticides free

Thousands of

chemical tests

every vintage

Technical support

to the grape

growers

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Business

Sustainability

Built over the

previous historical

plant

Headquarters – a geothermic full conditioned building

The stone facade

and the roof garden

for a perfect control

of the temperature

The previous wells

are used for

conditioning

A state-of-the-art

projectSesto San Giovanni (MI)

Energy efficient

Business

Sustainability

A real business

case happened

12 years ago

Campari Soda – termination of reusable bottles

Supplier Bottling Warehouse Customers

Warehouse Supplier Cleanser Bottling Warehouse Customers

AverageReturn 60%

40% New Bottles

Hot Water + Caustic Soda + Water + EnergyManual selection

Empty bottles collectionManagement

From an

energy intensive

and wasteful

process

To a

virtuous and lean

process

Saving money

and reducing

the environmental

pressure

waste40%

recycle100%

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Internal

Auditing and

Business

Sustainability

Clear guidelinesEvaluate new risks from acquisitions and opening of a new CompanyMantain a high degree coverageKeep control through constant follow up

Mainly focused on

strategic risks

Very close to the

Top ManagementCentralized function based in HQContacts - on a daily basis -

Perceived as Adaptive and flexibleResponding to the Group’s challengesCollaboratingAdding value

Internal

Auditing and

Business

Sustainability

Sharing best

practice from all

over the world

>>> EUROPE

Austria

Belgium

France

Germany

Greece

Ireland

Italy

Monaco

Poland

Switzerland

The Netherlands

U.K.

>>> AMERICAS

Argentina

Brazil

United States

Mexico

>>> ASIA/PACIFIC

Australia

China

Hong Kong

India

>>> EAST EUROPE

Russia

Ukraine

Audit performed in 22 countries

Providing input

to the other

Functions for a

fast and effective

intervention

Close collaboration with all the Functions during the activitiesExit meeting before leaving the fieldQuick report to the Top ManagementReport released within 10 days

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Findings and

Recommandations

A selection of some examples to keep the key wordsin mind

CSRsaving natural resourcessaving energywaste reductiongood things towards the PlanetROITrendya Marketing toola new professionconverting the businesscompetitive advantageopportunities for Internal Auditing

and Company DNA

Background

Country Mexico

Full Assessment post acquisition

Issue

Risk

Recommendation

Output from waste treatmentwas not compliant

SanctionsReputation

Quick intervention of Quality Dept.Input to Legal Dept. related to Reps & Warranties

Performed in full capacity period

Status A big investment has been initiated

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Background

Country China

Visit to the warehouse

Issue

Risk

Recommendation

Storage doesn’t respectQuality guidelines

The product could reach theCustomer in sub-optimal condition

To send a claim to the owner and change the warehousein case of a rejection

Status After two claims being ignored we moved to another provider

Background

Country Greece

Browsing through a local newspaper

Issue

Risk

Recommendation

Problem with local Unions

Bsn interruptionReputation

To report to HQ and devise the approach to fix it

Status Fixed in five days

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Background

Country Ukraine

Full Assessment – Assets disposals

Issue

Risk

Recommendation

Old lorries are piled inthe backyard waiting forState clearance

HazardPollutionSpace occupancy

Formalize the request to the State administration

Status None

Background

Country U.K. (Scotland)

Pre-acquisition visit

Issue

Risk

Recommendation

Roof covered with asbestosThe stream close to the premises

Hazard for peoplePollutionFlooding

To take into consideration during the negotiation

Status The price was lowered and the roof was replaced after the acquisition

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KEY TAKEWAYS FROM THESE EXPERIENCES

1. What does Business Sustainability mean for your Company ?

2. Don’t let the details get lost in the big picture

Be curious, a small thing could be the indicator of a big risk and also opportunity

Every Company has its own DNA and direction

3. Tough times can bring innovative solutions

During times of crisis each Function should share the Company`s aspirationto save resources and be more effective

Thank you

antonio.zucchetti@campari.com