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Brown-Forman’s Sales Accelerate In Fiscal Second Half, As Forex Weighs Down Full-Year Results

June 7, 2017

Brown-Forman said early this morning that while foreign exchange and divestiture activity cut into its net sales for its fiscal year ended in April, its business has been picking up speed in recent months. The company, which recently rejected an acquisition offer from Constellation Brands, insisting that it’s not for sale, said underlying net sales growth accelerated to 4% in the second half compared with 2% in the first half. On an underlying basis Brown-Forman posted a 3% sales increase to $3 billion for the full year, while operating income grew 7% to $1 billion. However, including foreign exchange, acquisitions and divestitures—such as its January 2016 sale of Southern Comfort and Tuaca to Sazerac for $544 million—net sales and operating income declined 3% and 35% respectively on a reported basis.

In the U.S., Brown-Forman saw sales increase 4% organically for the full year, with its upscale whiskey portfolio—led by Woodford Reserve (+19%)—showing strong gains. The company noted that both Woodford Reserve and Old Forester Bourbons continued to see double-digit growth for the year despite significant price increases. According to Impact Databank, the Woodford Reserve family vaulted 19% to 446,000 cases in the U.S. in calendar 2016, while the Old Forester family was up 18% to 175,000 cases.

Jack Daniel’s, Gentleman Jack and Tennessee Honey were also on the rise in the U.S. during the fiscal year, while Tennessee Fire was flat, with strong on-premise growth offset by slower sales in the off-trade. Jack Daniel’s is set to be extended with a new Rye offering in the coming months, and Brown-Forman is also preparing a push into Irish whiskey with its Slane brand, which is hitting the U.S. at a $30 price point this summer. Meanwhile, the company’s Tequila business continued to surge in the U.S., with the Herradura and El Jimador brands both up double-digits. Chambord, Korbel and Sonoma-Cutrer saw single-digit growth for the year, while the Early Times and Canadian Mist labels declined amid a tough competitive environment for mainstream-priced spirits.

Looking ahead, Brown-Forman is projecting 4%-5% organic net sales growth and a 6%-8% organic increase in operating income for its 2018 fiscal year, which began in May, although it noted that “The global economy remains volatile, particularly in the emerging markets, and the competitive landscape has intensified in the developed world, making it difficult to predict future results.” —Daniel Marsteller 

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