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Brown-Forman Invests Above The Line, Expects U.S. Growth To Accelerate

June 5, 2019

Brown-Forman saw its U.S. net sales rise 3% on an underlying basis in its fiscal year through April, but it says growth has been ramping up in recent months in line with increases in media spend and promotional activity. Globally, Brown-Forman’s sales increased 5% to $3.3 billion on an underlying basis during the fiscal year, with operating income up 5% to $1.1 billion. The U.S. accounts for 47% of Brown-Forman’s total sales.

Brown-Forman’s growth in the U.S. continues to be led by its premium-and-above Bourbon brands, especially Woodford Reserve and Old Forester, both of which recently earned Impact “Hot Brand” honors, increasing 22% to 650,000 cases and 18% to 223,000 cases, respectively, in 2018. Both brands continued to show double-digit net sales growth in the company’s fiscal year, as did Herradura and El Jimador Tequilas. Herradura, playing at the above-$40 tier of the Tequila category, was up 7.3% to 192,000 cases in the U.S. in 2018, according to Impact Databank, while El Jimador, in the $15-$25 range, rose 8.2% to 619,000 cases. Lower-priced Pepe Lopez is also making strides in Tequila for the company, jumping 15% to 243,000 cases.

Meanwhile, Brown-Forman’s core Jack Daniel’s family was up by low single-digits in the U.S. for the fiscal year, including double-digit gains for the higher-priced Gentleman Jack offshoot. Jack Daniel’s core Tennessee whiskey inched up 0.3% to around 5.25 million cases in the U.S. in calendar 2018, according to Impact Databank, while Gentleman Jack increased 4.4% to 404,000 cases. Jack Daniel’s has been one of the brands receiving increased backing lately, with its U.S. media spend (excluding flavors) up 56% to $23.6 million last year, according to Kantar.

“Although not yet reflected in the rate of sales growth, recent increases in media spend and promotional activity are beginning to accelerate takeaway growth rates in the United States,” Brown-Forman noted, adding that “consumer takeaway trends are in the mid-single-digit range” and have been moving higher in recent months as the company has increased its above-the-line activity.

Elsewhere, Brown-Forman saw solid growth in emerging markets, particularly Mexico, during the fiscal year. Still, the company warned that overall net sales were negatively impacted by one percentage point due to “tariff-related lower net prices to distributors in certain markets.” That impact could potentially worsen looking ahead, with the U.S. continuing to joust with the E.U., Mexico, and other markets over trade.—Daniel Marsteller

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