Tennessee Fire is performing well for Brown-Forman

Tennessee Fire is performing well for Brown-Forman

American whiskey is following in vodka's footsteps, according to analysts.

Earlier this week, Brown-Forman reported that its Jack Daniel's stable delivered a combined sales increase of 6% - a slowing from the 8% rise reported in the previous fiscal-year.

But it was the flavoured variants that appeared to be the star performers: The Tennessee Honey expression was up by 18% (+28% in fiscal 2015), while the broader roll-out of Tennessee Fire also played a positive part.

The company flagged "strong global demand for authentic American whiskey brands," as well as "consumer interest in flavoured whiskey".

In a note, Cowen analyst Vivien Azer draws parallels to the flavoured vodka market. Azer points out that among the major whiskey brands, four flavours dominate - honey, maple, cinnamon, and most recently apple.

"This is reminiscent of the early days of vodka's multi-decade long growth cycle, which ran from 1975-2010. Recall that initially the category was dominated by unflavoured vodka, and then in the 1980s a limited amount of flavours started to grow in popularity (namely, citrus, raspberry, orange, and vanilla)." Azer said even as recently as 2000, those four key flavours accounted for 97% of flavoured vodka volume sales, according to Impact.

"Indeed, it was the last ten years of the vodka cycle (2000-2010), where flavour proliferation accelerated... Given the barriers to entry in Bourbon (from an ageing and capex perspective), and given the modest amount of flavour innovation we are seeing today, we see the category's evolution as following the orderly progression seen in the first 20+ years of vodka's last growth cycle."

Azer described the competition in flavoured whiskey as "rational" and "not close to the point of being disruptive".

Stifel's Mark Swartzberg was also in praise of flavours, flagging Tennessee Fire's roll-out to 42 states. He says the cinnamon-flavoured product is "showing better adoption than Honey in the first eight states, suggesting its contribution to growth is likely to accelerate". He also says early tests in the UK and Czech Republic are "said to be encouraging".

The talk around RTDs and Australia wasn't so rosy, though. Swartzberg says the JD Family slowed, "largely driven by RTD declines in Australia". Meanwhile, Azer described the Australian market as a "drag".

Earlier this week, the company announced a packaging revamp for its Southern Comfort RTDs in the region - suggesting a pro-active approach to the market. And they are not the only ones - Diageo also unveiled new glass bottles for its Bulleit & Cola RTDs.