Analysis - Brown-Forman moves on pricing as brown spirits grow
Brown-Forman released its Q1 results yesterday
Analysts have praised Brown-Forman's pricing strategy across its portfolio despite some slowdown in US sales.
The company indicated a "robust" price/mix rise of 4% in yesterday's first-quarter results compared to 3% for full-year 2013, Nomura's Ian Shackleton said today (29 August). Pricing was stronger for Brown-Forman's brown spirits - including its Jack Daniel's range, which grew Q1 sales by 7% globally - than in white spirits, Shackleton said.
Stifel analysts Mark Swartzberg called Brown-Forman's pricing strategy “positive” and said it is in line with price rises elsewhere. "Price/mix across the industry is accelerating, including a 3.2% increase in the 12 months ending July 2013, versus 1.7% in the comparable period ending July 2012," Swartzberg said.
Brown-Forman yesterday posted a slight drop in Q1 profits as it came up against a tough comparison. Management said it expects Q2 to be much stronger, with full-year operating profits increasing by 9-11%.
However, Nomura's Shackleton raised a note of caution over the group's price increases, warning of “some slowdown in the overall US market dynamic” because of a “more mixed” on-trade that could hamper overall industry price/mix.
He also said the company has found “strong momentum” in Jack Daniel's extension Tennessee Honey, which increased Q1 sales by 26%. On a conference call with analysts yesterday, Brown-Forman CFO Don Berg said a global rollout of the flavoured whiskey has been successful in all markets except Australia, where demand has been diluted by competing RTDs.
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