US: Fortune Brands in confident spirits after H1
Fortune Brands is to increase spending behind key spirits brands in the second half of 2009, following a "solid" performance across much of its portfolio in the last six months.
Fortune Brands CEO and chairman Bruce Carbonari said in a conference call today (24 July) that Beam Global Spirits & Wine "continues to demonstrate resilience" to the economic downturn in the US and abroad.
He praised a "solid performance" from the division for helping to offset declines in Fortune's home and golf divisions. Beam made up more than 70% of Fortune's operating profits in the half-year.
Fortune today reported a 58% drop in net profits for the six months to 30 June, to US$107m, and an 18.5% drop in sales to $1.67bn, compared to the same period of 2008. The group remains on-track to hit the lower end of underlying earnings per share guidance, it said.
Spirits sales slipped by 3% to $1.08bn.
However, the group said several brands remain in growth and that it plans to "ramp up" spend on key brands in the second half, after "holding back brand spending" in the last six months.
Carbonari singled out two new products for particular praise. Red Stag, which is Jim Beam infused with natural black cherry, "sold more cases in its first six weeks than we forecast for all of 2009", said Carbonari, adding that "early reorder patterns are very stong".
Another new product, Sauza Margarita-in-a-Box, has "shipped more than double our initial forecasts", Carbonari said, adding that the brand has benefited from a trend for drinking at home in the recession.
Across the gobal spirits business, Carbonari said Beam Global US volume sales rose modestly in the half-year, while Spain fell by mid single digits. There was also "softness" in the UK and Germany. Mexico was broadly flat against the prior year, while Brazil, India and China continued to grow, although at a "more modest rate".
Russia was down by "quite a lot" during the period, but remains "attractive in long term". Duty free sales, particularly in the US, have also been hit hard, the company said. In Australia, Jim Beam has returned to growth in the RTD category.
Among the brands, Courvoisier Cognac volumes were down double digits for the half-year, reflecting a tough time for the Cognac sector.
In the US, despite trading down by consumers, Beam has seen growth at both ends of its portfolio. Carbonari said that high-end Bourbon Maker's Mark grew in double digits for the half-year, while economy brands "are seeing their best growth in many years".
High-end Sauza Tequilas, such as Hornitos and Tres Generaciones, have also reported growth in the US.
Commenting on costs, Fortune said that it still expected a $30m hit in its full-year from costs related to a distribution changeover in many markets, following the break-up of Maxxium Worldwide.
The firm played down the idea of acquisitions in spirits, saying it would focus on "paying down debt".
"There are diamonds out there, but the multiples out there are still very high and it would really have to be a very strong proposition strategically for us to make a large acquisition. Our position today is to pay down debt."
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