Insight - Brown-Forman hails RTDs for helping Q1 profits rise
Brown-Forman has said that it is "generally pleased" with its performance in the first three months of its fiscal year.
The company, which posted a 38% lift in net profits for the quarter to the end of July today (2 September), also said that its success had come from a renewed focus to promote its brands more actively in the off-premise environment.
Speaking at the quarter-one conference call, company CEO Paul Varga said that Brown-Forman had benefited from expansion and introduction of new RTD variants.
"We believe that RTDs can play an important role on two fronts in this challenging environment," Varga said. "First, with the consumer shift from on-premise to off-premise, RTDs make it more convenient for the consumer to drink spirits cocktails at home, allowing our spirit brands to be more competitive with both beer and wine.
"Second, we've learnt over the years that the sheer presence of branded, single-serve RTDs ... in the hands of consumers at the actual point of consumption creates a large number of incremental, highly-efficient branded impressions."
While Varga played down the theory that Brown-Forman was moving away from full-strength spirits brands towards RTDs, he did say he wanted to show "one example of how we're trying to be both adaptive and thoughtful with our sales and marketing activities in light of the changes in business conditions".
While the Jack Daniel's family of brands saw sales rise by 8% in the three-month period, Brown Forman also hailed its El Jimador Tequila, which delivered double-digit growth, as being "one of the hottest premium brands today in the US market.
The company's performance was held back, however, by double-digit declines in travel retail, and slowing growth for distilled spirits in the UK and US.
The company also said that it has shifted its focus in the two countries towards off-premise consumption with ready-to-drink and ready-to-pour line extensions being introduced "as a means to move with these consumer trends". Brown-Forman noted that it had shifted advertising away from on-premise promotions towards lower-cost, off-premise activities to help drive top-line growth.
The firm concluded that it "remained concerned about the economic, consumer and competitive environments", highlighting trading down, softening consumption trends and inventory level fluctuations as it enters "an extremely competitive holiday period".
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