just On Call - Brown-Forman toasts US whisk(e)y boom

By Chris Mercer | 9 December 2011

Brown-Forman toasts US whisk(e)y boom

Brown-Forman toasts US whisk(e)y boom

Brown-Forman's CEO has voiced his excitement at a resurgent whisk(e)y market in the US, driven by consumers' taste for luxury and innovations around flavour.

The Jack Daniel's brand levered Brown-Forman to a 12% rise in net sales for both the first half and second quarter of its fiscal year, it reported yesterday (8 December). The second quarter marked the first time that Brown-Forman's quarterly sales have passed the US$1bn barrier. 

Consumers in the US lapped up the firm's new Jack Daniel's Tennessee Honey in the period, as well as high-end varieties such as Gentleman Jack and Jack Daniel's Single Barrel. On a conference call with analysts yesterday, CEO Paul Varga highlighted a resurgence for all styles of whisk(e)y in the US.

"The category is accelerating due to explosive growth of flavoured whiskies, led in the last six months by Tennessee Honey, as well as excellent growth of the super and ultra premium price segments," he said. The firm is cautious about expanding too quickly into flavours, particularly on Jack Daniel's, but Varga added: "We'll be looking at all of our trademarks to see where they can participate."      

Brown-Forman believes that flavour innovation coupled with fresh consumer demand for authenticity and heritage is driving the best growth in a generation for whisk(e)y in the US. "We've seen a departure from the basic trend observed over the last several decades, when whisk(e)y has consistently lagged the performance of distilled spirits as a whole," Varga said.

He cited Nielsen figures for the year to 12 November that showed whisk(e)y sales in the US growing by 5.4% year-on-year in value terms, up from a growth rate of 1.1% at the same point of 2010. American whiskeys and Bourbon are growing at 6.5%. This suggests that whisk(e)y generally is outperforming the US distilled spirits category as a whole, which is growing by 3.4% year-on-year in value, up from a rate of 1.8% a year ago, according to the same Nielsen dataset.

"I haven't observed as comprehensively the kind of momentum that we've observed over the last 12 months, where each category within whisk(e)y has accelarated," Varga said. Within that trend, he added, Brown-Forman has increased its share of the US spirits market "for the first time in several years".

For the company's half-year, global net sales for the Jack Daniel's family of brands increased by 20% on the same period of last year. Other brands also performed well, such as Finlandia vodka and the high-end Chambord, which was lifted by the launch of Chambord vodka. Southern Comfort sales continued to decline, however, falling by 5% for the six months.

Despite the precarious economic conditions, Brown-Forman said that it expects to continue strong overall sales momentum in the second-half. Profits, however, are likely to be dented by a strengthened US dollar and this caused the company to trim its guidance range for full-year earnings per share. Half-year net profits increased by 4%, to $275.6m, with second-quarter profits up by 2% to $157.6m.

Group CFO Don Berg said that the group is keeping all options open regarding plans to return value to shareholders, including acquisitions. "We'll certainly look at acquisitions as a key component of ways to create shareholder value," he said.

Expert analysis

Brown-Forman Corporation: Company Profile and SWOT Analysis

ICD Research's "Brown-Forman Corporation: Company Profile and SWOT Analysis" contains in depth information and data about the company and its operations. The profile contains a company overview, business description, financial ratios, SWOT analysis, key facts, information on products and services, details of locations and subsidiaries, plus information on key news events affecting the company.

Sectors: Company results, Spirits

Companies: Brown-Forman, Jack Daniel’s, Finlandia, Southern Comfort

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