just On Call - Buoyant Beam Inc to invest behind Bourbon boom

Beam Inc expects Bourbon sales to continue heading north and is planning to invest in infrastructure to support growth.

Beam's CFO, Bob Probst, told analysts today (3 February) that the distiller is going to need more corn, barrels and warehouses to keep pace with ongoing resurgence for Bourbon, and specifically for its Jim Beam and Maker's Mark brands. "We do see investment behind that, but we can satisfy demand," he said on the firm's full-year results call.

For the 12 months to the end of December, Beam's global net sales rose by 10% to US$2.3bn. Jim Beam sales increased by 7% versus 2010, with Maker's Mark up by 14% and Courvoisier Cognac up by 19%.

With its core brown spirits in the ascendancy, plus explosive growth off a low base for the Skinnygirl brand, Beam is bullish going into its first fiscal year as a standalone entity. Commenting on early 2012, group CEO Matt Shattock said: "We have seen a continuation of momentum in Q4 and driven by the same trends we saw in Q4."

Bourbon's strong performance in both the US and in export markets has underpinned results. Figures released this week by the US Distilled Spirits Council show that Bourbon and Tennessee whiskey sales in 2011 increased by 3.9% in both volume and value in the US, to 16m nine-litre cases and $2bn in revenue.

Describing Bourbon as a latecomer to the premiumisation party, Shattock said that he is confident of more gains. "I think that Bourbon is set to continue to outgrow the market," he told analysts.

He highlighted consumer demand for "authenticity", and innovation as key sales drivers of the sector. Flavoured Bourbon accounted for around half of the category growth in the fourth quarter of last year. Beam has enjoyed particular success with its cherry-infused Jim Beam Red Stag Bourbon.

More generally, Shattock said that the US spirits sector has improved over the last 12 months. However, pricing gains remain hard to obtain. "We'll continue to take some selective pricing but we haven't seen an environment yet that would favour broader price increases across the industry." he said.   

"We expect our global spirits market to continue to grow value in the range of 3%, supported by solid growth in mature markets such as the US and double-digit growth in key emerging markets."

At the bottom line, Beam said that it expects raw materials price rises on corn in 2012, but expects to be able to absorb these. Operating profits should rise faster than sales, and net profit faster still, said the group.

In the first quarter of the year, the group expects to launch several new products, although specific details were not given. 

For 2011, Beam's net profits rocketed by 88% on the previous year, to US$917m, thanks to a one-off $782m gain related to the firm's spin-off from Fortune Brands. In contrast, operating profits fell by 13% due to higher marketing costs and one-off charges.