Analysis

Brown-Forman's FY Performance by Region, Brand - Focus

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Earlier today, Brown-Forman posted its Q4 and FY results. Here, just-drinks takes a closer look at the company's performance by region and brand in the 12 months to the end of April.

Brown-Formans Tennessee Fire brand performed well in fiscal 2016

Brown-Forman's Tennessee Fire brand performed well in fiscal 2016

Regions

A 3% sales boost in the US (a market that represents 43% of Brown-Forman sales) was powered by the Jack Daniel's family of brands, which grew underlying net sales by mid-single digits. Jack Daniel's Tennessee Whiskey continued its upward trajectory, growing to 5.2m cases, and combined depletions for Jack Daniel's Tennessee Honey and Tennessee Fire surpassed 1m cases in the US. Gentleman Jack's underlying net sales grew by 10% in the US (6% reported). There was 25% underlying net sales growth (29% reported) for Woodford Reserve and 48% for Old Forester (48% reported). Herradura and El Jimador Tequilas grew underlying net sales by high-teens in the US.

Western Europe's underlying net sales jumped high-single digits, as the UK, Germany and France delivered strong results. New Zealand and Canada continued to grow at a healthy rate, Australia, Japan and Spain each returned to underlying sales growth in the year, but Italy's sales declined, Brown-Forman said.

There was a "marked slowdown" for emerging markets during fiscal 2016 as weakening economic conditions and currency devaluations dampened consumer's purchasing power, Brown-Forman said. Aggregate underlying net sales grew 4% (-10% reported) in the emerging markets. This year was a tale of two halves, with emerging markets growing underlying net sales by 8% in the first half and only 1% in the second half. Turkey, Brazil, South Africa and Ukraine each delivered double-digit underlying net sales growth. Russia's underlying net sales declined 17% and southeast Asia dropped double-digits, led by declines in Indonesia due to recent changes to industry regulation of import duties. Mexico grew underlying net sales by 6%, while Poland grew only 1% due to a challenging competitive environment in vodka, Brown-Forman said.

Travel Retail's underlying net sales decreased 12% (-18% reported). According to Brown-Forman, Travel Retail's results were pressured by the decline in spending from travellers, as well as continued volatility in foreign exchange, which has also resulted in weaker consumer demand and a reduction in the historic price gap between Travel Retail and the local economy.

Brands

Underlying sales for the Jack Daniel's family were up 6% (-1% reported), with Jack Daniel's Tennessee Whiskey underlying net sales increasing by 4% (-1% reported). Jack Daniel's Tennessee Honey grew underlying sales by 9% (0% reported), powered by strong growth outside of the US. Jack Daniel's Tennessee Fire contributed roughly one percentage point to the company's underlying growth, Brown-Forman said. Jack Daniel's Tennessee Honey and Fire depleted a combined 1.9 million cases globally. Gentleman Jack and Jack Daniel's Single Barrel surpassed 700,000 case depletions in the year, and grew aggregate underlying net sales by 6% (1% reported). Jack Daniel's RTD/RTP business grew underlying net sales by 4% (-7% reported).

Brown-Forman's portfolio of super and ultra-premium whiskey brands, including Woodford Reserve and Woodford Reserve Double Oaked, Jack Daniel's Single Barrel, Gentleman Jack, Sinatra Select, No. 27 Gold, and Collingwood, collectively grew underlying net sales by mid-teens. Old Forester's underlying net sales grew 47% (48% reported), and the Woodford Reserve family of brands grew underlying net sales 28% (+29% reported).

Finlandia vodka experienced a 5% decline in underlying net sales (-16% reported), pulled down by weak results in Poland and Russia. The competitive landscape for premium vodka in Poland remains very challenging while results in Russia have worsened as the economic slowdown and Rouble depreciation are negatively impacting consumption, according to Brown-Forman.

El Jimador grew underlying net sales by 5% (-5% reported). Strong growth in the US was offset by anticipated volume declines in Mexico associated with the company's strategic repositioning of the brand at a higher price point through multi-year increases. New Mix's underlying net sales increase of 23% (+2% reported) continued to benefit from distribution gains and new sizes. Herradura grew underlying net sales by 13% (0% reported) globally, driven by double-digit gains in the US and Mexico.


Sectors: Spirits

Companies: Brown-Forman

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