just On Call - Brown-Forman CEO warns of social media threat to US on-trade
Brown-Forman released its full-year results yesterday
The head of Brown-Forman has suggested on-trade softness in the US spirits market may be long-term as new trends see younger consumers share drinks over social networks instead of in bars.
In a call with analysts after his company's strong year-to-date numbers release yesterday (5 March), Paul Varga said consumers in their early-to-mid 20s are choosing not to go out because of a lack of disposable income. People are now “creating the bar at home”, he said, with social media sites making it easy to connect with online friends.
“I think it's a fair question for all of us to be asking ourselves is, are we at the beginning of something that's evolving … in such a way that it might influence the business?” Varga said.
The CEO said on-premise trends in the US had “weakened significantly” in the past 12 months to the lowest level in almost five years. Brown-Forman blamed a reduction in casual dining and an overall slowdown in consumer spending for the drop, with Varga noting that caution over social media drinking was based only on his own observations.
However, he added: “I think it is one of the most interesting aspects of what’s going on with the millennials and whiskey and it actually, I think, could be influencing the on-premise today.”
He also said that Brown-Forman is looking at ways to push on-trade sales, which he called “the ultimate test” for brands. He said on-trade still remained “probably the greatest brand building environment for distilled spirits and a great differentiator of our industry, relative to most packaged goods”.
In Brown-Forman's results, net profits in the nine months to the end of January were up 10%, with sales increasing by 5%.
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