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US: Tequila troubles hit Brown-Forman profit

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Brown-Forman, the US drinks group, has blamed a lack of fit and healthy agave plants for a 7% fall in its first quarter profit.

Net profit slid to US$95m for the three months ended 30 June, Brown-Forman (B-F) said today (28 August). Operating profit fell 10% to US$155m.

The group, owner of Jack Daniel's and Southern Comfort, blamed the drop on a "non-cash charge related to an abnormal number of agave plants identified during the quarter as dead or dying".

Blue agave is the main raw ingredient for Tequila. It remained unclear whether B-F's problems had any connection to reports of agave farmers switching their fields to corn, a trend confirmed to just-drinks by the Tequila Regulatory Council this week.

B-F CEO Paul Varga said: "The loss of agave plants has reduced our inventory, but we do not believe this will constrain our ability to build our tequila brands to their full potential."

The problem forced the firm to lower its full-year earnings per share guidance to reflect expected profit growth of between 1% and 8%.

B-F said it increased revenue during the first quarter by 7% to $790m, boosted by double-digit growth from Gentleman Jack and Finlandia vodka. Price rises helped Jack Daniel's to increase sales in mid-single digits, but Southern Comfort declined during the period, due to on-trade weakness, the firm said.


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