BROWN-FORMAN POSTS SOLID GROWTH FOR Q-1
Almost all of B-F’s brands contributed to profit gains, but Jack Daniels especially helped drive volume growth and margin improvement for the company’s premium global portfolio in Q-1. Revenues and gross profit increased by 17% and 16% in the quarter, while operating income increased $7 million – up 5% from the previous year.
Jack Daniels posted steady volume growth outside of the U.S. at a double-digit rate, but moderated in the U.S. to a low-single digit rate. Overall performances were still “extremely strong” as Jack Daniels was up 7% worldwide based on volume, which comes out to 500,000-600,000 cases, said Paul Varga, CEO. B-F says the U.S. economy has had a hand in moderating the growth of Jack Daniels as casual dining has softened for the entire industry. Nevertheless, Paul remarked that Jack Daniels would continue to refrain from heavy discounting like its competitors, preferring to look at the long-term.
Global volumes for Southern Comfort grew 5% in the quarter, as double-digit gains in the U.S. more than offset declines internationally. “Southern Comfort doesn’t have aging requirements so it’s easier to expand more rapidly and get some good momentum going,” said Paul. “It’s a little more difficult with brands that have aging requirements.”
Finlandia volumes remained solid, fueled by double-digit rate gains in Poland, the brand's largest market, and a high-single digit growth rate in the U.S.
B-F has not changed its outlook for the remainder of the fiscal year which excludes the recent takeover of Casa Herradura. The company plans to fund the $875 million transaction “in cash and debt, most of which will be debt,” said CFO Phoebe Wood. “The acquisition price is in dollars so we don’t face any foreign exchange risks in the transaction,” she continued.
When asked about pricing for tequila this year, Paul replied, “It has been a very solid arena for pricing with significant growth in premium and super-premium brands.”
He pointed out that “players sold above a $25 price point are doing very well which is good for Herradura because it’s been flat for several years. There’s always room for brands priced at this level because you tend to have less price sensitive consumption going on.”
He capped it off by saying, “I don’t think we need to do much price repositioning” for the Herradura brands as the company expects premium tequila to continue growing faster in the category as a whole.
The company was also asked about the political risk factor that comes with owning a company based in Mexico. “We accessed the environment in Mexico and yes it’s riskier than the U.S. but there’s more stability than a decade or so,” said Paul. As a result, the company will be “sensitive and conservative with our planning, but its something that we shouldn’t avoid going into other spirits markets.”
In regards to B-F’s $250 million acquisition of Chambord in May, the company remains “very confident about its future,” said Phoebe.
Jack Daniels posted steady volume growth outside of the U.S. at a double-digit rate, but moderated in the U.S. to a low-single digit rate. Overall performances were still “extremely strong” as Jack Daniels was up 7% worldwide based on volume, which comes out to 500,000-600,000 cases, said Paul Varga, CEO. B-F says the U.S. economy has had a hand in moderating the growth of Jack Daniels as casual dining has softened for the entire industry. Nevertheless, Paul remarked that Jack Daniels would continue to refrain from heavy discounting like its competitors, preferring to look at the long-term.
Global volumes for Southern Comfort grew 5% in the quarter, as double-digit gains in the U.S. more than offset declines internationally. “Southern Comfort doesn’t have aging requirements so it’s easier to expand more rapidly and get some good momentum going,” said Paul. “It’s a little more difficult with brands that have aging requirements.”
Finlandia volumes remained solid, fueled by double-digit rate gains in Poland, the brand's largest market, and a high-single digit growth rate in the U.S.
B-F has not changed its outlook for the remainder of the fiscal year which excludes the recent takeover of Casa Herradura. The company plans to fund the $875 million transaction “in cash and debt, most of which will be debt,” said CFO Phoebe Wood. “The acquisition price is in dollars so we don’t face any foreign exchange risks in the transaction,” she continued.
When asked about pricing for tequila this year, Paul replied, “It has been a very solid arena for pricing with significant growth in premium and super-premium brands.”
He pointed out that “players sold above a $25 price point are doing very well which is good for Herradura because it’s been flat for several years. There’s always room for brands priced at this level because you tend to have less price sensitive consumption going on.”
He capped it off by saying, “I don’t think we need to do much price repositioning” for the Herradura brands as the company expects premium tequila to continue growing faster in the category as a whole.
The company was also asked about the political risk factor that comes with owning a company based in Mexico. “We accessed the environment in Mexico and yes it’s riskier than the U.S. but there’s more stability than a decade or so,” said Paul. As a result, the company will be “sensitive and conservative with our planning, but its something that we shouldn’t avoid going into other spirits markets.”
In regards to B-F’s $250 million acquisition of Chambord in May, the company remains “very confident about its future,” said Phoebe.
posted at 10:26 AM
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