FOR BROWN-FORMAN IT’S TIME TO EXECUTE
In today’s fourth quarter conference call, Brown-Forman chief and coo Paul Varga and Phoebe Woods spent a lot of time trying to convince analysts that the Casa Herradura deal will prove profitable.
“We acknowledge these brands [El Jimador and Herradura] are not as well known in the U.S. as they should be, and therein lies the value we think Brown-Forman can bring especially through marketing, distribution and pricing discipline,” said Phoebe during her prepared remarks.
She assured listeners that B-F’s US distributors are focused on growing El Jimador and Herradura. The company also reported plans to focus on building appropriate distribution and rate of sales for the Herradura brands during fiscal 2008 and 2009.
“In FY08 we’ll see a very noticeable increase in spending behind Herradura and El Jimador in comparison to what the previous owners were spending,” said Paul during the question and answer portion. “It’s going to take us the better part of FY 08 to get all of the positioning and some of the primary brand identity elements like packaging planned and ready for implementation either at the best late in FY 08 or more likely FY09.”
In fiscal 2008 “we expect there to be nice progress on the volumetric side and maybe pricing as well in the US,” he continued.
A NUMBERS GAME. With that aside, now onto the meat and potatoes. Revenue grew 18% in the fourth quarter and 16% in the fiscal year. While Jack Daniel’s depletions faired better internationally, US depletion growth remained in the low-single digits. Southern Comfort depletions were up mid-single digits in the U.S.
Paul remarked that “one of the contributing factors to not only Jack Daniels but the entire US spirits and wine portfolio that’s unique to Brown-Forman was some of the disruption associated with our reorganization during fiscal 07.”
The reorganization includes merging wine and spirits operations, integrating Herradura and Chambord, and coming up with a new structure in approaching the US market.
“When you have that multitude of changes,” said Paul, “you have natural disruption.”
ACQUISITIONS AND CONSOLIDATIONS. When asked whether B-F derives its competitive advantage from scale or from focusing on high margin brands, Paul replied:
“I consider our company to be almost a hybrid of them both.”
He said the company uses scale when it is helpful but more importantly focuses on individual initiatives behind each brand.
“Behind our reorganization last fiscal year, where we try to put to use what I would consider the influencer and importance of size where it’s actually a help and a value to the company,” stated Paul.
“But probably more importantly even with any size we have is a preference towards being focused on our brand building, so we have not found that it’s our greatest game to go out and be big strong portfolio sellers.”
Paul refused to comment on whether B-F has planned any trips to Sweden in its immediate future, but pointed out that Finlandia is growing at a favorable rate.
COMPANY OUTLOOK. Looking to the current fiscal year, B-F said it expects to earn between $3.53 to $3.68 a share as "global trends for our premium beverage portfolio remain strong." That outlook does not include costs associated with the company's acquisition of Herradura. With the costs, B-F looks to earn $3.35 to $3.55 per share, implying a 7% to 13% increase over fiscal 2007.
“We acknowledge these brands [El Jimador and Herradura] are not as well known in the U.S. as they should be, and therein lies the value we think Brown-Forman can bring especially through marketing, distribution and pricing discipline,” said Phoebe during her prepared remarks.
She assured listeners that B-F’s US distributors are focused on growing El Jimador and Herradura. The company also reported plans to focus on building appropriate distribution and rate of sales for the Herradura brands during fiscal 2008 and 2009.
“In FY08 we’ll see a very noticeable increase in spending behind Herradura and El Jimador in comparison to what the previous owners were spending,” said Paul during the question and answer portion. “It’s going to take us the better part of FY 08 to get all of the positioning and some of the primary brand identity elements like packaging planned and ready for implementation either at the best late in FY 08 or more likely FY09.”
In fiscal 2008 “we expect there to be nice progress on the volumetric side and maybe pricing as well in the US,” he continued.
A NUMBERS GAME. With that aside, now onto the meat and potatoes. Revenue grew 18% in the fourth quarter and 16% in the fiscal year. While Jack Daniel’s depletions faired better internationally, US depletion growth remained in the low-single digits. Southern Comfort depletions were up mid-single digits in the U.S.
Paul remarked that “one of the contributing factors to not only Jack Daniels but the entire US spirits and wine portfolio that’s unique to Brown-Forman was some of the disruption associated with our reorganization during fiscal 07.”
The reorganization includes merging wine and spirits operations, integrating Herradura and Chambord, and coming up with a new structure in approaching the US market.
“When you have that multitude of changes,” said Paul, “you have natural disruption.”
ACQUISITIONS AND CONSOLIDATIONS. When asked whether B-F derives its competitive advantage from scale or from focusing on high margin brands, Paul replied:
“I consider our company to be almost a hybrid of them both.”
He said the company uses scale when it is helpful but more importantly focuses on individual initiatives behind each brand.
“Behind our reorganization last fiscal year, where we try to put to use what I would consider the influencer and importance of size where it’s actually a help and a value to the company,” stated Paul.
“But probably more importantly even with any size we have is a preference towards being focused on our brand building, so we have not found that it’s our greatest game to go out and be big strong portfolio sellers.”
Paul refused to comment on whether B-F has planned any trips to Sweden in its immediate future, but pointed out that Finlandia is growing at a favorable rate.
COMPANY OUTLOOK. Looking to the current fiscal year, B-F said it expects to earn between $3.53 to $3.68 a share as "global trends for our premium beverage portfolio remain strong." That outlook does not include costs associated with the company's acquisition of Herradura. With the costs, B-F looks to earn $3.35 to $3.55 per share, implying a 7% to 13% increase over fiscal 2007.
posted at 3:22 PM
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