Fortune Sees No Signs of Trading Down
DISCUS said last week it expects trading up activity to slow somewhat in 2008. The sentiment has been echoed by Brown-Forman, Diageo (to an extent), analysts and other insiders. Fortune Brands, however, says its spirits business had yet to experience any problems as a result of the slowing economy.
The company’s spirits division “typically experiences volume growth of 2-4% in the U.S. This year is a little slower than what we saw in 2006, maybe at 2.5% to maybe a little higher then that rate. If you look back over the last 10 years you see a bouncing in that range...when you peel back the onion you see a continuation of people trading up to higher premium spirits whether it be premium or ultra premium. We have not seen any trading down here at all in the past several months,” said Bruce Carbonari, president and ceo of Fortune Brands.
In its fourth quarter and full year earnings report, Fortune said Jim Beam, Sauza Tequila and Maker’s Mark saw double digit revenue increases for the year on a constant currency basis. The company attributed the brands’ success on the following factors: higher pricing in a growing market, focus on building premium brand equity and a new kind of marketing.
Fortune launched a new vision in 2007 to “build brands people want to talk about.” Examples of the word of mouth marketing include the re-launch of Sauza’s Hornitos line, Courvoisier’s global campaign and the first multi-layer marketing campaign for Canadian Club in 20 years.
“We believe stronger brand equity builds growth,” said Bruce, “which is why marketing is now more focused on creating consumer pull in generating buzz then traditional push marketing.”
NO MORE WINE. Its motto of building strong brands also prompted Fortune to sell its wine business. As you’ll recall, Fortune sold its wine sector to Constellation in December for $885 million. Bruce remarked that the “wine industry has lower return business growth then spirits. The sale will allow us to focus resources on higher return opportunities across the company.”
Similarly, Fortune sold the U.S. distribution rights to Dalmore Scotch to India’s UB Group for $58 million. The brand brought in only $6 million a year in sales, said Bruce. The company is now focusing on growing its own global Scotch brands: Teacher’s, Ardmore and Laphroaig.
ABSOLUT. As we expected, Fortune declined to comment much on the sale of V&S. As a part of its prepared comments, Bruce said the following:
“We already share a very successful commercial partnership with V&S...we’re confident that bringing the companies together would bring long-term value to the Swedish state, the people of V&S and importantly our shareholders.”
Most people consider Fortune the frontrunner in the race for V&S, followed by Pernod and Bacardi.
“We’ve been asked by the Swedish government not to comment at all...this process is a little different. It’s not a business to business sale... it’s a privatization process...so they’re really calling on the shots and running the process and we respect what they’re doing and we’re following by the rules,” said Bruce during the Q&A.
IN THE FOURTH QUARTER spirits sales rose 10% to $859 million, helped by strong shipments of premium brands in the U.S. On a constant currency basis, sales grew in the low mid-single digit range in the quarter.
IN THE FISCAL YEAR, revenues were up in the mid-single digit range on a constant currency basis with slightly higher volumes. The spirits business experienced a favorable mix shift as global premium brands grew at a faster rate then regional and national brands, said the company.
Jim Beam grew low single digits in volume internationally. Sauza saw volume growth in the low-single digit range and performed strongly in the U.S. with help from the Hornitos re-launch. Maker’s Mark, meanwhile, was up a high-single digit rate in volume for the year. Courvoisier grew low-single digits in revenue and volume with a favorable mix shift.
“We feel better then ever about our strong position in the spirits market,” said cfo Craig Omtvedt.
Craig said the spirits industry benefits from great trends, such as trading up, a thriving cocktail culture and an industry that performs well in almost all economic conditions.
JIM VS JACK. In fiscal 2007, worldwide sales of Jim Beam exceeded 6million cases. It looks like Jim Beam is experiencing growth where Jack Daniel’s has suffered lately. Bruce says it all has to do with the marketing.
“We are putting that [bourbon] portfolio to work differently then maybe we have in the past. We aren’t relying on the traditional push methodologies that have been part of this industry for a long time. We’re introducing some new concepts and some of them are catching on. Some are working for us. And we’re testing those continuously and challenging ourselves to think differently about the business and I think we’ve been awarded for that.”
DIAGEO ACQUIRES ROSENBLUM CELLARS FOR $105 MILLION
Diageo Chateau & Estate Wines (DC&E) said today it has entered an agreement to acquire Rosenblum Cellars for $105 million. The proposed transaction, which is subject to regulatory approval in the United States, is expected to complete in the first quarter of calendar year 2008.
Rosenblum Cellars, founded in 1978 by Kent and Kathy Rosenblum and based in Alameda, CA, is one of the leading producers of Zinfandel and Rhone varietals in the United States.
The acquisition will give Diageo “one of the most recognizable names” in the “booming” Zinfandel category. Kent Rosenblum will play a key advisory role in the strategic direction of the brand.
REMY COINTREAU USA APPOINTS CFO
Remy said it has appointed Dennis Floam as senior vp and CFO. Dennis joins Remy from Carl Marks & Co. where he has been a Managing Director for the past three years. Prior to that, he had a 26 year career with the Altria Group (formerly Philip Morris Companies).
WSD BRIEF:
WINE.COM is putting its support behind proposed legislation that would enable out-of-state wine retailers to ship into Washington. At a hearing yesterday, representatives from Wine.com did a little damage control by speaking in favor of SB 6384 that would allow online wine retailers to ship wine to Washington customers from other states. “We’re for free trade,” said Rich Bergsund, Wine.com ceo.
TRUTH SQUADERS, PIPING ALL HANDS. Please take the time to fill out a quick WSD Truth Squad survey. It’s very helpful to us to understand where you stand on certain issues, and we’ll report the general results in the next couple of weeks. All answers are kept anonymous. Just click here to take the survey: http://tiny.cc/nnda6
Until tomorrow, Megan
“It is hard to believe that a man is telling the truth when you know that you would lie if you were in his place.”
-H. L. Mencken
--------- Sell Day Calendar ----------
Today's Sell Day: 19
Sell days this month: 22
Sell days this month last year: 22
This month ends on a: Thur
This month last year ended on a: Wed.
YTD sell days Over/Under: 0
The company’s spirits division “typically experiences volume growth of 2-4% in the U.S. This year is a little slower than what we saw in 2006, maybe at 2.5% to maybe a little higher then that rate. If you look back over the last 10 years you see a bouncing in that range...when you peel back the onion you see a continuation of people trading up to higher premium spirits whether it be premium or ultra premium. We have not seen any trading down here at all in the past several months,” said Bruce Carbonari, president and ceo of Fortune Brands.
In its fourth quarter and full year earnings report, Fortune said Jim Beam, Sauza Tequila and Maker’s Mark saw double digit revenue increases for the year on a constant currency basis. The company attributed the brands’ success on the following factors: higher pricing in a growing market, focus on building premium brand equity and a new kind of marketing.
Fortune launched a new vision in 2007 to “build brands people want to talk about.” Examples of the word of mouth marketing include the re-launch of Sauza’s Hornitos line, Courvoisier’s global campaign and the first multi-layer marketing campaign for Canadian Club in 20 years.
“We believe stronger brand equity builds growth,” said Bruce, “which is why marketing is now more focused on creating consumer pull in generating buzz then traditional push marketing.”
NO MORE WINE. Its motto of building strong brands also prompted Fortune to sell its wine business. As you’ll recall, Fortune sold its wine sector to Constellation in December for $885 million. Bruce remarked that the “wine industry has lower return business growth then spirits. The sale will allow us to focus resources on higher return opportunities across the company.”
Similarly, Fortune sold the U.S. distribution rights to Dalmore Scotch to India’s UB Group for $58 million. The brand brought in only $6 million a year in sales, said Bruce. The company is now focusing on growing its own global Scotch brands: Teacher’s, Ardmore and Laphroaig.
ABSOLUT. As we expected, Fortune declined to comment much on the sale of V&S. As a part of its prepared comments, Bruce said the following:
“We already share a very successful commercial partnership with V&S...we’re confident that bringing the companies together would bring long-term value to the Swedish state, the people of V&S and importantly our shareholders.”
Most people consider Fortune the frontrunner in the race for V&S, followed by Pernod and Bacardi.
“We’ve been asked by the Swedish government not to comment at all...this process is a little different. It’s not a business to business sale... it’s a privatization process...so they’re really calling on the shots and running the process and we respect what they’re doing and we’re following by the rules,” said Bruce during the Q&A.
IN THE FOURTH QUARTER spirits sales rose 10% to $859 million, helped by strong shipments of premium brands in the U.S. On a constant currency basis, sales grew in the low mid-single digit range in the quarter.
IN THE FISCAL YEAR, revenues were up in the mid-single digit range on a constant currency basis with slightly higher volumes. The spirits business experienced a favorable mix shift as global premium brands grew at a faster rate then regional and national brands, said the company.
Jim Beam grew low single digits in volume internationally. Sauza saw volume growth in the low-single digit range and performed strongly in the U.S. with help from the Hornitos re-launch. Maker’s Mark, meanwhile, was up a high-single digit rate in volume for the year. Courvoisier grew low-single digits in revenue and volume with a favorable mix shift.
“We feel better then ever about our strong position in the spirits market,” said cfo Craig Omtvedt.
Craig said the spirits industry benefits from great trends, such as trading up, a thriving cocktail culture and an industry that performs well in almost all economic conditions.
JIM VS JACK. In fiscal 2007, worldwide sales of Jim Beam exceeded 6million cases. It looks like Jim Beam is experiencing growth where Jack Daniel’s has suffered lately. Bruce says it all has to do with the marketing.
“We are putting that [bourbon] portfolio to work differently then maybe we have in the past. We aren’t relying on the traditional push methodologies that have been part of this industry for a long time. We’re introducing some new concepts and some of them are catching on. Some are working for us. And we’re testing those continuously and challenging ourselves to think differently about the business and I think we’ve been awarded for that.”
DIAGEO ACQUIRES ROSENBLUM CELLARS FOR $105 MILLION
Diageo Chateau & Estate Wines (DC&E) said today it has entered an agreement to acquire Rosenblum Cellars for $105 million. The proposed transaction, which is subject to regulatory approval in the United States, is expected to complete in the first quarter of calendar year 2008.
Rosenblum Cellars, founded in 1978 by Kent and Kathy Rosenblum and based in Alameda, CA, is one of the leading producers of Zinfandel and Rhone varietals in the United States.
The acquisition will give Diageo “one of the most recognizable names” in the “booming” Zinfandel category. Kent Rosenblum will play a key advisory role in the strategic direction of the brand.
REMY COINTREAU USA APPOINTS CFO
Remy said it has appointed Dennis Floam as senior vp and CFO. Dennis joins Remy from Carl Marks & Co. where he has been a Managing Director for the past three years. Prior to that, he had a 26 year career with the Altria Group (formerly Philip Morris Companies).
WSD BRIEF:
WINE.COM is putting its support behind proposed legislation that would enable out-of-state wine retailers to ship into Washington. At a hearing yesterday, representatives from Wine.com did a little damage control by speaking in favor of SB 6384 that would allow online wine retailers to ship wine to Washington customers from other states. “We’re for free trade,” said Rich Bergsund, Wine.com ceo.
TRUTH SQUADERS, PIPING ALL HANDS. Please take the time to fill out a quick WSD Truth Squad survey. It’s very helpful to us to understand where you stand on certain issues, and we’ll report the general results in the next couple of weeks. All answers are kept anonymous. Just click here to take the survey: http://tiny.cc/nnda6
Until tomorrow, Megan
“It is hard to believe that a man is telling the truth when you know that you would lie if you were in his place.”
-H. L. Mencken
--------- Sell Day Calendar ----------
Today's Sell Day: 19
Sell days this month: 22
Sell days this month last year: 22
This month ends on a: Thur
This month last year ended on a: Wed.
YTD sell days Over/Under: 0
posted at 2:39 PM
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