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Tennessee Honey helps drive Brown-Forman sales growth

New product launches including Jack Daniel’s Tennessee Honey have helped Brown-Forman achieve underlying net sales growth last seen by the company before 2008.

Jack Daniel's Tennessee Honey
Jack Daniel's Tennessee Honey has been a huge success in the US

In its full year 2012 financial results, the company reported an underlying net sales growth of 9% to US$3.6bn, up from 4% growth in 2011. Underlying operating income also came in with a 9% growth, up from 2011’s 6% gains.

Brown-Forman attributes 2% of its overall growth to product innovations and new line extensions, claiming Jack Daniel’s Tennessee Honey has created a halo effect for its parent brand.

Full year underlying net sales grew by 17% in Brown-Forman’s emerging markets, 8% in the developed world outside the US and just 5% in the States. All markets outside the US now account for 58% of the company’s total sales.

Paul Varga, chief executive of Brown-Forman, said the acceleration of underlying net sales and operating income was due mainly to the success of its premium brands – Finlandia vodka volume grew 7% to 3.1m cases with a 10% increase in sales thanks to strong demand in Eastern Europe and Russia – and the Jack Daniel’s range.

“While the economic backdrop remains uncertain, we expect that this strength in underlying sales will continue into fiscal 2013, with anticipated growth in the high single-digits.,” he said. “After several years of partially absorbing cost increases, we are planning for price increases to be a larger contributor to our total revenue growth, covering cost inflation and improving our relative price positions in the marketplace.

“As an industry leader in American whiskey, we are encouraged by the category’s momentum in the United States and around the world. Aided by super-premium line extensions, flavored expressions, and RTD innovation, the category’s growing popularity bodes well for Brown-Forman and our stable of leading trademarks.”

Gross profit for the year increased by 4% while underlying gross profit grew 8%.

Brown-Forman managed to reduce its overall debt by US$250m to US$506m thanks to strong operating cash flow, despite higher input and fuel costs that affected reported gross profit results.

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