Brown-Forman Q1 sales and profits slump
Brown-Forman’s first quarter financial results have been hit by the sale of its Southern Comfort and Tuaca brands, as well as hefty declines in the emerging markets.
Jack Daniel’s maker Brown-Forman has seen its sales and profits decline in Q1 2017The Jack Daniel’s whiskey producer saw its reported net sales slump 5% to US$661 million, while reported operating income fell 6% to US$213 million.
The group attributed a 3% sales decline to the sale of Southern Comfort and Tuaca to fellow US spirits producer Sazerac for US$542m earlier this year. The further 2% decline was blamed on foreign exchange.
Despite witnessing rapid growth since its launch in 2014, flavoured brand extension Jack Daniel’s Tennessee Fire experienced double-digit decline in the US due to “very challenging comparisons against last year’s US activation in the off-premise”.
Outside of the US, the Jack Daniel’s family of brands fuelled growth in the UK, Australia, Germany, France, Canada, Japan, Spain, New Zealand and Italy.
However, the emerging markets “did not stabilise as expected”, with reported net sales plummeting 17% due to weaker economic conditions, devalued currencies and political instability. In particular, Turkey, Russia, Brazil, China, Thailand and several markets in Eastern Europe witnessed declines.
In terms of brands, underlying net sales of Jack Daniel’s grew 3%, as Woodford Reserve Bourbon increased by an impressive 24% and Old Forester delivered “solid growth” despite “meaningful pricing actions of the brand”.
El Jimador Tequila pushed underlying net sales up by 10%, with activations in the US and Mexico proving successful, while Herradura grew 18%. However Finlandia continued its downward trajectory, experiencing a 4% decline due to challenges in Russia.
“Our first quarter reported results came in largely as anticipated considering the absence of previously disposed brands and the difficult comparisons against last year’s launch of Jack Daniel’s Tennessee Fire in the United States,” said Paul Varga, CEO of Brown-Forman.
“While our results continue to be hampered by the combined effects of adverse foreign exchange and challenging emerging market conditions, we still expect fiscal 2017 to be another year of solid underlying sales and operating income growth, driven by the Jack Daniel’s family of brands, as well as our portfolio of premium Bourbons and Tequilas.”
The company anticipates underlying net sales growth of 4-6% in FY17 and operating income gains of 7-9%.
In June this year, Brown-Forman completed its £281m (US$405m) acquisition of The BenRiach Distillery Company, marking the group’s re-entry into the Scotch whisky category.
