Emerging markets hit Brown-Forman in Q3

Weakness in a number of emerging markets has hampered the year-to-date sales of Jack Daniel’s maker Brown-Forman, despite a solid performance from its American whiskey brands.

2016/17 has proven to be a difficult fiscal year so-far for Jack Daniel’s producer Brown-Forman

In its third financial quarter, Brown-Forman’s reported net sales were flat at US$808 million, while reported operating income decreased 2% to US$273m. In the first nine months of the group’s fiscal year, reported net sales slid 3% to US$2.3bn, and reported operating income fell 4% to US$778m.

Brown-Forman has blamed the sale of the Southern Comfort and Tuaca liqueurs for the decline, as well as the impact of negative foreign exchange.

In China, Brazil and Thailand, the firm’s underlying net sales experienced a double-digit drop due to “weaker economic conditions combined with an appreciated US dollar” that “negatively impacted consumer’s purchasing power”.

After a “sluggish” start to the year, sales in Russia and Turkey “stabilised”, while Mexico and Poland delivered “strong” results.

In the US, underlying net sales grew 4%, driven by the Jack Daniel’s family of brands, which was up 4% thanks to volume gains and “modest” price increases. The global travel retail business also “rebounded” from last year’s “depressed levels” with underlying net sales up 7%.

Jack Daniel’s also experienced success at a global level and super-premium brands Old Forester and Woodford Reserve each grew underlying net sales by more than 20%.

Tequila brands el Jimador and Herradura saw solid gains thanks to their performances in the US, but Finlandia’s struggle continued, posting a 1% underlying net sales decline.

In October last year, Marshall Farrer, head of Brown-Forman Global Travel Retail, confirmed his company was “very committed” to vodka brand Finlandia following rumours of a sell-off.

Looking to its full fiscal year, Brown-Forman anticipates underlying net sales growth of 3-4% and underlying operating income growth of 5-7%.

“Against a continued challenging global backdrop for consumer staples, our third quarter underlying sales growth accelerated nicely relative to our first half,” said Paul Varga, CEO of the group.

“We expect our fourth quarter underlying sales to have a similar favourable comparison to the first half, though we now anticipate full year underlying results at the lower end of our original forecast.

“We are pleased with the sequential organic sales improvement we’ve been witnessing and note that the drag on reported results due to 2016’s portfolio reshaping has begun to abate.”