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Brown-Forman ‘doubles rate of growth’ in fiscal 2018

Brown-Forman has reported an 8% net sales increase in its 2018 fiscal year, driven by the Jack Daniel’s family of brands.

Jack Daniel’s once again boosted Brown-Forman’s 2018 fiscal year

Reported net sales reached US$3.248 billion, with an underlying growth rate of 6.5%. Underlying operating income also grew by 8%, bolstered by a “continued focus” on tightly managing costs.

In the US, net sales increased by 7% thanks to “broad-based gains” from the Jack Daniel’s family of brands.

Underlying net sales in developed markets outside of the US were “solid”, with double-digit growth reported in the UK (+10%), as well as 8% and 3% gains for Australia and Canada respectively.

Emerging markets “continued to strengthen despite increasingly difficult comparisons”, with Russia and Brazil reporting sales growth of 19% and 28% respectively.

A “solid year of growth” for travel retail saw net sales increase by 8%.

In terms of brands, Jack Daniel’s increased by 4% with “strong” volume gains in markets outside of the US. The Jack Daniel’s RTD business was boosted by “innovation” in new product launches, up 14%.

Super-premium American whiskey brands – including Woodford Reserve, Jack Daniel’s Single Barrel and Gentleman Jack – saw net sales increase by 15%.

Woodford Reserve grew by 22% while Old Forester “grew at an even faster rate”, bolstered by “favourable mix shift to more premium offerings in addition to strong volumetric gains”.

Finlandia vodka grew by 5% following the implementation of higher prices in Russia, which offset “continued pressure” in Poland.

El Jimador Tequila grew by 9% thanks to “strong takeaway trends” in the US. Herradura Tequila increased by 19%, with “double-digit gains” in the US and Mexico.

Underlying advertising spend increased by 6% as the company continued to invest in Jack Daniel’s, Bourbon and Tequila, as well as Slane Irish whiskey, GlenDronach and BenRiach.

Paul Varga, the company’s chief executive officer, who will retire at the end of the year, said: “Brown-Forman delivered excellent results in fiscal 2018, driven by underlying net sales growth of 6.5%, which more than doubled fiscal 2017’s rate of growth.

“Our results demonstrated an excellent balance across both geography and portfolio, while being driven once again by the Jack Daniel’s trademark and our premium American whiskey portfolio. Thoughtful resource allocation, high impact brand investments, and a heightened attention to cost efficiency yielded an operating margin of 32%, an ROIC2,4 of 20%, and a total shareholder return (TSR)5 of 53% in fiscal 2018.”

Looking ahead to fiscal 2019, Varga said the company is “in the early days” of capitalising on its American whiskey strategy and is “extremely well-positioned to maintain the renewed momentum in our business”.

He continued: “We have been investing over the last several years in our portfolio of brands, our route-to-market and our people, and our confidence is further bolstered by the significant actions and investments we chose to make in fiscal 2018, most notably during the fourth quarter.

“We expect fiscal 2019 to be another great year at Brown-Forman, with reported earnings per share gains of 18-25% fuelled by strong growth in our business and the benefits of tax reform.”

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