Brown-Forman delivers mid-single-digit growth in H1

6th December, 2019 by Nicola Carruthers

Jack Daniel’s owner Brown-Forman has reported a net sales increase of 5% to US$1.8 billion in the first six months of its 2020 fiscal year, boosted by Tequila and premium Bourbons.

Jack Daniel’s Tennessee Apple’s launch in the US helped to boost Brown-Forman’s growth

In the company’s six month period ending 31 October, operating income increased 1% to US$600 million.

Brown-Forman also reported its net sales for the second quarter, which were up 9% to US$989m. Operating income for the period increased 6% to US$352m.

“As expected, our results improved during the second quarter,” said president and CEO Lawson Whiting. “We continue to deliver solid underlying growth from both a geographic and portfolio perspective, despite the uncertain global economic and geopolitical environment.”

In terms of markets, the US grew net sales by 10% driven by “sustained double-digit growth” from premium Bourbons, Woodford Reserve and Old Forester, and double-digit underlying net sales gains from Tequila brands Herradura and El Jimador.

Reported net sales of emerging markets grew 4% with Russia experiencing a 27% net sales growth due to “higher volumes” of Jack Daniel’s and Finlandia vodka as a result of “favourable comparisons to the late fiscal 2018 route-to-consumer change” and “strong consumer demand” for both brands.

Developed international markets increased net sales by 1%. In the UK, net sales dropped 2%, while Germany’s net sales were “flat”.

Net sales in France grew 4% led by volume gains for Jack Daniel’s Tennessee Honey and the launch of Jack Daniel’s ready-to-drink (RTD) products.

Net sales were also “flat” in Australia due to “higher prices and increased volumes” of Jack Daniel’s. Travel retail sales declined by 9%.

Looking across the portfolio, the Jack Daniel’s family of brands increased by 5%, “propelled” by the launch of Jack Daniel’s Tennessee Apple in the US and “broad-based growth” for Jack Daniel’s RTDs and Jack Daniel’s Tennessee Honey.

Brown-Forman’s portfolio of premium American whiskey brands – including Woodford Reserve and Old Forrester – delivered 28% net sales growth. Woodford Reserve grew 25% boosted by the US, “where volumetric growth was supported by expanding consumer demand”.

Herradura Tequila grew by 21%, while El Jimador increased sales by 8%. Finlandia vodka dropped by 8% “as lower volumes and prices in Poland were partially offset by volume gains in Russia”.

Advertising investment was up 2%, reflecting the “increased investment” to support the US launch of Jack Daniel’s Tennessee Apple and “higher spend” behind Woodford Reserve, Jack Daniel’s Tennessee Whiskey, and Gentleman Jack.

‘Consumer momentum’ 

In June 2019, Brown-Forman reported a 2% net sales increase for its 2019 fiscal year, however tariff pressures “negatively impacted” the company’s growth.

Whiting added: “We reaffirmed our underlying net sales outlook for the year and remain on track to deliver another year of mid-single digit growth in underlying net sales led by the Jack Daniel’s family of brands, including the launch of Jack Daniel’s Tennessee Apple in the United States, as well as sustained double-digit growth from our premium Bourbon and Tequila portfolios.

“We continue to build our business for the long-term. Our takeaway trends remain healthy in many major markets as we continue to invest in consumer momentum by absorbing most tariff-related costs.

“We believe this, coupled with increased investments in advertising and route-to-consumer changes in certain markets, position us well for the next generation of growth.”

Looking ahead, Brown-Forman said that due to the “uncertainty in the current economic and geopolitical environment in certain emerging markets and the travel retail channel as well as higher input costs, the company modestly reduced its underlying operating income growth range by one percentage point”.

For the full-year fiscal 2020, the company expects underlying net sales growth of between 5% and 7% and underlying operating income growth of between 2% and 4%.

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