Woodford Reserve smashes one-million-case mark
Brown-Forman reported flat net sales for its third quarter, however the group’s Woodford Reserve Bourbon passed the one-million-case sales mark for the first time.
In the company’s third quarter ending 31 January 2020, net sales grew 3% to US$899 million. Reported operating income fell 5% to US$304m.
For the first nine months of fiscal 2020, the company’s reported net sales increased by 3% to US$2.7 billion and reported operating income dropped 1% year to date to US$904m.
Woodford Reserve, which surpassed the one million nine-litre-case mark during the quarter, grew 19%. It was boosted by the US, where “strong” consumer trends remained, as well as “broad-based volume growth” globally. The brand is “one of the largest growth contributors” to the firm.
The group also said innovations such as Woodford Reserve Double Oaked, first launched in 2015, helped to boost the brand’s growth. The Bourbon, which is released annually, has “gained a cult-like following and became a requested expression from consumers across the world”.
Speaking to The Spirits Business last year, Brown-Forman CEO and president Lawson Whiting said Woodford Reserve would become a “big global brand” and was nearing the million-case mark.
In the US, underlying net sales during the company’s first nine months grew 6%, boosted by the double-digit growth of Bourbon brands Woodford Reserve and Old Forester, the launch of Jack Daniel’s Tennessee Apple and double-digit net sales growth from Tequila brands Herradura and El Jimador.
Net sales in Russia were up by 15%, while Poland grew sales by 6%. Brazil reported a net sales increase of 6%, and Mexico’s sales rose 2% despite a “weakening economy”.
The company’s developed international markets increased net sales by 2%. Germany was up by 5%, boosted by Jack Daniel’s ready-to-drink (RTD) products.
However, the UK – the group’s second largest market after the US – declined by 7% as a result of “softness in the cash-and-carry channel and short-term disruptions from changes to [Brown-Forman’s] promotional strategy and upcoming route-to-market transition”.
In January this year, Brown-Forman opened its refurbished London headquarters, as it prepares to launch its own distribution company in the UK.
It came just seven months after the group revealed it had reached an agreement with Bacardi to end their distribution partnership in the UK after 18 years.
Travel retail sales fell by 3% due to “lower volumes” for Jack Daniel’s Tennessee whiskey, which were offset by volume gains from Woodford Reserve.
Underlying net sales for the company’s non-branded business, mainly comprised of used barrels, bulk whiskey, and contract bottling, declined 27%, largely attributed to “lower volumes and prices for used barrels and a reduction in bulk whiskey sales”.
Brown-Forman’s growth was led by the Jack Daniel’s family of brands, which were up 3%. Growth was driven by Jack Daniel’s Tennessee Apple in the US, Jack Daniel’s RTDs in Germany, the US and France, and “solid international growth” of Jack Daniel’s Honey and Gentlemen Jack.
Net sales of the flagship Jack Daniel’s whiskey were “flat” due to declines in the UK and travel retail, which were offset by growth in emerging markets.
Whiting said Jack Daniel’s Tennessee Honey and Fire “now contribute 2.4 million nine-litre cases”.
The Jack Daniel’s RTD business “is now over nine million cases globally and continues to deliver solid growth”, said Whiting, as it offers consumers “convenience in their drinking occasions”.
The company’s portfolio of premium American whiskey brands – including Woodford Reserve and Old Forester – delivered 22% growth.
Gentleman Jack is “now nearly 700,000 cases and continues to deliver strong international growth”, Whiting noted.
Brown-Forman said Old Forester “maintained an even faster rate of underlying net sales growth powered by volumetric gains and favourable mix from the brand’s high-end expressions”.
Herradura Tequila was up 20%, boosted by “higher volumes, favourable product mix and higher pricing” in the US and Mexico. The brand has grown to more than 600,000 cases with nearly half of its growth in Mexico, Whiting added.
El Jimador grew sales by 11%, driven by “higher volumes” in the US as consumer takeaway trends remain strong.
However, Whiting warned that the “unprecedented cost of externally sourced agave is putting pressure on gross margins”. As a result, Brown-Forman increased prices and accelerated the growth of Herradura Ultra. The group expects “cost pressure to continue” through fiscal 2021, while “strong sales trends” remain.
Whiting said the group’s single malt Scotch portfolio is “performing very well” boosted by Highland whisky brand GlenDronach, “which has been experiencing considerable growth and has a very promising future”.
The firm’s emerging brands, Slane Irish Whiskey, Cooper’s Bourbon and the recently acquired Fords Gin, “continue to show potential for very meaningful growth”.
Brown-Forman has also revised its full-year outlook to “reflect tempered expectations in some of its international markets reflecting both short-term disruptions and an increasingly uncertain global economic and geopolitical environment”. The company has also considered the impact of coronavirus.
For fiscal 2020, the group expects “low-single-digit underlying net sales growth”, and a “flat-to-modest decline in underlying operating income”.
Whiting said: “We revised our full-year outlook to reflect tempered expectations in some of our international markets as well as the increasingly uncertain global economic and geopolitical environment.
“While we are cautious regarding our near-term outlook, we continue to build our business, as we always have, for the long term. We believe the strength of our brands and the health of our balance sheet places Brown-Forman in a strong position both today and for the long term.”