Brown-Forman FY sales hit by Covid-19 crisis

Jack Daniel’s producer Brown-Forman reported a 1% net sales increase for its 2020 fiscal year, however the Covid-19 pandemic “negatively affected” the company’s major markets during its fourth quarter.

Woodford Reserve’s double-digit growth was boosted by the US market

Reported net sales for the year ending 30 April 2020 reached US$3.4 billion, while reported operating income dipped 5% to US$1.1bn. During the previous fiscal year, the group was impacted by tariff pressures. 

For the fourth quarter, the firm’s net sales fell by 5% to US$709 million.

In March 2020, the group reported its third quarter results and revised its full-year outlook to consider the impact of the coronavirus crisis on Asia, in particular China, and travel retail. Following the update, Brown-Forman said the rapid spread of the disease has led to all of the company’s major markets being “negatively affected”.

“Covid-19 began to affect our performance in the middle of March and continued throughout April as both on-premise, representing approximately 20% of our business globally, and travel retail channels essentially came to a halt,” said Jane Morreau, the company’s executive vice president and chief financial officer.

“We experienced strong growth in the off-premise (based on syndicated takeaway data) and e-premise channels across most of our developed markets as country lockdowns and government restrictions took hold reflecting both an increase in at-home consumption and some pantry loading.”

During the fourth quarter, Brown-Forman also recorded a non-cash brand name impairment charge of US$13m, equivalent to US$0.02 per share, in relation to Chambord liqueur.  The group said the brand has a “significant” presence in the on-trade and “is expected to be considerably affected by the closures and restrictions in this channel” amid the pandemic.

Performance by market

Geographically for the 2020 fiscal year, net sales in the US grew 5%, partly due to the launch of Jack Daniel’s Tennessee Apple, “despite slower growth” in Q4 as a result of the pandemic.

Net sales in the firm’s emerging markets declined by 1%. The group’s largest emerging market, Mexico, dipped 7% “as the recessionary economy was further hindered by the effects of the health pandemic”.

Developed international markets reported a sales decline of 1% due to the Covid-19 crisis affecting Q4 performance across these markets. The UK reported a sales loss of 8%, while Australia and France each declined by 1%.

In May, Brown-Forman launched its UK subsidiary, bringing distribution in-house for the first time since the company entered the market.

Travel retail sales fell by 10% as a result of restrictions on travel amid the pandemic.

Looking across Brown-Forman’s portfolio, the Jack Daniel’s range reported flat net sales for the 2019/20 full-year. Premium Bourbon brands – including Woodford Reserve and Old Forrester, grew by double digits. Woodford Reserve was up by 19% and surpassed the one million nine-litre case milestone in fiscal 2020, boosted by the US.

The Tequila portfolio grew 2% as New Mix’s declines were more than offset by Herradura’s 8% net sales growth, led by double-digit volume growth in the US. El Jimador rose by 5%.

Fiscal 2021 outlook

Looking ahead to the next fiscal year, Brown-Forman said: “The company faces substantial uncertainty related to the evolving Covid-19 pandemic and its effect on the global economy.

“As a result of this uncertainty, the company is not able to provide quantitative guidance for fiscal year 2021 at this time.

“With a strong balance sheet, solid cash flows, and ample liquidity, the company expects to fully fund ongoing investments in the business and pay regular dividends.”

Lawson Whiting, president and CEO of Brown-Forman, said: “With our attractive portfolio of brands in growing categories and our resilient supply chain, we believe we will successfully navigate these uncharted waters, similar to other challenges we have encountered over the past 150 years, and emerge an even stronger company with healthier brands to drive our growth in the future.”