Brown-Forman to invest in Jack Daniel’s after sales struggle in Q1

US drinks firm Brown-Forman will invest in a new campaign for Jack Daniel’s after the flagship variant recorded a double-digit decline in Q1 due to the closure of the on-trade.

Net sales of the flagship Jack Daniel’s variant dropped 10% in Q1

Earlier this week, Woodford Reserve owner Brown-Forman reported its first quarter sales for fiscal 2021, which fell 2% to US$753 million.

While the Jack Daniel’s family of brands recorded a 3% net sales growth, the core variant struggled to maintain sales, falling by 10% due to an ‘unfavourable channel mix shift’ in the US and developed international markets, the group said.

Speaking during a conference call for the results on 2 September, Brown-Forman CEO Lawson Whiting said the group was not happy with the growth rates for the Jack Daniel’s range over the last few years.

“The shift from on-premise to off-premise consumption in the developed markets drove the brand’s underlying net sales down further,” Whiting told analysts during the call. “However, overall, the brand remains quite healthy and is gaining share in the majority of its top 10 markets.”

Whiting pointed to the fact that the core Jack Daniel’s is “one of the largest on-premise brands in the world” and “in every bar” across the globe. The closure of the on-trade in markets across the world due to the pandemic saw the brand’s sales decline.

He explained: “That’s why that number is down somewhere around 7% down for the quarter on a global basis, a lot of that is on-premise. In the US itself, 30%-ish of its volume is in the on-premise and that went down drastically.”

Whiting said the firm will “rely further” on new campaigns to improve the brand’s growth. He said the group had hired a new advertising agency in January, however plans were on hold due to Covid-19. “Bringing out an entire new campaign with a whole bunch of money behind it is in our plans for the next six months,” he said.

Noting the challenges of the current climate, he said: “You’ve got to find ways to get to consumers that are outside of the bars. But I think we will be pretty effective in communicating that and getting that to them.”

Furthermore, Whiting said “a lot of new work from the Jack Daniel’s family” will come out soon.

RTD potential

One bright star of Brown-Forman’s first quarter results was the Jack Daniel’s ready-to-drink (RTD) portfolio, which recorded a 37% net sales increase.

RTDs are “having a moment right now, but it’s a business we’ve believed in and invested in for a long time”, said Whiting, noting that this part of the business has become “meaningful” for the company.

He said: “Globally, Jack Daniel’s RTDs are now over 10 million cases with Australia, the US, Germany, and Mexico all over one million cases. Jack RTDs were created to expand occasions where Jack could be enjoyed and focus was really on the key cocktail serves such as Jack & Cola, Lynchburg Lemonade, and Jack & Ginger Ale. These RTDs serve as an important consumer recruitment vehicle due to the category’s light and really accessible flavour profile.

“Through innovation, we feel we can meet consumer taste and pack preferences as they really do vary by market.”

The malt-based Jack Daniel’s Country Cocktails range, which launched nearly 30 years ago, remains the majority of the group’s RTD business in the US, and “is on fire” said Whiting. The group’s spirits-based RTDs business is “still pretty small” in the US at less than 50,000 cases,” he noted.

The firm’s Tequila-based New Mix RTDs in Mexico are now more than seven million cases, Whiting said. “This business is also doing well in the environment we’re in. I believe that we’re well positioned with the right offerings at the right time to meet the increase in popularity of these ready-to-drink cocktails.”

Spirits growth

Whiting also said the premiumisation trend has accelerated during the pandemic. “We’ve seen growth rates of premium and super-premium brands accelerate greatly in the US since March.”

“Consumer spending has remained strong in many developed markets and the spirits industry is benefiting,” he added. “We do believe consumers are looking for everyday luxuries, and this is great for super-premium spirits.”

Citing Nielsen trends in the US, Whiting said: “Spirits have remained very strong since the beginning of the pandemic and have really maintained those high rates of growth through the summer.

“The long-term trend of spirits taking share from beer and wine continues. I think as long as people are largely unable to spend on travel and other forms of entertainment, we think that the spirits’ strong growth will continue predominantly in the off-premise.”