Brown-Forman reports stagnant sales in Q3
Old Forester Bourbon owner Brown-Forman reported flat net sales for its third quarter, despite a 34% increase across the Jack Daniel’s ready-to-drink portfolio.
The firm’s net sales for the third quarter ending 31 January 2021 hit US$911 million, with operating profit falling by 8% to US$281m.
For the first nine months of fiscal 2021, reported net sales grew 2% to US$2.65 billion. Operating income for the year to date grew 10% to US$988m.
Brown-Forman president and CEO Lawson Whiting said: “We remain pleased with our year-to-date underlying net sales growth, particularly when considering the unprecedented and challenging operating environment.
“Importantly, we remain focused on executing our long-term strategic priorities and our commitment to be better and do better as individuals and as a company. Our strategic priorities have enabled us to build strong business momentum during the Covid-19 crisis and we believe they remain the right strategies to deliver broad-based growth and value creation over the long term.”
Sales in the US grew 7%, led by premium Bourbons, the Jack Daniel’s ready-to-drink (RTD) portfolio, Jack Daniel’s Tennessee Honey, Gentleman Jack, and Tequila brands Herradura and El Jimador. Brown-Forman said the gains were partially offset by declines for the core Jack Daniel’s expression due to a ‘channel mix shift’ and lower volumes in the on-trade.
Brown-Forman also reported ‘high-single-digit’ net sales growth in developed international markets, driven by Jack Daniel’s RTDs, Jack Daniel’s Tennessee Apple and Honey expressions, and super-premium American whiskey and Scotch.
Emerging markets returned to growth (up 1%) during the year to date, driven by Brazil, Poland and China. The increases mainly offset declines in Southeast Asia, India and a number of Latin American markets. Travel bans and Covid-19 restrictions ‘significantly’ affected travel retail sales, down 54%.
Brand performance
The Jack Daniel’s portfolio saw net sales increase 2%, with growth from its RTDs (34%), Apple (107%) and Honey (10%) line extensions, and Gentleman Jack (12%). The flagship Jack Daniel’s expression declined 7% due to lower travel retail sales, travel bans in certain emerging markets and Covid-19 restrictions.
Premium Bourbons rose by 18%, with ‘strong’ double-digit growth from both Woodford Reserve (up 18%) and Old Forester. The Tequila portfolio grew by 6%, boosted by New Mix in Mexico. El Jimador (up 1%) and Herradura (flat) both reported double-digit gains in the US. Brown-Forman reported a 19% decline for vodka, which included the Finlandia brand.
During the quarter, Brown-Forman’s board of directors approved a US$125m investment to expand Bourbon production in Kentucky. As such, the firm moved forward with its multi-million-dollar distillery expansion in Louisville to meet increasing demand for American whiskey.
Looking ahead, the firm expects to face continued uncertainty due to the pandemic. As a result, Brown-Forman has not provided guidance for the fiscal year.
Jane Morreau, executive vice president and chief financial officer, said: “While near-term uncertainty remains, we believe we are operating from a position of strength, and will emerge even stronger from this crisis, continuing to grow market share and drive long-term sustainable growth for all stakeholders.
“The company’s financial and business fundamentals have remained strong throughout the entire pandemic allowing us to deliver solid growth in this challenging environment.”
