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Tequila sales plunge in Brown-Forman Q1
El Jimador owner Brown-Forman saw organic revenue fall by 4% in the first quarter of fiscal 2025 after its Tequila sales dropped by double digits.
For the three months to 31 July 2024, Brown-Forman reported a revenue drop of 8% on a reported basis to US$1 billion.
Operating income for the three-month period fell by 13% organically to US$281 million.
Lawson Whiting, Brown-Forman’s president and CEO, said the results were in line with expectations.
The first-quarter (Q1) performance followed a 1% sales drop for Brown-Forman’s fiscal 2024 (year ending 30 April).
The group said the Q1 revenue decline was led by Jack Daniel’s Tennessee Whiskey (down by 6% in organic sales) and the disposal of Finlandia Vodka. The brand’s divestment to Coca-Cola in November 2023 resulted in a pre-tax gain of US$92m.
Brown-Forman’s Tequila sales dropped by 23%, with El Jimador plunging by 26% due to lower volumes in the US, Colombia and Mexico. Stablemate Herradura declined by 14% due to a decrease in Mexico, described as a ‘challenging economic environment’.
The group’s total whisky sales fell by 3%, with the core Jack Daniel’s expression impacted by the negative effect of foreign exchange and the timing of shipments when compared with last year’s first quarter.
Within that division, the group’s ‘rest of whiskey’ portfolio, which includes Scotch brands Glenglassaugh and Benriach, fell by 18%.
However, Brown-Forman’s premium Bourbons posted growth, including a 16% gain for Old Forester and a 3% increase for Woodford Reserve (both brands ‘outperformed the US whiskey category’ in the States).
The Jack Daniel’s Apple and Honey line extensions also made gains, up 5% and 4% respectively.
Ready-to-drink (RTD) sales dropped by 4%, with Tequila-based New Mix falling by 9%. The Jack Daniel’s RTD/ready-to-pour portfolio dipped by 2% after a change in the business model for the brand’s Country Cocktails RTDs.
Brown-Forman completed the transition of the supply, sales and distribution of Jack Daniel’s Country Cocktails to Pabst Brewing Company during fiscal 2024.
Finlandia was the main contributor to the firm’s ‘rest of portfolio’ sales, growing by only 1% (down by 18% on a reported basis).
Geographically, the group recorded organic sales growth only in Brazil (up 29%) and the ‘rest of developed international’ markets (up 3%), which includes Japan.
The US recorded a 4% drop, led by the flagship Jack Daniel’s variant, El Jimador, the ‘negative impact’ of Country Cocktails, and Californian sparkling wine Korbel.
The ‘developed international markets’ division declined by 6%, driven by double-digit drops in the UK (down 23%) and Spain (down 14%). Germany fell by 6%, France dropped by 5%, Canada dipped by 2% and Australia decreased by 1%.
Emerging markets posted a 5% downtick with Mexico falling by 16% and Poland down by 10%.
Travel retail sales fell by 8% due to lower volumes of Jack Daniel’s super-premium expressions and Woodford Reserve, and the Finlandia divesture. However, growth was partly offset by Diplomático rum.
Fiscal 2025 forecast
Brown-Forman is hoping to return to organic net sales growth in fiscal 2025, led by international markets and the normalisation of inventory trends.
The group reiterated its prediction of a full-year organic net sales increase between 2% and 4%, and income growth in the range of 2% and 4%.
Whiting added: “We believe we have the right strategy, brands, and geographic breadth in place to effectively manage through the challenging consumer and cost environment.”
The financial statement did not mention recent speculation that claimed Brown-Forman had abandoned its corporate diversity, equity and inclusion (DEI) programmes.
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