Brown-Forman CEO: spirits decline ‘cyclical’
The CEO of Brown-Forman believes the decline in spirits is due to “cyclical inflation” rather than structural changes, and is optimistic that the category will continue to take share from beer and wine.
Weighing in on the ‘structural versus cyclical’ debate in the spirits sector, Brown-Forman CEO Lawson Whiting believes that “cyclical inflation” is one of the main factors impacting the industry, with small formats “doing well” due to tighter budgets.
After a pandemic was declared in March 2020, Whiting said the spirits market was “globally on fire” for three years with demand being “so high” that Brown-Forman struggled with supply, he noted during a conference call for the group’s nine-month sales on 5 March.
“From September 2023 to December – literally four months – the market went from plus-six to zero, and then it ran at minus 2% for all of 2024,” he explained.
“I say all that because I don’t believe the big structural things that people talk about all the time – GLP-1s, cannabis in Gen Z – do not take six or eight points off the US spirits market in a period of five months. I just don’t believe that. There’s no way it could have that dramatic effect.
“I truly believe that it’s still inflation,” he continued, adding that consumers’ pockets are lighter now.
“I’m not trying to be naive that GLP-1s and cannabis are not a long-term headwind. I do think they’re out there. I just don’t think they are the driving factors of what is affecting the spirits market today.”
‘Gen Z will come back’
Whiting believes Gen Z are “a little bit different in terms of headwinds” as they are just starting their careers and have less disposable income.
He also claimed the “popular press is overreading into Gen Z and what they are doing”, emphasising that “Gen Z will come back”.
Whiting expects spirits to continue to take share from beer and wine, adding: “I don’t really see why that would change.”
He expressed some optimism: “There’s not a lot of premiumisation happening [right now], but even in the medium to long term, we feel pretty good about that.”
From May 2024 to January 2025, the group’s total organic sales rose by 2% year on year, led by gains for whiskey and the ready-to-drink (RTD) portfolio.
Woodford Reserve (up by 10%) and Jack Daniel’s Tennessee Whiskey (up by 2%) were the two largest growth drivers across the nine months, the CEO said.
He also noted that based on recent data of the top 10 spirits brands in the US, Woodford Reserve was one of only four brands in growth. Gains for the “number-one super-premium American whiskey globally” were led by the brand’s Distiller’s Select bottling and double-digit growth for the Double Oak expression.
Whiting said: “If you look at the same top 20 brands from six months ago, Woodford Reserve was one of only two brands in growth. So we are seeing some green shoots in the US spirits market.”
Rum and gin growth
Looking to the newer additions in Brown-Forman’s portfolio, both Diplomático and Gin Mare delivered double-digit growth. Diplomático was boosted by France, Czech Republic and German travel retail, while Gin Mare’s growth was driven by Germany, Spain and travel retail.
Whiting noted the two brands, which were acquired during fiscal 2023, have a “strong European presence that both aligned with our route-to-consumer investments” and provide growth opportunities in the US.
While Tequila might be the only spirits category growing worldwide, Brown-Forman saw its agave portfolio take a hit in its year-to-date results.
The group’s Tequila sales suffered a 13% organic sales drop in the year to date, as the result of a ‘competitive’ US market and ‘challenging macroeconomic conditions’ in Mexico.
Despite a 12% drop for El Jimador, Whiting said the brand experienced double-digit gains in Australia, Brazil and France.
He added: “Despite the performance of our Tequila brands in the short term, we believe we have the right brands to capitalise on the growth in the Tequila category globally over the long term.”
He told analysts that Tequila pricing had become “a little bit more aggressive” among the big players, with pricing in aggregate down by 1.7%.
Tequila-based RTD New Mix (up by 13% year-to-date) has seen double-digit organic sales increases in 12 of the 13 past quarters, Whiting highlighted.
The brand also “continues to gain market share in Mexico” and is set to launch a new tamarind-flavoured expression.
He said: “This launch reflects the culinary richness of Mexico and positions us to capitalise on the growing consumer demand for bolder and more refreshing flavours.”
Canada’s removal of US alcohol ‘worse than a tariff’
A contentious topic in the industry is US president Donald Trump’s 25% tariff on Canadian and Mexican products, which came into force on 4 March but has since been postponed to 2 April.
Regarding the tariff situation, Whiting said the removal of American alcohol from shelves in Canada was “worse than a tariff because it’s literally taking our sales away completely”. He called the move a “very disproportionate response” to the 25% tariff.
He expressed his hope for a return to tariff-free trade – the “best thing for the industry as a whole” – and is waiting to “see how it all plays out”.
Canada represents only around 1% of Brown-Forman sales, Whiting noted, but he said it would be “disappointing” for customers to not be able to buy Jack Daniel’s, a “big brand” in the country.
Rationale behind cooperage closure
In January, Brown-Forman revealed it would slash its 5,400-strong global workforce by approximately 12% and shut its Louisville-based barrel-making operation by April.
The company disclosed it had incurred US$33 million of restructuring and other charges due to the company’s workforce reduction, the planned closure of its cooperage, and the early retirement benefit offered to qualifying US employees.
A portion of these US$33m savings will be reinvested to drive growth, Whiting said.
Whiting said the closure of the Brown-Forman Cooperage after almost 80 years in operation was a “difficult decision”.
“During this time, the cooperage industry has evolved, and external suppliers are able to provide the same high-quality barrels at scale and at a competitive price,” he explained.
Brown-Forman has faced “significant” wood costs in the last few years, Whiting reflected, with the group taking “strategic steps to optimise [its] wood supply chain” by selling its mills and the cooperage in Alabama during fiscal 2024.
The shutdown of the Louisville-based cooperage marks the final step in Brown-Forman’s wood supply-chain strategy, which enables the firm to “create efficiencies” and “optimise its capital allocation”.
The actions are expected to deliver US$70-$80m in annual savings.
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