Brown-Forman CEO bets on Gin Mare and Diplomático
As its Tequila sales slip, Brown-Forman CEO Lawson Whiting believes Gin Mare and Diplomático could be key to driving long-term growth.
Last week, Brown-Forman reported organic full-year revenue growth of 1% despite a decline in its fourth quarter and struggling Tequila sales.
During a conference call on 5 June for the group’s full-year results ending 30 April 2025, Whiting noted the growth potential of newer additions to the firm’s portfolio.
Despite experiencing a slower than expected start, Brown-Forman believes Gin Mare will generate long-term growth for the group.
Gin Mare’s organic sales rose by 1%, led by Spain, Germany and France, but were offset by a decline in the brand’s biggest market, Italy.
Whiting explained this decline coincided with the company’s transition to its own distribution in Italy, beginning on 1 May 2025.
The CEO also noted a US$47 million non-cash impairment charge for Gin Mare and a reduction in the brand’s contingent consideration liability of US$43m.
Whiting said: “The impairment and liability reduction reflect a decline in our financial forecast assumptions due to the more challenging macroeconomic environment in Europe, where the brand has a strong presence.
“While the brand had a slower start than we had planned, we continue to expect that Gin Mare will contribute long-term growth to our portfolio of brands.”
Brown-Forman agreed to acquire Gin Mare in September 2022, joining Fords Gin in the group’s portfolio.
Diplomático rum, which sits within the firm’s ‘rest of portfolio’, reported double-digit organic sales growth for the full year.
Whiting said Diplomático’s growth was driven by France, Germany and travel retail.
“Within the super-premium-and-above price tier, Diplomático is the world’s third largest rum by value globally sold in over 100 countries,” he said.
He expects the rum brand to continue to be a “meaningful growth contributor over the long term”.
Venezuelan brand Diplomático was purchased by Brown-Forman in January 2023 as the group’s first rum.
New flavours for Jack Daniel’s and New Mix
In terms of innovation, the group revealed plans to launch Jack Daniel’s Tennessee Blackberry later this summer, which Whiting described as a “globally recognised, well-established flavour trend”.
“In consumer testing, Jack Daniel’s Tennessee Blackberry had high consumer appeal resonating with a broad audience,” he noted. “We’ve been strategic and purposeful with our innovation using consumer insights and trends to give consumers the opportunity to explore and discover within the Jack Daniel’s family.”
The group’s whiskey sales were up by 1%, with increases across all Jack Daniel’s products except Tennessee Fire (down 2%).
The core Jack Daniel’s whiskey rose by 1%, while Jack Daniel’s Tennessee Honey was up 2% and the apple-flavoured whiskey increased by 3%.
One of the strongest performers for Brown-Forman’s fiscal 2025 was Tequila-based ready-to-drink brand New Mix, which soared by 13%. Its growth was led by increased distribution, and a ‘steady pricing and promotional strategy’.
Whiting noted that the brand surpassed 11m nine-litre cases and continued to gain market share in Mexico. Data from the latest Brand Champions report showed an 8.4% increase to 10.9m cases in 2024.
The company is planning two new products for New Mix, Paloma and Cantarito, which will launch in key US states later this summer.
Regarding the Tequila portfolio, which was down by 12%, Whiting noted that the group’s brands (Herradura and El Jimador) “improved sequentially each quarter”.
Brown-Forman blamed the decrease for Tequila on ‘challenging macroeconomic conditions’ in Mexico and a competitive US market.
Whiting noted the prospect of growing the category outside of its two key markets: “IWSR projects the Tequila category will reach almost US$20 billion in retail value in the next five years with almost half the growth coming from outside the US and Mexico. We continue to ensure that El Jimador and Herradura are well positioned to capitalise on the growth.”
Regarding the pricing outlook for Tequila, Whiting told conference participants: “It’s not like the bottom is falling out, but I think we all accepted that you were going to see some pressure on Tequila pricing given the direction of the cost of agave. I don’t want to say pleasantly surprised, but I guess I am a little bit that the pricing environment has stayed where it is.”
Fiscal 2025 ‘year unlike any other’
Whiting described fiscal 2025 as a “year unlike any other” in the past three decades.
“I’m often reminded that this great company has existed for more than a century and half, and has faced many uncertainties and unknowns,” he said. “During these times, we remain focused on the long term and leverage our greatest strengths, our people and our brands. This has enabled us to deliver positive organic net sales and operating income growth in fiscal 25, which we believe is at the top of our industry.”
He added: “Despite headwinds, we believe that we have tremendous opportunities for long-term growth.”
Brown-Forman also noted that costs from its recent restructuring programme (which includes the 12% workforce reduction and cooperage closure) are expected to deliver US$70m to US$80m in annualised savings.
Brown-Forman recently sold its Louisville-based cooperage to Independent Stave Company for US$13.66m.
While sales in the US and the group’s ‘development international markets’ declined, emerging markets managed to post a 9% increase.
This was driven by a 43% increase in Turkey and a sales boost of 19% in Brazil, bolstered by Jack Daniel’s.
Leanne Cunningham, executive vice-president and chief financial officer, Brown-Forman told investors during the call: “The sustained growth of the premium whiskey category positively impacted our business in these markets, along with Brazil, which benefitted from our geographic expansion strategy and the launch of an additional package size for Jack Daniel’s Tennessee Whiskey.”
Opportunity for small formats
Whiting pointed out an opportunity for smaller formats, citing Nielsen US data for the last 12 months, where “80% of the dollar growth in spirits has been through the 375ml and the 50ml” formats.
“That’s unusual to say the least,” he noted. “And I think it goes further to talk about cyclical challenges of a consumer who’s pinched and just goes to the store with a US$10 bill instead of US$20, and then they get the smaller size.”
He added: “So I think that is a sign, and call it an opportunity too, that we need to get better at getting our small sizes out there and everyone, particularly in the US, is very aware of that, and they’re going for it.”
Whiting reiterated that the company views the declines in the industry as cyclical, rather than structural.
On this debate, he said there has not been a lot of newness to add to the conversation.
“It’s the same big three, the GLP-1s, the cannabis and Gen Z, and we’ve been saying that for 1.5 years now,” he told investors. “And I know on the sell side that the world seems to be a little bit split on the extent of the pressure that it’s putting on our category. We’d be naive if we didn’t say that there isn’t some pressure coming from those.
“But I still would argue that it is the consumer and their wallet just doesn’t have as much money in it. You’re right, they’re spending money on things like vacations and lodging and other things like that. But then when it trickles down and they go to the grocery store, I think in some cases, spirits has fallen out of the basket a little bit. And that isn’t, obviously, great.
“But on the tailwind side of things, there are some things that are doing well. Spirits continues to take share from beer and wine. So that dynamic hasn’t changed.”
Cunningham also noted that the firm expects “depletion-based trends in the US and developed international markets to remain similar to fiscal 2025 with the exception of Canada, where American spirit products largely remain off the shelf, partially offset by continued growth in our emerging markets”.
Regarding its recent decision to shake up its US route to market, where it has new partners in 13 markets, the company will gain “incremental dedicated headcount”.
“While these transitions will likely cause some disruption and volatility in the first half of this fiscal year, we believe they will unlock future growth,” said Cunningham. “These decisions were taken with great thought and care, and we believe they will bring tremendous opportunity for growth in the years and decades to come.”
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