Brown-Forman sees marginal sales decline

Brown-Forman has seen a marginal decline in its Q1 reported net sales, however the company’s Jack Daniel’s brand continued its strong performance.

Jack Daniel’s sales have soared in Brown-Forman’s first financial quarter

While the group’s net sales fell 2% to US$900m due the the adverse affect of foreign exchange, its underlying sales grew 7% and operating income increased 3% to US$227m.

However, Brown-Forman said the results marked a “strong start” to its 2015/16 financial year, and were driven by the success of its Jack Daniel’s family of brands, which grew 6%

In particular, Jack Daniel’s Tennessee Honey saw strong sales with 18% net sales growth due to its expansion outside of the US, while its stablemate Jack Daniel’s Tennessee Fire contributed three percent to the brand’s underlying growth.

Woodford Reserve brand saw an increase of 28%, boosting the sales of Brown-Forman’s super- and ultra-premium whiskey portfolio.

Finlandia vodka continues to suffer from “weak consumer demand”, but has clawed back growth with a 3% rise in sales as the Polish market begins to stabilise after last year’s duty hike.

The el Jimador and Herradura families grew underlying net sales by 11% and 28%, respectively, with double-digit gains for both brands in the United States. Southern Comfort continued to suffer at the hands of flavoured whiskies and reported a net sales decline of 4%.

Market volatility

In terms of markets, the US market “remained strong” and saw underlying net sales increase by 10%, driven by the “rapid” expansion of Tennessee Fire and the “continued success” of Brown-Forman’s other whiskeys.

The group was hit by a sharp double-digit decline in Russia due to its “weak economy” and a devaluation of the ruble. However, double-digit growth was achieved in other emerging markets, including Brazil, Mexico, Poland, Turkey, Africa and the Ukraine.

Brown-Forman reported solid gains in most developed markets outside of the US, however the firm struggled in Australia, reporting a double-digit decline due to the combined effects of a “weak economic backdrop, a tough competitive landscape, and a challenging excise tax environment for spirits”.

“Continuing to build on our results of the last few years, we are off to a strong start in fiscal 2016,” said Paul Varga, CEO of Brown-Forman.

“Despite a volatile global economy, adverse foreign exchange, and increasing competitive intensity, our growth in underlying sales and operating income were impressive, and continued to compare quite favorably to our industry competitive set.”

Brown-Forman said its fiscal 2015/16 outlook was “uncertain” due to the potential of the global economic environment to impact its business. However, the company said that “assuming no further deterioration in the global economy” it expects 6% to 7% growth in underlying net sales.