Brown-Forman has reported an energising start to FY24, and reaffirmed its projection of six to eight per cent organic growth by the close of the financial year.

Net sales increased three per cent to $1.0 billion for first quarter of fiscal year 2024. Growth was delivered across emerging and developed international markets, as well as the travel retail channel.

This was largely driven by the recent acquisition of Gin Mare and Diplomático, which have contributed to net sales growth. Jack Daniel’s has also had an impressive year, with growth in flavoured and super-premium whiskeys and the release of a new RTD. Additionally, Brown-Forman sold Finlandia Vodka to Coca-Cola HBC earlier in the quarter, almost two decades after acquiring the brand in 2004. However, the sale will not be completed until the latter half of 2023 and has not affected Q1FY24 results.

Lawson Whiting, Brown-Forman’s President and CEO, is optimistic about the remainder of FY24.

“As anticipated, our first quarter growth was impacted by the difficult shipment comparison from fiscal 2023, when we rebuilt inventory impacted by prior glass supply challenges. We continue to be confident in the strength of our people, our brands, and our business, and reaffirm our full-year fiscal 2024 guidance of five to seven per cent organic net sales growth and six to eight per cent organic operating income growth,” said Whiting.

There was significant brand investment to support the existing portfolio, new acquisitions, and new releases. As a result, reported advertising expense increased 19 per cent.

The timing and phasing of our operating expenses had an impact on our first quarter operating income as we launched and acquired new brands while also investing in our existing portfolio,” Whiting commented.

Brand results

Whiskey sales declined one per cent, with mixed performance across the category. Estimated net decrease in distributor inventories for Woodford Reserve and Gentleman Jack drove the decline, but were offset by growth in Jack Daniel’s Tennessee Apple (+49 per cent) and Jack Daniel’s super-premium expressions. While reported net sales of Jack Daniel’s Tennessee Whiskey were flat, the brand led the company’s organic growth (+ two per cent) even as it was negatively impacted by an estimated net decrease in distributor inventories in the United States.

Demand for convenience and flavour is driving RTD growth, with New Mix’s reported net sales increasing 52 per cent. Growth of Jack Daniel’s RTDs was flat, as the release of Jack Daniel’s & Coca-Cola RTD resulted in diminished sales of Jack Daniel’s & Cola. However, response to Jack Daniel’s & Coca-Cola was positive.

“I must say, you know you’re doing something right when consumers start wearing your spirits brands, and I just saw a picture of the first reported Jack & Coke RTD tattoo. The loyalty of our Jack Daniel’s fans is strong and impressive,” said Whiting.

Additionally, both Australian and the UK saw lower volumes of Jack Daniel’s RTDs. In Australia, this is part of two year-over-year decreases in Jack Daniel’s RTDs, in part due to micro-economic pressures negatively impacting volume growth.

Reported net sales for the tequila portfolio increased 15 per cent, largely driven by the 27 per cent net increase of el Jimador. Additionally, Herradura reported net sales increased by one per cent.

Leanne Cunningham, Brown-Forman Executive Vice President and CFO, spoke of the effects of agave pricing on the category.

“Given the increase in tequila demand, there was a significant increase in the number of plantings several years ago. We have long believed that this would lead to  an eventual increase in supply and a subsequent decrease in cost, assuming the tequila category remained strong. In the last three months, we have seen a significant decrease in agave cost, from 28 to 30 Mexican pesos per kilo, to 16 to 18 Mexican pesos per kilo, depending on the quality of the agave. While we are very encouraged that prices are coming down, the benefit to our cost of goods sold will not be immediate,” Cunningham explained.

The delayed impact on cost of goods is due to prior stock that must be sold, as well as aging time, as aged tequila makes up around half of the Brown-Forman portfolio. However, Blanca tequila will see a benefit more quickly.

Finally, the recently acquired Gin Mare and Diplomático brands collectively increased the company’s reported net sales by two per cent and drove the 97 per cent Rest of Portfolio increase.

FY24 projections

Despite two years of solid growth, Brown-Forman expects income growth to normalise in FY24, and reaffirms its expectation of six to eight per cent organic growth by the end of the fiscal year. Additionally, capital expenditures are planned to be in the range of $250 to $270 million.

“In what has been a highly dynamic operating environment, we continue to be optimistic. We continue to believe global trends will normalise after two years of strong growth. And, while consumer demand for our brands is also starting to reflect more historical trends. We expect to continue to grow on this elevated base as a result of our long-term pricing and revenue growth management strategies, as well as the addition of two super-premium brands – Gin Mare and Diplomático – to our portfolio, partially offset by a portfolio mix shift to RTDs,” Cunningham concluded.

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