Brown-Forman Finds Brand Success In Healthier Economies

Brown-Forman, which markets Jack Daniel's Tennessee Whiskey, Southern Comfort and Finlandia vodka, on Thursday reported its first-quarter net sales grew $106 million, up 17% over the prior-year period--mainly because of international demand for its premium brands, but also due to the addition of new brands to its portfolio.

Global sales for Jack Daniel's rose in the mid-single digits, led by double-digit growth abroad, the company said. In the U.S., the flagship brand's growth was up by a low single-digit rate. In a conference call with analysts, CEO Paul Varga attributed low to modest sales hikes in the U.S. to a slumping housing market, the subprime mortgage fiasco and higher fuel prices.

Sales for Southern Comfort and Finlandia followed the same pattern.

Sales for the company's super-premium developing brands, including Woodford Reserve bourbon and Chambord, increased at a double-digit rate in the quarter.

The company also said its advertising expenses rose 16% over a year ago to promote its premium brands and its newest brands, Casa Herradura, Charbourd and El Jimador.



Brown-Forman said it expects to grow 7 to 13% during its fiscal year compared to last fiscal year.

BF acquired Herradura and El Jimador in January and is looking to the heavy selling season for tequila, which begins next month. "We're still getting our hands around the positions of both" brands, said Varga.

He blamed low single-digit sales of Jack Daniel's and a modest decline in sales of Southern Comfort on a slowdown in the overall distilled spirits market, which he said was down as much as a point and a half versus a year ago. And, he said, consumers looking for value over brand were trading down, but the socioeconomic group of consumers who can afford premium products were "pinched less by gas prices or a raise in interest rates" and could still afford to drink well.

"During times we're looking at right now, people might trade down into beer," he said, in response to an analyst's question. "If they're out of pocket, it makes sense. But you can't just take it as a directional change that's going to continue."

The company's success overseas was a combination of "staged development, strong brands and having our route-to-market strengthened there [through] our partnership and cost sharing with Bacardi," said Varga.

CFO Phoebe Wood said Finlandia enjoyed "robust global growth due to improved marketing and better brand executions."

Finlandia has been on a roll--running at a 20% rate, Wood said, with Poland the driver. "It's more widespread than just Poland. We've seen growth in South America, we're up and down throughout Eastern Europe, in Czech we're doing quite well. We're doing well in Russia, Israel. Even in Germany and the U.K., we're beginning to do quite well."

Varga noted that the brand's success is a switch for the company--which, historically, took its successful brands out into the world, while Finlandia is doing better out in the world than it is at home.

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