Louisville, Ky. Brown-Forman Corporation reported third-quarter sales of $1,03bn, a rise of 14% (+22% on an organic basis) compared to the same prior-year period. In the quarter. Reported operating income increased 24% to $347m (+43% on an organic basis) and diluted earnings per share increased 19% to $0.54.
For the first nine months of the fiscal year, the company’s reported net sales increased 11% to $2.94bn (+14% on an organic basis) compared to the same prior-year period. Year-to-date reported operating income decreased 4% to $958m (+19% on an organic basis) and diluted earnings per share declined 12% to $1.43.
Brown-Forman’s president and CEO said: “Brown-Forman’s business remained strong as we delivered double-digit net sales growth year-to-date, even amid significant supply chain constraints, most notably glass supply. ”We believe our accelerated rate of growth keeps us on track to deliver high-quality results for fiscal 2022.”
Brand highlights for year-to-date
The Jack Daniel’s family of brands grew reported net sales 12% (+14% organic) powered by 17% reported net sales growth (+20% organic) from Jack Daniel’s Tennessee Whiskey. Supply chain disruptions adversely impacted the results for Jack Daniel’s Tennessee Whiskey, Jack Daniel’s Tennessee Honey, Jack Daniel’s Tennessee Fire, and Gentleman Jack during the first nine months of the fiscal year.
Speaking at an analyst briefing, Brown-Forman CEO Lawson Whiting said: “We had prioritized Jack Daniel’s Tennessee Whiskey, as we navigated the supply chain challenges. You can see that prioritization in the results as they demonstrate the strong and consumer demand for the brand, particularly in the on-premise, as well as our focus on rebuilding inventories across the supply chain. Given the size of the brand, this growth is particularly impressive, adding almost 1.6m nine-litre cases compared to the same period last year.”
He added: ”We continue to face challenges from supply chain disruptions, largely related to glass supply. These disruptions reduced our finished goods inventories along with the inventories of both the distributor and retailer levels, while we are seeing some signs of improvement that supply chain challenges negatively impacted our net sales and increase our costs in the year to date performance.”
Premium bourbons, led by Woodford Reserve and Old Forester, grew reported net sales 10% (+10% organic).
The tequila portfolio grew reported net sales 19% (+17% organic) driven by double-digit growth from Herradura and el Jimador. Whiting said: “Agave cost are remaining stable but are higher than our expectations as they are not easing as quickly as we thought due to the increased demand for our tequila brands as growth in the US and a faster than expected rebound in Mexico continue.”
Market highlights for year-to-date
Reported net sales in the United States3 grew 5% (+8% organic). Gains were driven by Jack Daniel’s Tennessee Whiskey, which benefited from volume growth and the continued reopening of the on-premise channel, along with strong consumer demand for tequilas and premium bourbons. An estimated net increase in distributor inventories positively impacted reported net sales. This growth was partially offset by lower volumes for Jack Daniel’s Tennessee Honey and Gentleman Jack. Reported net sales were adversely impacted by supply chain disruptions.
Developed international3 markets grew reported net sales 12% (+15% organic) fueled by broad-based growth largely due to the continued reopening of the on-premise channel as well as a rebound of travel and tourism in some markets. Gains were led by Jack Daniel’s Tennessee Whiskey and Jack Daniel’s RTDs.
Emerging markets3 maintained double-digit reported net sales growth of 22% (+27% organic) propelled by volume gains across most markets largely due to a favourable prior-year comparison. Results were powered by Jack Daniel’s Tennessee Whiskey and Jack Daniel’s Tennessee Apple.
Reported net sales in the Travel Retail channel increased 57% (+58% organic) primarily due to a favourable prior-year comparison as the business continues to recover from pandemic-related travel bans and restrictions. Whiting said: “Our travel retail business is still in recovery, as it is dependent on international airline travel and the cruise business, which continue to be below their pre-pandemic levels.”
In response to surging inflation, Brown-Forman has been taking price increases. Whiting said: “We are beginning to see pricing reflected in the US data and while food and beverage, as well as the spirits inflation lags the overall CPI, the numbers still show a healthy pricing environment. Based on Nielsen takeaway data, through the end of our third fiscal quarter, Brown-Forman is outpacing TDS pricing growth and is a pricing leader.”
He added: “The spirits inflation is between one and two points, and we’re going to be there too, maybe even a little better than that. And I would call that really on a global basis. And it’s a goal to be able to do that, consistently over the upcoming years. And, and we’ll see what the consumer reaction is. Gas prices going up is generally not great for the spirits industry. It’s not great for consumer spending in general.”
Commenting on the impact of Russia on the company, he said: “We want to make sure that people don’t overestimate the size of our Russian business. It’s a top 10 market, it was 1% of our business worldwide in Fiscal ’21. Russia has been a growing market for us that’s obviously going to be greatly disrupted.”
