RTDs drive growth for Brown-Forman Australia
Brown-Forman Australia has reported 6% growth in underlying net sales for FY2019, led by higher pricing of Jack Daniel’s RTDs.
President & CEO Lawson Whiting noted during an earnings call that Jack Daniel's RTDs have crossed the 9 million cases mark in sales globally. CFO Jane Morreau added that Australia contributed nearly one million of those case sales. However, the weaker Australian dollar affected margins.
“RTDs are increasingly important to the company and we continue to seek ways to play into the gin categories,” Whiting added.
Morreau revealed the company will also focus on upping its media spend in Australia during the year ahead by 30% to capitalise on sales momentum in the market.
Globally for the fourth quarter, the company’s reported net sales increased 1% to $744 million (+5% on an underlying basis) compared to the same prior-year period. In the quarter, reported operating income grew 55% to $228 million (+9% on an underlying basis).
For the full year, the company’s reported net sales increased 2% to $3,324 million (+5% on an underlying basis).
Reported net sales growth was negatively impacted by two percentage points from foreign exchange. The company estimates that net sales growth in the fourth quarter and full year were also negatively impacted by one percentage point due to tariff-related lower net prices to distributors in certain markets. Full-year reported operating income grew 9% to $1,144 million (+5% on an underlying basis).
Whiting said: “Although tariffs and higher input costs will negatively impact our gross margins again this year, we believe we are on track to return to high single digit operating income growth as we move beyond fiscal 2020. Our growth prospects remain bright as we develop our premium spirits portfolio around the world, led by the Jack Daniel’s family of brands and Woodford Reserve.”
Boom driven by ditching "unattractive categories"
The company’s underlying net sales gains were driven by growing global demand for American whiskey.
The Jack Daniel's family of brands is now selling more than 3.4 million cases and, together with tequila, whisky and gin, is the core business for Brown-Forman moving forward.
“We feel like we're positioned well in the categories that we want to be in and relatively less involved in categories like vodka, liqueurs, rum, wine and even beer where we do not have the much exposure,” Whiting said.
“So, it really supports our overall portfolio strategy and all the portfolio reshaping we've done over the past several years, as we've gotten out of some of those unattractive categories. For example, obviously, the divestiture of our wine business a few years ago and our liqueur businesses two or three years ago, and then really increasing our exposure to whiskey both with Irish and Scotches. So, we feel pretty good about the portfolio reshaping we've done and the impact that can have going forward.”
Whiting revealed he was frequently asked about the sustainability of this bourbon boom in general and the supply outlook and has been studying it closely.
“In short, we believe this bourbon renaissance is just getting started and the historical cycles really would support this, this viewpoint,” he noted. “Younger consumers are increasingly focused on brands with provenance and with authenticity and they are searching for quality over quantity.”