Dive Brief:
- For $543.5 million, Brown-Forman Corp. said it will sell Southern Comfort and Tuaca to Sazerac Co.
- Brown-Forman has held the Southern Comfort brand for more than 35 years, though competition has hindered sales. It owned Tuaca since 2002.
- According to the company, the sales are meant to aid in its growth, as the brand will make $475 million once the deal closes on an expected March 1.
Dive Insight:
Brown-Forman overall posted a 3.8% dip in profit to $200 million and 3.4% decline in revenue to $1.1 billion in its fiscal second quarter.
The Southern Comfort weakness, though, is telling — explaining the sale. The sector declined 11% in sales volumes the six months ending Oct. 31 as flavored whiskey competition hammered the brand. This segment is critical for the company, though underlying sales growth slid 14% for Jack Daniel's Tennessee Honey in the first six months of the year compared to 18% in the first quarter.
Sazerac recently sued Brown-Forman over marketing tactics of its Jack Daniels' Tennessee Fire cinnamon whiskey brand. This didn't move forward, and Sazerac didn’t give reasons for dropping the case.
Attempting to capitalize on trends is one avenue for growth, but when that doesn't succeed, getting rid of weaker sectors can lead to stronger investments in other brands, or in another trend entirely.