- Brown-Forman, one of the largest American-owned spirits and wine companies, raised its full-year earnings-per-share projection to between $1.90 and $1.98 following a strong second quarter. The maker of Jack Daniel's Tennessee Whiskey reported net income of $239 million during the quarter compared with $197 million a year ago. Sales jumped 11% to $1.17 billion from $1.06 billion.
- Across its product lines, underlying net sales for the Louisiana, Kentucky-based spirit maker grew 6% in the U.S. during the first half of its fiscal year fueled by growth of its Jack Daniel’s brands. U.S. sales of its Woodford Reserve, Old Forester bourbon and its tequila brands also posted strong growth.
- With double-digit sales increases in Mexico and Poland due to demand for Jack Daniel’s products, the company reported a 15% increase in underlying net sales in its emerging markets.
The thirst for vintage and mixed drinks among millennials in the U.S. and abroad in recent years has led to steady growth in the spirit industry. Brown-Forman’s most recent earning’s report shows just how much the market is growing, with no signs of sales running dry.
"A nice part of what's happening with us is the bounce back in emerging markets," Paul Varga, Brown-Forman's CEO told analysts, according to a Seeking Alpha transcript. "We don't take for granted that even in the U.S. market that the business is actually growing and has been doing this for many years — consecutive years at this sort of 3%, 4%, 5% range depending upon what the quarter or year is."
The upward trend in consumption of whiskey, bourbon, tequila and gin comes as beer sales have stalled. U.S. beer volume sales were flat in 2016, according to the Brewers Association. At the same time, a growing number of drinkers are turning to spirits and mixed drinks. Sales of hard alcohol — such as gin, tequila and whiskey — crept up 0.04% in 2016. Mixed drinks, like pre-made cocktails, surged 1.6%. IRI data indicates the 85-plus-proof bourbon sector recorded 12% growth in the 13 weeks ending Oct. 1, reports Beverage Industry.
It's no wonder that Constellation Brands, whose products include Svedka Vodka and Corona beer, tried to acquire Brown-Forman in May. Brown-Forman rebuffed the offer. Even privately owned Pabst Brewing — the maker of Pabst Blue Ribbon, Schlitz and Old Milwaukee, as well as Not Your Father’s Root Beer — is getting into the spirits business after introducing a whiskey brand called Not Your Father’s Bourbon.
Even though manufacturing spirits requires more experience and a longer product development time than beer — it takes years, rather than months for products to be ready — Brown-Forman's second quarter sales and its 2018 outlook show the continued popularity of spirits and the prospect of sustained growth make the time investment well worth it.
Varga said Brown-Forman is poised for a strong 2018 fiscal year as a result of ongoing success in its Jack Daniel’s brand and its super premium Irish and Scotch brands. The company raised its guidance to reflect this strong outlook.
"We would need some cooperation from the environment and that has occurred in our view as we've seen an improved backdrop in emerging markets and a continuation of the nice momentum in the categories and price segments where we are predominantly focused," Varga said. "In combination, we believe that these are the contributing factors to the nice acceleration we’ve reported this morning and which has led us to increase our guidance for the full year."
Millennials’ penchant for brand-hopping also presents a profitable opportunity for smaller distillers to gain traction in the market with products that feature original flavor profiles and premium ingredients. Overall, the outlook for the spirits market appears strong, but as the beer industry, especially the craft space where sales have slowed significantly shows, there is no time for producers in this space to ease up.