- Brown-Forman reported a 3.8% drop in profit to $200 million and 3.4% decline in revenue to $1.1 billion for the fiscal second quarter. This was due mainly to currency headwinds, as about 60% of Brown-Forman sales are from overseas markets, and increased competition in the U.S.
- Underlying sales growth in the U.S. declined to 4% as compared to 10% growth in the previous quarter. In the U.S., sales for flagship Jack Daniels have come up against contenders like Beam Suntory’s Jim Beam and Diageo’s Crown Royal Regal Apple, which have recently reported strong growth.
- However, "The U.S. results were offset by strong sales of Jack Daniel’s in emerging markets such as Russia, which grew more than 10%, and developed markets such as Germany and Australia, which grew around 5%," The Wall Street Journal reported.
"[Brown-Forman CEO Paul] Varga said 'adverse foreign currency exchange continued to dampen our reported results.' But the company's underlying results in the past six months remain strong, he said, and kept it on track to achieve its full-year growth outlook," according to Associated Press.
Growth of the Jack Daniels brand is crucial for Brown-Forman as whiskey continues to gain popularity in the U.S., the company's largest market. Flavored whiskey has been an important segment for Brown-Forman, but the underlying sales growth for Jack Daniel’s Tennessee Honey fell to 14% in the first six months of the year from 18% in the first quarter. This is likely also due to increased competition in this market, particularly with the proliferation of apple-flavored products.
Brown-Forman did benefit from sales growth of higher-priced brands like Woodford Reserve bourbon and Herradura tequila, which increased 28% and 7%, respectively, in the first six months of the year, while lower-priced brands like Finlandia vodka and Canadian Mist whiskey saw decreases of 2% and 8%, respectively, in that time frame.