UPDATE: Aug. 3, 2020: Brown-Forman announced the sale closed July 31. Details remained undisclosed.
- Brown-Forman Corporation is selling its Early Times, Canadian Mist and Collingwood brands to the Sazerac Company. Terms of the deal were not disclosed. The sale is expected to close later this summer.
- The Kentucky-based spirits manufacturer said the sale reflects the evolution of the company’s portfolio to prioritize premium brands that ensure a long-term growth strategy. The company’s portfolio includes Jack Daniel’s, Herradura tequila and Old Forester.
- Brown-Forman previously sold its Southern Comfort and Tuaca brands to Sazerac in 2016, according to Beverage Daily.
Premium and craft spirits have grown in popularity in recent years. Mintel data from 2017, cited by Beverage Industry, noted spirits are expected to increase by 11% through 2022 to $68 billion. A large portion of this growth is attributable to the thriving market for American whiskey and bourbon. However, it is namely high-end whiskey brands that are growing.
In 2019, the Distilled Spirits Council reported high-end premium and super-premium spirits sales had increased 7.6% and 7.9%, respectively. Other spirits brands, although growing, lagged behind with overall sales up 5.3% in 2019. Brown-Forman is seeing these trends play out in its own portfolio and is restructuring to focus on high-growth categories. In the company’s latest earnings report last week, net sales of premium bourbons grew 21%, led by Woodford Reserve and Old Forester. Its other whiskeys, which include brands the company agreed to sell, grew by 9%.
While this strategy of targeting premium spirits is likely to drum-up growth for the company, it also will limit the audience that Brown-Forman can reach. It's products may not have as big of an appeal among certain consumers or demographics.
Brown-Forman, however, is working to expand its audience through innovative offerings. Jack Daniel’s, which has the benefit of name recognition, has been in need of some revitalization. In Brown-Forman’s June earnings report, the company’s original Jack Daniel’s Tennessee Whiskey brand declined 4%. But recent innovations helped offset those declines. The Jack Daniel's Distillery recently launched a line of Jack Daniel’s Canned Cocktails in time for the start of summer.
Although sales from this new line were not recorded in the earning release, other ready-to-drink beverages from the brand rose 7%, an indication this format is popular with consumers. Similarly, the brand launched its first new flavor in years last October, The Tennessee Apple, which saw elevated sales through the quarter. The money Brown-Forman receives from this sale to Sazerac could be invested in the other premium brands in its portfolio that it is turning to for growth.
Even Brown-Forman’s premium bourbons are becoming more specialized. Early last year, the company introduced a new rye formulation of its Old Forester brand, the distillery's first grain recipe in almost 150 years. The formulation update was based on consumer, production and sales data.
This data-driven approach also likely helped the company decide to jettison some of its less-premium brands. Sazerac — one of the U.S.'s oldest family-owned distillers — has shown an interest in lower-end brands. Not only did it previously take on some of Brown-Forman’s cast-offs, but in 2018 the company assumed responsibility for 19 of Diageo’s brands including Seagram's whiskey, Romana Sambuca and Booth's gin.
Sazerac is not the only alcohol company interested in bucking the premium trend. E. & J. Gallo Winery is spending $1 billion to purchase wine and spirits brands from Constellation Brands, better know for its Modelo and Corona beers.
Although many companies are letting go of lower-tier offerings, others are finding success peddling these affordable options. Both Sazerac and E.& J. Gallo are privately held, but the companies’ dedication to these less-than-premium liquors indicates the strategy is profitable. As big alcohol companies continue to prune their portfolios, at least for now, it appears they have willing buyers for the brands they are looking to unload.