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Brown Forman Q3 rise in profits driven by Jack Daniel's and premium whiskey growth

Published:  05 March, 2015

Brown Forman's reported underlying net sales grew by 5% and operating income increased by 7% for the first nine months of fiscal 2015 ending on January 31, 2015, despite the headwinds of a strengthening US dollar and unfavourable foreign exchange.

Paul Varga, Brown-Forman's chief executive officer said: "Brown-Forman's 7% growth in underlying operating income over the first nine months is impressive against last year's strong comparisons.  Our industry-leading results were once again driven by our portfolio skew to premium American whiskey brands and a balanced geographic approach."

Jack Daniel's flavoured whiskeys are doing particularly well. Jack Daniel's Tennessee Honey grew underlying net sales by 32% compared to Jack Daniel's trademark which also grow but a much more conservative 8%.

The ultra-premium whiskey brands grew underlying net sales by double digits, with Woodford Reserve Family seeing growth of 32%.The premium brands within the Brown Forman portfolio include Woodford Reserve and Woodford Reserve Double Oaked, Jack Daniel's Single Barrel, Gentleman Jack, Jack Daniel's Sinatra Select, Jack Daniel's No. 27 Gold, and Collingwood which combined sales surpassed one million cases on a twelve month basis.

Brown-Forman was able to benefit from the increase in premium tequila sales in the US as well as improved distribution for El Jimador and Herradura, which netted double-digit growth.


Finlandia Vodka, the Brown-Forman's vodka brand, saw net sales decline by 9%, which is impart due to the introduction of an excise tax increase in Poland, but also do to the rise of dark spirits in general at the expense of clear spirits.

The strengthening of the US dollar is beginning to have a negative impact on sales in international markets. Foreign exchange negatively impacted reported operating income growth by seven percentage points.

"As a result of the recent strengthening of the US dollar, we are reflecting an additional five cents of negative foreign exchange impact in our updated full year EPS outlook," said Varga.

The company over the last decade has focused on international markets which further exposes the company to impacts from foreign exchange fluctuations.  Since 2004 the company has grown its total percentage of sales abroad from 36% to 59%, according to the Wall Street Journal.

Russia in particular saw a decline in sales, again partially due to the strengthening of the US dollar but also because of the devaluation of ruble during the third quarter.

Despite these challenges Brown-Forman is on track to deliver on its full year outlook. Vargas said: "Accelerating growth in the United States, combined with favourable fourth quarter comparisons, keep us on track to deliver our full year outlook for underlying sales and operating income growth."