Brown-Forman forecasts recovery in US spirits market amid inventory challenges 

US – Brown-Forman, an American-based alcoholic beverage giant, anticipates a return to normal growth rates of 4 percent to 5 percent in the US spirits market from the upcoming fiscal year.  

CEO Lawson Whiting addressed analysts after the company reported its third-quarter results, expressing confidence that challenges, particularly related to inventory issues stemming from the Covid-19 pandemic, would subside. 

Whiting acknowledged the impact of weaker consumer spending and substantial distributor inventories, stating, “We think this inventory conversation… will largely be over.”  

Highlighting the unique characteristics of the spirits category, Whiting remarked, “Spirits, I call it kind of in the middle.”

He emphasized that 80 percent of their consumer base only buys two bottles a year, contributing to a slower destocking process compared to other categories. 

The company revised its targets for annual organic net sales and organic operating income, attributing the adjustments to a “challenging operating environment.”  

The Jack Daniels maker now forecasts organic sales growth of 3-5 percent, down from the previous estimate of 5-7 percent. Additionally, organic operating income growth is expected to be 2 percent at best or flat at worst. 

In the nine-month period ending January, Brown-Forman reported a 1 percent increase in net sales to US$3.21 billion.  

However, sales slipped 1 percent in the third quarter to US$1.07 billion. The company noted growth in “emerging” markets and travel retail, partially offset by lower sales in the US and “developed international” territories. 

Whisky net sales faced a 2 percent decline, driven by lower volumes for Jack Daniel’s Tennessee Whiskey and Jack Daniel’s Tennessee Honey.  

On the other hand, the performance of Ready-to-Drink (RTD) beverages, such as New Mix RTD, saw a 17 percent organic growth, emerging as a significant driver in the challenging US spirits market. 

While acknowledging the current difficulties, Whiting remains cautious about the volatility of RTDs, recalling past instances of booms and busts in the category. 

Responding to concerns about potential volume impact, CFO Leanne Cunningham highlighted their strategy to expand geographic reach with the product. 

Despite facing headwinds, Brown-Forman remains optimistic about the future, with Whiting noting, “It’s been 30-plus years since TDS [total distilled spirits] has gone negative in the United States. There are certainly challenges there, but we do believe we are set up for long-term success.” 

Liked this article? Subscribe to Food Business Africa News, our regular email newsletters with the latest news insights from Africa and the World’s food and agro industry. HERE