Bourbon Industry

Brown-Forman reports sales up 5 percent for second quarter

Bottles of Woodford Reserve were on display near a fireplace in the Woodford Reserve Distillery's new tasting room.
Bottles of Woodford Reserve were on display near a fireplace in the Woodford Reserve Distillery's new tasting room. Herald-Leader

Sales of spirits are accelerating into the festive season, according to Brown-Forman.

The Louisville-based parent of Jack Daniel's Tennessee Whiskey and Woodford Reserve reported that sales for the second quarter were up 5 percent to nearly $1.14 billion. For the first half of the financial year, net sales are up 4 percent, the company said.

For the second quarter, Brown-Forman reported profits of $208 million, or $0.98 per share. That was up 1 percent from the same quarter of 2013, but it was below estimates of $1.04 by market analysts.

Year to date, profits are up 2 percent, to $358 million, or $1.68 per share.

The company plans to ride the wave of enthusiasm for cinnamon-flavored whiskey by rolling out its Jack Daniel's Tennessee Fire nationwide in late spring, after a successful trail run in a limited number of states, Brown-Forman announced.

CEO Paul Varga told market analysts that there had been "exceptionally strong test market results" of Tennessee Fire, on par with those from Jack Daniel's Tennessee Honey, which rolled out nationally about four years ago.

"The results are as strong or stronger than Tennessee Honey in its early days, and we've really had no media promotion behind it," Varga said. Tennessee Honey now sells more than 1 million cases annually, and sales are growing at more than 30 percent even though it is priced at $25 for a 750-milliliter bottle, Varga said.

You'll hear a lot more about Tennessee Fire in the next six months: Brown-Forman indicated that it's planning a major launch. Having a major player already in the cinnamon whiskey market — Sazerac's wildly popular Fireball — has cleared a path to potential consumers, Varga said.

Tennessee Fire will be priced well above Fireball, which sells for about $15 a 750 ml bottle, but Varga said Brown-Forman's market research shows that Jack Daniel's Tennessee Fire is "seen as having a great advantage in taste, premiumness, quality and masculinity."

The company lowered its projected annual earnings slightly because of the negative impacts of foreign currency exchange rates, but it expects growth in sales and profits. It expects earnings of $3.15 to $3.25 a share, "assuming no further deterioration in the current global market conditions," particularly in Russia.

"Brown-Forman's top-tier underlying results in the first half were roughly in line with our expectations, despite the backdrop of a tough trading environment for our industry," Varga said. "As anticipated, underlying net sales growth accelerated in our second quarter, and we believe that underlying trends remain favorable as we head into the important holiday selling seasons."

For the first half of the year, sales of the Jack Daniel's trademark family grew by 5 percent, with Jack Daniel's Tennessee Honey growing a whopping 39 percent as sales expanded into new locations, the news release states. But sales also continued to rise in established markets, Brown-Forman said, indicating that the appetite for the sweet liqueur has not topped out. Winter Jack, another flavored variant, also is back for the season.

Sales of Woodford Reserve, the company's premium bourbon brand, weren't far behind in growth, at 34 percent. Old Forester, the company's oldest brand, also saw sales growth, especially in bars, the company said. Tequila sales also grew, with El Jimador up 9 percent and Herradura up 20 percent.

Emerging markets including Turkey, Brazil, Indonesia, Ukraine and sub-Saharan Africa continued to climb, and sales in the U.S. also accelerated strongly, up 6 percent, according to the company.

The company attributed declining sales of the Finlandia vodka family to continued weakness in the Polish market, which has been hurt by a tax increase.

Sales of Southern Comfort slid 4 percent, driven by pressure from flavored whiskies and weakness in bar sales, the company said.