Brown-Forman net sales increased 3% to $1 billion in Q1 FY 2024, but took a hit in the U.S. due to slower whiskey sales, supply chain challenges, and rebuilding inventory.
Net sales in the U.S. decreased by 8% in the quarter ending July 31, driven by lower volumes. The company faulted a dip in distributor inventories which was partially due to cycling against a significant inventory rebuild during the same period last year after recovering from supply chain disruptions. Other major spirits companies have also reported slowdowns in the U.S. based on post-pandemic inventory fluctuation and sales normalization.
Net sales for whiskey fell by 1%, led by Woodford Reserve and Gentleman Jack, while Jack Daniel’s Tennessee Whiskey sales were flat. The decrease in distributor inventories was partially offset by the growth of Jack Daniel’s Tennessee Apple (+49%) and the brand’s super-premium expressions.
The company’s recent higher end acquisitions, Gin Mare and Diplomático, collectively gave the company a 2% increase to its net sales. Tequila was another bright spot: El Jimador rose 27% in sales growth and Herradura 1%, although the latter still suffered from lower volumes in the U.S. El Jimador’s RTD also delivered strong growth with the New Mix RTD growing sales 52%.
Global volume has grown to 1.8 million cases across 11 markets for Brown-Forman’s Jack Daniel’s & Coca-Cola RTD, but net sales were flat for Jack Daniel’s RTDs as volumes decreased for its former cola and whiskey canned cocktail. Lawson Whiting, Brown-Forman president and CEO, blamed low numbers on the switch-out in markets where Coca-Cola is “taking the lead” with the new cola and whiskey cocktail, indicating that those sales will now be recorded on “Coca-Cola’s books.” The RTD is “getting massive distribution flow” according to Whiting, but said it was too early to supply investors with repeat purchase numbers yet. The company plans to expand the RTD into 30 total markets by the end of 2024.
Significant brand investment supporting the existing portfolio, plus the the launch of Jack Daniel’s & Coca-Cola RTD, and the recent acquisitions of Gin Mare and Diplomático increased reported advertising expense 19%. Overall, supply, marketing, and overall costs outpaced revenue growth and took a toll on profits.
The company still expects net sales growth for fiscal 2024 to be in the 5% to 7% range.