Brown-Forman Achieves Profit Growth With Spending Cuts

Curtiss Gibson
Posted: March 12, 2010

Brown-Forman’s net sales through the first nine months of its fiscal 2010 were down 1% to $2.49 billion against the same period in 2009, yet the company was able to grow its operating income 10% to $591.5 million by reducing its ad spend, administrative overhead and workforce (via layoffs and an early retirement program that was implemented in fiscal 2009). The company did experience a 10% jump in net sales to $861.7 million during the third quarter, which ended January 31st.

Much of B-F’s recent growth has come via its ready-to-drink business. The Jack Daniel’s RTD portfolio’s depletions grew 45%, driving the Jack Daniel’s Family of Brands to a 12% rise in nine-liter case depletions. Jack Daniel’s Tennessee Whiskey (which grew 1% in the U.S. during the third quarter, but remained flat over the year-to-date), Gentleman Jack and Jack Daniel’s Single Barrel experienced a combined volume growth of 1% during the nine months. Southern Comfort RTDs grew 36% by volume while Southern Comfort liqueur lost 7% as on-premise sales continue to flag. Finlandia’s volume declined 3% and the vodka suffered a reported net sales loss of 16%, due primarily to struggles in Poland.

El Jimador-based RTD New Mix suffered from the H1N1 flu panic in Mexico City (the brand was down 4% in volume during the three quarters), but it soon recovered. B-F is betting that Mexico’s leading RTD will catch on in the U.S., where it was introduced to California in January with an expected nationwide presence by the end of spring.

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