Morningstar | While Tariffs Will Weigh on Near-Term Margins, Brown-Forman's Underlying Growth Prospects Strong
Brown-Forman’s focused spirits portfolio has yielded steady growth and impressive profitability, allowing the firm to generate returns on invested capital on par with the largest beverage manufacturers. The firm’s most valuable asset is the Jack Daniel’s brand, which has a leading share of the U.S. bourbon and Tennessee whiskey market, allowing for entrenched relationships with distributors, retailers, and on-premises channels. The multiyear aging requirements for whiskey also create significant barriers to entry, allowing the firm to protect its share from craft distilleries. Moreover, the firm has been able to capitalize on the strength of the Jack Daniel’s brand to enter into the flavored whiskey (Jack Daniel’s Tennessee Honey and Tennessee Fire) and super-premium (Jack Daniel’s Single Barrel Collection) categories, attracting new consumers to the segment. These innovations have helped drive volumes of the Jack Daniel’s brand family, which has averaged around 6% underlying depletion growth over the last five years.Outside the Jack Daniel’s family, we see potential in the firm's other premium whiskey brands, which include bourbon (Woodford Reserve), Irish whiskey (Slane), and single-malt scotch (BenRiach), as well as tequila brands el Jimador and Herradura. Steady demand for American whiskey and tequila should further boost sales; we estimate each of these categories averaged 6%-7% domestic volume growth over the last five years versus a low-single-digit rate for the overall spirits category.We continue to believe that the most sizable opportunities for growth in the Jack Daniel’s franchise lie in international markets (53% of fiscal 2018 revenue), as the firm invests in distribution capabilities in core geographies. Because of Brown-Forman’s premium positioning, which minimizes the need to compete on price when entering a market, international margins are generally comparable to those in the U.S., and we expect improving operating leverage as the firm expands its distribution abroad.Brown-Forman primarily manufactures, bottles, imports, exports, markets, and sells a range of alcoholic beverage brands. Co.'s principal brands include, among other, Jack Daniel's Tennessee Whiskey; Jack Daniel's Tennessee Honey; Jack Daniel's RTDs; Gentleman Jack Rare Tennessee Whiskey; Jack Daniel's Tennessee Fire; Jack Daniel's Single Barrel Collection; Jack Daniel's Winter Jack; Jack Daniel's Sinatra Select; Jack Daniel's No. 27 Gold Tennessee Whiskey; Jack Daniel's Tennessee Rye; Korbel California Champagnes; Korbel California Brandy; Woodford Reserve Kentucky Bourbon; Woodford Reserve Double Oaked; Woodford Reserve Kentucky Rye Whiskey; Finlandia Vodkas; and Slane Irish Whiskey.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.