US drinks firm Brown-Forman saw its first quarter net sales fall 2% in fiscal 2021 due to the impact of Covid-19 on its emerging markets and travel retail.
On an underlying basis, Brown-Forman’s net sales grew 3% to US$753 million in the three months ending 31 July 2020. Operating income rose 15% to US$387m.
Lawson Whiting, the group’s president and CEO, said he was “very pleased” with the firm’s performance.
He said: “Despite being faced with significant ongoing challenges, our business performed well during the quarter though much uncertainty remains in the current environment. We believe we are well positioned to navigate the headwinds we face today and emerge from the Covid-19 environment in a stronger position.”
The group’s largest market, the US, increased net sales by 9%. Developed international markets grew by 12% while emerging markets declined by 3%.
Brown-Forman said sales growth in the US and developed international markets had partially offset declines in travel retail (down 59%) and emerging markets.
The company registered ‘broad-based’ declines in emerging markets, driven by Russia, South East Asia, Sub-Saharan Africa and India. Within emerging markets, the group saw its sales grow in Mexico (up 29%) and Poland (up 6%).
The Jack Daniel’s family of brands grew net sales by 3%, led by the ready-to-drink portfolio (up 37%), the ongoing launch of the Apple flavour, Jack Daniel’s Tennessee Honey (up 16%), and Gentlemen Jack (up 14%). The core Jack Daniel’s whiskey declined by 10% due to an ‘unfavourable channel mix shift’ in the US and developed international markets, the group said.
Premium Bourbons performed well, growing by 18%. The growth was led by Woodford Reserve, which increased by 18%, and a ‘sustained’ double-digit boost for Old Forester.
The Tequila portfolio rose by 16%, bolstered by ‘strong volume-driven’ growth from New Mix in Mexico and a double-digit increase for El Jimador. Herradura, meanwhile, declined by 16% as double-digit growth in the US more than offset a decline in Mexico. Finlandia vodka fell 24%.
Non-branded and bulk net sales dropped 32% mainly due to lower demand and pricing for used barrels, Brown-Forman noted.
The company added that its investment in advertising dropped 34%, with investments expected to accelerate over the fiscal year.
Brown-Forman said it is unable to provide guidance for fiscal 2021 due to “substantial uncertainty” as a result of the “rapidly evolving environment with the Covid-19 pandemic and its effect on the global economy”.
Jane Morreau, executive vice president and chief financial officer, said: “We believe that we continue to be in a strong financial position and that our capacity to generate solid operating cash flows remain sound, allowing us to navigate this pandemic as circumstances evolve.”
Whiting added that the group is confident about its growth opportunities and the resilience of the business in the long term.
During the period, Brown-Forman agreed to sell its Early Times, Canadian Mist and Collingwood whiskies to Sazerac for an undisclosed sum. The deal was completed last month.
The firm also restructured its business with the creation of two new subsidiaries for Europe and its emerging markets.