Despite reporting single-digit quarterly sales declines during separate earnings calls today, both Brown-Forman and Pernod Ricard remained optimistic about their abilities to return to growth in 2025. The earnings calls echo other spirit companies struggling to regain their footing in the U.S. as the inventory build-up continues to create challenges. Meanwhile, Pernod Ricard announced separately it is further bolstering its non-alc portfolio.
Brown-Forman Bets on Jack & Coke Expansion
Brown-Forman – the maker of Jack Daniel’s, Woodford Reserve and Herradura Tequila – announced today a -1% decline in net sales to $1 billion in Q1 2025 fueled by lower volumes of whiskey as well as the company’s recent Finlandia divestiture.
Here’s the top-level view:
- Operating income decreased -14% to $281 million.
- Gross profit fell -13% (-8% organic) with a gross margin reduction of 330 basis points. The group blamed the decrease on the timing of input cost fluctuations and high inventory levels.
- Advertising expenses decreased -4% due to lower Jack Daniel’s & Coca-Cola RTD spend as compared to Q1 2024 and the impact of Brown-Forman’s recently divested brands. The reductions were partially offset by an increase in Jack Daniel’s Tennessee Whiskey advertising.
The company’s whiskey portfolio was down -5% in net sales. Lower volumes of Jack Daniel’s Tennessee Whiskey outweighed the growth of Old Forester and Woodford Reserve. The lower volumes were partially due to comparisons against the timing of shipments in the prior year period in the U.S., the United Arab Emirates and the U.K.
Still, Brown-Forman remains confident in the potential of the Jack Daniel’s brand. Outside of the U.S., Jack Daniel’s Tennessee Apple and Jack Daniel’s Tennessee Honey are benefiting from the growth of the premium-plus whiskey category and in India, where the company plans to launch the Jack Daniel’s & Coca-Cola RTD in September as part of the products’ geographic expansion.
In the U.S., the first displays of Jack & Coke Cherry are beginning to appear. According to Lawson Whiting, Brown-Forman president and CEO, Jack & Coke Cherry will be a limited time offering aimed at generating interest in the family of Jack Daniel’s RTDs and its full-strength family of brands.
“We continue to believe that Jack Daniel’s has a significant runway for long term growth, despite the recent short term headwinds. We continue to invest [in] the brand and have strategies and plans in place to engage a new generation of legal drinking age customers,” Lawson told investors during today’s earnings call.
The tequila portfolio also posted losses, with net sales falling -23%. Zeroing in on the agave portfolio, el Jimador’s net sales declined -26% driven by lower volumes in the U.S., Colombia and Mexico, while Herradura’s net sales declined -15%, also led by lower volumes in Mexico, which experienced a “challenging economic environment.”
Looking ahead, the group anticipates a return to growth for organic net sales and organic operating income in fiscal 2025, driven by gains in international markets and the benefit of normalizing inventory trends. Organic net sales and organic operating income are both expected to grow in the 2% to 4% range.
“We forecast that fiscal 2025 will be a year of two halves. We expect the second half of the year to be stronger, as we anticipate that we will benefit from having a full year of our outstanding new brands of Diplomatico Rum and Gin Mare,” said Lawson.
Notably, Brown-Forman did not discuss its recent decision to scrap its DEI programs on today’s call.
Pernod Ricard Expects Slow Start To Year, Invests In Non-Alc Agave Spirit
Pernod Ricard today posted a -1% net sales decline to $12.8 million (€11.59 million) in FY 2024, saying it achieved “robust results” in a “normalizing spirits market.” Meanwhile, the group separately announced it is going deeper into non-alc with a minority stake in Lewis Hamilton’s zero-proof agave ‘spirit’ brand, Almave.
Here’s the overview:
- Full-year net sales in the Americas dropped -5%. In the U.S., where sales declined -9%, the company’s acquired brands Jefferson’s and Código are “enjoying growth.”
- Operating margin expanded organically +80 basis points to +28.4% but declined on a reported basis to +26.9%.
Strategic international brands saw an overall -3% decline due to a sharp decline in Martell in China, and Jameson declines in the U.S. and Russia. The portfolio was buoyed by strong growth of Absolut in Europe.
Strategic local brands saw a +5% increase in sales, with strong momentum of Seagram’s whiskeys in India and strong growth of Kahlua in North America and Western Europe. Meanwhile, specialty brands fell -2% despite good growth across Asia, the Middle East, Central Europe and Central and South America thanks to brands like Bumbu, Skrewball, Altos and Lillet.
Looking ahead, in a still elevated interest rate environment, the company expects further inventory adjustments in the U.S. in FY 2025, likely leading to an anticipated decline in Q1. For the full year, Pernod Ricard is aiming for the upper end of 4% to 7% organic net sales growth.
In other news, the French spirits company announced today it has acquired a minority stake in Almave, a non-alc agave spirit from Mexican spirits company Casa Lumbre and Formula One champion and entrepreneur Lewis Hamilton. The investment aligns with the group’s push into non-alc via brands like Ceder’s, and through its venture arm, Convivialité Ventures. Convivialité Ventures’ portfolio includes Ghia, AF Drinks and Boisson. Pernod Ricard has also bought stakes in several Casa Lumbre brands before including Abasolo Ancestral Corn Whisky, Ojo de Tigre Mezcal, and Lenny Kravitz-backed sotol Nocheluna.