Soft consumer spending on bev-alc and tariff uncertainty weighed on whiskey giant Brown-Forman’s fourth quarter fiscal year 2025 earnings and outlook for next year, triggering shares to plunge 15% Thursday morning.
“We anticipate the operating environment for fiscal 2026 will be challenging, with low visibility due to macroeconomic and geopolitical volatility as we face headwinds from consumer uncertainty, the potential impact from currently unknown tariffs,” read a release.
The largest exporter of U.S. spirits has so far narrowly avoided retaliatory European Union tariffs that were set to be imposed on bourbon, but now faces 50% tariffs on steel and aluminum imports, impacting its ready-to-drink (RTD) products.
Fourth quarter reported net sales decreased 7% to $894 million compared to the same prior-year period. For the full year, the company’s reported net sales decreased 5% to $4 billion.
For fiscal year 2026, the company expects declines in the single-digit range in both organic net sales and organic operating income.
Net sales for Brown-Forman’s whiskey products were flat for FY 2025, while sales for the company’s RTD and tequila portfolios dropped 6% and 14%, respectively. Overall, net sales declined across all geographic aggregations, with U.S. sales decreasing 7%.
Despite U.S. consumers still spending on other goods and activities, CEO Lawson Whiting argued “when it trickles down and they go to the grocery store, I think in some cases, spirits have fallen out of the basket a little bit.”
RTD Sales Decline, But Small Formats An “Opportunity”
Within the RTD portfolio, Jack Daniel’s RTD brands decreased 8%, largely driven by a production transition to Pabst Brewing Company for the Jack Daniel’s Country Cocktails products in FY24. Net sales of New Mix declined 1% as double-digit volume growth was more than offset by the negative effect of foreign exchange.
Still, Whiting cited smaller formats as a continued opportunity, highlighting Nielsen data that 80% of the dollar growth in spirits over the last 12 months has been through 375ml and the 50ml formats.
“It goes further to talk about the cyclical challenges of a consumer who’s pinched and just goes to the store with a $10 bill instead of $20, and then they get the smaller size,” said Lawson. “So I think that is a sign and call it an opportunity too, that we need to get better at getting our small sizes out there. And everyone, particularly the U.S., is very aware of that and they’re going for it.”
In FY26, the group will extend New Mix beyond Mexico and launch into the U.S., beginning with targeted geographic areas.
Brown-Forman announced last week its first significant change to its U.S. route-to-consumer landscape in more than 60 years, and is among other spirits suppliers who are possibly aiming to optimize their positions with beer and total beverage distributors who are equipped with appropriate capacities for RTDs.
Leanne Cunningham, executive vice president and chief financial officer, told investors the new distribution strategy was about “making sure that the brands that we have in a competitive market are with partners that have proven track record, strong capabilities and a shared commitment to make sure they’re going to continue to grow our brands.”