Brown-Forman Corporation

This is our first report on Brown-Forman Corporation, one of the biggest alcohol manufacturing companies in the world. The company has faced its fair share of volatility, uncertainty with respect to the business environment, business interruptions, and obstacles but maintains strong fundamentals. It delivered a mixed result in the last quarter, with organic net sales increasing by 12% compared to last year, surpassing Wall Street expectations. Volumes rose by 9%. RTDs also contributed to growth, with Jack Daniel’s RTDs and New Mix expanding by double digits in Mexico. Moreover, Jack Daniel’s RTDs were introduced in Brazil and have had a fantastic start. Their developed foreign markets experienced 13% higher organic net sales growth. The U.S. business delivered organic net sales growth of 4%. Higher prices remained throughout the portfolio, led by Jack Daniel’s family of brands, which also helped boost organic net sales. However, these price increases were partially offset by reduced volume sales of Jack Daniel’s Tennessee Whiskey as the brand outperformed its strong prior year comparison. Although increased prices are helping Korbel California Champagne, lesser volume more than outweighs those advantages. Furthermore, they acquired Diplomático Rum brand and related assets from Destillers United Group SL in the quarter. We initiate coverage on the stock of Brown-Forman Corporation with a ‘Hold’ rating.