Tags: Brown-Forman | spirits | abroad | BF.B

Brown-Forman: Strong Spirits Abroad

By    |   Tuesday, 25 Oct 2011 03:02 PM

Brown-Forman (BF.B) represents one of the world’s strong liquor companies, led by its flagship Jack Daniel’s whiskey brand. The company also produces Southern Comfort whiskey, Finlandia vodkas, and Korbel champagne. The cachet of Brown-Forman’s brands of spirits has translated well abroad, too, with foreign sales accounting for 55 percent of its revenue.

The 10 biggest liquor companies account for less than 15 percent of the global market and only 3 percent in Asia, according to Morningstar data. That provides a lot more room for expansion in markets abroad by Brown-Forman and its competitors.

Those numbers also suggest there’s an opportunity for mergers among spirits companies. Brown-Forman has traditionally relied on organic growth but small acquisitions are highly possible in coming years.

One drag on the company in the quarters ahead will be the increased money it must spend on advertising to boost sales. Ad spending as a percentage of sales jumped 19 percent in the quarter ended July 31 from a year earlier.

The company’s profit rose 6 percent to $118.1 million in that quarter from $111.4 million a year ago. Revenue climbed 13 percent to $840.3 million.

Brown-Forman has been a consistent performer, as evidenced by the fact that it has raised its dividend for 26 years in a row. The stock recently sported a divided yield of 1.8 percent.

Pain, then gain

Standard & Poor’s analyst Esther Kwon has a four-star buy rating on Brown-Forman shares. “Long term, we look for continued strength in the global market, and we think spirits will continue to make successful inroads in the 21- to 27-year-old demographic,” she writes.

“BF should continue to capitalize on what we see as positive industry trends with its strong portfolio of spirits and international reach, particularly with its Jack Daniel's brand.”

Near term, though, the company faces stiff domestic competition, as rivals introduce new products and variations of old ones, Kwon says. But Brown-Forman’s own new products will help offset that impact.

The company next reports around Dec. 8.

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Brown-Forman (BF.B) represents one of the world s strong liquor companies, led by its flagship Jack Daniel s whiskey brand. The company also produces Southern Comfort whiskey, Finlandia vodkas, and Korbel champagne. The cachet of Brown-Forman s brands of spirits has...
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2011-02-25
Tuesday, 25 Oct 2011 03:02 PM
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