Brown-Forman (BFB) TD Cowen's 2nd Annual Sip, Snack & Scrub Summit 2024 summary

Industry outlook and recent performance

• U.S. spirits market saw strong growth post-pandemic but dropped from 5-6% to near 0% by late 2023, surprising the industry.

• Inflation and consumer financial pressure are seen as primary causes for the slowdown, with GLP-1s, cannabis, and Gen Z as potential long-term headwinds.

• Excess inventory in consumer cabinets from 2021-2023 is delaying normalization of demand.

• Distributor and retail inventory levels have normalized after significant destocking.

• Signs of improvement are emerging as inflation and gas prices ease.

Strategic growth pillars and portfolio evolution

• Growth strategy centers on portfolio optimization and international expansion.

• Portfolio has shifted from declining brands to a focus on high-growth acquisitions and innovations, including single malt Scotch, Fords Gin, Gin Mare, and Diplomático.

• International sales now surpass U.S. sales, with strong growth in markets like Brazil, Mexico, South America, and Japan.

• Brazil is a top ten market, with a focused city-by-city expansion and strong performance of Jack Daniel's flavors.

• On-premise channels are key for brand building and influencer engagement in new markets.

Brand performance and marketing strategies

• Jack Daniel's remains about 65% of volume, with mid-single-digit growth over the long term despite recent declines.

• Premiumization is mainly a U.S. trend; international growth is outpacing domestic.

• Marketing focuses on both recruiting new consumers and retaining lapsed users, leveraging music and pop culture partnerships.

• Super premium line extensions and flavors are driving growth and relevance.