Land of Fire and Honey...Jack Daniel’s fuels Brown-Forman
The company attributes its "industry leading" results in Q3 to the performance of its premium American whisky brands and their accelerating growth in the US; Jack Daniel’s trademark sales rose 8% on an underlying basis, and Brown-Forman said its Black Label brand would remain the main future priority.
"The highest priority for our time and capabilities...will remain the responsible globalization and development of the Jack Daniel's Black Label brand as we continue to build its mixability and premiumness," CEO Paul Varga said yesterday. "Jack Daniel's Black Label is the foundation of the Jack Daniel's trademark overall as well as Brown-Forman's most meaningful growth opportunity for the foreseeable future."
Nonetheless, Brown-Forman has high hopes for cinnamon-flavored whiskey Jack Daniel’s Tennessee Fire in the wake of success for sister brand Tennessee Honey. Launched in Oregon, Pennsylvania and Tennessee in April 2014, Fire was extended to five more states in October.
Tennessee Fire test sales fail to halt Honey growth
In yesterday’s earnings call, CFO Jane Morreau said the company has recently started shipping the first cases to the remaining 42 states.
“Our initial read through from our eight test states has been very encouraging, with Fire continuing to index quite favorably to Honey's introduction four years ago,” she said.“We believe the limited rollout has helped fuel consumer interest in the brand.
ANALYST INSIGHT: "We remain optimistic about the potential for Fire given the growing popularity of the flavored whiskey category and the amount of due diligence and testing that management has conducted on the product prior to its release. Flavor variations on whiskey are in demand as evidenced by the growth of Brown-Forman's Tennessee Honey as well the popularity of cinnamon whiskey being offered by competitors. The launch of Fire provides the opportunity for premiumization to the cinnamon category by using the Jack Daniel's brand."
"Testing has also been very positive as Fire is indexing 30-40% better than Honey at the same state in that flavor's original launch progression. Also encouraging is that testing indicated that there should not be much cannibalization to either Honey or core Jack Daniel's whiskey." (Vivien Azer, alcoholic beverage analyst, Cowen & Company)
Slow rollout builds pent-up demand
“Equally important, we believe that Fire is not only complementing Jack Daniel's Tennessee Whiskey, but is showing little sign of slowing the rate of growth for Tennessee Honey in the initial test market.” (Jack Daniel’s Tennessee Honey grew underlying net sales by 32% over the year to date for fiscal 2015, driven by continued growth and expansion into new markets)
Varga added the slow rollout had created ‘pent up’ demand. “I'd say the national roll-out is being received with as much or even more enthusiasm as the original test markets were,” he said.
“Jack Daniel's Tennessee Fire Twitter followers have already eclipsed the Jack Daniel's Tennessee Honey followers. And so while it's too early to know how the actual consumer acceptance in terms of real purchases in the marketplace will unfold, what we've seen so far - both at trade and consumer - is really encouraging.”