Major spirits suppliers will need to rely on price increases to grow revenues if the current downturn proves to be structural rather than cyclical, Brown-Forman’s CEO has warned.
Speaking to investors after the Jack Daniel’s maker forecast its annual sales and profit would decline next year yesterday (5 June), Lawson Whiting admitted the uptake of GLP-1 drugs, cannabis use in the US and Gen Z drinking less were dragging on spirits sales.
“It’s the same big three, the GLP-1s, the cannabis and Gen Z, and we’ve been saying that for one-and-a-half years now,” he said. “We’d be naive if we didn’t say that there isn’t some pressure coming from those.”
Pressed on what action spirits suppliers would need to take if the current downturn in sales persisted, Whiting said: “You take a page out of carbonated beverages and sodas, you take a page out of beer. That means you’re doing more pricing.”
Both beer and soft drinks had “lived on pricing for the last decade”, Whiting pointed out.
“The volume is not there and they still deliver,” he added.
Whiting insisted, however, that sluggish spirits sales were being driven by weak consumer sentiment and that the category was not in structural decline.
“I still would argue that it is the consumer and their wallet just doesn’t have as much money in it,” he said. “They’re spending money on things like vacations and lodging… but then when it trickles down and they go to the grocery store, in some cases, spirits has fallen out of the basket a little bit.”
Moreover, spirits continued to steal share from both beer and wine, while the rate at which consumers were trading down to cheaper brands had slowed, Whiting noted.
“Premiumisation is not at the same rate it was. It’s kind of stagnant a little bit, but I think that is good news for the most part.”
Brown-Forman shares sunk by 18% yesterday, after the Woodford Reserve maker posted fourth-quarter results in which sales slid organically by 3%.
The group said it now expected both organic net sales and organic operating income next year to decline in the low single-digit range.
Other spirits suppliers, including Pernod Ricard, Diageo and Rémy Cointreau, have also downgraded forecasts in recent months, as the category continues to grapple with weak consumer demand and the impact of trade tariffs.
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