The chances are high that you have indulged in a Jack & Coke or ready to drink bottled or canned cocktail while under quarantine. And you probably aren’t alone, suggests Brown-Forman (owner of Jack Daniels) President and CEO Lawson Whiting.
“I almost call it a phenomena that has happened in the U.S. It’s the amount of home consumption of spirits. What you have is the dynamic where the bars and restaurants close and global travel retail — which is a big segment for us at close to 25% to 30% of the business — goes not all the way to zero, but close to it. So the grocery channel, the liquor store channel and all those locations are absolutely booming now as consumers love to throw the home parties. It has worked out well for us,” Whiting told Yahoo Finance’s The First Trade.
Whiting isn’t kidding about consumers having thrown a few stiff ones back at home since March.
Off-trade spirit sales for the week-ending Aug. 22 surged 26.2%, according to data from Nielsen, continuing their blistering pace from the height of the pandemic. American and Irish whiskey sales rose 27.8% and 27.6%, respectively. Tequila sales spiked 59.1%. Ready to drink cocktail sales gained 101%.
While Brown-Forman wasn’t immune from the closures of bars and reduced travel in its most recent quarter shared this week, results were padded by strong at-home alcohol consumption.
The company’s U.S. and developed international markets segments grew sales by 9% and 12%, respectively. Emerging markets sales fell 3% amid reduced travel to places like Russia. Operating profits rose 56% from the prior year. Whiskey and tequila sales improved 4% and 16%, respectively. Wine sales increased 10%.
Brown-Forman shares are up close to 10% in the wake of this week’s earnings. Shares are up 18% year-to-date versus the S&P 500’s 11% advance. Alcohol rival Constellation Brands has seen its stock rise slightly on the year, while Diageo has plunged 20%.
The next hurdle for Korbel champagne owner Brown-Forman will be the holiday quarter, which makes up close to 30% of its annual sales. Whiting is approaching the holidays with a sense of reality.
“We came out of the first [fiscal] quarter hot with pretty good sales growth. But I am still concerned about the holiday season. Without bars and restaurants, without company Christmas parties, all of that is likely to go away. I think you’ll get the home entertainment and you will likely get a lot of that. I worry a bit about what the holiday season is going to do for the spirits business. I think it’s going to be a tough one,” Whiting says.