Brown-Forman Corporation (NYSE:BF-B) is a liquor company that makes Jack Daniel’s whiskey and Southern Comfort, along with 33 other brands of wine and spirits. The Jack Daniel's brand is especially important to the firm as it represents about one-third of total sales. The company earned $3.2 billion in revenue and $449 million in net income in 2010.
Brown-Forman has grown despite a general decline in alcohol consumption in the United States, its primary market. This is because of recent consumer trends away from beer and towards premium spirits, which represent over 70% of the firm's portfolio. As a distiller, the firm's margins have been affected by the sharp rises in commodity prices, though not as much as those of brewers.
The firm faces intense and ever-increasing competition in the largely stagnant alcohol industry, where it competes with large conglomerates such as Diageo (DEO) and Constellation Brands (STZ) as well as brewers such as Anheuser-Busch Companies (BUD) and Molson Coors Brewing Company (TAP). The primary avenues for growth for producers of alcohol are developing markets. Over the past 10 years, the company has grown its international sales from 22% of net sales to 53% of net sales in 2010.
Brown-Forman manufactures and distributes 35 brands of alcoholic beverages worldwide, though the United States accounts for 53% of sales. The firm’s best-selling products include Jack Daniel’s Tennessee Whiskey (the most popular American whiskey brand in the world), Southern Comfort (the second most popular liqueur in the United States) and Canadian Mist (the third-largest selling Canadian whiskey worldwide.) Accounting for 30% of sales by volume, Jack Daniel’s in particular is central to the firm’s success.
The global alcoholic beverages industry is mature, and has posted low growth rates (2-3% annually) over the past decade. Due to this, industry participants compete primarily for existing market share through acquisitions, though the development of innovative products to differentiate themselves from the competition (mixed drinks, creative packaging, etc) is also a focus for many. Brown-Forman, which holds 5% of the US market, competes primarily with other producers of wine and spirits, though makers of substitute products (most significantly beer) are also indirect competition.