Market Presence and Sales - Jack Daniel's Tennessee Whiskey is the largest American whiskey brand globally and the fourth-largest premium spirits brand, with consistent volume growth over the past five years[9]. - The United States accounted for 50% of the company's net sales in fiscal 2020, with the remaining 50% from international markets[13]. - Approximately 30% of net sales for fiscal 2018, 2019, and 2020 occurred in the fourth calendar quarter, indicating seasonality in sales[18]. - The company operates in over 170 countries, with significant owned distribution in markets like Australia, Brazil, and the UK, launched in May 2020[16]. - The two largest customers, Republic National Distributing Company and Breakthru Beverage Group, accounted for approximately 18% and 13% of consolidated net sales in 2020, respectively[17]. - Jack Daniel's Tennessee Honey is the second-largest-selling flavored whiskey globally, highlighting the brand's strong market presence[9]. - The company has a diverse portfolio of over 40 brands, including premium offerings like Woodford Reserve and Old Forester, which have received industry recognition[9]. - The U.S. remains the largest market for the company, with growth driven by fast-growing spirits categories and inclusive marketing strategies[39]. - The company plans to expand sales of Jack Daniel's Tennessee Apple internationally as part of its long-term growth strategy[80]. Competition and Market Risks - The company faces competition from major global spirits companies, including Bacardi and Diageo, but maintains a strong competitive position due to brand awareness and product quality[18][19]. - Increased competition from small, local distilleries in the U.S. could negatively affect demand for the company's premium and super-premium whiskey brands, including Jack Daniel's[79]. - The company faces substantial competition in the spirits industry, including new entrants and consolidation among producers, which could hinder marketing and distribution efforts[95]. Financial Performance and Growth Strategy - The company expects continued growth in its premium spirits portfolio, focusing on organic growth and innovation, with a strategic emphasis on acquisitions and partnerships[31]. - Woodford Reserve surpassed one million nine-liter cases during fiscal 2020, indicating strong global growth potential for the brand[36]. - The Jack Daniel's family of brands continues to be the company's most valuable asset, contributing significantly to overall financial performance[35]. - The Jack Daniel's family of brands is the primary driver of revenue and growth, and any significant decline in its volume or selling price could negatively impact financial results[77]. Sustainability and Corporate Responsibility - The company aims to achieve a 15% reduction in absolute greenhouse gas emissions by 2023 from a 2012 baseline, supported by a wind power project expected to offset over 90% of its electricity usage in the U.S.[47]. - The company has achieved zero-waste at 14 of its owned facilities by the end of 2019, with a goal to send zero waste to landfill for all facilities by the end of 2020[47]. - The company integrates its Corporate Responsibility and Annual Reports to provide a comprehensive view of its business results alongside sustainability efforts[30]. - The company made a $2 million donation to the Republic Bank Foundation YMCA in fiscal 2019 to expand health and wellness resources in underserved communities[51]. - The company aims to expand civic engagement in global office locations, allowing employees to decide on charitable-giving resources[52]. - The Brown-Forman Foundation was created in fiscal 2018 to provide a consistent source of revenue for charitable giving independent of annual earnings[52]. Employee and Governance - Approximately 4,800 employees were employed worldwide as of April 30, 2020, with about 2,600 in the United States, and 14% of U.S. employees represented by a union[55]. - The company has a long-term-focused shareholder base, anchored by the Brown family, which provides a strategic advantage in capital allocation and investments for long-term growth[53]. - The Brown family controls a majority of the voting stock, which may lead to actions that do not align with the interests of other shareholders, potentially affecting stock price[119]. - The dual-class share structure allows the Brown family to maintain control, which could make the company less attractive as a takeover target, impacting stock value[120]. Regulatory and Economic Risks - The company is exposed to various risks, including health pandemics, regulatory changes, and fluctuations in foreign currency exchange rates, which could impact financial performance[5]. - The company is subject to extensive regulatory requirements that could increase costs or limit business activities, particularly in advertising and promotional activities[69]. - The company has observed excise tax increases in Australia, Poland, and the Czech Republic in fiscal 2020, which could affect product affordability and sales[76]. - Unfavorable economic conditions, such as those caused by the COVID-19 pandemic, could lead to decreased consumer confidence and spending, negatively impacting demand for products[71]. - The company is exposed to fluctuations in foreign currency exchange rates, which could materially affect financial results as foreign currency revenues exceed expenses[68]. Supply Chain and Production Risks - The company faces risks related to supply chain disruptions, particularly for its major brands distilled at single locations, which could impact product availability[83]. - The company acknowledges the inherent uncertainty in forecasting supply and demand for aged products, which could lead to inventory surplus or shortages[84]. - Higher costs or unavailability of key materials, such as glass and American white oak logs, could adversely affect production capabilities and financial results[87]. - The company is exposed to risks from geopolitical events, tariffs, and climate change that could impact raw material costs and availability[89][90]. Brand Protection and Legal Risks - Counterfeiting and inadequate protection of intellectual property rights pose risks to the company's business prospects, affecting brand equity and financial results[103]. - The company combats product counterfeiting through memberships in organizations like the Alliance Against Counterfeit Spirits (AACS) and React, although effectiveness varies by market[104]. - Product recalls due to contamination or quality issues could materially affect sales and the company's financial results[105]. - Legal disputes and litigation could expose the company to financial and reputational risks, impacting business operations and results[106]. - Increased IT security threats and cyberattacks pose risks to the security and availability of the company's IT systems, potentially harming business operations and financial results[112]. - Compliance with personal data protection laws, such as GDPR, may require costly changes to business practices and could result in fines or litigation, negatively affecting financial performance[113]. - Negative publicity, whether accurate or not, could adversely affect the company's corporate reputation and financial results[114]. Marketing and Brand Strategy - The company emphasizes creative marketing strategies to enhance brand recognition and consumer demand, aiming to be the best brand-builder in the industry[12].
Brown-Forman(BF_A) - 2020 Q4 - Annual Report