I'll drink to that! Jack Daniel's maker Brown-Forman says it wants to take advantage of the growing interest in the "browns" of the distilled spirit world and will be expanding the whiskey's capabilities by investing $103 million over the next two into new facilities.
Both Brown-Forman and rival Beam have seen their sales surge in recent years as tipplers imbibe ever greater amounts of sour mash distillates. B-F recently said American whiskey volumes grew 7% last year and it anticipated another 8% growth this year, similar to the heady growth wine and vodka have achieved, and putting it near the top shelf of alcoholic beverage sales. Its Woodford Reserve family of super-premium bourbons jumped 26% in fiscal 2013 while Beam also enjoyed a 44% spike in first-quarter sales of Maker's Mark bourbon and another 18% jump in the second. Its Jim Beam whiskey brand was up a more modest 4% in the quarter.
Brown-Forman's expansion plans are targeted at the Jack Daniel's whiskey facilities in Lynchburg, Tenn., that will allow it to increase production capacity by 15% to 20% using the same source spring that's made the brown liquor famous. It includes the addition of stills, barrel warehouses, and related infrastructure.
As Jack Daniel's has experienced growth in sales volumes for more than two straight decades, it's become the distiller's most important brand in the process. And though the U.S. market remains its largest, international sales account for more than half of the total. According to analysts at Impact Databank, Jack Daniel's is the fifth-largest spirits brand and the world's largest American whiskey brand.
Poland's thirst for Tennessee Whiskey, for example, helped drive growth in Eastern Europe for Brown-Forman, while Russia and Turkey both enjoyed double-digit percentage increases in sales. But changes in regulations there as well as in China -- which currently is a negligible market for the distiller -- could impact results going forward. Yet with new product introductions such as Tennessee Honey and ready-to-drink beverages already gaining traction with consumers here and abroad, it can readily justify the need to expand its capabilities.
Although it may appear that there's a certain faddishness to various aspects of the growth being witnessed -- as Diageo has discovered with vodka, the addition of new flavors has helped boost sales -- because it's also drawn more women to start drinking whiskey and bourbon, it may have more staying power than you might otherwise think. And as sales continue to grow, Brown-Forman will have its "browns" to thank for keeping it in the black.
The article Brown-Forman Floats on a Whiskey River originally appeared on Fool.com.Fool contributor Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends Beam, Boston Beer, and Diageo. The Motley Fool owns shares of Boston Beer. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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