Spirits cut B-F's wine losses

Wines & Vines, April, 2003

Brown-Forman, the Kentucky wine and spirits producer and marketer, has reported a 22% gain in third quarter earnings, despite a "substantial drop" for its wine division. Southern Comfort and Jack Daniel's led the charge.

Earnings per share for the quarter ended Jan. 31, 2003 were $1.02 or 18 cents per share. Adjusted for business improvement costs, earnings for the quarter improved 14 cents per share, or 16%.

In a statement the company said: "Higher underlying profits reflected solid growth for Jack Daniel's and Southern Comfort, increased profitability in the United Kingdom from a new distribution arrangement and benefits from a weaker U.S. dollar. Tempering growth was a substantial drop in earnings for BrownForman's wine business, which continues to suffer from higher costs and a very competitive pricing environment in the United States."

Profits from Fetzer and Bolla wines declined sharply for the nine months ended Jan. 31, due to lower margins in the U.S. While Fetzer reported low single-digit depletion growth during this period, achieving that volume level required a reduction in net prices from the previous fiscal year. Bolla depletions were down slightly, although the combination of a weaker U.S. dollar and significant cost increases for most Italian grape varietals have reduced profit margins dramatically. Korbel reported gross profit and depletion growth, as the brand continues to increase its market share in the U.S.