Jack Daniel's maker Brown-Forman cut organic net sales forecast for fiscal 2024 on Wednesday, a sign that higher prices are weighing on the demand for its whiskey and spirits, sending its shares down nearly 5% in premarket trading.
Higher input costs of raw materials such as agave — a key input for tequila — wood and glass have forced most alcoholic beverage makers to raise product prices in the previous years to shield their margin.
Cheaper Alternatives
Increased prices, however, prompted cost-conscious consumers to look for cheaper alternatives in the face of sticky inflation, hurting demand for Brown-Forman's spirits and premium whiskey brands.
The company said it saw lower volumes for its whiskey business, which includes Jack Daniel's Tennessee Whiskey and Jack Daniel's Tennessee Honey, so far in the fiscal year 2024.
Forecasts
Brown-Forman forecasts annual organic net sales to be flat, compared with its prior range of 3% to 5% growth.
The company posted net sales of $1.07 billion (€978 million) for the quarter ended January 31, compared with analysts' average estimate of $1.12 billion (€1.2 billion), according to LSEG data.
Investors
Last month, it was reported that investors are warming to beer stocks as a relatively cheap way to benefit from growth in alcohol brands, particularly in emerging markets, as easing cost pressures help brewers close the gap on the spirits giants that have outshone them for years.
While spirits companies enjoyed record growth during a post-pandemic boom in expensive liquors, brewers like Anheuser-Busch InBev and Heineken have struggled with huge spikes in costs of everything from energy to barely.
Growth Ambitions
This slashed margins and hurt sales as they hiked prices to cover their bills, and accelerated a shift from wine and beer to spirits in Western markets.
But now brewers are set for a recovery in margins as inflation eases, and are raising growth ambitions.
