Jack Daniel’s maker warns of potential Russia woe

August 27, 2014, 1:12 PM UTC
Jack Daniels & New York Magazine Celebrate Jack Daniels' Sinatra Select
NEW YORK, NY - FEBRUARY 20: A general view of atmosphere at a party hosted by Jack Daniels and New York Magazine celebrating Jack Daniels' Sinatra Select at By Robert James Boutique on February 20, 2014 in New York City. (Photo by Stephen Lovekin/Getty Images for New York Magazine)
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Jack Daniel’s maker Brown-Forman on Wednesday became the latest alcoholic beverage company to warn the geopolitical crisis in Russia could affect sales.

In a statement tucked into outlook commentary, Brown-Forman said “the geopolitical environment remains fragile, particularly in Russia, where iconic American brands are experiencing increased scrutiny, including some of Brown-Forman’s brands.” Still, Brown-Forman’s sales in Russia were resilient in the latest quarter, up in the double-digits and matching the performance of other emerging markets like Turkey and Brazil.

Still, the region is problematic for Western alcoholic beverage companies. Carlsberg and Heineken, two of the largest beer providers in Russia, earlier this month reported a softer quarterly performance in Russia and Ukraine, results that looked especially poor as the World Cup fueled beer sales in Western Europe and other markets.

For American distillers like Brown-Forman, exports are an important driver of growth. Exports of American distilled spirits exceeded $1.5 billion in 2013, with more than $1 billion of that from bourbon and Tennessee whiskey, according to the Distilled Spirits Council of the United States.

But excluding the potential problems in Russia, Brown-Forman reported another strong quarter as it benefits from the bourbon and whiskey boom. Adjusted sales of the flavored Jack Daniel’s Tennessee Honey jumped 29% in the fiscal first quarter, while sales were also sharply higher for the higher end brands like Woodford Reserve. Tequila has also been a hot spirit recently, and Brown-Forman’s El Jimador and Herradura each posted double-digit gains.

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