First Read: European Spirits "Spirits industry read-across from Brown-Fo..."

Research evidence excerpt

First Read: European Spirits "Spirits industry read-across from Brown-Fo..."

US growth: 11 new distributors across 25 markets. Distributors bring capabilities, scale

and operational excellence to support portfolio growth. Shipments should be ahead of

depletions for the FY27E. Innovation is the main source of growth in bottled spirits as

highlighted by JDTW Blackberry. This product was not the only innovation.

US depletions: Macro environment remains challenging. Believe inventory levels

should come down for next year but some momentum should come from innovation

like JDTW Blackberry and stabilization of barrel sale.

US pricing: Repositioning down brands is a different story for Brown-Forman vs

competitors as group has historically repositioned up on the contrary. Big companies

stay pretty rational in the US market (same in Europe). On whisky category, price/mix is

down around -1.5% which is negative but nothing to do with price repositioning. In

reality, spirits have not taken a lot of price and beer is now more expensive than spirits.

It's more the intermediaries that have taken more prices to expand margins and absorb

their fixed cost based. Pricing is not the main challenge.

Pernod Ricard M&A discussions: Group mentioned M&A discussions with Pernod

were part of group regular review of strategic opportunities. Both parties have not

managed to reach a mutually agreeable terms. Thus Brown-Forman is back to its

strategic priorities. Group made no further comments.

Price/mix: Impacted by rise in RTDs and decrease in super-premium sales. Should

continue to weigh on gross margin.

Tequila: Portfolio decreased -6% in organic terms over the FY26 with Herradura -10%

led by lower volumes. The category remains competitive. El Jimador also saw declines of

-2% including in the US.