Brown-Forman is a producer and marketer of consumer beverage alcohol products. It is one of the largest American-owned spirits and wine companies. Brown-Forman has a strong portfolio of brands with high brand equity, which enables the company to differentiate itself in the market and increase customer loyalty. However, increasing competition could lead to a loss of market share for the company.
In our opinion, Brown-Forman has a moat based on its intangible brand assets. The crown jewel of Brown's portfolio is its Jack Daniel's brand, which we estimate controlled approximately 10% of the U.S. whiskey market and 28% of the U.S. bourbon and Tennessee whiskey market by volume in 2014. The firm increased its international exposure to 59% of sales in 2014 from 47% in 2007.
Ongoing macroeconomic weakness in Brown-Forman's foreign markets, including Australia and Europe. We anticipate this scenario will persist through fiscal yearend. Furthermore, foreign exchange translation losses, given the strength of the U.S. dollar, are expected to erode bottom-line profitability. The company's brands are globally recognized and hold a formidable presence in the alcohol space, market conditions are a not favorable at this time.
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Strong brand portfolio provides a competitive advantage
Geographic presence increases access to demand pockets
Unfunded pension benefits obligation
Stringent advertising regulations Booming trade of counterfeit alcohol
Increasing labor costs
Shift in consumer preferences
Positive outlook for global spirits market
Growing wine market
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