COMPANY DESCRIPTION

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. 

 

ECONOMIC MOAT

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.

 

OUTLOOK

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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STRENGTHS

  • Strong brand portfolio provides a competitive advantage

  • Geographic presence increases access to demand pockets 

WEAKNESSES

  • Unfunded pension benefits obligation 

THREATS

  • Intense competition

  • Stringent advertising regulations Booming trade of counterfeit alcohol

  • Increasing labor costs 

OPPORTUNITIES

  • Shift in consumer preferences

  • Positive outlook for global spirits market

  • Growing wine market 

The above report is for information purposes only, and is not a solicitation or offer to buy or sell any securities. Past performance is no guarantee of future performance. Neither diversification nor asset allocation ensures a profit or guarantees against loss. Before investing, investors should consider their risk tolerance, investment objectives, time horizon, available capital, and charges and expenses.  

 

The information presented in this report has been obtained from sources believed to be reliable, but accuracy and completeness cannot be guranteed. All material is subject to change without notice. The views and opinions expressed are those of Focused Stock Research and/or WALT ST Investment Management, Ltd. and in no way reflect the views and opinions of Investment Consultants nor their Broker Dealers.

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