Flat Sales Is Good News? Sure Enough

The best news of the past week appeared in two headlines on page B3 of Friday's (6/5) Wall Street Journal. "Brown-Forman Warns of Flat Sales" read one. "Remy Says Business Has Been Stabilized" read the other.

The alcohol beverage business has been through some awful times in the past two or three years, so stablization and flat sales qualify as good news compared to declining sales which would be more bad news.

That's not to say everything's coming up roses. As we've been reporting, there's so much whiskey and wine floating around that major producers are shutting down production so inventories can return to something approaching normal.

To quote Winston Churchill, "This is not the beginning of the end, but it is the end of the beginning." We will have another year or two before the oversupply of the past few years settles out. After that, it's likely there will be a smaller, but more stable industry at every level.

Brown-Forman Sales Rose 2% in Fiscal 4th Quarter; Flat Sales Seen Next Year

Brown-Forman Corp. reports net sales in its fourth quarter and fiscal year ended April 30 increased 2%  to $912 million (+2% on an organic basis) compared to the like year-earlier period. In the quarter, reported operating income decreased 53% to $96 million (flat on an organic basis) and diluted earnings per share decreased 62% to $0.12.

For the full year, the company’s reported net sales decreased 1% to $3.9 billion (flat on an organic basis) compared to the same prior-year period. Reported operating income decreased 10% to $1 billion (-2% on an organic basis) and diluted earnings per share decreased 17% to $1.53.

“We finished the fiscal year ahead of our expectations, driven by strong execution in our innovation portfolio, the early benefits of our U.S. route-to-market transformation, and strategic cost-restructuring initiatives,” said President/CEO Lawson Whiting. “Our ability to grow cash flows from operations and free cash flow by more than $400 million in a declining market speaks to the strength of our business and our commitment to a robust capital allocation strategy," he said. "While we expect continued market volatility and a challenging cost cycle in the year ahead, our performance this year proves we have the right people, brands, and strategy to navigate these challenges effectively.”

Fiscal 2026 Highlights

• The net sales decline was led by the end of the Korbel Champagne Cellars relationship and the absence of the Sonoma-Cutrer prior-year transition services agreement (TSA), partially offset by the launch of Jack Daniel’s Tennessee Blackberry.
• From a geographic perspective, net sales growth in Emerging markets and the Travel Retail channel was partially offset by a decline in the United States. Developed International markets were flat.
• Gross margin expanded 160 basis points driven by the positive effect of acquisitions and divestitures.
• Cash flows from operations grew by $402 million to $1.0 billion and free cash flow ² increased by $462 million to $893 million.
• The company returned $827 million to stockholders by distributing $427 million in regular quarterly dividends and $400 million through its share repurchase program.

Fiscal 2026 Brand Results

• Net sales for Whiskey products increased 3% (+1% organic) driven by the launch of Jack Daniel’s Tennessee Blackberry, the positive effect of foreign exchange, and the growth of Woodford Reserve in the United States, partially offset by declines of Jack Daniel’s Tennessee Whiskey.
• Net sales for the Tequila portfolio decreased 4% (-6% organic). Herradura’s net sales declined 9% (-10% organic) led by lower volumes in the United States. el Jimador’s net sales decreased 2% (-2% organic) driven by declines in the United States and Mexico, partially offset by higher volumes in Colombia.
• Net sales for the Ready-to-Drink (RTD) portfolio increased 11% (+7% organic). Net sales of New Mix increased 41% (+33% organic) fueled by market share gains in Mexico within an accelerating category and the product’s launch in the United States. Jack Daniel’s RTD/RTP portfolio decreased 3% (-5% organic) driven by declines in the United States and the absence of American-made beverage alcohol from retail shelves across most provinces in Canada.
• Rest of Portfolio's net sales declined 31% (+18% organic) driven by the unfavorable impact of acquisitions and divestitures, partially offset by the distribution of new agency brands in Japan and Mexico, as well as strong double-digit growth of Gin Mare and Diplomático.
• Net sales for non-branded and bulk decreased 68% (-68% organic) driven by lower used barrel sales.

Fiscal 2026 Market Results

• Net sales in the United States declined 7% (flat organic) driven by the end of the Korbel relationship and the absence of the Sonoma-Cutrer prior-year TSA, as well as lower volumes of Jack Daniel’s Tennessee Whiskey and unfavorable portfolio mix, partially offset by innovation, led by Jack Daniel’s Tennessee Blackberry and growth of Woodford Reserve. Higher net pricing across the portfolio as a result of changes to our distributor relationship terms and favorable timing of distributor ordering patterns positively impacted net sales.
• In a challenging economic environment, net sales in the Developed International markets were flat (-3% organic). The positive effect of foreign exchange and the benefit from the transition to owned distribution in Italy was offset by the absence of American-made beverage alcohol from retail shelves in most of the Canadian provinces and declines in Germany and the United Kingdom.
• Net sales in Emerging markets increased 14% (+12% organic) driven by growth across the Jack Daniel’s family of brands led by Türkiye, the United Arab Emirates, and Brazil, strong double-digit growth of New Mix in Mexico, an estimated net increase in distributor inventories, and the positive effect of foreign exchange.
• The Travel Retail channel’s net sales increased 6% (+5% organic) largely due to increased passenger traffic leading to higher volumes of Jack Daniel’s Tennessee Whiskey as well as the positive effect of foreign exchange.

Fiscal 2027 Outlook

Brown-Forman said it anticipates the operating environment for fiscal 2027 to remain challenging, as macroeconomic pressures and geopolitical instability continue to negatively impact consumer behavior and beverage alcohol consumption, particularly within developed markets. It said it remains committed to building the business for the long term while focusing intensely on the variables within its control.

"We believe we will benefit in fiscal 2027 from our previously announced restructuring initiative and U.S. distributor changes, and continued new product innovation, such as the expansion of Jack Daniel's Tennessee Blackberry," the company said. "Considering these factors, we expect the following in fiscal 2027:

• Organic net sales to be approximately flat.
• Organic operating income decline in the 3% to 5% range.
• Our effective tax rate to be in the range of approximately 20% to 22%.
• Capital expenditures planned to be in the range of $60 to $70 million.

Remy Cointreau Organic Sales Rise 0.2%, Says Business Stabilized

Rémy Cointreau reported sales were basically flat for fiscal 2026, rising just 0.2% from a year earlier. Sales were down 5% as reported, including a negative 5.2% currency effect that was due primarily to trends in the dollar and the renminbi.

Current operating profit was €165.4 million (or $190.21 million), down 11.5% on an organic basis. This mainly reflects a decline in gross margin linked to incremental customs duties, as well as unfavorable trends in price mix and production costs. This deterioration was partially offset by strict control of overhead costs. Current operating margin was down by 4.4 percentage points to 17.7% as reported, of which 2.6 percentage points were on an organic basis.

Reported net profit plunged 35.1%, the company said.

CEO Franck Marilly said:

"In a persistently complex macroeconomic and geopolitical environment, we delivered a 2025-26 performance in line with our objectives, driven by tangible progress on our key priorities: stabilizing the business, preserving profitability, and improving cash generation.

"In this year of transition, we have won several key battles: our brands are regaining ground in the United States, Rémy Martin is strengthening its leadership and market share in China, and our Travel Retail business is gradually recovering, with the aim of doubling in size within three years.

"At the same time, we have continued to reduce overhead costs while maintaining investment in our brands. In 2026-27, despite limited visibility, our determination remains unwavering. We will continue strict execution of our priorities: accelerating the growth of our non-cognac brands, seizing every opportunity in cognac to rebuild momentum, and strengthening our positions in the United States and China, while identifying new growth drivers and leveraging innovation.

"The creation of a new entity dedicated to Emerging Markets should make it possible to substantially accelerate our development in these regions and supports our ambition to double our sales there within three years," he said. "This strategy will be reinforced by the launch of RC Forward, a plan designed to sustainably strengthen our fundamentals and create value across all our operations. It will generate around €100 million (or $115 million) of value creation by 2028-29 and will be a key enabler of our growth strategy, supporting it sustainably while reducing our exposure to macroeconomic cycles. We will present our medium-term objectives in November 2026."

Cognac

Cognac division sales declined 0.5% on an organic basis in full-year 2025-26, reflecting a 7.8% rise in volumes and an 8.3% decline due to price mix. Performance was driven primarily by strong growth in sales in the Americas, supported by a favorable basis of comparison and sequential improvement in depletions compared to last year.

Early results of the push to revitalize Rémy Martin VSOP contributed, together with a stronger performance in the high-end segment. At the same time, sales in the Asia-Pacific region were hurt by disruption in Travel Retail in the first half. Yet Rémy Martin proved resilient and continued to gain market share. Elsewhere in Asia, strong sales growth was driven by Rémy Martin VSOP and XO. In the Europe, Middle East, and Africa region, performance was once again affected by sluggish consumption and intense competition.

In the Liqueurs & Spirits division, full-year sales rose 2.8% on an organic basis, including a 2.6% rise in volumes and a 0.2% price-mix impact. This reflected strong showings by Cointreau, The Botanist and Bruichladdich. The Americas were the division's main driver, supported by a favorable basis of comparison and solid trends in depletions. The Asia-Pacific region generated solid growth, due primarily to Bruichladdich whisky, whose sales in China resumed, and to excellent momentum in Japan and the rest of Asia. In the Europe, Middle East, and Africa region, performance was uneven, as consumers adopted a wait-and-see attitude.

Looking Ahead

In 2026-27, Rémy Cointreau said it anticipates a return to sustainable organic sales growth, with momentum expected to strengthen progressively over the year.

The group also anticipates a slight organic improvement in current operating margin. This projection is based on current operating profit integrating an estimated €20 million (or $23 million) in customs duties, compared with around €15 million (or $17.25 million) in 2025-26.

The company also announced RC Forward, an ambitious three-year plan to regain market share, maximize the potential of its brands, and sustainably strengthen its business model. It also represents a major contributor to the medium-term strategy and is designed to gradually reduce its dependence on macroeconomic cycles.

RC Forward is structured around three major strategic initiatives:

• The first aims to implement several sizeable growth projects designed to shape the group's sales trajectory over the medium term. These initiatives are designed to sustainably reignite growth in Cognac, accelerate the development of other strategic categories, and strengthen the group's presence in high-potential markets.
• Rémy Cointreau has identified five priority initiatives: the launch of a breakthrough innovation for Rémy Martin in the United States in the first quarter of 2027-28, unlocking the full potential of both Rémy Martin XO and the Prestige division, scaling up in emerging markets, and accelerating the expansion of Global Travel Retail. These projects, which will contribute increasingly over time, represent important long-term growth drivers for the group.
• The second initiative focuses on improving commercial execution by making distribution networks more efficient, strengthening the Revenue Growth Management program, and optimizing the effectiveness of advertising and promotional investments.
• The third initiative will increase centralization of group procurement.

Finally, RC Forward will be accompanied by a shift to a more agile and efficient business model, based on a clearer definition of roles between brands and regions, as well as simplified internal processes.

By 2028-29, Rémy Cointreau said it plans to generate approximately €100 million (or $115 million) of value creation compared to 2025-26, at the current operating profit level. This estimate corresponds to the plan's gross contribution in the current economic environment, at constant exchange rates.