Brown Forman Inc · NYSE:BF.A
Brown Forman — Investor Day (December 2018)
70 slides from Brown Forman's investor day presentation, Dec 12, 2018
Slide 1: The Next Generation: Brown-Forman Investor Day 2018
the NEXT Generation 20 18 BROWN-FORMAN INVESTOR DAY 1
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Slide 3: Presenters
PRESENTERS “~ @Y
Slide 4: Paul Varga, Chairman and Chief Executive Officer
PAUL VARGA CHAIRMAN AND CHIEF EXECUTIVE OFFICER BROWN-FORMAN CORPORATION – Paul Varga was appointed president and chief executive officer of Brown-Forman Corporation on August 1, 2005, and became chairman of the company in August 2007. He has been a member of the company’s board of directors since 2
Slide 5: Lawson Whiting, Incoming President and CEO
LAWSON WHITING INCOMING PRESIDENT AND CHIEF EXECUTIVE OFFICER BROWN-FORMAN CORPORATION – Lawson Whiting is the incoming president and chief executive officer of Brown- Forman Corporation, effective January 1, 2019. He has served on the company’s Executive Leadership Team since 2013. Prior to being a
Slide 6: Mark McCallum, Chief Brands Officer
MARK McCALLUM EXECUTIVE VICE PRESIDENT CHIEF BRANDS OFFICER BROWN-FORMAN CORPORATION – Mark McCallum is executive vice president, chief brands officer at Brown-Forman Corporation. McCallum joined Brown Forman in 2003 as chief marketing officer and prior to his current role held the positions of pres
Slide 7: John Hayes, President, USA & Canada
JOHN HAYES SENIOR VICE PRESIDENT PRESIDENT, USA & CANADA BROWN-FORMAN CORPORATION – John Hayes is president, USA & Canada. He is a member of Brown-Forman’s Executive Leadership Team. Most recently, he served as chief marketing officer of Brown-Forman brands. Prior to this he served as managing direc
Slide 8: Thomas Hinrichs, President, International Division
THOMAS HINRICHS SENIOR VICE PRESIDENT PRESIDENT, INTERNATIONAL DIVISION BROWN-FORMAN CORPORATION – Thomas Hinrichs is president, international division, Brown-Forman. He also serves on Brown-Forman’s Executive Leadership Team. Hinrichs began his career at Brown-Forman in 1996 as marketing manager fo
Slide 9: Jane Morreau, Chief Financial Officer
JANE MORREAU EXECUTIVE VICE PRESIDENT CHIEF FINANCIAL OFFICER BROWN-FORMAN CORPORATION – Jane Morreau is executive vice president, chief financial officer for Brown-Forman Corporation. Prior to becoming CFO, Morreau served as a senior vice president and chief production officer. Previously, she was
Slide 10: Geo. Garvin Brown IV, Chairman of the Board
GEO. GARVIN BROWN IV CHAIRMAN OF THE BOARD BROWN-FORMAN CORPORATION – Garvin Brown is the Chairman of the Board of Brown-Forman. He is a great, great grandson of George Garvin Brown, the company’s founder. Brown began his employment at Brown-Forman in 1996 in field sales in New York. Since that time
Slide 11: Jay Koval, Vice President Investor Relations
JAY KOVAL VICE PRESIDENT INVESTOR RELATIONS BROWN-FORMAN CORPORATION – Jay Koval joined Brown-Forman in early 2012 as vice president of investor relations. He brings a breadth of investor relations expertise and two decades of capital markets experience to the role that will further strengthen Brown
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Slide 13: Presentations
PRESENTATIONS 13
Slide 14: Investor Day: Jay Koval
Investor Day New York Stock Exchange December 12, 2018 Jay Koval VP Investor Relations 14
Slide 15: 2018 Investor Day Agenda and Forward-Looking Statements
The following presentations contain statements, estimates, and projections that are “forward-looking statements” as defined under U.S. federal securities laws. Words such as “aim,” “anticipate,” “aspire,” Forward- “believe,” “can,” “continue,” “could,” “envision,” “estimate,” “expect,” “expectation,
Slide 16: Paul C. Varga and Lawson Whiting
Paul C. Varga Chief Executive Officer Lawson Whiting Chief Executive Officer 16
Slide 17: A Generation of Superior TSR
Photo Montage A Generation of Superior TSR Total Shareholder Returns April 30, 1998 to April 30, 2018 $1,600 $1,200 $800 $400 $0 BF Comp Set S&P 500 Consumer Staples Source: FactSet, as of April 30th, 2018, in local currency, assuming dividends reinvested. The Competitive Set is a weighted average b
Slide 18: Strategic Framework: Portfolio
Brown-Forman Strategic Framework Portfolio Lead in Premium American Whiskey and Increase Focus on Super-Premium Portfolio 18
Slide 19: Geography and Investment
Geography Deliver Balanced Geographic Growth with Competitive Routes to Consumer Investment Deliver Shareholder- Friendly Capital Allocation and Top-Tier TSR 19
Slide 20: People
People Continue to Build a Strong and Agile Workforce The Next Generation of Brown Family Stewardship 20
Slide 21: Thank You! Mark McCallum
Thank You! Mark McCallum Chief Brands Officer 21
Slide 22: Reshaped Portfolio Focused on 10 Key Trademarks
Reshaped Portfolio Focused on 10 Key Trademarks 10 Trademarks Yield Over 30 Individual Brands 22
Slide 23: Portfolio Focused on Whisk(e)y, Tequila & Vodka
Portfolio Focused on Whisk(e)y, Tequila & Vodka Category > 10% 5 yr CAGR Whiskey Tequila Vodka Gin Brandy Rum < 10% 5 yr CAGR Price Segment Super Premium + +10% +12% +1% +34% +4% +19% Premium +6% +11% +4% +16% +4% +7% Standard +4% +5% +3% +8% +2% +2% Source: IWSR, 2017 $ Retail Value, Size of bubble
Slide 24: Portfolio Priorities by Geography
Portfolio Priorities by Geography United States Developed International Emerging Markets In select markets B-F Brand Growth Framework Penetration Mental Availability Physical Availability Meaningful Reach Presence Prominence Portfolio Price Distinction 24
Slide 25: Jack Daniel's Continues to Lead Next Generation Growth
Jack Daniel’s Continues to Lead Next Generation Growth JD FoB 10yr CAGR = 3% JD FoB 10yr CAGR = 6% JD FoB 10yr CAGR = 5% JDTW 10yr CAGR = 3% JDTW 10yr CAGR = 6% JDTW 10yr CAGR = 3% JW FoB, +3% (30 yr CAGR) 16 brands +5% 20 +4% 15 7 brands JD FoB, +5% 10 3 brands (30 yr CAGR) 5 2 brands 0 1987 1992 1
Slide 26: Jack Daniel's Has Significant Geographic Opportunity
Jack Daniel’s Has Significant Geographic Opportunity Jack Daniel’s indexed against Johnnie Walker globally Duty-Free Source: IWSR; 2017 9L Depletions; Adjusted for RTD equivalents Mental Availability Meaningful Reach Distinction 26
Slide 27: Physical Availability
Jack Daniel’s Family of Brands advertising vignette video Jack Daniel’s social / digital video Jack Daniel’s documentary video Physical Availability Presence Prominence Portfolio Price 27
Slide 28: Woodford Reserve
ran EXCLUS == OF THE <> JACK DANIEL, FAMILY. “© I. WOODFORD RESERVE WOODFORD RESERVE theNEXTGeneration 28
Slide 29: Woodford Reserve Globalization Under Way
+700,000 cs. Woodford Reserve Globalization Under Way USA International 200,000 cs. 100,000 cs. Brand Launch FY97 FY07 FY13 FY18 Source: Internal Data: 9L Depletions, US/ROW Herradura Family (HE/EJ/New Mix/Antiguo) Woodford Reserve Quality advertising video Woodford Reserve Kentucky Derby video Wood
Slide 30: Tequila Portfolio
TEQUILA HERRADURA Tequila Portfolio theNEXTGeneration 30
Slide 31: Strong Tequila Portfolio Momentum
Strong Tequila Portfolio Momentum 1M cs 740k cs 450k cs 300k cs F08 F09 F10 F11 F12 F13 F14 F15 F16 F17 F18 US Rest of World (excl. Mexico) Source: Internal Data: 9L Depletions, US/ROW Herradura Family (HE/EJ/New Mix/Antiguo) Tequila Portfolio Herradura Silver advertising video Herradura Ultra adver
Slide 32: Single Malt Scotch Whisky Brands
PES BEMRIACH ants en SINCE SINCE HIGHLAND SINGLE MALT SINGLE MALT SCOTCH WHISKY BLAND SINGLE M @ BROWN TORMAN theN EXT Generation 32
Slide 33: Highly Awarded Portfolio of Single Malts
Highly Awarded Portfolio of Single Malts Dec. 7th, 2018 Rachel Barrie, Master Blender, Brown-Forman Scotch 1st woman in Scotch Whisky to be inducted in the whisky hall of fame… Nov. 20th, 2018 GlenDronach 15 Year Revival #8 in the 2018 top 20 Innovation Key to Next Generation Growth Other Brands Sou
Slide 34: Innovation Expected to be Key to Next Generation Growth
Innovation Expected to be Key to Next Generation Growth 9L Depletions (millions) 30 Existing Portfolio Acquired Brands Innovation 25 20 15 10 1998 2018 Source: Internal 9L Depletions; Adjusted for RTD equivalents Portfolio Priorities by Geography United States 34
Slide 35: Thank you! John Hayes
Thank you! John Hayes President, USA & Canada 35
Slide 36: USA is the Largest Premium+ Spirits Market Taking Share from Beer
USA is the Largest Premium+ Spirits Market Taking Share from Beer 2007 Total Bev Alc Value: $187B 2017 Total Bev Alc Value: $234B 37% 32% 48% 53% 15% 15% Beer Wine Spirits 2017 Adams Liquor Handbook We are Positioned in the Growth Categories Now and for the Future American Whiskey +8% Tequila Catego
Slide 37: USA Spirits Market
Moet & Hennessy 100% Brown-Forman Fifth Generation 100% Competes in the Brown-Forman 90% Premium+ Price William Grant 89% Segments Pernod Ricard 80% Premium+ Price Segment Share Diageo 75% Proximo 59% Bacardi 56% Campari 55% Beam Suntory 43% Heaven Hill 29% Sazerac 15% Nielsen 52 weeks value through
Slide 38: USA Organizational Focus
Brown-Forman’s Premium American Whiskey Portfolio USA Organizational Focus Capabilities Whiskey Expertise Inclusive Marketing Modern Media E-Premise Structure Focus on Opportunity Brands Through Structure 38
Slide 39: Whiskey Expertise
Whiskey Expertise Education Advocacy Point-of-Sale 39
Slide 40: Inclusive Marketing
3 Inclusive Marketing 35% 45% 1IN2 AACM (21+) ARE NBA FANS 20% 22% HISPANICS (21+) 42% 1IN4 ARE NBA FANS 36% 21-34 35-54 55+ 54 Inclusive Marketing 35% 45% 1IN2 AACM (21+) ARE NBA FANS 20% Jack Daniel’s NBA “Rings” advertising video 22% HISPANICS (21+) 42% 1IN4 ARE NBA FANS 36% 21-34 35-54 55+ 40
Slide 41: Modern Media
Modern Media AT H O M E D I G I TA L | P R I N T | VOICE ASSIST E-COMMERCE TELEVISION D E L I V E RY OOH C O C K TA I L AMAZON ALEXA RESERVE BAR COURIER 56 Inclusive Marketing 35% 45% 1IN2 AACM (21+) ARE NBA FANS 20% Woodford Reserve Kentucky Derby video montage 22% HISPANICS (21+) 42% 1IN4 ARE NBA
Slide 42: e-Premise Channels
e-Premise Channels E - TA I L E R S EMERGING C U R AT E D CLICKS & BRICKS DELIVERY APPS INTERMEDIARIES MARKETPLACES Emerging Brands Focus 42
Slide 43: Emerging Brands Organization Focus
Emerging Brands Organization Focus City Center Hand Selling Retail Focus Influencer City Focus Field-Focused Skew More On-Premise / Whiskey Than Distributor Management Shops / High End Retailers American Whiskey Far From 70’s Peak 70,000 50,000 30,000 10,000 1952 1970 2000 2017 Source: Adams Liquor
Slide 44: Thank You! Investor Day
Thank You! Investor Day New York Stock Exchange December 12, 2018 44
Slide 45: B-F International at a Glance
Thomas Hinrichs President, International B-F International at a Glance 28M 9L cases 170 Countries 53% B-F Net Sales *1,300 Full Time Employees Source: Internal company data. *Non-production employee count. Data as of April 30, 2018. 45
Slide 46: Continuous Globalization & Increased Focus
B-F International at a Glance 2018 1998 # Countries with . . . 1998 2008 2018 Non-US 21% Non-US 53% US 47% +50,000 cases 10 24 28 +500,000 cases 2 2 2 US 79% +1,000,000 cases 1 4 6 Source: Internal company data. 5 Continuous Globalization & Increased Focus Developed Markets Emerging Markets 46
Slide 47: Developed Markets: Historical Growth Drivers
Developed Markets DEVELOPED MARKETS Historical Growth Drivers 5 Top markets account JDTW & JD FOB Investment behind Organization design for 70% sales driving growth Route-to-Consumer and capabilities are supporting strategy and growth Source: IWSR 47
Slide 48: Long Runway for Growth
DEVELOPED MARKETS Long Runway for Growth P R E M I U M + TO TA L D I S T I L L E D S P I R I T S S H A R E C O M PA R I S O N Tequila Whiskey 52% share Vodka Rum National Gin Flavored Brandy (4% CAGR) S TA N D A R D + W H I S K E Y C A G R 6% American Whiskey 5% Irish Whiskey 3% Single Malt -1% Scot
Slide 49: Brown-Forman Portfolio Aligned for Growth
DEVELOPED MARKETS And, an Even Larger Super-Premium Opportunity SUPER-PREMIUM+ WHISKEY Rest of Brands Source IWSR: % CAGR 2012-2017; Premium+ whiskey 2017 volume Brown-Forman Portfolio Aligned For Growth 49
Slide 50: Developed Markets Strategic Priorities
DEVELOPED MARKETS Strategic Priorities Lead in American Whiskey Invest in our super-premium portfolio Leverage route-to-consumer investments SPAIN 4th largest international Whiskey market Spain moved to Owned (only Standard+) Distribution in July 2018 1 6 M O N T H S L AT E R … Whiskey is the Whiske
Slide 51: Emerging Markets
Spain Owned Distribution video Emerging Markets 51
Slide 52: Emerging Markets Historical Growth Drivers
EMERGING MARKETS Historical Growth Drivers 5 Top markets JD FOB, Tequilas Seeding investment Evolve Route-to- account for over & Finlandia Consumer, 50% of sales driving growth partnerships & local organizations Source IWSR EMERGING MARKETS DEVELOPED MARKETS Long Runway for Growth S TA N D A R D + T
Slide 53: Emerging Markets Strategic Priorities
EMERGING MARKETS DEVELOPED MARKETS Long Runway for Growth % Emerging Markets % Emerging Markets 1990 2004 2017 1990 2004 2017 Trademark 33% 53% 56% Family of Brands 2% 9% 17% 25,000 20,000 20,000 Developed Emerging 15,000 15,000 Developed Emerging 10,000 10,000 5,000 5,000 - - 1990 2017 1990 2017 So
Slide 54: Brown-Forman International Strategic Summary
BRAZIL 6M Case +23 -12% Scotch The city strategy has Whiskey Market -2% American successfully driven growth. (5 Yr CAGR) Others B-F GROWTH JD FOB 12% DRIVEN THROUGH… 3M Case Standard+ • Focused portfolio approach Whiskey Market • Thoughtful geographic prioritization • Effective resource allocation •
Slide 55: Thank You! Jane Morreau
Thank You! Jane Morreau EVP & Chief Financial Officer 55
Slide 56: Superior Risk-Adjusted Returns with Less Volatility
Superior Risk-Adjusted Returns with Less Volatility 10 Year Leading TSRs BFB 17% Comp Set 12% With a 10 year Beta of 0.60, Brown-Forman delivers superior, risk-adjusted returns against the Consumer Staples 9% S&P 500 and Consumer Staples benchmarks. S&P 500 9% Source: FactSet for TSR, as of April 30
Slide 57: Consistent Net Sales Growth
Driving Shareholder Returns: Our Value Equation Growth Profitability Investment TSR Net Sales Operating Margin ROIC Appreciation Cash Consistent Net Sales Growth 10% 5% 0% 35 Yr CAGRs 25 Yr CAGRs 15 Yr CAGRs 5 Yr CAGRs FY18 Reported Underlying Source: Company information. See appendix for additional
Slide 58: Active Portfolio Management
100% Active Portfolio Divestitures Management Net Sales FY08 vs FY18 Organic Whiskey Growth 72% 58% Sources of New Revenue (Innovation & Acquisitions) 0% FY08 FY18 Whiskey RTD Wine Tequila Vodka Liqueur Other Source: Company information. Multiple Levers to Pull for Balanced Growth 16% US US Dev-ex D
Slide 59: Leading Operating Margin
Driving Shareholder Returns: Our Value Equation Growth Profitability Investment TSR Net Sales Operating Margin ROIC Appreciation Cash Leading Operating Margin… 40% B-F Comp Set S&P 500 Consumer Staples 30% 20% 10% 0% FY08 FY10 FY12 FY14 FY16 FY18 Source: Company information. Reported operating margi
Slide 60: Operating Investment Leverage
Leading Operating Margin… Helped by Operating Investment Leverage Leveraging Investments (Operating Investments as % of Sales) 45% 40% 35% 30% 25% FY08 FY10 FY12 FY14 FY16 FY18 Source: Company information. Reported operating margins and operating expenses have been adjusted to remove the Southern Co
Slide 61: Ongoing Productivity Programs
Ongoing Productivity Programs On track to deliver $100M in cost savings (FY18 – FY20) Revenue Growth Cost of Sales Operating Taxes Management Investments • Price / Volume • Packaging • Reducing Discretionary • Tax Reform Opportunities • Promotion Effectiveness • Sourcing Spending • Excise Tax • Mark
Slide 62: Generating Significant Cash Over the Past Decade
Generating Significant Cash Over the Past Decade CAPEX • Invested $900M in Capex Accelerated two-fold in the last 5 years $8B $2B Source: Company information (FY09– FY18) Generating Significant Cash Over the Past Decade W O R K I N G C A P I TA L • Invested $800M in working capital with ~90% in in
Slide 63: Generating Cash; Top Tier ROIC
Generating Significant Cash Over the Past Decade ACQUISITION • Invested over $450M in Single Malt Scotches and Irish Whiskey $8B $2B Source: Company information (FY09– FY18) Despite Significant Investments Maintained Top Tier ROIC ROIC 30% Brown-Forman $8B ROIC 15% Consumer Comp Staples Set $2B S&P
Slide 64: Shareholder-Friendly Return of Cash
Continuation of Shareholder-Friendly Return of Cash $6B $8B $2B Source: Company information (FY09– FY18) Driving Shareholder Returns: Our Value Equation Growth Profitability Investment TSR Net Sales Operating Margin ROIC Appreciation Cash 64
Slide 65: Leading Total Shareholder Returns
Leading Total Shareholder Returns Total Shareholder Returns April 30, 2008 to April 30, 2018 $600 $500 $501 $400 $300 $317 $239 $200 $100 $0 Apr 2008 Apr 2009 Apr 2010 Apr 2011 Apr 2012 Apr 2013 Apr 2014 Apr 2015 Apr 2016 Apr 2017 Apr 2018 S&P 500 Consumer Staples Competitive Set BF Source: FactSet,
Slide 66: Thank You! Geo. Garvin Brown IV
Thank You! Geo. Garvin Brown IV Chairman of the Board 66
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Slide 68: Thank You! Investor Day
Thank you! Investor Day New York Stock Exchange December 12, 2018 68
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Slide 70: 850 Dixie Highway, Louisville, Kentucky
850 DIXIE HIGHWAY LOUISVILLE, KENTUCKY 40210 | BROWN-FORMAN.COM 70