The paragraph introduces a conference call for Brown-Forman's first half fiscal 2025 earnings. The call begins with the Operator's remarks, followed by Sue Perram, the Vice President and Director of Investor Relations, acknowledging the participants. She is joined by Lawson Whiting, the President and CEO, and Leanne Cunningham, the CFO. The call includes forward-looking statements with noted risks and uncertainties, and the company disclaims any obligation to update these statements. A press release with the company's second-quarter results and related presentation materials are available on their website. The release also lists risk factors associated with the forward-looking statements.

The paragraph discusses a conference call where non-GAAP financial measures will be discussed, along with their relevance to investors. It mentions a transition in the Board of Directors Chair at Brown-Forman, with Campbell Brown and his successor, Marshall Farrer, both descendants of the company's founder, speaking about this change. Campbell Brown highlights the importance of intentional family connections and relationships in maintaining the company's family-controlled status for 154 years.

In a recent meeting, the current Chair of Brown-Forman's Board of Directors announced their decision to step down in July 2025, a move aligned with the company's succession planning. Although leaving the Chair position, they aim to continue contributing as a Board member. They expressed pride in the company's values, culture, and governance, crediting these attributes for Brown-Forman's success. The Board approved Marshall B. Farrer, the Chair's cousin, as the successor. Farrer, a fifth-generation family member, will assume the role following the 2025 Annual Meeting of Stockholders.

Marshall Farrer is set to become the Chair of Brown-Forman's Board of Directors, bringing his extensive experience within the company and his support for family governance to the role. He has collaborated closely with CEO Lawson Whiting and the Board on long-term strategies. Having worked at Brown-Forman since 1998, Marshall held various roles globally before returning to Louisville, Kentucky. His 26 years of operational experience and nine years of Board service, along with his work on formalizing family governance, prepare him well for this position. Campbell expresses confidence in Marshall's leadership and invites everyone to congratulate him. Marshall thanks the Board for their trust and reflects on his career and family involvement in the company's governance.

The paragraph discusses the transition in leadership at Brown-Forman as the company enters its 155th year. A new Board Chair, Marshall, is taking over from Campbell, and both have been praised for their contributions to the company. Lawson Whiting expresses his excitement about working with Marshall and acknowledges the company's long-standing commitment to sustainable growth and its responsibility to shareholders. He also appreciates the efforts of the company's 5,700 employees and is set to report on the fiscal 2025 first half results.

The paragraph discusses Brown-Forman's performance in the first half of fiscal 2025, noting that results are in line with expectations despite a challenging operating environment. The company anticipated a stronger second half compared to the first, which faced tough comparisons due to previous inventory replenishments and pre-emptive purchases ahead of price increases. Reported net sales decreased by 5%, while organic net sales were flat after accounting for divestitures, exchange rates, and business model changes. Growth was driven by increased used barrel sales and strong performances from brands like Woodford Reserve, Diplomatico Rum, and Old Forester, although this was offset by declines in el Jimador and Herradura. Woodford Reserve, in particular, continued to outpace the U.S. whiskey market, growing organic net sales by 8% due to higher volumes and favorable pricing.

The paragraph reports strong sales growth for Woodford Reserve and Diplomatico, with Woodford Reserve Distiller Select being the top super-premium American whiskey globally, and Diplomatico experiencing significant growth in markets such as France and Czechia, as well as through travel retail channels. Diplomatico has been integrated into the company's emerging brands portfolio in Europe and the U.S. Despite Old Forester's strong sales performance, the company's tequila brands, el Jimador and Herradura, are facing challenges in their primary markets—the U.S. and Mexico—due to increasing competition and Mexico's tough economic climate. Nonetheless, the company remains confident in capitalizing on long-term global growth in the tequila category.

The paragraph discusses Herradura's and el Jimador's initiatives and market performance. Herradura has been celebrating its heritage and launched a new product, Cristal, in Mexico. El Jimador has solidified its position in the premium tequila market, experiencing growth in Southeast Asia, Brazil, and Australia, despite challenges in the US and Mexico. The brand aims to introduce tequila to global consumers by highlighting its versatility. Jack Daniel's Tennessee Whiskey saw significant improvement in sales during the first half of fiscal '25 and continues to engage new consumers through various sponsorships, campaigns, and products like Jack Daniel's and Coca-Cola ready-to-drink (RTD) beverages. RTDs have shown growth globally, with new market expansions including India.

The paragraph discusses the successful performance of the Jack & Coke Cherry limited edition, which attracted new customers to the Jack & Coke ready-to-drink (RTD) lineup. A variety pack, including Jack & Coke, Jack & Coke Cherry, and Jack & Coke Vanilla, is set to launch in the US in March 2025 to coincide with summer activities. The company anticipates its continued geographic expansion and innovation will boost interest in its Jack Daniel's RTDs and other brands. Additionally, the paragraph addresses concerns about tariffs, emphasizing Brown-Forman's history as a leading US spirits exporter. It highlights the challenges tariffs pose, particularly to distinct spirits like American whiskey, and outlines the company's preparedness and strategies to handle potential trade barriers.

The first half of fiscal 2025 met expectations, with the company remaining optimistic about stronger performance in the second half despite uncertainties. While short-term organic results were below historical trends, the company is confident in long-term growth potential due to its strategy, portfolio, geographic reach, and talent. Leanne Cunningham reports 6% organic net sales growth in emerging international markets, driven by strong performance of Jack Daniel's products in Turkiye and Brazil. The growth in Turkiye is attributed to the rising premium whiskey category, while Brazil's resilient economy supported growth in the premium-plus whiskey sector and geographic expansion.

Brazil has seen double-digit growth in Jack Daniel's depletions and now ranks among the US, UK, and Germany as a million-case market. In contrast, Mexico's economic challenges have led to a decline in sales for el Jimador and Herradura, though the company still gained market share, driven by strong performance in RTDs and whiskey. Herradura is capitalizing on the Cristalino trend with the launch of Herradura Cristal. In travel retail, sales declined by 3% due to a drop in super-premium American whiskey sales, despite growth in Jack Daniel's Tennessee Whiskey and Diplomatico. For developed international markets, net sales fell by 3%, with growth in Japan offset by declines in the UK and South Korea. Japan's growth follows a change in distribution strategy, while the UK is rebounding after last year's excise tax-related purchase surge.

The paragraph discusses the sales performance and strategic focus for certain whiskey and champagne brands in South Korea and the United States. In South Korea, Jack Daniel's Tennessee Whiskey faced increased competition, while in the U.S., organic net sales decreased by 3%, despite strong growth from Woodford Reserve, Old Forester, and Jack Daniel's RTDs. Declines in Jack Daniel's Tennessee Whiskey and Korbel California Champagne offset this growth. The decline in Jack Daniel's Tennessee Whiskey was impacted by previous inventory ordering patterns. Korbel's decline was attributed to timing, with promotional efforts focused on the latter half of the year. U.S. distributors maintained low inventory levels but increased shipments for key brands in preparation for the holiday season.

The paragraph discusses how some retailers are maintaining low inventory levels to meet consumer demand and avoid stock shortages, despite a slight decrease in total distilled spirits value over a three-month period. Premiumization is evident as higher-priced spirits, particularly US whiskey and tequila, continue to grow in value. The company's gross profit decreased in the first half of fiscal 2025, leading to a contraction in gross margin due to higher input costs, foreign exchange impacts, and services agreements related to divestments. The conclusion of a transition services agreement with Sonoma-Cutrer improved gross margin. Additionally, operating expenses and organic advertising expenses were lower compared to the previous year due to seasonal factors.

In the first half of fiscal 2025, Brown-Forman's spending was concentrated in launching Jack Daniel's and Coca-Cola RTD in the U.S., leading to a 3% decrease in organic SG&A and a corresponding decline in operating income and EPS. Additionally, the company recorded $2 million in income from its equity share in the Duckhorn Portfolio, which is being acquired by private equity funds for $350 million, subject to customary conditions and approval. Brown-Forman intends to report Duckhorn's earnings one quarter in arrears until the merger, after which they will record a gain on disposal. The company remains committed to building a sustainable business.

The paragraph highlights Brown-Forman's commitment to its shareholders, noting a 4% quarterly dividend increase and its status as a member of the S&P 500 Dividend Aristocrats Index. It outlines an optimistic fiscal 2025 outlook, expecting growth in organic net sales and operating income, driven by international market gains and stabilizing inventory trends. However, global economic and geopolitical uncertainties may impact this outlook. The company anticipates the second half of the fiscal year to better reflect consumer demand, contingent on unpredictable supply chain behavior. It also anticipates facing comparisons against prior strong shipments and a slowdown in the distilled spirits market.

The company anticipates full-year growth from its super-premium brands, Gin Mare and Diplomatico, supported by a pricing strategy expected to boost organic net sales growth by 2% to 4%, especially in international markets. They foresee improved profitability from divesting lower-margin brands and completing transition services agreements for Sonoma-Cutrer and Finlandia. Despite managing higher costs due to agave price fluctuations and inflation, they anticipate a slight contraction in gross margins for fiscal 2025.

The paragraph outlines Brown-Forman's financial outlook and strategic focus. The company anticipates organic operating income growth between 2% and 4%, heavily influenced by consumer demand and distributor inventory levels, particularly in key markets like the United States. Despite a volatile economic environment, the third quarter remains crucial for annual results. An effective tax rate between 21% and 23% is expected, with capital expenditures now projected at $180 million to $190 million due to project delays. Although organic results for the first half of fiscal 2025 lag behind historical trends, the company expects sequential growth improvement in the second half. The emphasis remains on balancing short-term pressures with long-term strategic goals.

The paragraph involves a conference call where Lauren Lieberman from Barclays asks about inventory levels. Leanne Cunningham responds, stating that distributors are maintaining inventory at the low end of their normal range due to low consumer demand and current interest rates, similar to the previous quarter. She notes that shipments slightly exceed depletions, reflecting a typical supply chain movement from supplier to distributor to retailer to consumer.

The paragraph discusses the preparations for the holiday selling season, emphasizing efforts to ensure adequate stock levels of specific brands like Jack Daniel's, Woodford Reserve, and Korbel to meet consumer demand and avoid stockouts. In the US, there are no significant changes in trade inventory levels, and globally, inventory levels are steady, with specific insights into markets like Mexico and Brazil. The text notes that tequila is performing well in Mexico, while overall inventory levels in Brazil are low. The speakers express confidence in their inventory positioning and briefly mention the uncertainty about the holiday environment, noting a lack of detailed data at this point.

The paragraph discusses the declining trend in the US market over the past 18 months, attributing it to economic challenges, inflation, and consumer financial struggles. It notes that the market was doing well until late last year, but then unexpectedly dropped, affecting various consumer categories. The outlook for the current Christmas season is described as cautious, with expectations being relatively muted. However, there is a positive note regarding improved consumer takeaway data for Jack Daniel's Tennessee Whiskey in the last six months, though Nielsen data still shows negative trends. Overall, the continued impact of financially strained consumers is expected to persist.

In the paragraph, Bonnie Herzog from Goldman Sachs inquires about the differing trends between U.S. consumer takeaways and reported whiskey depletions. She notes a 3% to 4% decline in sales trends from scanner data and questions about the sources of growth, such as in non-tracked channels or on-premise, and asks about growth expectations for the American Whiskey category, specifically regarding Jack Daniel's. Lawson Whiting responds by acknowledging the divergence between NABCA and Nielsen. He states that the company's performance is roughly at a negative 3%, aligning with consumer takeaway data, and notes an improvement from Q1 to Q2. He mentions that on-premise sales are slightly weaker but overall trends are stable, without expecting significant changes soon. Leanne Cunningham starts to address the guidance aspect of Bonnie's question.

The paragraph discusses the performance and strategy of Brown-Forman, emphasizing the full-year benefits from including Gin Mare and Diplomatico in their results and the growth of Jack Daniel's Tennessee Whiskey outside the US. Nadine Sarwat from Bernstein asks about the company's performance in October and November, and the risks and strategies related to tariffs, particularly on imports from Mexico and exports to Europe. Leanne Cunningham notes sequential improvement in the US market, despite a slight decline in tequila market share. Lawson Whiting addresses the ongoing issue with retaliatory tariffs from Europe linked to steel and aluminum, highlighting past challenges faced between 2018 and 2021.

The paragraph discusses the challenges faced by a US company due to tariffs on American whiskey exports, highlighting concerns about potential changes to these tariffs by the end of March and the uncertainty surrounding different possible scenarios. The company is engaging with government stakeholders to seek stable trade relationships while preparing risk mitigation strategies. Recently, attention has shifted to import tariffs on Canada and Mexico, affecting a broader range of alcohol categories. The company emphasizes its experience in handling such issues as a US-based spirits business, producing distinctive products like bourbon and Tennessee whiskey.

The paragraph discusses concerns about the growth of distinctive products made outside the U.S. and their impact on domestic investments, expressing uncertainty about negotiation tactics related to these products. The conversation then shifts to Robert Ottenstein from Evercore ISI asking about Jack Daniel's Tennessee Whiskey in the U.S. and the company's efforts to restore its growth. Lawson Whiting responds, emphasizing that while Jack Daniel's was performing well before COVID-19, it faced challenges in the last 18 months. The company is focused on recruiting a new demographic of consumers, aged 21 to 30, to revitalize the brand.

The paragraph discusses McLaren Racing's increasing importance in a broader marketing strategy, highlighting collaborative efforts between McLaren and music acts to create unique brand activations like "Jack's Garage." These events, featuring artists like Shaboozey, aim to enhance brand visibility and relevance, especially among college and sports audiences, through creative promotional activities such as the widely recognized "Shaboozey's Bar Song." Additionally, the paragraph mentions diverse media engagement, introducing products like Jack & Coke, and reports that these efforts are positively impacting brand health metrics, including consumer penetration and recall.

The paragraph discusses the positive trends at Brown-Forman, a global brand, where nearly all of the company's 5,700 employees are focused on turning the business around. They're starting to see growth indicators ("green shoots") in the U.S. and positive news outside the U.S., indicating improvement. Chris Pitcher from Redburn Atlantic asks about the impact of resumed shipments to Japan and used barrel sales on growth, suggesting they contributed around 2 percentage points. Leanne Cunningham explains that growth in used barrels is due to a combination of supply-demand dynamics and customer mix, which is volatile. The company has acknowledged the significance of growth from Japan but hasn't disclosed specific numbers.

The paragraph discusses the impact of distributor inventories on organic sales, particularly in emerging markets. Filippo Falorni from Citi asks about the significant contribution of distributor inventories to organic sales and its implications for the company's guidance of 2% to 4% growth for the full year. Leanne Cunningham explains that the previous year's activity involved refilling inventories in markets like the United Arab Emirates. She adds that moving into the second half of the fiscal year, most inventory movements are behind them, and they expect their trends to align more closely with the overall distilled spirits market.

The paragraph is a transcript from a financial discussion involving company executives and analysts. It includes a question from Bill Kirk of ROTH about the company's strategy for pre-shipping goods to countries in light of potential tariffs, specifically focusing on the difference in approach between countries where the company owns its distribution and others. Lawson Whiting, an executive, responds by saying that the company is handling this matter quietly due to competitive sensitivity and acknowledges the difficulty of the situation. Peter Grom from UBS then asks about financial expectations, noting that the company has maintained its outlook for the year but mentioned weaker gross margin expectations, questioning if this implies lower operating profit growth or if there is an offset not accounted for. The paragraph reflects ongoing discussions about strategy and financial expectations amidst challenging market conditions.

The paragraph is part of a discussion during a conference call, where Leanne Cunningham and Lawson Whiting address a question about potential changes in consumer demand due to a shorter period between Thanksgiving and Christmas. Cunningham discusses the company's financial guidance, explaining that they have modeled various scenarios based on consumer demand and distributor inventory changes. She mentions that they are planning for a slight contraction in gross margin while controlling SG&A expenses. Whiting notes that they haven't considered the potential impact of fewer selling days between Thanksgiving and Christmas and haven't seen it as an issue. As for holiday performance, Cunningham says it's too early to assess November and December results, but anticipates consistent consumer demand throughout the holiday season. They also acknowledge a question from Eric Serotta of Morgan Stanley.

The paragraph discusses Brown-Forman's progress in reducing its finished goods inventory by lowering production levels, which has improved cash flow and working capital requirements. In terms of industry supply, there has been an increase observed for some bourbons in the $20-$40 range, but no significant impact on high-end bourbons or Jack Daniel's is expected. Industry-wide, there was a prior shortage, particularly for fast-growing brands like Woodford, but production adjustments have been made to address this. MGPI's challenges with third-party customers are noted, but no specific implications for industry supply are detailed.

The paragraph discusses the current challenges faced by smaller, independent craft or challenger brands in the industry, emphasizing difficulties due to retailers reducing inventory, especially slower-selling products. Distributors are focusing on big brands that generate more profit, putting smaller brands at a disadvantage. Despite these conditions, big established brands may have an advantage because of their stronger financial positions. The paragraph concludes with a mention of Brown-Forman's fiscal year 2025 earnings call, and Sue Perram acknowledges National Repeal Day, encouraging a toast in celebration of the end of Prohibition and the holiday season.

The call has concluded, and participants are thanked for joining the conference. The session is officially over, and attendees may disconnect. Wishing everyone a great day.

This summary was generated with AI and may contain some inaccuracies.