Brown-Forman, the maker of Jack Daniel’s Tennessee Whiskey, is undergoing significant restructuring amid declining sales and a stock price at a ten-year low. The company announced it will cut 12% of its global workforce, equating to around 648 jobs, and close its Louisville cooperage, where barrels have been crafted since 1945. The barrel-making operation will cease by April 25, and barrel supply will be outsourced, generating approximately USD 30 million from asset sales.
The restructuring aims to achieve annual savings of USD 70-80 million, part of which will be reinvested in growth strategies. These measures also include upper management reorganization, with Jeremy Shepherd appointed as the new chief marketing officer.
The company’s net sales have been pressured by evolving consumer preferences, economic challenges, and shifting market trends. Brown-Forman reported a 5% decline in net sales in the first half of the fiscal year, following the divestiture of Finlandia and Sonoma-Cutrer brands. Despite launching innovations like the Jack and Coke ready-to-drink beverage, the company has struggled with decreasing demand for spirits among younger consumers, who increasingly opt for beer or a "California sober" lifestyle that favors cannabis over alcohol.
Additional challenges include inflation, gradual price increases impacting margins, and potential trade tensions. Former President Donald Trump, set to return to office, has hinted at imposing new tariffs. The looming reinstatement of a 50% tariff on American whiskey by the EU, due in late March unless resolved, could exacerbate issues, following earlier trade disputes that cost Kentucky bourbon producers USD 500 million in exports (inside.beer, 17.11.2021).
Despite these headwinds, Brown-Forman maintains cautious optimism, expecting organic net sales growth of 2-4% for the full year, and aims to position itself as a leaner and more adaptable company.