Q3 2023 Brown-Forman Corp Earnings Call

March 8, 2023

Okay.

[music].

Good day, and thank you for standing by and welcome to the third quarter and year to date fiscal 'twenty three earnings conference call. At this time, all participants are in a listen only mode.

After the speaker's presentation, there will be a question and answer session.

Ask a question during that session you will need to press star one on your phone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star one one again please.

Please be advised that today's conference is being recorded and I would now like to handle conference over to your speaker today, Ms. Sue <unk>, Vice President and director of Investor Relations Ms. Tian. Please go ahead.

Thank you and good morning, everyone I would like to thank each of you for joining us today for Brown Forman third quarter and year to date fiscal 2023 earnings call. Joining me today are Lawson Whiting, President and Chief Executive Officer, and Leann Cunningham Executive Vice President and Chief Financial Officer. This morning's conference call contains.

Forward looking statements based on our current expectations numerous risks and uncertainties may cause actual results to differ materially from those anticipated or projected in these statements. Many of the factors that will determine future results are beyond the company's ability to control or predict you should not place undue reliance on any forward looking.

And except as required by law. The company undertakes no obligation to update any of these statements whether due to new information future events or otherwise. This morning, we issued a press release containing our results for the third quarter and nine months ended January 31, 2023. In addition to posting presentation materials that Lawson.

Leann will walk through momentarily, both the release and the presentation can be found on our website under the section titled investors events and presentations in the press release, we have listed a number of the risk factors that you should consider in conjunction with our forward looking statements. Other significant risk factors are described in our Form 10-K and Form 10-Q.

<unk> report filed with the Securities and Exchange Commission. During this call we will be discussing certain non-GAAP financial measures. These measures a reconciliation to the most directly comparable GAAP financial measures and the reasons management believes they provide useful information to investors regarding the company's financial condition and results of operations are continuing.

And in the press release and Investor presentation with that I would like to turn the call over to Lachlan.

Thank you Sue and Hello, everyone I'm proud of the results that we're sharing with you today as we delivered strong organic performance for the first nine months of fiscal 2023 before I go into the details of our most recent results I wanted to take a moment to step back and acknowledged that it has now been three full years since March of 2020, which for Brown Forman in the world.

The start of the COVID-19 pandemic since that time, we've experienced significant volatility and uncertainty will always remaining focused on the long term health and growth of our portfolio of brands and our people consider that during this three year time period, we added two new Super premium brands, and Genmar and diplomat ago, we divested others.

We just launched a major global initiative with Jack and Coke, we grew by more than 500 employees as we evolved our route to consumers in five markets strengthened our integrated marketing communications capabilities and grew our emerging brands teams among other changes and importantly, compared to the first nine months of fiscal 'twenty, We grew Jack Daniel's, Tennessee whiskey by one.

<unk> 5 million cases, and Woodford reserve by 500000 cases, even amid severe supply chain constraints.

Through it all we delivered what our investors have come to expect from Brown Forman consistent reliable compounding of growth. If you followed brown Forman long enough you know that we often speak not in quarters or years or even decades, we speak and generations and I truly believe one of our greatest competitive advantages is this long term perspective, it allows us to demonstrate.

Creativity and resilience in the face of constant change to execute on our strategic priorities and invest boldly behind our brands and our people. This focus has allowed us to deliver short term results that are in line and recently, even ahead of our historical growth rates, while still investing in our business and it is this long term focus that gives me confidence that as the world.

<unk> and our business begin to normalize we will continue to deliver against our long term growth algorithm producing mid single digit organic topline growth and high single digit organic operating income growth over the next decade.

So regardless of how you look at our business through the lens of the last three months the last three quarters. The last three years of the last three decades I believe youll reach the same conclusion Brown <unk> business is strong we are well positioned in the best categories and price points, and there's nothing better than the market and our talented people around the world now turning with focus.

Back to our year to date fiscal 'twenty three net sales results, we delivered high single digit topline growth on a reported basis and double digit topline growth on an organic basis as the reported results were impacted by foreign exchange headwinds organic net sales growth in the first nine months was driven by continued strong growth project, Daniel's, Tennessee whiskey and our <unk>.

International markets in the travel retail channel by Woodford Reserve and the U S and a strong performance in Rtd's driven by Jack Daniel's RTD is in Australia, and Germany, along with new mix in Mexico, Jack Daniel's, Tennessee Whiskey continued to be the largest driver of our topline performance year to date, delivering 12% organic net sales growth driven by strong consumer demand.

Higher pricing and the rebuilding of distributor inventories given the size of this brand and the fact that the brand delivered a 20% organic net sales increase in the year ago period. This growth is particularly impressive consumer demand for Woodford Reserve also remained very strong and we're significantly better positioned to meet this demand as supply constraints mainly related to glass.

East and we increased our bottling capacity. This resulted in organic net sales growing 35% through the first nine months of the year.

<unk> been some exciting news in the past couple of months for Woodford Reserve, which I believe will continue to position the brand for future success in January we announced the Woodford reserve entered into an agreement with Churchill Downs to renew Woodford as the presenting sponsor of the Kentucky Derby through 2027. The extended partnership also includes old Forester is the official module for the Kentucky Derby.

Along with Finlandia in Herradura Woodford Reserve also recently named Elizabeth Mccall as Master Distiller. The third in the brand's 26 year history and the first female Master distiller. She is the second generation of our family to work in the spirits industry. Following in her mother's footsteps blizzard with builds on a legacy crafted by Chris Morris, who is taking on a master distiller <unk>.

For this role and has been instrumental in the growth of Woodford over the past 25 years, we're very thankful for criminal Elizabeth and all they are doing to build a very promising future for Woodford reserve Rtd's remain the third largest contributor to overall company growth driven by the consumer trends of convenience and flavor Jack Daniel's RTD is grew organic net sales 10%.

New mix delivered 41% organic net sales growth while on the topic of our Tds have thought it would be interesting to take a look at one of the oldest and one of the newest brands in our RTD portfolio first protecting this country cocktails, which we launched in the early 19, 90% two years ago on this call we announced that we are partnering with Pabst brewing company for the supply.

Sales and distribution objecting as country cocktails within the United States, We believe that the partnership would provide tremendous growth potential for the brand with greater access to production and variety pack capabilities, along with perhaps distribution network, which would provide more efficient access to new distribution channels I'm pleased to say that our beliefs were correct.

Just on Nielsen at the beginning of February Jack Daniel's country cocktails was the second fastest growing flavored malt beverage in the United States continuing to gain share and grow distributions Jack Daniel's country cocktails is now a top 10 flavored malt beverage brand and I want to thank both the brown Forman and perhaps teams for significantly accelerating the growth of this brand I also have a <unk>.

<unk> for the teams at Brown Forman and the Coca Cola Company, who are working on our newest RTD and that is of course, Jack Daniels and Coca Cola, while we only have a couple of months of data from the distributors since the November launch in Cancun, Mexico. The early results are certainly very positive they shared that the nine liter case volume of the Jack Daniel's and Coca Cola are TV significantly.

Ceded the volume of the JAK down some colo RTD and the equivalent two months period, a year ago. They reached the distribution target within days of launch showing the excitement and enthusiasm from the retailers and the consumer repurchase rate is encouraging the experiences and learnings from Cancun has helped to set the stage for a successful national launch across Mexico, which began in.

Early February these learnings will also be shared with other markets that are launching soon including the United States a number of European markets as well as Japan for these initial markets cans are now rolling off the production lines and we will be on retailer shelves and cold boxes in late March and early April we're excited not only about the potential growth of this product, but also believe.

As we always have with our Tvs, but the Jack Daniels and Coca Cola are TD will have a positive impact on the full strength family of brands are TD service consumer recruitment vehicle, bringing new consumers of legal drinking age into the Jack Daniel's family as well as a marketing vehicle visibly showcasing the trademark and what we often call cans in hands.

The Jack Daniel's and Coca Cola RTD launches will be supported by a new global advertising campaign jointly funded by Brown Forman and the Coca Cola company, which introduces the product and showcases the incredible attitude of these two iconic trademarks coming together in a single can will continue the product launch in additional European Asian African and Latin America.

Markets throughout the calendar year, 2023, and I look forward to sharing more in the upcoming quarters, while we're on the topic of product launches I want to briefly provide an update on Jack Daniel's bonded over the past five years, we've been working purposely to premium is the Jack Daniel's family of brands and elevate our whiskey credentials initially laying the foundation with specialty launches such as <unk>.

Jack Daniel's single barrel special release Heritage barrel, and Jack Daniel's 10 year old, Tennessee Whiskey earlier this fiscal year, we introduced the first Jack Daniel's Super premium permanent line extensions and over 25 years with Jack Daniel's bonded, Tennessee whiskey injecting those triple mash whiskey in just a few months the new bonded series received powerful and impact.

For claim from whiskey critics across the globe, including Jack Daniel's bonded being named the 2022 whiskey of the year by whisky advocate the most coveted global accolade in the whiskey industry like the Jack Daniels and Coca Cola are Tvs. These new whiskies give both long term trends of Jack Daniels and new friends, the opportunity to explore and discover within the.

Jack Daniel's family, while there is excitement and momentum in the whiskey and RTD categories Tequila remains an attractive and fast growing category within total distilled spirits as we shared last quarter after experienced significant supply chain disruption to the first three months of fiscal 'twenty three glass supply for Herradura has continued to increase we're now better positioned to meet consumer.

Tumor demand in Herradura delivered a 9% increase in organic net sales in the first nine months of fiscal 'twenty. Three we're also seeing takeaway growth accelerated in the U S. As distributor inventories are being rebuilt and organic net sales for <unk> increased 19% driven by consumer demand and pricing growth both in the U S and in Mexico in November we launched <unk>.

<unk> legend of unique on Yahoo, Tequila that has matured and heavily charred new American white oak barrels a process thats unique in the category and one that leverages, our barrel knowledge and expertise as premium innovation continues in the category legend is a permanent member of the <unk> portfolio that enables us to participate in the prestige price.

<unk> segment on the topic of pricing two years ago, we introduced our long term pricing strategy for our portfolio brands, which aims to increase prices consistently year after year and to grow net sales through a combination of both volume and value.

Our organic net sales growth benefited from three points of favorable price mix in the first nine months of fiscal 'twenty. Three this was driven by higher prices across much of our portfolio and was led by Jack Daniel's, Tennessee Whiskey.

Based on the latest Nielsen data Brown performance pricing growth of nearly 3% is outpacing total distilled spirits of just over 2% our revenue growth management initiatives, which includes identifying pricing opportunities not just in the U S. But in every market are a key part of our comprehensive focus on topline growth.

In summary, despite the volatility and uncertainty disruptions and challenges around forming continues to deliver against our long term ambitions are long term focus has allowed us to execute on our strategic priorities and invest in the momentum of our brands. This has produced strong organic results in the first nine months of the fiscal year as well as over the last three years so in closing.

On this international Women's day, I would like to acknowledge the women of Brown Forman and thank them along with all of our very talented brown Forman employees around the globe for their commitment to our strategic priorities and our company values and their continued focus on delivering sustainable and consistent long term growth day after day year after year generation.

After generation.

With that I'll turn the call over to Lan and she'll provide more details on our year to date results as well as our outlook for the remainder of fiscal 'twenty three.

Thank you Lawson and good morning, everyone as lots of idea the topline drivers from a portfolio perspective for the first nine months of fiscal 2023, I will provide a few additional details on the top line results as well as other items that drove our business results and our outlook for the fiscal year first as Lachlan mentioned whether or not.

All lines have fiscal 2023 organic net sales increased 12% compared to the same period last year. The growth was driven by a 9% increase in volumes, particularly for Nymex, Jack Daniels, Tennessee, Whiskey and Jack Daniels RTD.

So again, 3% from price mix, reflecting higher prices across much of our portfolio led by Jack Daniel's, Tennessee Whiskey from a geographic perspective for the first nine months of fiscal 2023 strong results were broad based with organic net sales growth in each geographic cluster compared to the same period.

A year ago.

Secondly, our emerging international markets continued to deliver very strong double digit organic net sales growth increasing 26%. This growth was led by Jack Daniel's, Tennessee, whiskey, particularly in Turkey, and Brazil, driven by improved product availability and supply chain disruption eased.

As well as increased pricing RTD is also contributed to growth with new mix and Jack Daniels RTD growing strong double digits in Mexico, where we are gaining share in a growing category and increasing price. In addition, Jack Daniel's RTD when launched in Brazil earlier this year.

After a very strong start this impressive growth includes the impact of the year over year declines in Russia, as we suspended our commercial operations almost exactly one year ago in March of 2022. Prior to this suspension. This market represented approximately 2% of our total reported net.

Sales are developed international markets collectively delivered strong organic net sales growth up 13% for the first nine months, we continue to closely monitor the inflationary impact on consumer confidence and still have not observed signs of down trading.

We have continued to increase price to our revenue growth management strategies and spirits remain an affordable luxury consumers Jack Daniel's, Tennessee Whiskey was the largest contributor to your growth in these markets driven by Germany, where Jack is gaining share within the whiskey category, Japan, which is benefiting from strong consumer.

Demand with growth in both the on and off trade Korea as the consumer is continuing to shift to international whisky brands and Belgium, as Youll recall, Belgium transition to owned distribution at the beginning of calendar 2022, we believe that own distribution transition can feel a share growth strengthen our.

Folio unlock future potential and enable us to capture more of the value chain. We are seeing that growth in Belgium, as Jack Daniels, Tennessee Whiskey recently became the number one whiskey brand in Belgium during the holiday season, achieving record market share in the month of December Australia, and Germany continue to drive that.

Growth of Jack Daniel's RTD, leading to double digit organic net sales growth, which represented the next largest contributor to growth. The RTD category is growing in these large important market and we are gaining share our emerging brands team in Europe continues to drive the growth of brands such as our Hema door Woodford.

Reserve Gentleman, Jack and Glenn Jonnick, each brand delivered double digit organic net sales growth, reflecting our strategic priority of increasing focus on our premium and Super premium portfolio of course diplomat ago. Amgen Moray are just getting started we believe they will soon be a meaningful contributor to this in <unk>.

<unk> brands business.

Business is beginning to normalize and delivered 4% organic net sales growth as we have shared with you in the previous three quarters the seasonality of our fiscal 2023 results have been impacted by the abnormal seasonality of the fiscal 2022 shipments due to supply chain disruptions and the <unk>.

First half of fiscal 2022 distributor inventory did not increase ahead of the holiday season as is typical and we experienced stronger shipments in the second half of fiscal 2022 and supply chain challenges began to ease as expected in the first half of 2023 distributor inventories continued to.

Return to more normalized levels, which benefited the U S. Net sales growth rate by seven points. As we are now beginning to lap the increase in shipments related to the rebuilding of our inventory position in the prior year period, particularly for Jack Daniel's, Tennessee Whiskey, we estimate the net change in distributor.

Inventories reduced the net sales growth rate by one point for the first nine months of the fiscal year Woodford reserve remain the largest contributor to organic net sales growth driven by strong consumer demand and an increase in distributor inventories as glass supply and capacity constraints continue to ease organic net.

Sales also benefited from higher prices across the portfolio led by the Jack Daniel's family of brands, though partially offset by lower volumes of Jack Daniel's, Tennessee Whiskey as the brand lapped a strong prior year comparison as you will recall at this time last year, we shared that due to supply chain constraints.

Particularly for glass, we prioritize Jack Daniel's, Tennessee Whiskey. This prioritization was reflected in the year ago results as we met the strong consumer demand for the brand, particularly in the on premise and focused on rebuilding inventory levels across the supply chain Corbell, California Champagne is benefit.

And from higher pricing, though that benefit is being more than offset by lower volume in the U S. The gap between Nielsen takeaway and our actual results have narrowed considerably as we lap many of the factors that created the disconnect such as the shift to the on premise with its reopening along with the brand and market prioritized.

<unk> impacts from the supply chain challenges overall takeaway trends improved during the quarter as the industry began to normalize with total distilled spirits value growth in the mid single digits as we lap the impact of the supply chain constraints that previously suppressed our performance, particularly for Jack Daniel's, Tennessee Whiskey.

Gentleman, Jack and Jack Daniel's, Tennessee flavors, our takeaway performance is accelerating and Brown Forman has closed the gap with total distilled spirits for the first time in two years, we continue to work to rebuild finished goods inventory levels across the three tiered system and believed that distributor inventory levels.

Starting to normalize we are continuing to rebuild some brands and sizes, but shipments and depletions are now largely in balance across our full strength portfolio and finally, the travel retail channel continued its strong rebound as travel continued to rebound with the return of International Airlines travel in the cruise industry.

Organic net sales grew 52% led by higher volumes across much of our portfolio and our business has nearly returned to pre COVID-19 levels now turning to gross profit in the first nine months of fiscal 2023, our reported gross profit increased 5% or 11% on.

On an organic basis for gross margin headwinds more than offset our tail winds, resulting in 170 basis points of contraction compared to the same period last year favorable price mix and the removal of the European Union and the United Kingdom tariffs on American whiskey were more than offset by higher costs.

Due to the impact of inflation on our input costs and supply chain disruptions largely related to global logistics constraints as well as the negative effect of foreign exchange moving onto our operating expenses compared to the same prior year nine month period organic advertising expenses grew at a.

<unk> higher rate than our topline growth largely due to the timing of our increased marketing investment for Jack Daniel's, Tennessee Whiskey Woodford reserve the launch of Jack Daniel's bonded and ore Dara in the United States organic SG&A investment increased double digits, driven primarily by higher.

Sanction related expenses and the investment behind our people as we return to in person events and activities in support of our collaborative culture and relationship based industry. Our reported operating expenses were impacted by two items.

Noncash impairment charge for the Finlandia brand name largely due to macroeconomic conditions, including rising interest rates and increasing cost and certain post closing costs and expenses in connection with the acquisition of diplomat ago, largely driven by costs related to the termination of existing distribution.

Contract as we integrate the brands and to our distribution partners and total reported operating income decreased 13% and organic operating income grew 9% in the first nine months of fiscal 2023. These results combined with a pension settlement charge resulted in a day.

<unk> EPS decrease of 16% to $1 20 per share lastly, until our fiscal 2023 outlook. Our performance for the first nine months of fiscal 2023 was strong with high single digit reported and double digit organic net sales growth driven by <unk>.

Consumer demand higher pricing and the rebuilding of distributor inventories and while there were a number of items in the third quarter that negatively impacted our reported operating income results for the first nine months of fiscal 2023, we delivered high single digit organic operating income growth as trends.

We began to normalize globally, we remain confident in the broad based growth of our U S and international markets, along with the travel retail channel, while the global macroeconomic and geopolitical environment remains volatile and uncertain. We believe our business will remain resilient, reflecting strong consumer demand the strength.

Our portfolio of brands the continued execution of our pricing strategy and the return of inventory to more normalized levels for the full year. The effect of the estimated net change in distributor inventories could range from no impact to a moderate unfavorable impact on our results as we lap the <unk>.

Michigan inventory rebuilding during the fourth quarter of fiscal 2022, our guidance assumes no impact from an estimated net change in distributor inventories for the full year and we now expect organic net sales growth in the range of 8% to 10% as it relates to our fiscal 'twenty.

23 cost the inflationary environment increased input cost ahead of our expectations and supply chain disruptions, particularly transportation logistics and freight while easing remain challenging. Additionally, we have noted the impact of foreign exchange on our reported results while the U.

<unk> dollar has weakened from its peak in September the U S. Dollar remains strong against many major currencies, most notably against the Euro Turkish lira pound Sterling and Polish zloty as we continue to navigate these challenges and work to limit their impact we expect the headwinds of inflation.

Hi chain disruption costs and foreign exchange to impact our full year results, partially offsetting these headwinds we continue to expect pricing and the removal of the EU and UK tariffs on American whiskey to remain tailwind for the full year based on these headwinds and tailwind we continue to expect full year <unk>.

<unk> gross margin to be consistent with the first half of fiscal 2023, we are reaffirming our expectations for operating expenses as we believe that investments in our brands and our people will drive strong long term top and bottom line growth as a reminder, since the time, we were burdened with the EU.

And U K tariffs, we have long been committed to reinvesting a portion of the tariff relief back behind our brands once removed, which we were finally able to act upon in fiscal 2023, driving our brand investment at a rate above our top line growth and we will also invest in our people to support our business needs in a more normalized environment.

Based on the above expectations and assuming no full year impact from the estimated net change in distributor inventories. We continue to anticipate high single digit organic operating income growth. We continue to expect our fiscal 2023 effective tax rate to be in the range of approximately 22 to <unk> 23 per.

And our capital expenditures are still planned to be in the range of $190 million to $210 million. In summary, we are pleased and proud of the strong results delivered for the first nine months of fiscal 2023 with double digit organic net sales growth that was broad based across our portfolio.

In geographies and as expected the seasonality of our fiscal 2023 results are being impacted by the abnormal seasonality of the fiscal 2022 shipments related to the supply chain disruptions as trends are normalizing, we believe our business will remain resilient, reflecting the strength of our portfolio of.

<unk> and our talented people. We also believe our long term perspective enables us to navigate the changes of our world and to deliver sustainable and consistent long term performance. This concludes our prepared remarks. Please open the line for questions.

Thank you.

As a reminder to ask a question. Please press star one on your phone and wait for your name to be announced to withdraw your question. Please press star one again.

Standby as we compile the Q&A roster.

And one moment for our first question.

Our first question will come from Vivien <unk> of Cowen Your line is open.

Hi, Thank you good morning.

Good morning.

So I wanted to follow up on the commentary around the Jack and Coke strong start internationally is it possible to quantify that at all.

In terms of the contribution to the country level growth and or the impact that it had on the broader Jack franchise, and then as a follow up to that can we talk a little bit about the expected investment spending for the last one as well. Thank you.

Yes Vivien.

Thanks Juan.

I think you know the launch was really Ken kun over the last few months. So it was not even across the entire country of Mexico and so the impact on this fiscal year is negligible.

Even probably within the country of Mexico would be negligible.

But look I mean, I think in this land some of the comments that she made its off to a good start we're pleased with the distribution we are pleased with.

The consumer repurchase rates and everything so everything is going as planned or even maybe a little bit better than planned, but it's tough to extrapolate or see that impacting fiscal 'twenty three.

Now fiscal 'twenty four I mean, we haven't given any guidance yet on that.

We'll probably do that after the next quarter when we start talking a lot more about fiscal 'twenty four but.

I think it is worth pointing out a little bit about how this is going to work just so that you all understand how the model works.

And I'll just use a couple of examples we can use Mexico is probably a good starting point the Coca Cola company has taken the lead in the business model is actually similar to how they work with their bottlers around the world, but instead of two players theres three as we are part of that too. So the revenues the costs the brand expands.

All of that will be reflected on the Coca Cola company's P&L.

P&L not on Brown Forman, we won't be selling whiskey bulk whiskey kind of almost the equivalent of concentrated in their terms.

And so that's the revenue impact on us, but youre not going to see the full P&L impact in a country like Mexico, turning to the U S. If you look at the U S and it is going to be also similar for Germany, and Australia, which are our two really big our TV markets, we're going to handle the manufacturing and the distribution and so.

S Australia, Germany, you will see the revenues the brand expense the cost all in our P&L. So.

It's difficult when you try to consolidate the two to figure out how you know how is that all total up because it really is going to depend on the balance of sales between all the different markets around the world.

One way or the other we still feel pretty good about it and we will talk more about that as I say in the next quarter.

And then okay.

And then from an investment perspective, it answered the second part of your question.

Is about as often mentioned jointly being funded between Brown Forman and the Coca Cola company and that joint advertising.

So have a halo effect over the entire Jack Daniel's family of brands kind of as we think amplifying the trademark.

Yes.

Perfect. That's helpful clarification. Thank you so much.

Thank you.

One moment please for our next question.

Our next question will come from Andrea Teixeira of Jpmorgan. Your line is open.

Hey, Good morning. This is drew Levine on for Andrea Thank you for taking our questions.

I wanted to ask on the gross margins it doesn't seem like the cost headwinds really abated much at all.

I think last quarter, there was a pretty sizable headwind due to mitigation efforts to get the product on shelf. In addition to inflation. Obviously, so could you talk about where you are seeing continued pressure on that cost line and how you see that evolving over the coming quarters, because I think.

Most of those mitigation efforts, where we are in the past, but maybe it doesn't appear so any color there would be helpful. Thank you.

Okay, and I'll take that in two parts, because where we are in a year to date and then stepping back tomorrow.

The year outlook.

First I think it's important that youll recall, our full year guidance, which is consistent in line with our first half of 2023. So it does imply an improvement in the fourth quarter for us our normal seasonality of the fourth quarter generally has a positive impact on gross margin and we will have a benefit and lapping of foreign exchange.

<unk> impact that we had in the fourth quarter last year.

Continue to say, we're always fortunate with our premium and Super premium portfolio of brands that can handle the pressure that we've been facing over these last quarters.

As you can see on slide seven we did contract 170 basis points ending at $58 for that price mix positively impacted gross margin by 200 basis points.

This increases across our portfolio led largely by Jack Daniel's, Tennessee whiskey than.

And then we have the removal of a positive impact of the removal of the European Union and the UK tariffs on American Whiskey, which benefited our gross margin by 170 basis points.

Specifically to your point on cost.

Our cost for the year to date was negatively impact of 430 basis points and it's those two key drivers, which is the impact of inflation, which we are still seeing largely most of our commodities. So some of that is beginning to ease I'll speak to that in a moment, and then energy and fuel as well as for us.

Our third quarter, we still have in November and December in our third quarter. So we were still extent experiencing.

Expenses related to costs related to supply chain disruptions and getting that product to the shelf, though we do see those beginning to ease with our inventories retort returning to a more normalized level.

And then I've already mentioned FX.

It will be a headwind for the full year it negatively impacted us year to date of 120 basis points, but we do see a bit of a.

Benefit as we go into the fourth quarter.

For our full year one of the things we are seeing as it relates to the impact of inflation. When we planned this year, we planned it at <unk>.

For inflation to be higher than our average and in reality, we know it's been well above that really on our commodities in our energy.

Three notable areas that we do see easing beginning to come which is in the space of natural gas specifically in the U S. It is beginning to decrease significantly in Q4, and even as we look into the our Q3 and even as we see into the early parts of Q4 it can.

The step down it's still above the prior year level, but it is beginning to ease.

Then I'll also note that with glass prices.

They continue to increase in conjunction with the commodities.

And the inflation on the commodities it takes to build the glass. This significant decline in the U S. Natural gas prices will help moderate the expected increases as we enter F. 'twenty four.

And then lastly, as it relates to freight we've been talking about freight transportation logistics that.

From an equipment perspective, it will remain in balance draft, but the cost of fuel has been one of the largest drivers of the transportation costs.

And now with the cost of oil that has been volatile we do see that diesel prices are now below their peak as well. So those are three early indicators kind of some of the easing of the inflation that we haven't seen that really is it still yet ahead of us to come.

Thanks, so much for the color.

Thank you.

Again, one moment. Please next.

Next question.

Our next question will come from.

So what <unk> Bernstein your line is open.

Hi, Thank you good morning, everybody.

Wanted to stick to that gross margin point.

So far we've been talking about what you're seeing at the moment and going into this last quarter could you help us understand any of your expectations for gross margins on the medium term I. Appreciate you might not want to give explicit guidance, but to the extent that you could give us the puts and takes about where you think you can be trending including calling out maybe where.

Gourmet prices are that would be very helpful.

And then lastly on your impairment just a follow up on that Columbia brand. One of the reasons you called out were higher interest rates I presume that would impact your.

Your entire portfolio when going through that exercise. So could you just give us a little bit more color about your expectations for this brand in particular, how that's changed and the role you see it playing your portfolio going forward. Thank you.

Okay, I will start on a bit more color on the mid term for cost you are correct and we're always excited this time of year to begin thinking about and talking about the next fiscal year, but we will well next quarter is when will provide significantly more detail on that I can say and what the commentary that we have.

As with the with our distributor and retailer inventories returning to a more normalized level.

A significant portion of the costs that we have incurred related to.

The expedited shipments of our finished goods into the market.

We believe that's going to significantly ease as we as we move forward that's probably yeah.

The best thing that I can say for that today to your comment on agave agave, we continue to be weak.

We've talked about there is strong demand for the category, but we do see greater supply coming on we are beyond our peak, but we have kind of stabilized around the 28 to 30 pesos per kilo.

And for US specifically, our demand has been.

Very strong so the balance between our internal and external sourcing is for us kind of one of the headwinds we had faced in this year.

But again, we do see that supply coming on as and we will talk more about that in the next quarter is what we think for the next this fiscal year.

And then on Finlandia so yes.

Locate a sizable impairment charge is not something thats funded and obviously I think you all know it's noncash what happened was it's a combination of things. It's the rising interest rates meant the impairment testing that quickly catches on the impairment testing front and that's that's the major reason that we.

We had to take the second impairment charge on Finlandia. It's also feeling the pressure from higher cost input costs are higher.

And then obviously, Russia, and then not only Russia, but the countries that touch at all around there are all very very weak and so.

It's just been a tough situation.

You all know.

It is a regional brand for us it's not really even sold in much of the world at this point in time anymore. It's a very it is an important brand in certain countries, particularly in eastern Europe . So.

The suspension of the business in Russia.

Was the biggest single factor that made it that made it so difficult, but we're going to continue trying to improve the performance of the brand and.

Continuing to fight through what is a very difficult situation.

Very clear thank you.

Okay.

Thank you.

One moment please for our next question.

Okay.

Our next question will come from Stephen powers of Deutsche Bank. Your line is open.

Hey, Thanks, and good morning, everybody.

I just wanted to go back maybe.

Round out the gross margin.

Conversation in the car.

The conversation I think the commentary you gave around cost pressures year to date.

That's very helpful, but I guess.

Left with the question I'm, just trying to I'm trying to untie.

How much of what you've experienced and are experiencing is just a byproduct of general cost pressures kind of industry wide.

I'm sure the big part there.

Versus how much of what you've incurred maybe specific to brown Forman just based on the way your supply chain is configured.

Is there or procurement timing contracting realities.

To understand how much maybe kind of more unique to you versus versus the industry and if there are things that are more unique to you.

Just if there's any learnings there.

About the medium to longer term about how you could.

Maybe insulate yourself from some of that volatility against except there is a company specific element there.

Well a few things have happened and when you think about kind of the impact of inflation and supply chain disruption generally speaking two third one third two thirds being inflation.

I mean, I think we've experienced.

Fairly globally, the same from inflation I mean, our mix of commodities may be a bit different than other people of commodities, whether we're sourcing domestically in the United States or internationally in our mix may be a bit different.

Others.

For Us I think we continue to have.

The opportunity, where we have talked about for the last few quarters and we have taken on some cost as it relates to risk mitigation to our supply chain that you have heard us talk about as we went through.

<unk> chain challenges related to glass, we were intentional.

Diversifying our supplier base that always comes at a bit of a cost but again.

We thought we think and continue to think it will position us well for the future again for the one third related to supply chain challenges I've already talked to you that I think that we are seeing we are moving beyond that as we return our inventory too.

To more normal again, one thing that might be a bit different from us.

Just the percent of inventory, we had at of our business at aged product that might be a little bit different than than others, but we can.

They can sell it at a different day, but.

Okay understood.

It wasn't.

The last part of your question.

No actually.

Okay on agave I think there might have been a question earlier on just sort of what youre seeing on agave have you got any comments there.

Thank you very much.

Thank you.

One moment please for our next question.

Our next question will come from Filippo <unk> of Citibank. Your line is open.

Hi, good morning, guys.

I was wondering if you can talk about.

Consumer trends that youre seeing across the world, particularly in terms of putting utilization.

Whether you're seeing any slowdown in your prepared remarks, you sounded still optimistic about the premier mutation trend, but on the margin are you seeing any change in consumer behaviors and if you can comment on this topic for your key market looking about the U S Europe and some of your emerging markets. Thank you.

Yes, I'll talk a little bit about I mean.

Consumer demand.

Looking ahead still remain very very strong.

You can see just in our top line figures.

I think if you there's a question around premium amortization, which has been happening.

For 20 years has been happening in our industry.

If we go down to the U S market and look about premium innovation, it really pre musician trends spiked a lot during COVID-19. They are returning to a little bit more of a normal man, we'll see but if you look at Tds in the United States. When you take a look at the breakdown by price point Youll still see let's say super premium ultra premium.

We're growing it at a higher rate than say.

Premium, but premium or something down on the standard category. So the.

The story is still true that consumers are premium realizing their purchases in spirits and that trend is still strong, but it's not the differential between the two is not as strong as it was I'll say a couple of years ago. So.

Explain that right.

We're still seeing the premium trends and just the delta between Super premium and Ultra and then the other price points Down-low has has come down a little bit.

A positive.

Take out of all of this though is our pricing strategy over the last couple of years. So we're through essentially through two years of this of low single digit, but consistent regular pricing seems to be working pretty well. We think we've got a nice balance between where consumers are willing to take the price increases where retailers are willing to take.

The price increases.

We think it's the smart thing to do over the long term and so we're going to continue that trend.

As much as we can and so far we have not seen.

And elasticity that would really make us say you know what I'm not sure. That's the right thing to do we continue to plow forward and I think we're getting a better balance between volume and pricing, which is something we very much want.

Got it anything parties, all youre seeing in Europe , and emerging markets, maybe if you can comment on on distributions.

I mean not really.

But I would caution it's difficult to take our trends and extrapolate them to a broad read to read around the consumers around the world and that has everything to do with the shipment comparisons that were dealing with so if we're only looking at our brands.

The shipment comparison, the timing of glass availability last year, and how we compare against that this year, it's sort of dominates our trends more so than what we would say is a read across the consumer moving around so.

It doesn't really answer your question, but we're just sort of in a unique situation given the volatility that we've seen seen with glass.

Got it thank you I'll pass it on.

Okay.

Thank you.

One moment for our next question.

Our next question will come from Kevin Grundy of Jefferies. Your line is open.

Hey, great. Thanks, good morning, everyone.

Hi, Kevin Hi, Thank yous.

Hey, I thought it'd be useful we have we spent a little bit of time on the U S business, so down 10% year over year in the quarter understanding the dynamics around inventory difficult year over year comp.

A few questions here just comment if you wouldn't mind have U S business came in relative to your own expectations understanding you're certainly run the business longer term I think we understood. We can appreciate that but from a quarterly perspective, how it came in.

Land you also made comments about normalization of inventory levels I'm, assuming that that commentary sort of holds for U S. As well, but if you could just confirm that and then lastly, just from a consumer demand perspective, maybe just touch on retail takeaway in depletions in the quarter, specifically for the U S and then vacate.

<unk> here as we look out in the intermediate term so that would be helpful. Thanks for all that guys I appreciate it.

Alright, Kevin I'll start it and then you can.

Add on.

Want to.

It is the U S market is beginning to normalize and we said that a couple of times, but it's normalizing on a higher base for sure compared to where we were a few years ago, but if you look at Tds right now it's trending back to the mid single digit range, which was where it was.

For many of the years pre Covid. So now we delivered 4% in the first nine months of the year.

That was essentially expected remember we are plus 11 through the first half and so we knew a slowdown was coming.

And it did appear that way out it essentially came in.

Relatively close to where we thought there is.

Another big factor in this Q3 number for the U S and Thats. If you go back to last year, just looking at Jack Daniel's, Tennessee Whiskey in the third quarter of fiscal 2002, we were plus 35, so that that is a huge number to compare against and that's because we're back to the same glass availability.

Topic, where the glass became available in the third quarter, we prioritize Jack over the rest of our portfolio is the on premise was also opening and it just was a massive quarter and so.

That comparison had a big impact if you step back and look at Nielsen or NAPCO.

You can get a much more sort of normalized rate of growth. These days and that would tell us the U S market for US is in that 6% range I think Tds is five to six somewhere right around there and the napkin numbers are actually even a little bit higher than that and so we feel pretty good that.

Maybe if it has returned to normal but normal still pretty good.

For the U S market and certainly we're seeing stronger rates of growth outside of the United States. So.

I think it's also worth pointing out at least within our own performance, we're doing a little bit better than Tds, which is something that is a goal that we always have out there and to.

To be ahead of both Nielsen and NAPCO costly it's been awhile since since we were above it.

Once again, a lot of that because of the glass, but it's nice for our teams to know that they are back ahead of Tds and then I'll just add two things.

All the way back to when we originally plan this fiscal year Youll recall that we plan.

Planned for the beginning of normalization with an outlook of topline organic outlook at mid single digits, which aligns with our long term algorithm that included as cycling the largest impacts of the pandemic and also the absence of our Russia business.

As we've gone through it again all of the prioritization and the.

Strong shipments.

And our first half we had a five point benefit year over year due to that effort now that we're beginning to lap that very strong comparison of our rebuilding the inventory against the prior year and our markets around the world are beginning to normalize we haven't a benefit of two points. So I think that's worth noting.

The other thing I would say as in the prepared remarks, we talk about the U S business inventory being back in line and at a normal level at the enterprise level. We continue to make significant progress we continue to see a net increase in distributor inventories at the same time I'm still having.

Strong consumer demand, but.

We still believe as we said last quarter that you know by the end of this fiscal year, we would kind of be back at from the enterprise perspective, a more pretty much normal historical levels of inventory.

Okay very good. Thank you both I appreciate the time.

Thank you.

One moment. Please next question.

Our next question will come from Brett Cooper of consumer Edge Research. Your line is open.

Thank you. Good morning, a question for you on distribution of route to market in the U S. One of your competitors moved to beer distributors. Many states outside the U S. We're seeing distillers testing alternative routes to market whether that be through the coke. Following that work are selling for Brewers and with your business building and relationship with the beer distributors in the U S.

Network outside of the U S. I was wondering if you could speak to or assess your route to market potential for changes and if theres an opportunity to supplement your current efforts. Thanks.

Well I'll speak to a little bit at least about the U S changes to route to market.

We are using raise out in California for our launching of Jack and Cokes, So thats something that is quite a bit different.

But we're still very much in partnership with breakthrough on R&D you see for the most is our largest two partners in the U S in that business.

As you can see through the numbers. It remains pretty strong. We also made a change two years ago with perhaps I think it was.

What it was that was all about getting with a distributor partner that was able to reach all these points.

Retailers that are able to sell more products.

As Jack Daniel's country cocktails and that has been an enormous.

Benefit to that brand and so I think we are testing different models in the United States. When you leave the U S. It's very different that story has all been about us sort of forward integrating and being responsible for our own route to market and when we say five markets in the last.

Two years, something like that so we continue to be pretty agile and tried to mix. It up and tried different changes are different models and different partnerships.

I think overall, that's had a pretty healthy.

Impact on our business really not even over the last year, but over the last decade, or so it's been a pretty meaningful impact.

Perfect. Thank you.

Thank you.

And one moment. Please next question.

Our next question will come from Lauren Lieberman of Barclays. Your line is open.

Great. Thanks, good morning.

Adam I wanted to ask a sort of backward looking question, but informing the forward and it's just that in hindsight, maybe it seems like you had greater supply chain issues or glass constraints.

Then some of your peers in the industry.

And I would just say that based on you know as you've talked through reasons for the gap between your performance and Tds.

And that also kind of catching up so just.

Yes.

Looking backwards. So look forward are there changes you're making in terms of <unk>.

Supply chain relationships with suppliers et cetera.

Or the way that you manage inventory.

How's thoughts on with distributors to make sure that youre not in that position again.

Okay.

Well, we can start with you.

In comparison to Tds again, we've talked we've talked many times move again around how we were impacted and then how we prioritized our brands as Hal.

Based off the opportunities that were available at the time, so with the glass supply capacity that we had we wanted to prioritize Jack Daniels, Tennessee whiskey with the reopening of the on premise quickly thereafter with our test of Woodford reserve to have that brand available and so as we went through that power.

The nation it it wasn't as said many times, it's made it very very hard to compare.

Our.

Results in our takeaway trends compared to Tds now what we have done is again, you've heard me talk about we.

We have done a few things on the supply chain side of our business.

We have invested in new technologies to give us greater visibility and we are implementing new processes I think Lauren when we were together, we talked about actually the new processes related to <unk>.

Forecasting and planning demand and then from a cost perspective, we've also.

Some cost to them.

Diversify our supply chain, specifically around glass supply, but then we've also brought in new tools and learn new ways of expediting our.

Products to market, when and where that's needed.

I think I think.

We've said this on some prior calls too but.

We were nearly 100% with one partner for glass supply.

When you talk about Jack Daniel's and Woodford.

Youre looking at a U S supplier of glass or.

For the World.

When that one supplier began to really struggle it impacted us greatly and we didn't have anywhere else to turn.

So.

It has taken.

Well, it's been about a year since we in earnest found some other partners and so we are diversifying we're still heavily heavily reliant on that one supplier but.

We're trying to diversify that so once again, we don't get caught in this again, although I must say we are with that same supplier for 100 years and never had any problems before that so it was very much a COVID-19 driven crazy volatile world that caused a lot of these problems.

Okay, Alright, great. Thank you.

Okay.

Thank you.

And this is all the time, we have allotted for questions.

I'll now turn the conference back to Sue Param for closing remarks.

Well, thank you and thank you Lawson and Leann and thank you to everyone for joining us today for Brown <unk> third quarter and year to date fiscal 2023 earnings call. If you have any additional questions. Please contact us on.

On this international Women's day, we hope you will join us in celebrating the women of Brown Forman and women all around the world with that this concludes our call.

Sure.

This does conclude today's conference call. Thank you all for participating you may now disconnect and have a pleasant day.

The conference will begin shortly.

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Good day, and thank you for standing by welcome to the third quarter and year to date fiscal 'twenty three earnings conference call. At this time, all participants are in a listen only mode.

After the speaker's presentation, there will be a question and answer session.

You'd be advised that today's conference is being recorded and I would now like to hand, the conference over to your speaker today, Ms. Sue <unk>, Vice President and director of Investor Relations Ms. Carolyn. Please go ahead.

Thank you and good morning, everyone I would like to thank each of you for joining us today for Brown <unk> third quarter and year to date fiscal 2023 earnings call. Joining me today are Lawson Whiting, President and Chief Executive Officer, and Leann Cunningham Executive Vice President and Chief Financial Officer. This morning's conference call contains.

<unk> will walk through momentarily both the release and the presentation can be found on our website under the section titled investors events and presentations in the press release, we have listed a number of the risk factors that you should consider in conjunction with our forward looking statements. Other significant risk factors are described in our Form 10-K and Form 10-Q.

Our reports filed with the Securities and Exchange Commission. During this call we will be discussing certain non-GAAP financial measures. These measures a reconciliation to the most directly comparable GAAP financial measures and the reasons management believes they provide useful information to investors regarding the company's financial condition and results of operations are contained.

And in the press release and Investor presentation with that I would like to turn the call over to Lachlan.

It was the start of the COVID-19 pandemic since that time, we've experienced significant volatility and uncertainty will always remaining focused on the long term health and growth of our portfolio of brands and our people consider that during this three year time period, we added two new Super premium brands and Genmar and diplomatic go and we divested others.

$1 5 million cases, and Woodford reserve by 500000 cases, even amid severe supply chain constraints through it all we delivered what our investors have come to expect from Brown Forman consistent reliable compounding of growth. If you followed brown Forman long enough you know that we often speak not in quarters or years or even decades.

We speak and generations and I truly believe one of our greatest competitive advantages is this long term perspective, it allows us to demonstrate creativity and resilience in the face of constant change to execute on our strategic priorities and invest boldly behind our brands and our people. This focus has allowed us to deliver short term results that are in line and recently even ahead.

Our historical growth rates, while still investing in our business and it is this long term focus that gives me confidence that as the world and our business begin to normalize we will continue to deliver against our long term growth algorithm producing mid single digit organic topline growth and high single digit organic operating income growth over the next decade.

So regardless of how you look at our business through the lens of the last three months the last three quarters. The last three years of the last three decades I believe youll reach the same conclusion Brown <unk> business is strong we are well positioned in the best categories and price points and there is nothing better than the market and our talented people around the world now turning to <unk>.

Focus back to our year to date fiscal 'twenty three net sales results, we delivered high single digit top line growth on a reported basis and double digit topline growth on an organic basis as the reported results were impacted by foreign exchange headwinds organic net sales growth in the first nine months was driven by continued strong growth for Jack Daniel's, Tennessee Whiskey.

In our international markets in the travel retail channel by Woodford Reserve and the U S and a strong performance in RTD is driven by Jack Daniel's RTD is in Australia, and Germany, along with new mix in Mexico, Jack Daniel's, Tennessee Whiskey continued to be the largest driver of our topline performance year to date, delivering 12% organic net sales growth driven by strong consumer.

Demand higher pricing and the rebuilding of distributor inventories given the size of this brand and the fact that the brand delivered a 20% organic net sales increase in the year ago period. This growth is particularly impressive consumer demand for Woodford Reserve also remained very strong and we're significantly better positioned to meet this demand as supply constraints mainly related to glass.

Have eased and we increased our bottling capacity. This resulted in organic net sales growing 35% through the first nine months of the year. There's been some exciting news in the past couple of months for Woodford Reserve, which I believe will continue to position the brand for future success in January we announced the Woodford reserve entered into an agreement with Churchill Downs to renew Woodford.

It is the presenting sponsor of the Kentucky Derby through 2027 extended partnership also includes old Forester is the official module for the Kentucky Derby, along with Finlandia in Herradura Woodford Reserve also recently named Elizabeth Mccall as Master Distiller. The third in the brand's 26 year history and the first female Master distiller. She is the second generation of our fans.

To work in the spirits industry. Following in her mother's footsteps blizzard with builds on a legacy crafted by Chris Morris, who is taking on a master distiller emeritus role and has been instrumental in the growth of Woodford over the past 25 years, we're very thankful for criminal Elizabeth and all they are doing to build a very promising future for Woodford Reserve Rtd's remained the third.

Largest contributor to overall company growth driven by the consumer trends of convenience and flavor. Jack Daniel's RTD is grew organic net sales, 10% and new mix delivered 41% organic net sales growth while on the topic of our Tds have thought it would be interesting to take a look at one of the oldest and one of the newest brands in our RTD portfolio first.

In this country cocktails, which we launched in the early 19 nineties two years ago on this call we announced that we are partnering with Pabst brewing company for the supply sales and distribution objecting as country cocktails within the United States. We believe that the partnership would provide tremendous growth potential for the brand with greater access to production and variety pack capabilities.

Along with perhaps distribution network, which would provide more efficient access to new distribution channels I'm pleased to say that our beliefs were correct based on Nielsen at the beginning of February Jack Daniel's country cocktails was the second fastest growing flavored malt beverage in the United States continuing to gain share and grow distributions Jack Daniel's country cocktails is now.

<unk> 10, flavored malt beverage brand and I want to thank both the brown Forman and perhaps teams for significantly accelerating the growth of this brand I also have immense gratitude for the teams at Brown Forman and the Coca Cola Company, who are working on our newest RTD and that is of course, Jack Daniels and Coca Cola, while we only have a couple of months of data from the distributors since the November launch in <unk>.

<unk> Kun Mexico. The early results are certainly very positive the shared that the nine liter case volume of the Jack Daniel's and Coca Cola are TV significantly exceeded the volume of the <unk> RTD and the equivalent two months period, a year ago. They reached the distribution target within days of launch showing the excitement and enthusiasm from the retailers and the consumer reach.

Purchase rate is encouraging the experiences and learnings from Cancun has helped to set the stage for a successful national launch across Mexico, which began in early February . These learnings will also be shared with other markets that are launching soon including the United States a number of European markets as well as Japan for these initial markets cans are now rolling off the production.

And we will be on retailer shelves and cold boxes in late March and early April we're excited not only about the potential growth of this product, but also believe as we always have with our Tds the projected and Coca Cola are TD will have a positive impact on the full strength of family of brands RTD serve as consumer recruitment vehicle, bringing new consumers.

Legal drinking age into the Jack Daniel's family as well as a marketing vehicle visibly showcasing the trademark and what we often call cans and Hannes.

Jack Nielsen Coca Cola RTD launches will be supported by a new global advertising campaign jointly funded by Brown Forman and the Coca Cola company, which introduces the product and showcases the incredible attitude of these two iconic trademarks coming together in a single Tam will continue the product launch in additional European Asian African and Latin American market.

It's throughout the calendar year of 2023, and I look forward to sharing more in the upcoming quarters. While we're on the topic of product launches I want to briefly provide an update on Jack Daniel's bonded over the past five years, we've been working purposely to premium is the Jack Daniel's family of brands and elevate our whiskey credentials initially laying the foundation with specialty launches such as object.

The new single barrel special release Heritage barrel, and Jack Daniel's 10 year old, Tennessee Whiskey earlier this fiscal year, we introduced the first Jack Daniel's Super premium permanent line extensions and over 25 years with Jack Daniel's bonded, Tennessee whiskey injecting those triple mash whiskey in just a few months the new bonded series received powerful and impactful.

Claim for whiskey critics across the globe, including Jack Daniel's bonded being named the 2022 whiskey of the year, but whisky advocate the most coveted global accolade in the whiskey industry like the Jack Daniels and Coca Cola are Tvs. These new whiskies give both long term friends of Jack Daniels and new friends, the opportunity to explore and discover within the Jack.

Daniel family well.

There is excitement and momentum in the whiskey and RTD categories Tequila remains an attractive and fast growing category within total distilled spirits as we shared last quarter after experienced significant supply chain disruption to the first three months of fiscal 'twenty three glass supply for Herradura has continued to increase we're now better positioned to meet consumer demand and <unk> delivered on.

9% increase in organic net sales in the first nine months of fiscal 'twenty three.

Also seeing takeaway growth accelerate in the U S. As distributor inventories are being rebuilt and organic net sales for <unk> increased 19% driven by consumer demand and pricing growth both in the U S and in Mexico in November we launched Herradura legend of unique on Yahoo. Tequila that has matured and heavily charred new American white oak barrels a process.

Thats unique in the category and one that Leverages, our barrel knowledge and expertise as premium innovation continues in the category legend is a permanent member of the <unk> portfolio that enables us to participate in the prestige price point segment on the topic of pricing two years ago, we introduced our long term pricing strategy for our portfolio brands, which aims.

The increased prices consistently year after year and to grow net sales through a combination of both volume and value our organic net sales growth benefited from three points of favorable price mix in the first nine months of fiscal 'twenty. Three this was driven by higher prices across much of our portfolio and was led by Jack Daniel's, Tennessee Whiskey.

Just on the latest Nielsen data Brown performance pricing growth of nearly 3% is outpacing total distilled spirits of just over 2% our revenue growth management initiatives, which includes identifying pricing opportunities not just in the U S. But in every market are a key part of our comprehensive focus on topline growth.

After generation.

With that I'll turn the call over to Lan and she'll provide more details on our year to date results as well as our outlook for the remainder of fiscal 'twenty three.

Thank you Lawson and good morning, everyone as lots of reviewed the top line drivers from a portfolio perspective for the first nine months of fiscal 2023, I will provide a few additional details on the topline results as well as other items that drove our business results and our outlook for the fiscal year first as Lachlan mentioned for the <unk>.

Nine months of fiscal 2023 organic net sales increased 12% compared to the same period last year. The growth was driven by a 9% increase in volumes, particularly for new mix, Jack Daniels, Tennessee, Whiskey and Jack Daniels RTD, We also gained 3% from price mix, reflecting.

Higher prices across much of our portfolio led by Jack Daniel's, Tennessee Whiskey from a geographic perspective for the first nine months of fiscal 2023 strong results were broad based with organic net sales growth in each geographic cluster compared to the same period a year ago.

Of late our emerging international markets continued to deliver very strong double digit organic net sales growth increasing 26%. This growth was led by Jack Daniel's, Tennessee, whiskey, particularly in Turkey, and Brazil, driven by improved product availability and supply chain disruption eased as well as any.

Kris pricing Rtd's also contributed to growth with new mix and Jack Daniels RTD growing strong double digits in Mexico, where we are gaining share in a growing category and increasing price. In addition, Jack Daniel's RTD when launched in Brazil earlier, this year and are off to a very.

<unk> start this impressive growth includes the impact of the year over year declines in Russia, as we suspended our commercial operations almost exactly one year ago in March of 2022 prior to the suspension. This market represented approximately 2% of our total reported net sales.

Our developed international markets collectively delivered strong organic net sales growth up 13% for the first nine months, we continue to closely monitor the inflationary impact on consumer confidence and still have not observed signs of down trading.

We have continued to increase price to our revenue growth management strategies as spirits remain an affordable luxury consumers Jack Daniel's, Tennessee Whiskey was the largest contributor to growth in these markets driven by Germany, where Jack is gaining share within the whiskey category, Japan, which is benefiting from strong consumer.

Both of Jack Daniel's RTD, leading to double digit organic net sales growth, which represented the next largest contributor to growth. The RTD category is growing in these large important market and we are gaining share our emerging brands team in Europe continues to drive the growth of brands such as Hema door Woodford.

Reserve Gentleman, Jack and Glenn Tronic, each brand delivered double digit organic net sales growth, reflecting our strategic priority of increasing focus on our premium and Super premium portfolio of course diplomat ago. Amgen Moray are just getting started we believe they will soon be a meaningful contributor to this in <unk>.

<unk> brands business.

Inventories reduced the net sales growth rate by one point for the first nine months of the fiscal year Woodford reserve remain the largest contributor to organic net sales growth driven by strong consumer demand and an increase in distributor inventories of glass supply and capacity constraints continue to ease organic net sales.

<unk> also benefited from higher prices across the portfolio led by the Jack Daniel's family of brands, though partially offset by lower volumes of Jack Daniel's, Tennessee Whiskey as the brand lapped a strong prior year comparison as you will recall at this time last year, we shared that due to supply chain constraints.

From higher pricing, though that benefit is being more than offset by lower volume in the U S. The gap between Nielsen takeaway and our actual results have narrowed considerably as we lap many of the factors that created the disconnect such as this shift to the on premise with its reopening along with the brand and market prioritization.

Gentleman, Jack and Jack Daniels, Tennessee flavors, our takeaway performance is accelerating and Brown Forman has closed the gap with total distilled spirits for the first time in two years, we continue to work to rebuild finished goods inventory levels across the three tiered system and believe that distributor inventory levels are.

Starting to normalize we are continuing to rebuild some brands and sizes, but shipments and depletions are now largely in balance across our full strength portfolio and finally, the travel retail channel continued its strong rebound as travel continued to rebound with the return of international airline travel in the cruise industry.

On organic basis for gross margin headwinds more than offset our tail winds, resulting in 170 basis points of contraction compared to the same period last year favorable price mix and the removal of the European Union and the United Kingdom tariffs on American whiskey were more than offset by higher costs.

Due to the impact of inflation on our input costs and supply chain disruptions largely related to global logistics constraints as well as the negative effect of foreign exchange moving on to our operating expenses compared to the same prior year nine month period organic advertising expenses grew at a.

Inefficiently higher rate than our topline growth largely due to the timing of our increased marketing investment project Daniel's, Tennessee Whiskey Woodford reserve the launch of Jack Daniel's bonded and ore Dara in the United States organic SG&A investment increased double digits, driven primarily by higher.

<unk> related expenses and the investment behind our people as we return to in person events and activities in support of our collaborative culture and relationship based industry. Our reported operating expenses were impacted by two items.

Non cash impairment charge for the Finlandia brand name largely due to macroeconomic conditions, including rising interest rates and increasing cost and certain post closing costs and expenses in connection with the acquisition of diplomat ago, largely driven by costs related to the termination of existing distribution.

<unk> EPS decrease of 16% to $1 20 per share lastly to our fiscal 2023 outlook. Our performance for the first nine months of fiscal 2023 was strong with high single digit reported and double digit organic net sales growth driven by <unk>.

Begin to normalize globally, we remain confident in the broad based growth of our U S and international markets, along with the travel retail channel, while the global macroeconomic and geopolitical environment remains volatile and uncertain. We believe our business will remain resilient, reflecting strong consumer demand the strength.

<unk> 23 cost the inflationary environment increased input costs ahead of our expectations and supply chain disruptions, particularly transportation logistics and freight while easing remain challenging. Additionally, we have noted the impact of foreign exchange on our reported results while the U S.

The chain disruption costs and foreign exchange to impact our full year results, partially offsetting these headwinds we continue to expect pricing and the removal of the EU and UK tariffs on American whiskey to remain tailwind for the full year based on these headwinds and tailwind we continue to expect full year reported.

<unk> gross margin to be consistent with the first half of fiscal 2023.

We are reaffirming our expectations for operating expenses as we believe that investments in our brands and our people will drive strong long term top and bottom line growth as a reminder, since the time, we were burdened with the EU and UK tariffs, we have long been committed to reinvesting a portion of the tariff relief.

Behind our brands once removed, which we were finally able to act upon in fiscal 2023, driving our brand investment at a rate above our top line growth and we will also invest in our people to support our business needs in a more normalized environment based on the above expectations and assuming no full year impact from the estimated.

Net change in distributor inventories, we continue to anticipate high single digit organic operating income growth. We continue to expect our fiscal 2023 effective tax rate to be in the range of approximately 22% to 23% and our capital expenditures are still planned to be in the range of 190 to 200.

$10 million.

In summary, we are pleased and proud of the strong results delivered for the first nine months of fiscal 2023 with double digit organic net sales growth that was broad based across our portfolio and geographies and as expected the seasonality of our fiscal 2023 results are being impacted by that.

Abnormal seasonality of the fiscal 2022 shipments related to the supply chain disruptions as trends are normalizing, we believe our business will remain resilient, reflecting the strength of our portfolio of brands and our talented people. We also believe our long term perspective enables us to navigate the changes of our world.

And to deliver sustainable and consistent long term performance. This concludes our prepared remarks. Please open the line for questions.

Thank you.

As a reminder to ask a question. Please press star one on your phone and wait for your name to be announced to withdraw your question. Please press star one again.

Standby as we compile the Q&A roster.

And one moment for our first question.

Yeah.

Our first question will come from Vivien <unk> of Cowen Your line is open.

Hi, Thank you good morning.

Good morning.

So I wanted to follow up on the commentary around the Jackson Coke strong start internationally is it possible to quantify that at all.

Yes, Vivien a couple.

Couple of things one.

I think you know.

The launch was really an kan coon over the last few months it was not even across the entire country of Mexico and so the impact on this fiscal year is negligible.

Even probably within the country of Mexico would be negligible.

But look I mean, I think in this land on some of the comments that she made its off to a good start we're pleased with the distribution. We are pleased with the consumer repurchase rates and everything so everything is going sort of as planned or even maybe a little bit better than planned, but it's tough to extrapolate.

See that impacting fiscal 'twenty three.

Fiscal 'twenty four I mean, we haven't given any guidance yet on that.

We'll probably do that after the next quarter when we start talking a lot more about fiscal 'twenty four but.

I think it is worth pointing out a little bit about how this is going to work just so that you all understand how the model works.

We are part of that too so the revenues the costs. The brand expands all of that will be reflected on the Coca Cola company's.

<unk> not on Brown Forman, we won't be selling whiskey bulk whiskey almost the equivalent of concentrated in their terms.

And so that's the revenue impact on us, but youre not going to see the full P&L impact in a country like Mexico, turning to the U S. If you look at the U S and it is going to be also similar for Germany, and Australia, which are our two really big RTD markets, we're going to handle the manufacturing and the distribution and so U S.

Australia, Germany, you will see the revenues the brand expense the cost all in our P&L. So it's.

It's difficult when you try to consolidate the two to figure out how how is that all total up because it really is going to depend on the balance of sales between all the different markets around the world but.

One way or the other we still feel pretty good about it and we'll talk more about that as I say in the next quarter.

And then that's it.

And then from the investment perspective, it answered the second part of your question. This is about as often mentioned jointly being funded between Brown Forman and the Coca Cola company and that joint advertising.

We will also have a halo effect over the entire Jack Daniel's family of brands kind of as we think amplifying the trademark.

Perfect. That's helpful clarification. Thank you so much.

Yeah.

Thank you.

One moment please for our next question.

Our next question will come from Andrea Teixeira of Jpmorgan. Your line is open.

Hey, Good morning. This is drew Levine on for Andrea Thank you for taking our questions.

I wanted to ask on the gross margins it doesn't seem like the cost headwinds really abated much at all.

Although I think last quarter, there was a pretty sizable headwind due to mitigation efforts to get the product on shelf. In addition to inflation. Obviously, so could you talk about where you are seeing continued pressure on that cost line and how you see that evolving over the coming quarters, because I would think.

Most of those mitigation efforts where were in the past, but maybe it doesn't appear so any color there would be helpful. Thank you.

Okay, and I'll take that in two parts of where we are in a year to date and then stepping back from our full year outlook.

<unk> impact that we had in the fourth quarter last year.

Continue to say, we're always fortunate with our premium and Super premium portfolio of brands that can handle the pressure that we've been facing over these last quarters.

As you can see on slide seven we did contract 170 basis points ending at 58, four that price mix positively impacted gross margin by 200 basis points.

This increases across our portfolio led largely by Jack Daniel's, Tennessee whiskey than.

And then we have the removal of a positive impact of the removal of the European Union and the UK tariffs on American Whiskey, which benefited our gross margin by 170 basis point.

Specifically to your point on Commerce.

Our cost for the year to date was negatively impact of 430 basis points and if those two key drivers, which is the impact of inflation.

We are still seeing largely on most of our commodities does some of that is beginning to ease I'll speak to that in a moment and then energy and fuel as well as for us in our third quarter. We still have in November and December in our third quarter. So we were still expense experiencing.

And then I've already mentioned FX.

It will be a headwind for the full year it negatively impacted us year to date about 120 basis points, but we do see a bit of a benefit.

Benefit as we go into the fourth quarter.

For our full year one of the things we are seeing as it relates to the impact of inflation. When we plan. This year, we planned it for inflation to be higher than our average and in reality, we know it's been well above that really on our commodities in our energy.

Continues to step down it's still above the prior year level, but it is beginning to ease.

Then I'll also note that with glass prices.

So they continue to increase in conjunction with the commodities.

And the inflation on the commodities it takes to build the glass the significant decline in the U S. Natural gas prices will help moderate the expected increases as we enter F. 'twenty four.

And then lastly, as it relates to freight we've been talking about freight transportation logistics.

From an equipment perspective, it will remain in bandwidth and stress that the cost of fuel has been one of the largest drivers of the transportation cost.

And now with the cost of oil that has been volatile we do see that diesel prices are now below their peak as well. So those are three early indicators kind of some of the easing of the inflation that we have seen that really is is still yet ahead of us to come.

Thanks, so much for the color.

Thank you.

Again, one moment please.

Next question.

Our next question will come from.

So what all Bernstein your line is open.

Hi, Thank you good morning, everybody.

Want to stick to that gross margin point, so far we've been talking about what you're seeing at the moment and going into this last quarter could you help us understand any of your expectations for gross margins on the medium term I. Appreciate you might not want to give explicit guidance, but to the extent that you could give us the puts and takes about where you think you can.

Be trending, including calling out maybe where agave prices are that would be very helpful.

And then lastly on your impairment just a follow up on that <unk> brand. One of the reasons you called out were higher interest rates I presume that would impact.

Your entire portfolio when going through that exercise. So could you just give us a little bit more color about your expectations for this brand in particular, how that's changed in the role you see it play in your portfolio going forward. Thank you.

Okay, I will start on a bit more color on the midterm cost Youre correct and we're always excited this time of year to begin thinking about and talking about the next fiscal year, but we will next quarter is when we will provide significantly more detail on that I can say and what the commentary.

We had as with the with our distributor and retailer inventories returning to a more normalized level.

Significant portion of the costs that we have incurred related to.

The expedited shipments of our finished goods into the market. We believe that's going to significantly ease as we as we move forward that's probably.

The best thing that I can say for that today to your comment on agave agave, we continue to be.

We've talked about there is strong demand for the category, but we do see greater supply coming online we are beyond our peak, but we have kind of stabilized around the 28 to 30 pesos per kilo.

And for US specifically, our demand has been.

Very strong so the balance between our internal and external sourcing is for us kind of one of the headwinds we had faced in this year.

But again, we do see that supply coming on as and we'll talk more about that in the next quarter is what we think for the next.

Full year.

And then on Finlandia so yes.

Locate the sizeable impairment charge is not something thats funded and obviously I think you all know it's noncash what happened was it's a combination of things. It's the rising interest rates meant the impairment testing I mean that quickly catches on the impairment testing front and that's what that's the major reason that.

We had to take a second impairment charge on Finlandia. It's also feeling the pressure from higher cost input costs are higher.

And then obviously, Russia, and then not only Russia, but the countries that touch at all around there are all very very weak and so.

It's just been a tough situation as you all know.

The suspension of the business in Russia.

Was the biggest single factor that made it that made it so difficult, but we're going to continue trying to improve the performance of the brand and.

Continuing to fight through what is a very difficult situation.

Very clear thank you.

Okay.

Thank you.

One moment please for our next question.

Okay.

Our next question will come from Stephen powers of Deutsche Bank. Your line is open.

Hey, Thanks, and good morning, everybody.

I just wanted to go back maybe.

Round out the gross margin.

Conversation and the cost conversation I think the commentary you gave around cost pressure year to date.

That's very helpful, but I guess.

What was the question I'm, just trying to I'm trying to untie.

How much of what you've experienced and are experiencing is just the byproduct of general cost pressures kind of industry wide.

I'm sure there's a big part there.

Versus how much of what you've incurred maybe specific to brown Forman just based on the way your supply chain is configured and the reality is there or procurement timing contracting realities I'm just trying to understand how much maybe kind of more unique to you versus versus the industry and if there are things that are more unique to you.

Just if there's any learnings there as you think about the.

But medium to longer term about how you could.

Maybe insulate yourself from some of that volatility again to the extent there is a company specific element there.

Well a few things have happened and when you think about kind of the impact of inflation and supply chain disruption generally speaking two thirds, one third two thirds being inflation.

I mean, I think we've experienced.

From others.

For Us I think we continue to have.

The opportunity, where we have talked about for the last few quarters and we have taken on some costs as it relates to risk mitigation to our supply chain that you have heard us talk about as we went through.

Slide chain challenges related to glass, we were intentional about.

Diversifying our supplier base that always comes at a bit of a cost.

But again.

We thought we think and continue to think it will position us well for the future again for the one third related to supply chain challenges I've already talked to that I think that we are we are moving beyond that as we return our inventory.

To a more normal again, one thing that might be a bit different from us.

Just the percent of inventory, we had at of our business as our aged product that might be a little bit different than than others, but we can.

They can sell it at a different day, but.

Thank you understood.

It wasn't.

You've noticed the last part of your question.

No actually.

Okay on agave I think there might have been a question earlier on just sort of what youre seeing on agave, if you've got any comments there.

Thank you very much.

Thank you.

One moment please for our next question.

Our next question will come from Filippo phenomena.

Of Citibank Your line is open.

Hi, good morning, guys.

I was wondering if you can talk about.

Consumer trends that youre seeing across the world, particularly in terms of putting utilization.

Whether you're seeing any slowdown in your prepared remarks, you sounded still optimistic about the premium edition trend, but on the margin are you seeing any change in consumer behaviors and if you can comment on this topic for your key market looking about the U S Europe and some of your emerging markets. Thank you.

Yes, I'll talk a little bit about the.

Consumer demand.

Look it has still remained very very strong.

You can see just in our top line figures.

I think if you there's a question around premium amortization, which has been happening.

For 20 years has been happening in our industry.

If we go down to the U S market and look about premium amortization, it really <unk> trends spiked a lot during COVID-19. They are returning to a little bit more of a normal man well see but if you look at Tds in the United States. When you take a look at the breakdown by price point Youll still see I'll say super premium ultra premium.

And growing it at a higher rate than say.

Our plane premium, but premium or something down on the standard category so that the.

The story is still true that consumers are premium revising their purchases in spirits and that trend is still strong but it is not the differential between the two is not as strong as it was I'll say a couple of years ago. So.

Explain that right. So youre still seeing the premium trends and just the delta between Super premium and Ultra and then the other price points Down-low has has come down a little bit.

A positive.

The price increases.

We think it's the smart thing to do over the long term and so we're going to continue that trend.

As much as we can and so far we.

We have not seen.

And elasticity that would really make us say you know what I'm not sure. That's the right thing to do we continue to plow forward in.

Think we're getting a better balance between volume and pricing, which is something we very much want.

Got it anything parties, all youre seeing in Europe , and emerging markets, maybe if you can comment on on this vision.

I mean not really.

But I would caution it.

Difficult to take our trends and extrapolate them to a broad read read around the consumers around the world and that has everything to do with the shipment comparisons that were dealing with so if we're only looking at our brands.

No that doesn't really answer your question, but we're just sort of in a unique situation given the volatility that we've seen seen with glass.

Got it thank you I'll pass it on.

Okay.

Thank you.

One moment for our next question.

Our next question will come from Kevin Grundy of Jefferies. Your line is open.

Hey, great. Thanks, good morning, everyone.

Kevin I think useful.

A few questions here just comment if you wouldn't mind have U S business came in relative to your own expectations understanding you certainly run the business longer term I think we understood. We can appreciate that but from a quarterly perspective, how it came in.

Leo you also made comments about normalization of inventory levels I'm, assuming that that commentary sort of holds for U S. As well, but if you could just confirm that and then lastly, just from a consumer demand perspective, maybe just touch on retail takeaway in depletions in the quarter, specifically for the U S and then vacate.

<unk> here as we look out in the intermediate term so that would be helpful. Thanks for all that guys I appreciate it.

Alright, Kevin I'll start it and then.

Add ons.

Want to look.

<unk> percent in the first nine months of the year.

That was essentially expected remember we are plus 11 through the first half and so we knew a slowdown was coming.

And it did it fair that way out it essentially came in.

Relatively close to where we thought there is.

We're back to the same glass availability.

Topic, where the glass became available in the third quarter, we prioritize Jack over the rest of our portfolio is the on premise was also opening and it just was a massive quarter and so.

That comparison had a big impact if you step back and look at Nielsen or NAPCO.

Maybe if it has returned to normal but normal still pretty good.

The U S market and certainly we're seeing stronger rates of growth outside of the United States. So.

I think it's also worth pointing out at least within our own performance, we're doing a little bit better than Tds, which is something that's a goal that we always have out there and.

To be ahead of both Nielsen and NAPCO costly it's been awhile since since we were above it.

Once again, a lot of that because of the glass, but it's nice for our teams to know that they are back ahead of Tds and then I'll just add two things.

All the way back to when we originally plan this fiscal year Youll recall that we plan.

Planned for the beginning of normalization with an outlook of topline organic outlook at mid single digits, which aligns with our long term algorithm that included a cycling the largest impacts of the pandemic and also the absence of our Russia business.

As we've gone through it again all of the prioritization and the.

Strong shipments.

And in our first half we had a five point benefit year over year due to that effort now that we're beginning to lap that very strong comparison of our rebuilding the inventory against the prior year and our markets around the world are beginning to normalize we haven't a benefit of two points. So I think that's worth noting in.

And the other thing I would say in the prepared remarks, we talk about the U S business inventory being back in line and at a normal level at the enterprise level. We continue to make significant progress we continue to see a net increase in distributor inventories at the same time, it's still having.

The strong consumer demand, but.

We still believe as we said last quarter that by the end of this fiscal year, we would kind of be back at from the enterprise perspective, more pretty much normal historical levels of inventory.

Okay very good. Thank you both I appreciate that.

Thank you.

One moment. Please next question.

Yeah.

Our next question will come from Brett Cooper of consumer Edge Research. Your line is open.

Thank you. Good morning, a question for you on distribution of route to market in the U S. One of your competitors move to beer distributors. Many states outside the U S. We're seeing distillers testing alternative routes to market, whether that be through the coke bottling network or selling to growers and with your business building a relationship with the beer distributors in the U S.

Network outside of the U S. I was wondering if you could speak to or assess your route to market potential for changes and if there is an opportunity to supplement your current efforts. Thanks.

Well I'll speak to a little bit at least about the U S changes throughout the market.

We are using raise out in California for our launching of Jack and Cokes. So that's something that is quite a bit different.

But we're still very much in partnership with breakthrough on R&D you see for the most is our largest two partners in the U S in that business.

<unk>.

As you can see through the numbers it remains pretty strong. We also made the change two years ago with perhaps.

What it was that was all about getting with a distributor partner that was able to reach all of these points.

Sure.

Retailers that are able to sell more products.

As Jack Daniel's country cocktails and that has been an enormous.

Two years, something like that so we continue to be pretty agile and try to mix it up and try different changes are different models and different partnerships.

I think overall thats a pretty healthy.

The impact on our business really not even over the last year, but over the last decade, or so it's been a pretty meaningful impact.

Perfect. Thank you.

Thank you.

And one moment. Please next question.

Our next question will come from Lauren Lieberman of Barclays. Your line is open.

Great. Thanks, good morning.

Wanted to ask a sort of backward looking question, but informing the forward. It just that in hindsight, maybe it seems like you had greater supply chain issues or glass constraints and then some of your peers in the industry.

And I'd, just say that based on you know as you've talked through reasons for the gap between your performance and Tds.

Previously in that analysis kind of catching up so.

Just.

Looking backwards to look forward are there changes you're making.

In terms of supply chain relationships with suppliers et cetera.

Or the way that you manage inventory in house, not so much as distributors to make sure that youre not in that position again.

Okay.

Well, we can start with you.

In comparison to Tds again, we've talked we've talked many times move again around how we were impacted and then how we prioritize our brands as Hal.

<unk>.

Based on the opportunities that were available at the time said with the glass supply capacity that we had we wanted to prioritize Jack Daniel's, Tennessee whiskey with the reopening of the on premise.

Quickly thereafter, with our test Woodford reserve to have that brand available and so as we went through that prioritization as well as I've said many times, it's made it very very hard to compare.

Our razor.

<unk> and our takeaway trends compared to Tds now what we have done is again, you've heard me talk about we.

We have done a few things on the supply chain side of our business.

Forecasting and planning demand and then from a cost perspective, we've also.

<unk> costs too.

Diversify our supply chain, specifically around glass supply, but then we've also brought in new tools and learn new ways of expediting our.

Products to market, when and where that's needed.

I think.

We've said this on some prior calls too but.

Or nearly 100% with one partner for glass supply and when you talk about Jack Daniel's and Woodford.

Youre looking at a U S supplier of glass for the.

The world.

When that one supplier began to really struggle it impacted us greatly and we didn't have anywhere else to turn in.

So yes it.

It has taken.

Well, it's been about a year since we in earnest found some other partners and so we are diversifying we're still heavily heavily reliant on that one supplier, but we.

We're trying to diversify that so once again, so we don't get caught in this again, although I must say we are with that same supplier for 100 years and never had any problems before that so it was very much a COVID-19 driven crazy volatile world that caused a lot of these problems.

Okay, Alright, great. Thank you.

Thank you.

And this is all the time, we have allotted for questions.

I will now turn the conference back to Sue Param for closing remarks.

On this international Women's day, we hope you will join us in celebrating the women of Brown Forman and women all around the world with that this concludes our call.

Sure.

This does conclude today's conference call. Thank you all for participating you may now disconnect and have a pleasant day.

Q3 2023 Brown-Forman Corp Earnings Call

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