Q4 2024 Brown-Forman Corporation Earnings Call

June 5, 2024

Operator: Good day, and thank you for standing by. Welcome to Brown Forman's Corporation Fourth Quarter and Fiscal Year 2024 Earnings Results Conference Call. At this time, all participants are in listen-only mode.

Good day, and thank you for standing by.

To grasp on news Corporation fourth quarter and fiscal year 2024 earnings results Conference call.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automatic message advising that your hand is raised. Please note that today's conference is being recorded. I will now hand the conference over to your speaker host for today, Sue Perm, Vice President and Director of Investigations. Sue, please go ahead.

Speaker Change: At this time, all participants on listen only mode.

Speaker Change: After the speaker's presentation, there will be a question and answer session. Just a question during the session you will need to press star one one on your telephone you will then hear an automatic message advising yohan. It's me.

Speaker Change: Note that today's conference is being recorded I will now hand.

Speaker Change: Conference over to your speakers for today, So Carlin Vice President director of Investor Relations.

Speaker Change: Please go ahead.

Susanne J. Perram: Thank you and good morning, everyone. I would like to thank each of you for joining us today for Brown Forman's fourth quarter and fiscal year 2024 earnings call. Joining me today are Lawson Whiting, President and Chief Executive Officer, and Leanne 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.

Thank you and good morning, everyone I would like to thank each of you for joining us today for Brown Forman fourth quarter and fiscal year 2024 earnings call. Joining me today are Lawson Whiting, President and Chief Executive Officer, and Leigh Ann Cunningham Executive Vice President and Chief Financial Officer. This morning.

Susanne J. Perram: 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 statements, 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 fourth quarter and fiscal year 2024, in addition to posting presentation materials that Lawson and Leanne will walk through momentarily.

Speaker Change: 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.

Speaker Change: 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.

Susanne J. Perram: 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 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 reports filed with the Securities and Exchange Commission.

Speaker Change: Morning, We issued a press release containing our results for the fourth quarter and fiscal year 2024. In addition to posting presentation materials that Lawson and 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.

Speaker Change: <unk> of the risk factors 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 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.

Susanne J. Perram: During this call, we will be discussing certain non-GAAP financial measures. These measures are reconciliations 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 in the press release and investor presentation. With that, I would like to turn the call over to Lawson.

Speaker Change: Both 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 in the press release and Investor presentation with that I would like to turn the call over to Lawson.

Lawson E. Whiting: Thank you, Sue, and good morning, everyone. Thank you for joining us today as we share Brown Forman's Fiscal 2024 results. Before diving into the details, I wanted to provide a few high-level comments on our performance and my perspectives on the year. Brown Forman is a 154-year-old company, so we have been through periods of complexity and uncertainty in the past. We understand what it means to be resilient.

Lawson: Thank you Sue and good morning, everyone. Thank you for joining us today as we share Brown Forman fiscal 2024 results before diving into the details I wanted to provide a few high level comments on our performance in my perspectives on the year Brown Forman is a 154 year old company. So we have been through periods of complexity and uncertainty in the past we.

Lawson: Stand what it means to be resilient, we know how to navigate short term challenges while remaining focused on our long term strategy fiscal 2024 has certainly been a challenging year, because we're still operating in a highly dynamic environment, while our business is not immune to the impacts of industry and macroeconomic headwinds Brown Forman and its people have remained agile focused.

Lawson E. Whiting: We know how to navigate short-term challenges while remaining focused on our long-term strategy. Fiscal 2024 has certainly been a challenging year as we're still operating in a highly dynamic environment. While our business is not immune to the impacts of industry and macroeconomic headwinds, Brown Forman and its people have remained agile, focused, and committed to the long-term growth of our brands and of our business. There is certainly a lot of complexity to our results, which we will walk you through momentarily.

Lawson: And committed to the long term growth of our brands and of our business. There is certainly a lot of complexity to our results, which we will walk you through momentarily. However, when you consider our depletion based results, which we believe represents the true health of our business. We're pleased with our fiscal 2020 for performance as it is in line with our long term growth expectations well that's.

Lawson E. Whiting: However, when you consider our depletion-based results, which we believe represents the true health of our business, we're pleased with our Fiscal 2024 performance as it is in line with our long-term growth expectations. Now, that statement may surprise some of you.

Lawson E. Whiting: This past fiscal year was greatly impacted by changes in consumer, retail, and distributor inventories. We believe our brands remain healthy, we're in the right categories and price points, and we're confident in the outlook for our, So let's discuss all of this in greater detail. Throughout the year, we've been using the word normalization as we lapped the impact of the supply chain challenges and the rebuilding of inventory in the prior year, as well as consumers getting back to historical consumption patterns. We expected our organic results to moderate in fiscal 2024 after two-plus years of double-digit growth. However, as we moved through the year, conditions changed.

Lawson: Statement may surprise some of you. This past fiscal year was greatly impacted by changes in consumer retail and distributor inventories. We believe our brands remain healthy we're in the right categories and price points and we're confident in the outlook for our business. So lets discuss all of this in greater detail throughout the year, we've been using the word norm.

Lawson: Amortization as we lap the impact of the supply chain challenges and the rebuilding of inventory in the prior year as well as consumers getting back to historical consumption patterns, we expected our organic results to moderate in fiscal 2024. After two plus years of double digit growth. However, as we move through the year conditions changed consumers faced higher inflation an increase.

Lawson E. Whiting: Consumers faced higher inflation and increased interest rates that made them, as well as distributors and retailers, reconsider when and how they made purchases. In this environment, our fiscal 2024 results were below our expectations, with organic net sales declining 1% and organic operating income decreasing 2%. And this is where it gets particularly complex and potentially confusing, so thank you for allowing me to get into the weeds here a bit. As seen in Schedule D, the estimated net change in distributor inventory had a very significant influence on our results this year, reducing our organic net sales by 6% and operating income by 14%.

Lawson: Interest rates that made them as well as distributors and retailers reconsider when and how they made purchases in this environment. Our fiscal 2024 results were below our expectations with organic net sales declining 1% and organic operating income decreasing 2% and this is where it gets particularly complex and potentially confusing.

Lawson: So thank you for allowing me to get into the weeds here, but as seen in schedule D. Estimated net change in distributor inventory had a very significant influence on our results this year, reducing our organic net sales by 6% and operating income by 14%. The scale of this impact is significant when compared to any other time prior to the <unk>.

Lawson E. Whiting: The scale of this impact is significant when compared to any other time prior to the pandemic, as the estimated net change in distributor inventory has historically only impacted organic results by one or two points in any given year. The sizable difference in fiscal 2024 between shipments and depletions was driven by several factors converging at one time.

Lawson: <unk> is the estimated net change in distributor inventory has historically only impacted organic results by one or two points in any given year. The sizeable difference in fiscal 2024 between shipments and Depletions was driven by several factors converging at one time. This includes the tough comparison against the rebuilding of distributor inventories in fiscal 2023 related to the.

Lawson E. Whiting: This includes the tough comparison against the rebuilding of distributor inventories in fiscal 2023 related to the glass and supply chain challenges, along with the more recent changes in distributor and retail ordering patterns. We found that the timing and size of orders have fluctuated from their historical patterns to adjust for higher interest rates and moderating consumer demand. We believe our performance is best captured by factoring in the impact of the estimated net change in distributor inventories, which is what I referred to earlier as our depletion-based results. These depletion-based results, which capture the sale of our brands from distributors to retailers, are the way we manage our business internally within Brown Forman and the way we incentivize our leaders.

Lawson: <unk> and supply chain challenges along with the more recent changes in distributor and retail ordering patterns. We found that the timing and size of orders has fluctuated from their historical patterns to adjust for higher interest rates and moderate in consumer demand. We believe our performance is best captured by factoring in the impact from the estimated net change in distributor inventories, which.

Lawson: What I referred to earlier as our depletion based results. These depletion based results, which capture the sale of our brands from distributors to retailers is the way, we manage our business internally within Brown Forman and the way we incentivize our leaders from this perspective, our topline results more closely reflect our longer term trends in our bottom line results were.

Lawson E. Whiting: From this perspective, our top-line results more closely reflect our longer-term trends, and our bottom-line results were particularly strong. For these reasons, we believe the fundamental health of our brands and our business remains solid. We've also been using the word normalization because if we look back over the past five years, which encompasses the numerous impacts of the pandemic, our five-year organic net sales compound annual growth rate is 6%. This is in line with our long-term growth algorithm and demonstrates our strong track record of consistent and sustainable results over the long term.

Lawson: Particularly strong for these reasons, we believe the fundamental health of our brands and our business remains solid we have also been using the word normalization because if we look back over the past five years, which encompasses the numerous impacts of the pandemic. Our five year organic net sales compound annual growth rate of 6%. This is in line with our long term growth algorithm and.

Lawson: Demonstrates our strong track record of consistent and sustainable results over the long term I also want to highlight the 150 basis points of reported gross margin expansion that we delivered in fiscal 2024, we benefited from favorable price mix as we continue to execute our long term pricing strategy, along with our enhanced revenue growth management capabilities.

Lawson E. Whiting: I also want to highlight the 150 basis points of reported gross margin expansion that we delivered in fiscal 2024. We benefited from favorable price mix as we continue to execute our long-term pricing strategy, along with our enhanced revenue growth management capabilities. We also benefited from the growth of our super premium brands. Price mix, along with the absence of supply chain disruption costs in the prior year period, more than offset higher input costs and unfavorable foreign exchange. We're very pleased with our strong reported gross margin expansion and believe we will continue on this path in the coming fiscal year.

Lawson: We also benefited from the growth of our Super premium brands price mix, along with the absence of the supply chain disruption costs in the prior year period more than offset higher input costs and unfavorable foreign exchange. We're very pleased with our strong reported gross margin expansion and believe we will continue on this path in the coming fiscal year now as we did.

Lawson E. Whiting: Now, as we dig into the full results of the fiscal year, I'll start with our top-line performance and share some highlights from our portfolio of brands. Leanne will then provide additional details for fiscal 24 before providing our outlook for fiscal 25.

Speaker Change: Into the full results of the fiscal year I'll start with our top line performance and share some highlights from our portfolio of brands. Leann will then provide additional details for fiscal 'twenty four before providing our outlook for fiscal 'twenty five the main growth drivers of organic net sales for Jack Daniel's, Tennessee, Apple the Jack Daniel's Super premium expressions, new mix and Glenn glass.

Lawson E. Whiting: The main growth drivers of organic net sales were Jack Daniel's Tennessee Apple, Jack Daniel's Super Premium Expressions, Numix, and Glen Glassaw. We haven't talked much about these brands in the past, but they're examples of how the consumer trends of premiumization, convenience, and flavor continue to drive our business. They also illustrate the value and importance of our portfolio evolution and innovation strategy, as well as our continued geographic expansion and route-to-market strategy.

Speaker Change: So we haven't talked much about these brands in the past, but there are examples of how the consumer trends of premium innovation convenience and flavor continues to drive our business. They also illustrate the value and importance of our portfolio evolution and innovation strategy as well as our continued geographic expansion and route to market strategy. The work we've done to build a diversified global.

Lawson E. Whiting: The work we have done to build a diversified global portfolio focused on premium and super premium brands provides us with many opportunities for growth, even in dynamic and challenging times. Jack Daniel's Tennessee Apple was a top performer as the brand delivered very strong double-digit organic net sales growth in its now almost 900,000 9-liter cases.

Speaker Change: Mobile portfolio focused on premium and Super premium brands provides us with many opportunities for growth even in a dynamic and challenging times, Jack Daniel's, Tennessee, Apple was a top performer as the brand delivered very strong double digit organic net sales growth and is now almost 900009 liter cases. The brand was launched in 2019, just prior to the beginning of the.

Speaker Change: The pandemic when the closure of the on premise and supply chain disruptions significantly impacted our ability to build brand awareness, however to supply and logistic challenges eased we were better able to meet consumer demand for the product today, we're seeing strong growth in markets, such as Brazil, and Chile, and we have also continued to introduce the brand into new markets and had a strong launch in south.

Speaker Change: Korea in fiscal 'twenty, four collectively projecting a superpremium expressions also delivered strong double digit organic net sales growth in fiscal 'twenty for this growth was led by Jack Daniel's Sinatra, Jack Daniel's single barrel Rye barrel proof and the newest member of the bonded series, Jack Daniel's bonded Ray our exclusive global travel retail offering Jack.

Lawson E. Whiting: Collectively, the Jack Daniels Super Premium Expressions also delivered strong double-digit organic net sales growth in fiscal 24. This growth was led by Jack Daniels Sinatra, Jack Daniels Single Barrel Rye Barrel Proof, and the newest member of the bonded series, Jack Daniels Bonded Rye.

Lawson E. Whiting: Our exclusive global travel retail offering, Jack Daniels American Single Malt, also contributed to the strong growth. Over the last several years, to meet consumer preferences, we have purposefully premiumized the Jack Daniels family of brands and elevated our whiskey credentials through innovation and specialty launches. This has allowed us to offer both long-term friends of Jack Daniels and new friends the opportunity to explore and discover within the Jack Daniels family. Of course, another trend in beverage alcohol is the continued growth of ready-to-drink beverages. Specifically, Spirit-Based RTDs.

Speaker Change: <unk> American single Malt also contributed to the strong results over the last several years to meet consumer preferences. We are purposefully premium is the Jack Daniel's family of brands and elevated our whiskey credentials through innovation and specialty launches. This allowed us to offer both long term trends of Jack Daniels and new friends the opportunity to explore and discover.

Speaker Change: Within the Jack Daniels family of course, another trend in beverage alcohol is the continued growth of ready to drink beverages, specifically spirit based our Tds. This trend is evident in our fiscal 'twenty four results with new mix, serving as the second largest positive contributor to organic net sales growing to more than 10 million nine liter cases in fiscal 'twenty for the <unk>.

Lawson E. Whiting: This trend is evident in our Fiscal 24 results, with NuMix serving as the second-largest positive contributor to organic net sales, growing to more than 10 million 9-liter cases in Fiscal 24. The brand continued to deliver double-digit organic net sales growth, benefiting from higher pricing and value-share gains in the RTD category, despite a challenging environment in March. The third largest positive contributor to overall organic net sales was Glenglassaw, as the brand's awareness and prestige among whiskey connoisseurs continued to grow. Most notably, Glenglassaw's Sand End was named the 2023 Whiskey of the Year by Whiskey Advocate Magazine.

Speaker Change: <unk> continued to deliver double digit organic net sales growth benefiting from higher pricing and value share gains in the RTD category. Despite a challenging environment in Mexico. The third largest positive contributor to overall organic net sales was one glass off as the brand's awareness in prestige among whiskey common stores continued to grow most notably Glen glass loss.

Speaker Change: Sand and being named the 2023 whiskey of the year by Whisky Advocate magazine and as we've shared over the last couple of quarters. The brand continued to benefit from task sales, particularly in Asia through its old and rare program. The growth from these brands was almost entirely offset by declines in organic net sales from Jack Daniel's, Tennessee, Whiskey, Jack Daniel's, Tennessee Whiskey.

Lawson E. Whiting: And as we've shared over the last couple of quarters, the brand continued to benefit from cask sales, particularly in Asia, through its old and rare program. However, the growth from these brands was almost entirely offset by declines in organic net sales from Jack Daniel's Tennessee Whiskey. Jack Daniel's Tennessee Whiskey declined 5%, led by lower volumes in Japan as we transitioned to owned distribution, the United States due to slowing consumer demand, and the United Arab Emirates and Sub-Saharan Africa, both of which had strong comparisons given the significant rebuilding of inventory last year.

Speaker Change: Climbed 5% led by lower volumes in Japan, as we transition to owned distribution, the United States due to slowing consumer demand and the United Arab Emirates, and sub Saharan Africa, both of which had strong comparisons given the significant rebuilding of inventory last year as we shared during our Investor day in March Despite recent short term.

Lawson E. Whiting: As we shared during our Investor Day in March, despite recent short-term headwinds in our industry, we believe Jack Daniel's has a significant runway for growth and are confident in achieving our long-term ambitions. Jack Daniel's remains one of the most iconic brands in the world, with solid brand health and a long-term performance track record with the Jack Daniel's family of brands, growing volume at a 5% compound annual growth rate over the past 5, 10, and 30 year periods.

Speaker Change: Ends in our industry, we believe Jack Daniels is a significant runway for growth and are confident in achieving our long term ambitions. Jack Daniel's remains one of the most iconic brands in the world with solid brand health and our long term performance track record with the Jack Daniel's family of brands growing volume at a 5% compound annual growth rate over the past 510, and 30 year period.

Speaker Change: The fact that the brands five year growth rate is the same as its 30 year growth rate means that it is not slowing down that is impressive for a brand of its size. The Jack Daniel's family of brands has a robust portfolio that expands across multiple occasions price points and geographies and we believe we have strategies and plans in place to engage a new generation of legal drinking age consumers.

Lawson E. Whiting: The fact that the brand's five-year growth rate is the same as its 30-year growth rate means that it is not slowing down, and that is impressive for a brand of its size. The Jack Daniels Family of Brands is a robust portfolio that expands across multiple occasions, price points, and geographies, and we believe we have strategies and plans in place to engage a new generation of legal drinking-age consumers while retaining our core. In addition, we are positioned to capture the global growth of American whiskey as we accelerate the geographic expansion of Jack Daniel's.

Speaker Change: While retaining our core consumers. In addition, we are positioned to capture the global growth of American whiskey as we accelerate the geographic expansion of the Jack Daniel's family of brands, we continue to support the brand's health and growth through it to make it count Global campaign Mclaren Formula one sponsorship and the Jack Daniels and Coca Cola RTD I do.

Lawson E. Whiting: We continue to support the brand's health and growth through the Make It Count global campaign, McLaren Formula One sponsorship, and Jack Daniels and Coca-Cola. However, I do want to acknowledge that the impact of Jack and Coke RTD is difficult to see in our fiscal 24 results, primarily due to the transition to Jack and Coke RTD from our pre-existing Jack and Coke. Even so, we continue to believe Jack & Coke is an iconic brand and a fabulous product and can build a stronger and more global foundation for the Jack Daniels family of companies. Consider, for example, the Jack & Coke RTD grew to 4.5 million 9-liter depletions in over 25 markets around the world in Fiscal 24, of which 2 million of the cases were incremental, leading to more than 120 million cans in consumer hands.

Speaker Change: I want to acknowledge that the impact of Jack and Coke RTD is difficult to see in our fiscal 'twenty four results, primarily due to the transition to Jack and Coke RTD from our preexisting Jack in Cola RTD business, even though we continue to believe Jack and Coke is an iconic brand and a fabulous product and can build a stronger and more global foundation for the Jack Daniel's family of <unk>.

Speaker Change: Brands consider for example, the Jack and Coke are TV grew to $4 5 million nine liter depletions in over 25 markets around the world in fiscal 'twenty, four of which $2 million of the cases were incremental and leading to more than 120 million cans in consumer hands brand investment increased significantly in markets, where we transitioned from and coal and coke with more.

Lawson E. Whiting: Brand investment increased significantly in markets where we transitioned from AnCola to AnCoke, with more than half of the increase contributed by Coca-Cola and a very positive consumer response, with greater than 86% of consumers indicating strong intent to repurchase the Jack & Coke RTD. Jack and Coke was a significant portfolio enhancement for us, as were the additions of Jinmari and Diplomatico. On fiscal 24, Jinmari and Diplomatico were integrated into the Brown Forman portfolio brands, and I'm pleased to say that both brands delivered strong double-digit organic net sales growth.

Speaker Change: Half of the increase contributed by Coca Cola and very positive consumer response with greater than 86% of consumers, indicating strong intent to repurchase Jack and Coke RTD, Jack and Coke was a significant portfolio enhancement for us as with the additions of Genmar and diplomatic go from fiscal 'twenty four genmar in diplomatic over integrated into the Brown Forman.

Speaker Change: Portfolio of brands and I am pleased to say that both brands delivered strong double digit organic net sales growth. These brands have given us scale in Europe and enabled route to consumer changes such as our recent announcement for Italy zoned distribution transition and with these brands Brown Forman owns at least one of the top five brands globally and for strong growth categories.

Lawson E. Whiting: These brands have given us scale in Europe and enabled route-to-consumer changes, such as our recent announcement about Italy's own distribution transition. And with these brands, Brown Forman owns at least one of the top five brands globally in four strong growth categories: Super Premium American Whiskey, Super Premium Tequila, Ultra Premium Gin, and Ultra Premium Rum.

Speaker Change: Super premium American Whiskey Super premium Tequila, Ultra premium gin and ultra premium room. We believe this portfolio evolution alongside product innovation gives us the best opportunity for long term growth and value creation as I close I want to thank my Brown Forman colleagues around the world for their commitment to our company values and their daily efforts to deliver our long.

Lawson E. Whiting: We believe this portfolio evolution, alongside product innovation, gives us the best opportunity for long-term growth and value creation. As I close, I want to thank my Brown Forman colleagues around the world for their commitment to our company values and their daily efforts to deliver our long-term ambitions. Throughout our 154-year history, it has been the strength of our people, the health of our portfolio, and the breadth of our geographic reach that has enabled us to navigate short-term uncertainty and volatility.

Speaker Change: Term ambitions throughout our 154 year history. It has been the strength of our people the health of our portfolio and the breadth of our geographic reach that has enabled us to navigate short term uncertainty and volatility while we experienced a very dynamic operating environment in fiscal 'twenty four we still believe the spirits category and Brown Forman offer attractive growth.

Lawson E. Whiting: While we experienced a very dynamic operating environment in Fiscal 24, we still believe the spirits category and Brown Forman offer attractive growth. We delivered over 60% gross margin and a 30% operating margin while generating strong cash flows with high returns on capital.

Leann: We delivered over 60% gross margin and a 30% operating margin while generating strong cash flows with high returns on capital and we are well positioned to benefit over the long term from the evolution of our brand portfolio and the investments behind our brands and people Leann I will now turn the call over to you to provide more detail on our fiscal 'twenty four.

Leanne Cunningham: And we are well-positioned to benefit over the long term from the evolution of our brand portfolio and the investments behind our brands. Leanne, I'll now turn the call over to you to provide more detail on our fiscal 24 performance and our outlook for fiscal. Thank you, Lawson, and good morning, everyone. As Lawson has thoroughly reviewed our top-line growth and the performance of our brands for the fiscal year, I will share details on our geographic performance, other business results, and our outlook for fiscal 2025.

Leann: <unk> and our outlook for fiscal 2025.

Leann: Thank you Lawson and good morning, everyone and welcome has thoroughly reviewed our topline growth and the performance of our brands for the fiscal year I will share details on our geographic performance other business results and our outlook for fiscal 2025 first from a geographic perspective emerging international markets and the travel retail channel.

Leanne Cunningham: First, from a geographic perspective, emerging international markets and the travel retail channel delivered mid- to high-single-digit organic net sales growth, respectively, which was more than offset by organic net sales declines in the United States and developed international markets. In the United States, organic net sales declined 4%, largely reflecting lower volumes due to a negative 4% impact from an estimated net change in distributor inventory.

Leann: <unk> delivered mid to high single digit organic net sales growth, respectively, which was more than offset by organic net sales declined in the United States and the developed international markets in the United States organic net sales declined 4% largely reflecting lower volumes due to a negative 4% impact from an <unk>.

Leann: The net change in distributor inventory first I'll speak to the significant amount of noise. If you will created by changes in distributor inventories in the U S market for our business this fiscal year.

Leanne Cunningham: First, I'll speak to the significant amount of noise, if you will, created by changes in distributor inventories in the U.S. market for our business this fiscal year, which we have been sharing with you throughout this fiscal year. In our first half, we cycled against the significant inventory rebuild during the same period last year. As we entered our second half, takeaway trends for total distilled spirits, and also for our business, moved below the historical mid-single-digit range as consumer demand slowed.

Leann: We have been sharing with you throughout this fiscal year and our first half we cycled against a significant inventory rebuild during the same period last year as we entered our second half takeaway trends for total distilled spirits and also for our business nib below the historical mid single digit range as consumer demand slowed as can.

Leanne Cunningham: As consumer takeaway remains below its historical range, retailers have adjusted their inventory levels in response to the slower demand and the higher interest rate environment. Distributor inventory levels were largely at normal levels throughout fiscal 2024, with movement to the low end or just below the normal range in our fourth quarter.

Leann: Similar takeaway remains below its historical range retailers have adjusted their inventory levels in response to the slower demand and the higher interest rate environment distributor inventory levels were largely at normal levels throughout fiscal 2024 with movement to the low end or just below the normal range and our fourth quarter, while we.

Leanne Cunningham: While we are on this topic, I will add here that in our outlook, the expectation is that distributor inventory levels will remain consistent with their current levels. Now to turn to what we believe are the more important indicators of the health of our business in this market. While total distilled spirits trends continue to be below their historic norms in the low single-digit range, our portfolio of brands is holding share. Consumer demand for U.S. whiskey, particularly super premium, is strong as U.S. whiskey remained one of the largest contributors to total distilled spirits value growth in Nielsen.

Leann: We're on this topic I'll add here is that in our outlook. The expectation is that distributor inventory levels will remain consistent with their current levels now to turn to what we believe either more important indicators of the health of our business in this market, while total distilled spirits trends continue to be below their historic norms in the low single digit range.

Leann: Our portfolio of brands is holding share consumer demand for U S whiskey, particularly super premium is strong as U S. Whiskey remain one of the largest contributors to total distilled spirits value growth in Nielsen and the whiskey category consumers continue to seek premium ness, which drove the growth in our Super <unk>.

Leanne Cunningham: In the whiskey category, consumers continue to seek premiumness, which drove the growth in our super premium Jack Daniels offerings, such as Jack Daniels Single Barrel Rye Barrel Proof, Jack Daniels Sinatra, and Jack Daniels Bonded Rye, all of which delivered strong growth.

Leann: Premium Jack Daniel's offerings, such as Jack Daniels single barrel Rye barrel praise, Jack Daniel's Sinatra, and Jack Daniel's bonded Ray all of which delivered strong growth. This growth partially offset the decline in Jack Daniels, Tennessee Whiskey volume. In addition, our founding brand old Forester delivered another year.

Leanne Cunningham: This growth partially offset the decline in Jack Daniels Tennessee whiskey volume. In addition, our founding brand, Old Forrester, delivered another year of double-digit organic net sales growth driven by strong consumer demand. However, Woodford Reserve was negatively impacted by an estimated net change in distributor inventory levels.

Leann: A double digit organic net sales growth driven by strong consumer demand. The Woodford reserve was negatively impacted by an estimated net change in distributor inventory levels from a depletion based and takeaway perspective, the brand remains healthy with strong consumer demand in our developed international markets collectively.

Leanne Cunningham: From a depletion-based and takeaway perspective, the brand remains healthy with strong consumer demand. In our developed international markets, collectively, organic net sales declined 5% in the fiscal year and were negatively impacted by 6% due to an estimated net change in distributor inventories. In Germany, our largest developed international market, we have been continuously gaining value share, which drove 7% organic net sales growth. However, growth from Glen Glassell's cast sales in Singapore, the continued launch of Jack Daniels Tennessee Apple in South Korea, and the integration of Diplomatico were more than offset by the decline in Jack Daniels Tennessee whiskey largely related to the route-to-consumer transition in Japan.

Leann: Gannett net sales declined 5% in the fiscal year and was negatively impacted by 6% due to an estimated net change in distributor inventories in Germany, our largest developed international markets, we have been continuously gaining value share, which drove 7% organic net sales growth.

Leann: Finally, Glenn glass of cash sales in Singapore. The continued launch of Jack Daniel's, Tennessee, Apple and South Korea, and the integration of diplomatic were more than offset by the decline in Jack Daniels, Tennessee whiskey largely related to the route to consumer transition in Japan, Japan as one of the worlds largest spirits markets with a.

Leanne Cunningham: Japan is one of the world's largest spirits markets with a significant footprint and a leading position in premium plus whiskey, and we have now transitioned successfully to own distribution on April 1st, 2024, representing the 16th market where we own and operate the distribution of our portfolio. Though there are short-term impacts to our P&L as we increase the ownership of our route-to-market, we believe these investments will lead to unlocking growth for our broader portfolio of brands.

Leann: Second footprint and a leading position in premium plus whiskey and we.

Leann: We have now transitioned successfully to owned distribution on April one 2024, representing the 16th in market, where we own and operate the distribution of our portfolio. So there are short term impacts to our P&L as we increase the ownership of our route to market. We believe these investments will lead to unlocking gratifying.

Leann: Our portfolio of brands the travel retail channel, which has returned to its pre COVID-19 level of 4% of our organic net sales delivered 6% growth driven by strong double digit growth from our Super premium brands, particularly our exclusive global travel retail offering Jack Daniel's American Sangamo.

Leanne Cunningham: The travel retail channel, which has returned to its pre-COVID level of 4% of our organic net sales, delivered 6% growth driven by strong double-digit growth from our super premium brands, particularly our exclusive global travel retail offering, Jack Daniels American Single Malt, along with Woodford Reserve and Glen Glassell. This growth was partially offset by a decline in Jack Daniels Tennessee honey.

Leann: With Woodford reserve and Glenn glass out this growth was partially offset by a decline in Jack Daniels, Tennessee Honey.

Leanne Cunningham: And, to wrap up our geographic commentary with emerging international markets that collectively increased organic net sales by 8% for the fiscal year, despite a 12% headwind from an estimated net change in distributor inventories, which was largely driven by the lumpiness of how the supply chains were refilled in these markets in the second half of the prior year. Jack Daniels Tennessee Apple drove organic net sales growth, most notably in Brazil and Chile, due to our ability to meet strong consumer demand with the return of consistent supply.

Wrapping up our geographic commentary with American International markets that collectively increased organic net sales by 8% for the fiscal year. Despite a 12% headwind from an estimated net change in distributor inventories, which was largely driven by the lumpiness of how the supply chains were resold in these markets in the second half.

Leann: For the prior year, Jack Daniel's, Tennessee, Apple drove the organic net sales growth, most notably in Brazil, and Chile due to our ability to meet the strong consumer demand with the return of consistent supply in Mexico as a last one you mentioned new mix continued to deliver strong double digit growth as the brand continued to benefit from our.

Leanne Cunningham: In Mexico, as Lawson mentioned, Numix continued to deliver strong double-digit growth as the brand continued to benefit from our pricing strategy and gain share of the RTD category. However, this growth was partially offset by declines in El Hemador and Aridura, particularly Aridura Ultra, largely due to the challenging macro environment.

Leann: Pricing strategy and gained share of the RTD category. This growth was partially offset by declines in our hema door and ore Dara, particularly <unk> ultra largely due to the challenging macro environment, Jack Daniel's, Tennessee Whiskey growth was led by Turkey.

Leanne Cunningham: Jack Daniels Tennessee whiskey growth was led by Turkia as momentum in the premium whiskey category continued. Moving to our gross profit growth and gross margin expansion of 150 basis points, for the full fiscal year, reported gross profit increased 1%, with organic growth of 2%.

<unk> momentum in the premium whiskey category continuing.

Leann: Turning to our gross profit growth and gross margin expansion of 150 basis points for the full fiscal year reported gross profit increased 1% with organic growth of 2%. The successful efforts of executing our pricing strategy and reducing cost led to reported gross margin expansion of 150.

Leanne Cunningham: The successful efforts of executing our pricing strategy and reducing costs led to a reported gross margin expansion of 150 basis points, which was in line with our expectations. In total, our favorable price mix and the absence of supply chain mitigation costs more than offset higher input costs and the negative effects of foreign exchange. Now to operating expenses. Our total reported operating expenses increased 1%, with organic increasing 7%, which again was in line with our expectations. The increase in reported operating expenses was driven by increased SG&A expense, advertising expense growth, and the negative effect of foreign exchange.

Leann: Basis points, which was in line with our expectations and total our favorable price mix and the absence of supply chain mitigation costs more than offset higher input costs and the negative effects of foreign exchange now to operating expenses. Our total reported operating expenses increased 1%.

Leanne Cunningham: The increase was largely offset by the absence of a non-cash impairment charge for the Finlandia brand name in the prior year, as well as the absence of post-closing costs and expenses in connection with the acquisitions of Diplomatico and Genmari in the prior year. Our advertising expenses, as we have shared with you throughout the year, had abnormal seasonality due to the phasing of our investments behind the launch of Jack Daniels and Coca-Cola RTD in the first half of the fiscal year that moderated through the year, with reported and organic advertising expense growth of 4% and 2%, respectively, for the fiscal year. Reported SG&A expenses increased 11% in fiscal 2024, led by higher compensation and benefit-related expenses and our commitment to the Brown-Forman Foundation to support the vision of transformative community impact.

Leann: With organic increasing 7%, which again was in line with our expectations. The increase in reported operating expenses was driven by increased SG&A expense advertising expense growth and the negative effect of foreign exchange. The increase was largely offset by the absence of a noncash impairment charge.

Leann: Whether finlandia brand name in the prior year as well as the absence of post closing cost and expenses in connection with the acquisitions of <unk> and Gen. <unk> in the prior year, our advertising expenses as we have shared with you throughout the year had abnormal seasonality due to the phasing of our investments behind the launch of Jack Daniel's <unk>.

Leann: Coca Cola RGD in the first half of the fiscal year that moderated through the year with reported and organic advertising expense growth of 4% and 2% respectively for the fiscal year reported SG&A expenses increased 11% in fiscal 2024 led by higher compensation and.

Leann: And benefit related expenses and our commitment to the Brown Forman Foundation to support division of transformative community impact our organic SG&A expenses grew 7% as we continued to invest behind our people and strategic route to consumer initiatives again, we anticipate that these investments which have.

Leanne Cunningham: Our organic SG&A expenses grew 7% as we continue to invest in our people and strategic route-to-consumer initiatives. Again, we anticipate that these investments, which have short-term impacts on our P&L, will unlock future growth. In total, reported operating income increased 25% and organic operating income declined 2% in fiscal 2024. These results led to a 32% diluted earnings per share increase to $2.14 per share.

Leann: Short term impacts on our P&L will unlock future growth and total reported operating income increased 25% and organic operating income declined 2% in fiscal 2024. These results led to a 32% diluted earnings per share increased to $2 14 per share.

Leanne Cunningham: And lastly, to our fiscal 2025 outlook, we believe our business is continuing its path back towards our longer-term norms following the significant multi-year disruption related to our supply chain, two years of exceptionally high demand, and the current impact of higher inflation and interest rates on the consumer and trade. We remain confident in the strength of our portfolio, which is well-positioned to capitalize on the consumer trend of premiumization that excites existing consumers and convenience and flavor that provides access points to new consumers, along with our pricing strategy and the further globalization of our entire portfolio across vast geographies.

Leann: And lastly to our fiscal 2020 outlook, we believe our business is continuing its path back towards our longer term norms. Following the significant multiyear disruption related to our supply chain to years of exceptionally high demand and the current impact of higher inflation and interest rates on the consumer and trade.

Leann: We remain confident in the strength of our portfolio that is well positioned to capitalize on the consumer trend a premium innovation that excites existing consumers and convenience and flavor that provides access points to new consumers.

Leann: Along with our pricing strategy and the further globalization of our entire portfolio across vast geographies. We expect that the operating environment ahead, we will remain volatile with global macroeconomic and geopolitical uncertainties. In this environment. We are not forecasting significant changes in trade inventories as the impacts.

Leanne Cunningham: We expect that the operating environment ahead will remain volatile with global macroeconomic and geopolitical uncertainties. In this environment, we are not forecasting significant changes in trade inventories as the impacts of inflation and higher interest rates on the behavior of the consumer and trade are expected to continue.

Leann: Inflation and higher interest rates on the behavior of the consumer and trade are expected to continue we do believe we have now experienced the majority of the movement in inventories across the distributor retailer and consumer supply chain and that we will benefit from having a full year of growth from our outstanding new brands of Genmar and deploy.

Leanne Cunningham: We do believe we have now experienced the majority of the movements in inventories across the distributor, retailer, and consumer supply chain and that we will benefit from having a full year of growth from our outstanding new brands of GenMari and Diplomatico. Therefore, we expect organic net sales growth in the 2% to 4% range, driven by our emerging and developed international markets. Similar to fiscal 2024, we expect fiscal 2025 to be a year of two halves.

Leann: Therefore, we expect organic net sales growth in the 2% to 4% range driven by our emerging and developed international markets similar to fiscal 2024, we expect fiscal 2025 to be a year of two halves in our first half on a year over year basis, we will still be comparing against the <unk>.

Leanne Cunningham: In the first half of the year, on a year-over-year basis, we will still be comparing against the strong shipments in a few emerging international markets, as well as lapping stronger shipments associated with the execution of our pricing strategy. We expect the second half of the year to be stronger, which is reflected in our guidance. We believe we will benefit from price mix through the evolution of our portfolio and our revenue growth management activities. And while costs will continue to benefit from lower agave prices, we expect the benefit will be more than offset by the impact of inflation on our input costs and lower production volumes.

Leann: Strong shipments and a few emerging international markets as well as lapping stronger shipments associated with the execution of our pricing strategy. We expect the second half of the year to be stronger which is reflected in our guidance. We believe we will benefit from price mix to the evolution of our portfolio and our revenue growth management.

Leann: <unk> and well costs will continue to benefit from lower agave prices, we expect the benefit will be more than offset by the impact of inflation on our input cost and lower production volumes our outlet for organic operating expenses reflect continued investment behind our brands and our people leading to the growth generally.

Leanne Cunningham: Our outlook for organic operating expenses reflects continued investment in our brands and our people, leading to growth generally in line with our top-line growth. Based on the above, we anticipate organic operating income growth in the 2% to 4% range. We also expect our effective tax rate to be in the range of approximately 21% to 23%. We will continue to fully invest in our business to meet what we believe will be future consumer demand for our brands over the long term. Therefore, for fiscal 2025, we estimate our capital expenditures will be in the range of $195 to $205 million for the full year.

Leann: In line with our topline growth based on the above we anticipate organic operating income growth in the 2% to 4% range. We also expect our effective tax rate to be in the range of approximately 21% to 23%. We will continue to fully invest behind our business to meet what we believe will be the future consumer demand for.

Leann: Our brands over the long term therefore in fiscal 2025, we estimate our capital expenditures will be in the range of $195 million to $205 million for the full year and lastly, as a reminder, in fiscal 2025, we will begin to reflect our equity share of the Doug Horne portfolio.

Leanne Cunningham: And lastly, as a reminder, in fiscal 2025, we will begin to reflect our equity share of the Duckhorn Portfolio's earnings or losses as a line item below the operating income line of our P&L based on the equity method. In summary, we believe we have navigated the highly dynamic operating environment in fiscal 2024, maintaining our growing market share in some of our largest markets, including the U.S. And from a depletion-based perspective, our full-year results came in in line with our expectations and consistent with our long-term growth algorithm. It was great to see many of you in person during our Investor Day in March.

Leann: <unk> earnings or losses is a line item below the operating income line of our P&L based on the equity method in summary, we believe we have navigated the highly dynamic operating environment in fiscal 2020 for maintaining or growing market share in some of our largest markets, including the U S and from a depletion based <unk>.

Leann: Our full year results came in in line with our expectations and consistent with our long term growth algorithm. It was great to see many of you in person during our Investor day in March from there you may recall that we shared that we believe our business is healthy and the issues impacting our topline growth are temporary and not structural which.

Operator: From there, you may recall that we shared that we believe our business is healthy and the issues impacting our top-line growth are temporary and not structural, which we hope we have clearly shared are largely related to changes in inventory levels. We are confident with the support of our 5,700 employees who are incredibly committed to Brown Forman and the opportunities we see for our portfolio of brands and our ability to achieve our fiscal 2025 outlook as well as our long-term ambitions.

Leann: We hope we have clearly shared are largely related to changes in inventory levels. We are confident with the support of our 5700 employees, who are incredibly committed to brown forman and the opportunities we see for our portfolio of brands and our ability to achieve our fiscal 2025 outlook as well as our long term <unk>.

Speaker Change: <unk>. This concludes our prepared remarks, please open the line for questions.

Operator: This concludes our prepared remarks. Please open the line for questions. Thank you. Ladies and gentlemen, to ask a question, you will need to press star 1 1 on your telephone and wait for your name to be announced.

Operator: To withdraw your question, simply press star 1 1 again. Please stand by while we compile the Q&A roster. Now, the first question coming from the lineup: Bryan Spillane with Bank of America.

Speaker Change: Thank you, ladies and gentlemen to ask a question you wanted to Westar one one on your telephone and wait for your name to be announced to withdraw your question simply press Star One again, please standby, while we compile the Q&A roster.

Speaker Change: First question coming from the line of Bryan Spillane with Bank of America. Your line is now open.

Bryan Spillane: Your line is open. Hey, thanks, operator. Good morning, guys. I guess just a couple of quick questions, like probably more clarifications, but I guess the first one, can you give me? You mentioned ingredient costs as, you know, inflationary for next year. Is that like corn?

Thanks, operator, good morning, guys.

Bryan Spillane: I guess just a quick just a couple of quick quick questions, probably more clarifications, but.

Bryan Spillane: I guess the first one.

Bryan Spillane: Can you give me your mentioned ingredient costs as.

Bryan Spillane: Inflationary for next year is that like corn.

Leanne Cunningham: I know we've obsessed so much about agave and barrels, but I just wanted to kind of clarify just what it is that's moving against. Yeah, so Bryan, it's Leanne. And the things that we have going again, as a tailwind for us will be the agave, which we've talked about many times; it's kind of going from that 28 to 30 Mexican pesos per kilo at the high, we've now seen down to as low as nine pesos per kilo in June, depending on the quality of it. And also rain.

Speaker Change: I know, we have obsessed so much about agave and barrels but.

Just wanted to kind of clarify just what it is that that's moving against you.

Speaker Change: Yes, so Brian this land and the things that we have going again as a tailwind for us will be the agave, which we've talked about many times. It has kind of gone from that 28 to 30 Mexican pesos per kilo in at the high <unk>.

Speaker Change: We've now seen down to as low as nine pesos per kilo in June depending on the quality of it and also grain.

Speaker Change: We're continuing to expect lower prices in the shorter term, but still above the pre pandemic averages.

Leanne Cunningham: We're continuing to expect lower prices in the shorter term, but still above the pre-pandemic averages. Where we're seeing some increases are related to our glass, even though we have lower natural gas and diesel prices that are slowing the rate of inflation, we're still expecting that in the U.S., where the vast majority of our glass comes from, it'll be a 2 to 3 percent increase. And then, again, with transportation, that's going to be in the low single digits.

Speaker Change: Where we're seeing some increases are related to our glass, even though we have lower natural gas and diesel prices that are slowing the rate of inflation, we're still expecting that in the U S where the vast majority of our glass comes from it'll be 2% to 3% increase and then again with transportation, that's kind of that's going to be in the law.

Speaker Change: Low single digits. So what will also be what we talked about in our prepared remarks higher inflation on our cost. But then also the cost associated to lower production volumes. That's all about us working to return our to our more normal levels.

Speaker Change: And our working capital on our balance sheet would we've talked about a lot over time it get the commodity costs content continues to be high with made we've talked about adjustments in our infrastructure that we believe will help to offset some of that commodity cost that we still expect it to be high as well.

Leanne Cunningham: So what we'll also be, what we talked about in our prepared remarks, higher inflation on our costs, but then also the costs associated with lower production volumes, that's all about us working to return to our more normal levels of working capital on our balance sheet. Wood, we've talked about a lot over time.

Speaker Change: Thanks, Lee and then Austin, maybe can you just give us a perspective as youre looking forward I guess this year that the category has been soft.

Lawson E. Whiting: And then Lawson, maybe, can you just give us a perspective as you're looking forward, I guess, this year, you know, the category has been soft, is your expectation, in terms of, and I'm really more focused on America Whiskey, is the expectation that the current trends will hold for next year? Do you expect that the category to accelerate? And just to tie that in, Lawson, can you talk a little bit about, I will, one thing I think that's important to hit. Leanne said that a bit in her opening remarks.

Speaker Change: Is your expectation in term.

Speaker Change: Really.

Speaker Change: We're focused on American whiskey.

Speaker Change: Spectation that.

Speaker Change: Current trends.

Speaker Change: Kind of hold for next year do you expect the category to accelerate and.

Speaker Change: And just to tie to that Boston can you talk a little bit about.

Speaker Change: The amount of inventory.

Speaker Change: Industry inventory kind of sitting I guess aging at this point and whether were at risk of like an oversupply situation. We've had that question a couple of times, so it'd be great to sort of get your perspective on it. Thank you.

Speaker Change: Yes.

Brian: Thanks, Brian.

Speaker Change: I mean, a few things one U S whiskey and Tequila, which are our two biggest categories continue to be the healthiest part of Tds.

Speaker Change: That is a good thing, but Tds has been bouncing along in that sort of 1% range now for nine months something like that so.

Speaker Change: It Hasnt really changed a whole lot.

Speaker Change: It's obviously been a tough year for the consumer and a tough year for US one thing I think that's important.

Speaker Change: Hit Li answered it a bit in her.

Speaker Change: Opening remarks.

Lawson E. Whiting: And I think it's the sort of question of the day, is the change structural in some way or another where spirits demand, which, COVID aside, has been in that 4 to 5% range for decades and decades, or is it largely based on timing, really difficult comps, and inventory issues? And I do believe, you know, the big three that everyone talks about, GLP-1s, cannabis, and Gen Z, they are headwinds that But I don't think that really has much, if anything, to do with the current state of the consumer or the current state of the spirits business in the U.S. And the reason I say that is when you look at TDS in, say, Neil's, I mean, it was going along pretty well. And then in late summer and early fall, it fell sharply.

Speaker Change: I think it's the sort of question of the of the day.

Speaker Change: <unk> is the changes is the slowdown structural in some way or another where spirit's demand, which.

Speaker Change: Covid aside was been in that 4% to 5% range for decades, and decades or is it largely based on timing really difficult comps and the inventory issues.

Speaker Change: I do believe.

Speaker Change: The big three that everyone talks about <unk> cannabis and Gen Z.

Speaker Change: They are headwinds that are looming in the long term.

Speaker Change: But I don't think that really has much if anything to do with the current state of the consumer or the current state of the spirits business in the U S and the reason I say that is when.

Speaker Change: You look at Tds.

Speaker Change: So in Nielsen.

Speaker Change: I mean, it was going along actually pretty well and then late summer early fall it fell sharply.

Lawson E. Whiting: And it caught everyone in our industry, including you all. I think everyone got caught up in it and was surprised a bit by it. But I really do believe that it's really driven by inflation for the most part, and then there was a level of demand that got pulled forward during COVID. And that's the consumer element of it that we talked about last quarter. There was a lot on this conference call where consumers had an extra bottle or two sitting in their cabinet at home, and it's taken some time to work through that. And so I'm just not a believer that, you know, things like cannabis have a lot to do with the current state out there.

Speaker Change: Everyone in our industry.

Speaker Change: You all I think everyone got caught up in it.

Speaker Change: And was surprised a bit by it but I really do believe that it is really driven by inflation for the most part and then if there was a level of demand that got pulled forward during COVID-19 and that's the consumer element of it that we talked about last quarter a lot on this conference call, where consumers had an extra bottle or two sitting in their cabinet at home.

Speaker Change: It's taken some time to.

Speaker Change: To work through that and so.

Speaker Change: I'm, just not a believer that.

Speaker Change: Things like cannabis have a lot to do with the current states out there.

Lawson E. Whiting: And if TDS went from five to four and a half to four and you saw this sort of gradual weakening, I would be more worried than I am now based on every trend that we can follow. So, and then your other question about industry whiskey supply; I've seen a few people write things about that in the last few months. So it's something we track internally and have done for a long, long time as part of our planning process.

Speaker Change: <unk> went from five to four five to four and you saw that sort of a gradual weakening.

Speaker Change: That would be quantifying more worried than than I am now based on based on every trend that we can follow them. So and then your other question about industry Whiskey supply, yes, I've seen a few people write things about that in the last few months. So it's something we track internally and have been for for a long long time as part of our planning processes.

Speaker Change: And a lot of it has to do with what you think the demand is going to be going forward. Obviously so.

Speaker Change: For a long long time whiskey wasn't growing in the United States. It has for the last 12 or 13 years, but we went through that 40 year window or it didn't grow at all and so supply and demand were kind of equal I think it depends on what you think the forward looking demand number is going to be but.

Lawson E. Whiting: But we went through that 40-year window where it didn't grow at all, and so supply and demand were kind of equal. I think it depends on what you think the forward-looking demand number is going to be. It doesn't seem to be that far out of line for us.

Lawson E. Whiting: We actually kind of have a different point of view on that than some of the folks that have written about it. I do think it's important to note, too, that the majority of the inventory that is out there is from the largest suppliers. There's a lot that's been written about the number of craft producers that have multiplied many times over in the last, you know, over the last decade. I don't really, that's not really what I'm worried about, but that's not where I think the oversupply, if there is any, is coming from.

Speaker Change: It doesn't seem to be that far out of line for us we actually kind of have a different point of view on that that some of the folks that have written that I do think it's important to note to the majority of the inventory that is out there is from the larger suppliers.

Speaker Change: There's a lot that's been written about the number of craft producers that have multiplied many times over in the last over the.

Speaker Change: Last decade, I don't really that's not really.

Speaker Change: That's not even worried about but that's not where I think the oversupply.

Speaker Change: If there is much is coming from it's the big players.

Lawson E. Whiting: It's the big players. It's in whiskey, it's, you know, who they are. I mean, it's the big players that have to continue to build for long-term growth, and they're behaving rationally for the most part. You know, so I just don't see there being that big. That's very helpful.

Speaker Change: In Whiskey, it's you know who they are I mean, it's the big players.

Speaker Change: That have to continue to build for long term growth and they're behaving rationally for the most part and I think.

Speaker Change: So I just don't see there being that big disconnect between supply and demand.

Lawson E. Whiting: Thanks, Lawson. Thanks, Leanne. Thank you. And our next question coming from the line-up: Nadine Sarwat with Bernstein and Yolanda Salfin. Thank you for taking my question.

Speaker Change: That's very helpful. Thanks, Boston think leann.

Thank you.

Speaker Change: And our next question coming from the line of.

Speaker Change: 19, Starwood with Bernstein. Your line is now open.

Nadine Sarwat: One short term and one long term for me. On the short term, coming back to inventories, obviously, a large headwind in this quarter. Could you talk about how this compares versus your expectations on the last conference call? And what would have been the cause for any difference there?

Speaker Change: Thank you for taking my question, one short term and one long term for me on the short term coming back to inventories, obviously large headwind in this quarter could you talk about how this compared versus your expectations on the last conference call and what would have been the cause for any difference there and a little.

Nadine Sarwat: And a little bit more color on where your inventories are today? I understand the sort of moving parts, but you feel they're fully at the right level, the right size to that right level going forward. And then my long-term question, coming back to the US, you know, what's your best assessment of where underlying spirits net sales growth for the US today is for the industry? Obviously, Nielsen and NASCA, covering some very different channels.

Speaker Change: Bit more color on where your inventories are today I understand the sort of the moving parts, but do you feel there. So when we get the right level right size to that right level going forward and then my long term question coming back to the U S. What's your best assessment of where underlying experienced net sales growth for the U S.

Nadine Sarwat: And what would you need to see, in your opinion, for the industry to get back to mid single digits? Is it a more favorable macro environment for the consumer? Is it something else?

Speaker Change: <unk> today is for the industry, obviously Nielsen not covering some very different channels.

Speaker Change: Or would you need to see in your opinion for the industry to get back to mid single digits is it more favorable macro environment for the consumer is it something else. Thank you.

Leanne Cunningham: Thank you. Thank you, Nadine. And I'll take the inventory question, again kind of pointing to what we have talked about, that our depletion-based results came in in line with our expectations. But first, I'll point you to Schedule B. For fiscal 2024, depletions are ahead of shipments on our full-strength portfolio and even to a greater extent than when we reported in our third quarter call. In the U.S., we know retailers have adjusted their inventory levels in response to the consumer takeaway trends being below their historic mid-single-digit range and with a higher inflation rate environment.

Speaker Change: Thank you Adrienne and I will take the inventory question again kind of pointing to what we have talked about that our depletion delayed based results came in in line with our expectations first I'll point you to schedule will be for our fiscal 2024 Depletions are ahead of shipments on our <unk>.

Speaker Change: Strength portfolio, and even to a greater extent than they than when we reported in our third quarter call.

Speaker Change: In the U S. We now have a retailer.

Speaker Change: Retailers are adjusting their inventory levels in response to the consumer takeaway trends being below their historic mid single digit range and with the higher inflation rate environment.

Leanne Cunningham: We've been talking about for the entire fiscal year that at the distributor level, our distributor inventories have been within that normal, targeted range as we have gone through the majority of this fiscal year. However, in the fourth quarter in the U.S., distributor levels did unexpectedly, for us, drop to the low end or just below their normal, targeted range.

Speaker Change: We've been talking about for the entire fiscal year that at the distributor level, our distributor inventories have been within that normal targeted range as we have gone through the majority of this fiscal year. However in the fourth quarter in the U S. The distributor levels did unexpectedly.

Speaker Change: <unk> dropped to the low end or just below their normal targeted range, while continuing to partner really closely with them as we have been all year.

Leanne Cunningham: We're continuing to partner really closely with them, as we have been all year, probably even more so now. But I will say we do believe we've now experienced the majority of the movement in inventories across the distributor, retailer, and consumer supply chain. And our thoughts on that were in our prepared remarks. We have that built into the guidance that we've provided. And then I'll turn it over to Lawson for the second part of your question.

Speaker Change: Really even more so now than I will say, we do believe we've now experienced the majority of the movement in the inventories across the distributor or retailer and consumer supply chain and our kind of thoughts on that were in our prepared remarks, we have that built into the guidance that we've provided and then I will.

Speaker Change: Turn it over to Lawson for you the second part of your question.

Leanne Cunningham: Yeah, so the question just being a little bit over the longer term, when and what's it going to take, essentially, to get the U.S. market back on track again? You know, it's very difficult to predict when what is going to happen with consumer spending.

Speaker Change: So.

Speaker Change: I'm, just being a little bit over the longer term win win and what's it going to take essentially to get the U S market back on track again.

Speaker Change: It's very difficult to predict.

Speaker Change: Going to happen with consumer spending I mean, the one thing we know for sure is the comps are going to get easier. So.

Lawson E. Whiting: And the one thing we know for sure is that the comps are going to get easier. So not only ours, but even in the Nielsen number world, which, as I mentioned earlier, that sort of August, September fall off, you know, we're coming up upon that. And so I hate talking about easier comps, but the reality is that they will ease up.

Speaker Change: Even not only ours, but even in the Nielsen number of world.

Speaker Change: As I mentioned earlier that sort of August September falloff will coming up upon that and so.

Lawson E. Whiting: I do believe, given partially the way you call it underlying or depletion-based results, are better than shipments. This largely is an inventory correction issue that includes the consumer. As we said just a minute ago, the consumer's got to work through it. It's the bottles that are sitting at home and, You know, we talked about this on the last call, and I know a few of you did some analysis on this.

Speaker Change: I hate talking about easier comps, but the reality is that they will ease up.

Speaker Change: I do believe given partially the way you call it underlying our depletion based results.

Speaker Change: Our better than shipments this largely as an inventory correction issue.

Speaker Change: Includes the consumer so we said just a minute ago the consumers got to work through it.

Speaker Change: The bottles that are sitting at home.

Speaker Change: We talked about this on the last call and I know a few of you all did some analysis on this.

Lawson E. Whiting: And sort of agreed, I think, with our statements that it was going to take about a year to work through that consumer inventory, and so we're coming up on that year-lapping period in a few months. You know, it's difficult to predict, and consumer spending is going to need to improve across all CPJs, not just spirits. I mean, the consumer's been hurt everywhere, but if you pinned me down and said, what do you really think, I think we would say that sometime in the fall or into the winter that... Transworld.

Speaker Change: Sort of agreed I think with our.

Speaker Change: Statements that it was going to take about a year to work through that consumer inventory and so we're coming up on that year lapping period in a few months so.

Speaker Change: It's difficult to predict and consumer spending is going to need to eat.

Speaker Change: Improve across all CPG is not even just spirits I mean, the consumer has been heard everywhere. So.

Speaker Change: Yes.

Speaker Change: If you pin me down and said what do you what do you really think I think we would say that sometime in the fall or into the winter that.

Speaker Change: Trends will improve.

Lawson E. Whiting: And then the only thing I'll add is, and we've said it in our prepared remarks again, but just to emphasize it, in the US and some of our other key markets, we have been able to maintain market share in this volatile environment. So we feel good about all the noise that's in the system that our brands are maintaining market share in the marketplace. Okay. Thank you very much.

Speaker Change: And then the only thing I'll add is and we've said it in our prepared remarks again, but just to emphasize it.

Speaker Change: Are you asking some of our other key markets, we have been able to maintain market share in this volatile environment. So we feel good about with all the noise. That's in the system that our brands are maintaining the share.

Speaker Change: In the marketplace.

Speaker Change: Understood. Thank you very much.

Yes.

Lawson E. Whiting: Thank you. And our next question comes from the line of Robert Moskow with TD Cowen. Your line is open. Hi, this is Seamus Cassidy on behalf of Robert Moskow.

Speaker Change: Thank you.

Speaker Change: Next question is coming from the line of Robert Moskow with TD Cowen Your line is open.

Seamus Cassidy: Thanks for taking the question. So given the target that you reiterated at your March Investor Day to double fiscal 22 operating income by fiscal 32, and with fiscal 25 expected to be another below-algo year, I'm curious how you see this trending beyond fiscal 25. And maybe, where do you expect to get operating leverage in the coming years, given that you'll need to invest more this year in terms of advertising and promotion? Thank you. Yeah. Well, look, we always knew that ambition was, you know, was not easy.

Jim viscosity: Hi, This is Jim viscosity onto Rob Moskow and thanks for taking the question.

Speaker Change: So given the target that you reiterated your March Investor day to double fiscal 'twenty, two operating income by fiscal <unk> to fiscal 'twenty five expected to be another below algo year I'm curious how you see this trending beyond fiscal 'twenty and maybe what you expect to get operating leverage in the out years, given that youll need to invest more this year.

Speaker Change: In terms of advertising and promotion. Thank you.

Lawson E. Whiting: Caught lofty a little bit, particularly the last couple of years, or really last year, for the most part, has been difficult. Look, 2032 is still a fair ways away. We still believe in the portfolio, and everything that we are doing has the growth characteristics to deliver on those goals. And so we're not changing our long-term growth algorithm at all. You asked about leverage.

Speaker Change: Yes.

Speaker Change: Well look.

Speaker Change: We always knew that ambition was.

Speaker Change: It was not easy laughter.

Speaker Change: Lofty a little bit.

Speaker Change: Particularly the last couple of years or really last year for the most part has been difficult but.

Speaker Change: Looked at 2032 is still a fair ways away, we still believe in the portfolio and everything that we're doing has the growth characteristics to deliver on those those goals and so all along we're not changing our long term growth algorithm at all and you asked about leverage I know, we are working very hard to get some gross margin.

Lawson E. Whiting: I know we are working very hard to get some gross margin leverage around here, and so I think that's going to take continued work, but continued, you know, you've heard me say before, low and slow. I want to continue that, and everyone is, you know, we're all on board and focused on that right now, and thankfully, even in the current environment that we're in today, we still think that pricing is a lever in all this to continue to generate growth, and it's actually coming true in the numbers, and so a little bit of gross margin improvement with expense controls that make sure that our operating expenses don't grow at a rate greater than our sales.

Speaker Change: Margin leverage around here and so I think that's going to take continued work, but continued you've heard me say before low and slow I want to continue that and everyone is we're all onboard and focused on that right now.

Speaker Change: Thankfully even in the current environment that we're in today, we still think that pricing is a lever and all of us to continue to generate growth.

Really coming through in the numbers and so.

Speaker Change: So a little bit of gross margin improvements with expense controls that make sure that our operating expenses don't grow at a rate greater than our sales I mean thats the model.

Lawson E. Whiting: I mean, that's the model that we believe in and will continue to do, and, you know, I know we're only two years into this 10-year plan, and so there's plenty of time. That's helpful. Thanks.

Speaker Change: That we believe in and we'll continue to do.

Speaker Change: <unk>.

Speaker Change: I know, we're only two years into this 10 year plan and so there is there is plenty of time to accelerate.

Lawson E. Whiting: You've sort of talked about your excitement about a return to annual pricing in the spirits industry, but you also sort of called out inflation as something that's been a headwind for consumers. So I'm curious how you're thinking about that in fiscal 25. Thanks. Well, look, I mean, we kind of already hit that.

Speaker Change: That's helpful. Thanks, and then maybe just one quick follow up you've sort of talked about your excitement about a return to annual pricing in the spirits industry.

Speaker Change: You also sort of called out inflation, something thats been a headwind for consumers. So im curious how youre thinking about that in fiscal 'twenty five.

Lawson E. Whiting: I mean, consumer demand is normalized. We all know we all but, keep in mind, it was two and a half years of double-digit growth where it was difficult to drop all that to the bottom line because of all the things you all know about, but it was outstanding for a period of time. And I think it's just a return to that normalization a little bit. I think if we're honest with ourselves, a year ago, we thought that meant it was just the market was gonna hit, go back to that four to 5% range, and stay there.

Speaker Change: Well look I mean.

Speaker Change: We kind of already hit that I mean, the consumer demand is normalizing.

Speaker Change: But I mean keep.

Speaker Change: Keep in mind, it was $2 five years' worth of double digit growth.

Speaker Change: Sure.

Speaker Change: It was difficult to drop all that to the bottom line because of all the things you all know about but.

Speaker Change: It was outstanding for a period of time and I think it's just a return to that normalization a little better.

Speaker Change: If we're honest with ourselves a year ago, we thought that meant it was just the market was going to hit go back to that 4% to 5% range and stay there and it's taken a year of being below that to sort of correct. This consumer inventory thing so.

Lawson E. Whiting: And it's taken a year of being below that to sort of correct this consumer inventory thing. So, the timing we'll see, but I still feel pretty confident that the long-term outlook for spirits in this country is excellent, and nothing really has structurally changed. Did that answer the question?

Speaker Change: <unk>.

Speaker Change: Yes.

Speaker Change: The timing, we will see but I still feel pretty confident that the long term outlook for spirits. In this country is is excellent and nothing really has structurally changed.

Speaker Change: Okay.

Speaker Change: Does that answer the question.

Speaker Change: Yes. Thank you.

Okay.

Lauren Rae Lieberman: Yes, thank you. Thank you. And our next question, coming from the lineup, is from Lauren Lieberman with Barclays. Your line is open.

Speaker Change: Thank you and our next question coming from the line of <unk>.

Speaker Change: Lauren Lieberman with Barclays. Your line is now open.

Lauren Rae Lieberman: Great. Thanks, so much.

Lauren Rae Lieberman: Completely hounding on what you guys have already been talking about but the notion that the inventory clean up both the distributors consumers retailers and so on is complete it's just very different than what we're hearing from others in the industry. So not taking issue at all with your view loss on the long term health of the <unk>.

Lauren Rae Lieberman: So, not taking issue at all with your view, Lawson, on the long-term health of the industry, that nothing structural has changed, really just getting at the question of the longevity of the correction and the visibility that there is. I'm just curious, you know, what is it that you guys are seeing or your reasons to believe that that inventory correction throughout the, you know, again, distributor, retailer, and consumer landscape is complete? Thanks.

Lauren Rae Lieberman: Industry that nothing structural has changed really just getting at the question of the longevity of the correction in the visibility that there is so.

Speaker Change: Just curious what is it that you guys are seeing or your reason to believe that that inventory correction throughout the.

Speaker Change: Distributor retailer consumer landscape is complete.

Speaker Change: Yes.

Speaker Change: And this goes back to what we've been saying for quite some time now with all the disruption that has been in our system that started with the pandemic and the glass supply challenges logistics challenges, we continue to be in a significantly different position than most of our comp set because of the glass of law Chan.

Speaker Change: Just that we have gotten into we've talked about this over time, how we prioritize brands, we prioritize markets to rebuild and resale our supply chain.

Lawson E. Whiting: And even in 24, there was lumpiness that we had to compare against, especially in the fourth quarter when we were in the prior year when we were reloading our emerging international markets, and we have had to compare against that.

Speaker Change: And even in 'twenty four there was lumpiness that we had to compare against especially in the fourth quarter. When we were in the prior year, where we were reloading our emerging international markets and we have had to comp against that we've come up too in.

Lawson E. Whiting: We've come up to normal inventory levels where others were in a different place and may be coming down. And so we've really felt like we have been there and been closely aligned with our partners in the U.S. distribution system. For us, it really was about that unexpected drop in their inventory levels in the fourth quarter as they got kind of down to absolutely the lowest end and below, just below their targeted inventory range. So that was kind of the myth and what was unexpected.

Speaker Change: We've come up to normal inventory levels, where others were in a different place and may be coming down and so we really felt like we had been there and then closely aligned with.

Speaker Change: Our partners in the U S distribution system.

Speaker Change: For us it really was about that unexpected drop in there in their inventory levels in the fourth quarter as I got kind of down to the absolutely the lowest in the low.

Speaker Change: Just below their targeted inventory range. So that was that was kind of for us the Miss on what was unexpected as we continue to do our work. We continue to believe the vast majority of that movement is now behind us, but we are definitely not saying that all of it is behind us as it relates to the U S. So again.

Lawson E. Whiting: As we continue to do our work, we continue to believe the vast majority of that movement is now behind us, but we're definitely not saying that all of it is behind us as it relates to the U.S. So again, all of that would be included in our guidance, and we understand the distributor side of it and the retailer side of it. It's fairly clean, and we have data again. The biggest question is the health of the consumer itself and when that comes back. And look, everybody's going to have a different opinion on that, and I don't have a great crystal ball any more than you do. We're just...

Speaker Change: All of that would be included in our guidance.

Speaker Change: And understanding the distributor side of it and the retailers.

Speaker Change: Clean and we have data against the biggest question is the health of the consumer itself of when that comes back in.

Speaker Change: Everybody is going to have a different opinion on that and I don't have a great crystal ball any better than you do.

Speaker Change: We're just I won't walk through the consumer example, again, but we do think that the.

Speaker Change: Pantries are are not as full as they were a year ago.

Speaker Change: It just depends a little bit when the consumer comes back and start spending in a big way, particularly also we haven't talked at all about the on premise but.

Speaker Change: On premises weakened over the last year and.

Speaker Change: That doesn't help overall trends either but.

Speaker Change: We think that will start to come back to over the next year.

Lawson E. Whiting: And again, it was just, you know, one small line in our prepared remarks, but the importance of, you know, what we talked about that in our outlook, it just assumes that where our inventories are today, it's just going to continue going into the future. And Leanne, actually, I wanted to clarify on that point. Should we think about that as the absolute level of inventories to distribute inventories or where they should be?

Speaker Change: And then again this is just one small one in our prepared remarks, but the importance of what we talked about that in our outlook. It just assumes that where our inventories are today. It's just it's going to continue.

Speaker Change: Going into the future.

Speaker Change: Okay, and actually I wanted to clarify on that point should we think about that as the absolute level of inventories to our distributor inventories are where they should be so from a growth standpoint, like the next quarter or two that still a headwind to growth, but again like an in app.

Lawson E. Whiting: So from a growth standpoint, like the next quarter or two, that's still a headwind to growth. But again, like at an absolute level, we're at the right point. [inaudible] Yeah, so what we're talking about is kind of here in the US. They're kind of at the low end, or just below their levels.

Speaker Change: Pollute level, we're at the right point, if your father I'm asking yeah.

Lawson E. Whiting: In our guidance, it assumes they're going to stay consistent with where they are right now and that as we move forward, we've talked about in our outlook, we're going to go against in our first half strong shipments. Again, part of it's related to the lumpiness of the shipments in F-24 for the emerging international markets, but then also in the U.S. against as we executed our pricing strategy last year, that would have seen stronger shipments in the first half. And again, all that's built in.

Speaker Change: Yes, so what we're talking about is kind of there in the U S. They are kind of at the low end or.

Speaker Change: Just below their levels in our guidance. It assumes we're going to can say assistant with where they are right now and that.

Speaker Change: As we move forward, we've talked about in our outlook.

Speaker Change: We're going to go against in our first half strong shipments again part of it is related to the lumpiness of the ship.

Speaker Change: Shipments in the prior in F. 'twenty four for the emerging international markets, but then also in the U S against wood as we executed our pricing strategy last year that would have seen stronger shipments in the first half and again all of that's built into the stronger first half as we look at F. 'twenty five.

Lawson E. Whiting: So the stronger first half, as we look at F-25 and, sorry, and then we expect a stronger first and second half in F-25. OK. Okay, got it. Absolute levels, but then the growth rates are something different, but the absolute levels have kind of the point where they need to be. Okay, I'll pass it along.

Speaker Change: <unk>.

Speaker Change: And then we expect a stronger second half in 'twenty five.

Speaker Change: Okay. Okay.

Speaker Change: Okay got it absolutely absolute levels, but then the growth rates or something different but the absolute levels have kind of reached the point, where they need to be.

Lauren Rae Lieberman: I have more, but I'll pass it on. Thank you. Thank you. And our next question, coming from the line of Nick Modi with RBC, your line is open. Thank you. Good morning, everyone.

Speaker Change: Okay.

Speaker Change: Generally pass it along.

Speaker Change: But I'll pass it on thank you.

Speaker Change: Thank you.

Speaker Change: And our next question coming from the line of Nik Modi with RBC. Your line is open.

Sunil Harshad Modi: I had two questions. The first was just, on, you know, Jack Daniels, given all the kind of line extensions over the years and different flavor expressions, you know, have you as an organization figured out how to spend behind the Jack Daniels equity and really kind of provide a halo for all the expressions? Because there's a lot of innovation coming out from other players in some of these areas, and it seems like there's some cannibalization of your business.

Sunil Harshad Modi: Thank you and good morning, everyone.

Sunil Harshad Modi: I have two questions first was just.

Sunil Harshad Modi: On Jack Daniel's given all the kind of line extensions over the years on different flavor expressions have you as an organization figured out how to.

Sunil Harshad Modi: Spend behind the Jack Daniels equity.

Sunil Harshad Modi: And really kind of provide a halo for all the expressions because theres a lot of innovation coming out from other players in some of these areas that seems like there is some cannibalization of your business.

Sunil Harshad Modi: So just wanted to get your perspective on how you think about brand building long term and then just kind of sticking on the Jack Daniels.

Sunil Harshad Modi: Daniel.

Sunil Harshad Modi: Mainline.

Sunil Harshad Modi: Brand.

Speaker Change: We're hearing a lot of promotional activity from our competitor base. Some of that is not tracked in.

Speaker Change: The Nielsen data instant redeemable.

Speaker Change: For example, coupons et cetera. So I just wanted to get your perspective on that and kind of how youre thinking about that embedded in your guidance.

Sunil Harshad Modi: So just wanted to get your perspective on how you think about building a brand long term and then just kind of sticking with Jack Daniels. Mainline brand, we're hearing a lot of, you know, promotional activity from your competitor base, some that's not tracked in the Nielsen or Sarkana data, you know, instant redeemable coupons, etc. So just wanted to get your perspective on that and kind of how you're thinking about that embedded in your guidance. All right, so hit the jack one first.

Speaker Change: Alright, So first hit the JAK Jacqueline first.

Lawson E. Whiting: Well, for one, there's the short term, and then I'll take it a little bit longer term, a little bit higher up. But organic net sales for Jack Daniel's Tennessee Whiskey, so Black Label, were down 5%. But there was an 8% impact from the net change in distributor inventories. And so, don't think that all of a sudden the brand is, you know, in this big decline from a consumer perspective. We still feel very good about that.

Speaker Change: Well for one there's the short term and then I'll take it a little bit longer term, a little bit higher but organic net sales trajectory in east, Tennessee Whiskey Black label was.

Speaker Change: It was down 5%, but there was an 8% impact from the net change in distributor inventories and so.

Lawson E. Whiting: There's just been so much noise, and we're also comparing against, in the prior period, some very high numbers. And so, when you step back and you look at it, say, on a five-year basis, or even longer than that, the brand has maintained the growth rate. I think we just said the same growth rate on a five-year basis, a 10-year basis, a 30-year basis is all plus five, so we're not seeing a long-term slowdown, even in Tennessee whiskey. As we have introduced, we've had, I The health metrics remain stable.

Speaker Change: Let's not do you think that all of a sudden the brand is in this big decline from a consumer perspective, we still feel very good about that theres just been all it has been so much noise in it.

Speaker Change: We're also comparing against in the prior period prior period.

Speaker Change: Some very high numbers and so when you step back and you look at it and say on a five year basis or even longer than that.

Speaker Change: The brand has maintained the growth rate I think we just said the same growth rate on a five year basis 10 year basis on a 30 year basis as all plus five so.

Speaker Change: We're not seeing a long term slowdown even in Tennessee whiskey as we have introduced we've had the flavors. It's been a few years since we've introduced a new one but we have all of these higher in line extensions that we've been doing on the brand that I do think act.

Speaker Change: They drive profit in and of themselves, but they're also a halo over top of the over top of the brand or the franchise altogether.

Speaker Change: The health metrics remain stable.

Speaker Change: And we do believe the Tennessee whiskey is going to normalize over the next year and so.

Lawson E. Whiting: And we just, we do believe that Tennessee whiskey is going to normalize over the next year, and so it's, you know, and then back to the marketing and the brand expenses and the levels that we have and all those kind of things. We've changed up the marketing mix quite a bit over the last few years. I'm very happy with the state of the brand and some of the communications that we're doing now. We're doing a whole lot with McLaren Racing, and that's been fun, and it's been interesting and a different brand building model for the brand, but a very good one, a very, very premium one.

Speaker Change: It is.

Speaker Change: And then back to the marketing and the <unk>.

Speaker Change: <unk> expense in the levels that we have on all of those kinds of things.

Speaker Change: Look we've changed up the marketing mix quite a bit over the last few years, we do well.

Speaker Change: I'm very happy with the state of the brand and some of the communications that we're doing now we're doing a whole lot with Mclaren racing and that's that's been fun and it's been interesting in a different.

Speaker Change: Brand building model for the brand but.

Speaker Change: A very good one of very very premium one and.

Lawson E. Whiting: And so, and as far as absolute span to be able to continue to deliver the kind of growth and momentum we have, we're pretty comfortable with where we are and expect, you know, I think we've said many times before, the brand expense is going to grow at something close to the brand's top line sales. So the combination of Black Label continuing and remaining in growth mode, we will continue to do some innovations.

Speaker Change: So and as far as absolute spend to be able to continue to deliver the kind of growth and momentum we have we're pretty comfortable with where we are and expect.

Speaker Change: I think we've said many times before the brand expense is going to grow in something close to it.

The brand's topline sales. So so the combination of black label continuing in remaining in growth mode. We will continue to do some innovations our Tds are very popular right now and Jack and Coke, while just getting started as something.

Lawson E. Whiting: RTDs are very popular right now, and Jack and Coke, while just getting started, is something we really believe in, and we do have a pipeline of new thoughts on premium offerings. So we remain comfortable overall with that.

Speaker Change: We really believe in and we do have a pipeline of new thoughts on premium offerings and so.

So we remain comfortable overall with that and so and then back now down to the second question that you asked on the U S pricing environment.

Lawson E. Whiting: And so, and then back now to the second question that you asked about the U.S. pricing environment, and maybe you and I, maybe we're looking at the same thing. I'm actually, I've been a little surprised that some of our competitors have said that, because I'm looking at the data, and I'll just throw out some very basic ones, but TDS pricing, on a 52-week basis is 1.2, and on a 13-week basis is 0.8.

Speaker Change: Maybe you and I have and maybe we're looking at the same thing I'm actually have been a little surprised.

Speaker Change: But some of our competitors have said that because im looking at the data.

Speaker Change: Just throw out some very basic ones, but GDS pricing, a 52 week basis is $1 two and a 13 week basis 0.8, so still positive and it's positive across most of the major brands.

Lawson E. Whiting: So, still positive, and it's positive across most of the major brands, particularly American whiskey, which I think, You know, I don't know if I'm surprised at this necessarily, but American whiskey pricing is as strong as any, probably the strongest pricing environment of any of the major categories in the U.S., which, you know, bodes well that rational people are maintaining, you know, maintaining a positive price outlook. And we are definitely part of that; we're in that, you know, just even Woodford, for example, is plus 1.9, and Jack is plus 1.3. So, that low and slow thing is coming back again, particularly in American whiskey. Tequila is a little different, and we'll see how this plays out over the next year or two or three years.

Speaker Change: Particularly American whiskey.

Speaker Change: We don't know if im surprised at this necessarily but American whiskey pricing is as strong as any probably the strongest pricing environment or any of the major categories in the U S which.

Bodes well that rational people or maintaining.

Speaker Change: Maintaining a positive price outlook and we are definitely as part of that were in that just even Woodford. For example is plus one nine and Jack is plus one three so so.

Speaker Change: That low and slow thing comes back again, particularly in American whiskey.

<unk> is a little different.

Speaker Change: We'll see how this plays out over the next year or two or three years. A lot of you have written stuff about agave costs and what's that going to do the promotional environment, but it's not really happening yet it's not coming through in the numbers and you mentioned I think it was a coupon thing or something that actually don't really know about that but I can say that the big tequila.

Lawson E. Whiting: A lot of you have written stuff about agave costs and what that's going to do to the promotional environment, but it's not really happening yet. It's not coming through in the numbers, and you mentioned it. I think it was a coupon thing or something. I actually don't really know about that, but I can say that the big tequila brands, particularly ours and some of the stronger tequila brands, continue to take pretty hefty price increases or they're not discounting.

<unk> brands, particularly hours and some of the stronger Tequila brands continue even over a 13 week basis take pretty hefty price increases or they're not just getting there are a couple of brands that are having a struggle and their weaker and they are starting to discount a little bit more theyre not ours and we hope that.

Lawson E. Whiting: There are a couple of brands that are having a struggle, and they're weaker, and they are starting to discount a little bit more. They're not ours, and we hope that the industry will maintain sort of that rational pricing perspective, but you just don't see it in the numbers now, so I'm not sure where everyone is coming up with this notion that the environment has gotten a lot more promotionally driven. And the one thing I'll add to that is for El Hemador specifically, when you look at brown ants pricing in tequila versus TDS, you will see ours is... definitely higher. And that's all about the repositioning of our El Hemador brand, getting it firmly into that 20 to $29.99 price tier where we see the fastest growth right now.

Speaker Change: No.

Speaker Change: The industry will be maintained in sort of that rational pricing perspective, but you just don't see it through the numbers now so I'm not sure where everyone is coming up with this the notion that the environment has gotten a lot more promotional driven and the one thing I'll add to that is for <unk>, specifically when you look at Brown Forman pricing and tequila versus.

GDS you will see ours is <unk>.

Speaker Change: Definitely higher and Thats all about the repositioning of our L. Hema doorbrand getting it firmly into that 20 to 29 $99 price tier where we see the fastest growth right now.

And we have a new package that will be coming out that supports that in this year. So we're excited about what we'll see from al Hema door as we move forward with that price repositioning work we're doing.

Lawson E. Whiting: So, and we have a new package that will be coming out that supports that this year. So we're excited about what we'll see from El Hemador as we move forward with that price repositioning work we're doing. Thanks so much, everyone.

Speaker Change: Thanks, So much I'll pass it on.

Speaker Change: Okay.

Speaker Change: Thank you.

Lawson E. Whiting: Thank you. And our next question, coming from the line of... Filippo Falorni with City, Elena Soltan, Hey, good morning, everyone. I had a question about the developed international and emerging market business. In previous calls, you've talked about some weakness in some European markets. So maybe you could give an update there, and also on emerging from Mexico. And then for the second half of the year, Leanne, you mentioned the improvement in the second half.

Speaker Change: And our next question coming from the line of.

Paul <unk>: Hello, Paul <unk> with Citi. Your line is now open.

Lawson E. Whiting: What gives you the confidence in the improvement in the second half on the top line? Is it mainly the comps on the inventory side, or are you assuming also an acceleration in category growth in the U.S. and international markets? Thank you.

Speaker Change: Hey, good morning, everyone.

Speaker Change: Had a question on the developed international and emerging market business in the past calls you've talked about some weakness in some European markets. So maybe can you give an update there.

Speaker Change: And also in emerging on Mexico, and then for the second half of the Leon you mentioned the improvement in the second half.

Speaker Change: What gives you the confidence in the improvement in the second half on top line is it mainly the kind of the comps on the inventory side or are you. Assuming also an acceleration in category growth in the U S and international markets. Thank you.

Filippo Falorni: I'll start with your last question first, because it's the most succinct, which is about what we will be comping in the second half of this year and then going to some of the international markets. In the UK, we're continuing to hold our value share in both the on and off trade. The consumer does continue to reduce their spending and the trade downs present in that market. For us, Germany continues, and you can see that in the numbers, continues to be really strong, and the consumer climate there we see as improving.

Speaker Change: I'll start with your last one first because it's unless you think which is about what we will be comping.

Speaker Change: In the second half of this year and then to go to some of the international markets in the U K, we're continuing to hold our value share in both the on and off trade.

Speaker Change: <unk> does continue to reduce their spending and trade downs present in that market for US Germany continues and you can see that in the numbers continues to be really strong and the consumer climate, there we see as improving.

Filippo Falorni: Poland, we're still growing nicely in that market while consumers are remaining cautious with their spending. And then France, it's just a market, I think, which is a consistent theme we've talked about for the entire year, which is they just continue to down trade and have promotional activities. So maybe having the Olympics this summer will change that a bit.

Speaker Change: Poland, we're still growing nicely in that market, while consumers are remaining cautious with their spending and then Francis system market I think is a consistent theme with <unk>.

Speaker Change: Consistent theme, we've talked about for the entire year, which is they just continue to downgrade and having the promotional activity. So maybe they having the Olympics. This summer well will change that a bit and then as it relates to Mexico. This similar trend is what we have we have been reporting which is.

Leanne Cunningham: And then as it relates to Mexico, the similar trend is what we have been reporting, which is the consumer continues to be slowing down in spending. And we've been talking about that in our business, and you can see that through El Jemador and Eridor.

Speaker Change: The consumer continues to be.

Speaker Change: Slowing down in spending and we've been talking about that in our business and you can see that through <unk> and <unk> performance.

Lawson E. Whiting: Brazil, we continue to deliver low single-digit growth there because our Jack Daniel's Tennessee apple is just being really well received by consumers, and it's driving market share gains, and the consumer takeaway there is slowing a bit as well, and it's the competitive environments intensified that we're actually delivering double-digit or strong growth in Brazil. Hey, let me add one point on the UK, just because if you look at Schedule C, it looks kind of ugly on the UK with down 14 percent sales.

Speaker Change: Brazil, we continue to deliver low single digit growth there because our Jack Daniel's, Tennessee Apple.

Speaker Change: It's just being really well received with the consumers and that's driving market share gains and consumer takeaways, there is slowing a bit as well and if the competitive environment intensified that we're actually.

Speaker Change: Delivering double digit or strong growth in Brazil, Hey, Let me, let me add one point on the U K just because if you look at schedule C. It looks kind of ugly on the UK down 14% sales, but very importantly.

Lawson E. Whiting: But very importantly, that is largely driven by Jack and Coke and Jack and Cola. So that was a very big market, a very healthy one, and a good, you know, good business for us for a long time. That is the cleanest example, I guess, of a market where we used to sell directly to ourselves, and now the Coca-Cola company is doing it. So we've had to pull Jack and Cola off the shelves, and now we're selling like we do with all the other markets where Coca-Cola is sold. Effectively selling them concentrate really concentrates them, which obviously has a lot lower sales numbers, so it makes the UK look worse than it really is. Great. Thank you. That's helpful.

Speaker Change: And that is largely driven by Jack and Coke and Jackson Cola. So that was a very big Jackson Cola market.

Speaker Change: But very healthy and a good a good business for us for a long time that is the cleanest example, I guess of a market, where we used to sell it directly ourselves announced the Coca Cola company is doing and so we've had to pull Jackson Cola off the shelves and now we are selling like we do with all the other markets, where Coca Cola Sin.

Speaker Change: Effectively selling them concentrate really.

Speaker Change: Which obviously is a lot lower sales number so it makes it makes the UK look worse than it really is.

Filippo Falorni: And then maybe following up on the gross margin questions previously, is the Q4 decline and performance mainly driven by the lower inventories that you had expected? Have you already started to see some of those costs and inflation headwinds that you mentioned for next year already playing out in Q4? And then thinking about 25, I know you mentioned there are puts and takes, agave favorable, some other commodities, inflationary, but overall, are you still expecting some margin expansion, gross margin expansion, in 2025? Thank you.

Speaker Change: Great. Thank you that's helpful. And then maybe following up on the gross margin questions previously.

Speaker Change: Is the Q4 decline in performance, mainly driven by the lower inventories that you had expected have you already started to see some of those cost inflation headwind that you mentioned for next year already playing out in Q4, and then thinking about 25, I know you mentioned theres puts and takes agave.

Speaker Change: Favorable some other commodities.

Speaker Change: <unk>, but overall are you still expecting some margin expansion gross margin expansion in 2025.

Speaker Change: Thank you.

Leanne Cunningham: So, to answer your first question, the big change in the fourth quarter is really going to be driven by inventory-related costs, as we would call it LIFO, and this is our LIFO calculation on the year-over-year change of what we had in the fourth quarter of 23 compared to the fourth quarter of 24. So, that's an extreme change there. And then, for the rest of our gross margin, we will have that low single-digit favorable price mix, largely driven by price in F-25. But again, that's going to be a little bit more than offset by cost and the work that we will be doing to normalize the working capital on our balance sheet. All right. Very helpful.

So to your first one the big change in the fourth quarter is really going to be driven by inventory related cost as we would call. It LIFO and it's our LIFO calculation on the year over year change of what we had in the fourth quarter of 2003 compared to the fourth quarter of.

Speaker Change: <unk> 24, so that's that's the extreme change there and then related to gross margin expansion for F. 'twenty five just as.

Speaker Change: As we talk about reported gross margin the change in our portfolio as it relates to the addition of Jim Loree and diplomatic go.

Speaker Change: And the divestiture of Finlandia in genomic a chair that will provide us with gross margin expansion from a reported perspective and then for the rest of our gross margin, we will have that low single digit favorable.

Speaker Change: <unk> mix, largely driven by price and F. 'twenty five, but again, that's going to be a little bit more than offset by cost and the work that we will be doing to normalize the working capital and our balance sheet.

Speaker Change: Okay very helpful. Thank you.

Filippo Falorni: Thank you. Thank you. And our next question comes from the line of Peter Grom with UBS. The line is open.

Speaker Change: Thank you.

Speaker Change: Our next question coming from the line of Peter Grom with UBS. Your line is open.

Peter Grom: Thanks, Operator. Good morning, everyone. So, Leanne, maybe building on that last question, you kind of touched on this, you know, a tale of two halves, first half more subdued. Can you maybe provide some parameters in terms of how you're thinking about the first half versus the second half in terms of groceries? And then maybe kind of following up to Filippo's question, it seems like one of the primary reasons you were expecting a more challenging first half was due to the tougher shipments.

Speaker Change: Thanks, operator, and good morning, everyone. So Lee.

Lee: Maybe building on that last question you kind of touched on this a tale of two halves first half more subdued can you maybe provide some parameters in terms of how you're thinking about the first half versus second half in terms of grocery and then maybe kind of following up to <unk> question. It seems like one of the primary reasons, you're expecting a more challenge for us.

Speaker Change: That was due to the tougher shipments, but can you maybe just share what's embedded in the guidance from a category perspective.

Speaker Change: I think you mentioned the improvement in the back half is more comp driven but there just doesn't seem to be a lot of visibility in terms of when this inflection to the historical growth rate occur. So just would be curious whats kind of the assumption embedded in the outlook.

Speaker Change: From a category standpoint thanks.

Speaker Change #100: Well I would say from what.

Speaker Change #100: What we are looking for.

Speaker Change #100: Our growth rate is.

Speaker Change #101: We shared it was really going to be driven by developed and emerging international markets that those will be driving the greatest growth rates to your point. The tale of two halves that we won't have in F. 'twenty, five which because of disruptions we've had.

Speaker Change #101: The tailor to have story now for a couple of years again for us in the first half of 'twenty five it's really going to be about comping against those strong shipments that we had in the first half Conversely, when we just talked about the the lower distributor.

Speaker Change #101: Inventory levels will be comping against that in the second half of this year.

Speaker Change #101: <unk>.

Speaker Change #101: As we when we continue to look at our business. We continue to be on a path back to kind of our long term growth algorithm and F. 'twenty five it'll be another step in that path back to normalization.

Speaker Change #101: But again with what we see right now from the consumer and the trade.

Speaker Change #101: We're just assuming that were pretty consistent with where we are until we get.

Speaker Change #101: Indicators of change as we go through this year.

Speaker Change #102: Got it thanks, so much I'll pass it on.

Speaker Change #102: Okay.

Speaker Change #103: Thank you.

Speaker Change #104: And ladies and gentlemen, that's all the time, we have for our Q&A session I will now turn the call back over to Stuart for any closing comments.

Stuart: Thank you and thank you to locking in land and to everyone for joining us today for Brown <unk> fourth quarter and fiscal year 2024 earnings call. If you have any additional questions. Please contact us as we close I want to acknowledge and anniversary that the company just celebrated yesterday on June 4th $19 24 in the midst of.

Stuart: <unk> Brown Forman relocated to its headquarters in the location that we're sitting in today, marking our century is another milestone in our 150 year four year history, and a reminder of the agility and resilience of this company and its people as we work everyday to ensure that there is nothing better than the market with that this concludes today's call.

Speaker Change #106: Ladies and gentlemen that does conclude our conference for today. Thank you for your participation you may now disconnect.

Stuart: Yeah.

Stuart: [music].

Stuart: Okay.

Stuart: [music].

Stuart: Okay.

Stuart: [music].

[music].

Stuart: So.

Stuart: Hum.

Stuart: [music].

Stuart: Okay.

Stuart: Sure.

Stuart: [music].

Stuart: Okay.

Stuart: [music].

Stuart: Yes.

Stuart: [music].

Stuart: Yes.

Stuart: Okay.

Stuart: Yes.

Stuart: [music].

Stuart: Okay.

Stuart: Yes.

Stuart: Okay.

Stuart: Yes.

Stuart: Okay.

Stuart: Yes.

Stuart: [music].

Stuart: Okay.

Stuart: [music].

Stuart: Okay.

Stuart: [music].

Okay.

Stuart: [music].

Stuart: Okay.

Stuart: [music].

Stuart: Yes.

Stuart: [music].

Stuart: Okay.

Stuart: [music].

Stuart: Right.

Stuart: Yes.

Stuart: [music].

Stuart: Okay.

Stuart: [music].

Stuart: Okay.

Stuart: Yes.

Stuart: [music].

Stuart: Okay.

Stuart: Great.

Stuart: Okay.

Stuart: [music].

Stuart: Sure.

Stuart: Yes.

Stuart: Okay.

Okay.

Stuart: [music].

Stuart: Okay.

Stuart: [music].

Stuart: Yes.

Stuart: [music].

Stuart: Okay.

Stuart: Thank you.

Stuart: [music].

Stuart: Sure.

Stuart: [music].

Stuart: Okay.

Stuart: [music].

Stuart: Yes.

Stuart: Okay.

Stuart: [music].

Stuart: Okay.

Stuart: Sure.

Stuart: [music].

Stuart: Sure.

Stuart: Thank you.

Stuart: Okay.

Stuart: Yes.

Stuart: Okay.

Stuart: [music].

Stuart: Yes.

Stuart: [music].

Stuart: Sure.

Stuart: Okay.

Okay.

Stuart: Sure.

Stuart: Okay.

Stuart: Thanks.

Stuart: Yes.

Stuart: Sure.

Stuart: Thanks.

Stuart: Okay.

Stuart: Yes.

Stuart: Okay.

Stuart: Yes.

Stuart: Thank you.

Stuart: Okay.

Stuart: Yes.

Stuart: Okay.

Stuart: Thank you.

Stuart: Okay.

Stuart: Yes.

Yes.

Stuart: Yes.

Stuart: [music].

Stuart: Okay.

Stuart: Thank you.

Stuart: Okay.

Stuart: Thank you.

Stuart: Yes.

Stuart: Okay.

Stuart: Thank you.

Stuart: Okay.

Stuart: [music].

Stuart: Okay.

Stuart: Thank you.

Stuart: [music].

Stuart: Okay.

Stuart: [music].

Stuart: Okay.

Stuart: Yes.

Stuart: Okay.

Stuart: Thanks.

Stuart: Thank you.

Stuart: Yes.

Stuart: Okay.

Stuart: Yes.

Stuart: [music].

Stuart: Okay.

Stuart: Great.

Stuart: [music].

Yes.

Sure.

Stuart: Yes.

Stuart: Okay.

Stuart: Yes.

Stuart: Okay.

Stuart: Yes.

Stuart: Sure.

Stuart: Okay.

Stuart: Yes.

Stuart: Okay.

Stuart: Great.

Stuart: <unk>.

Stuart: Yes.

[music].

Stuart: Thanks.

Stuart: Okay.

Stuart: Yes.

Stuart: Okay.

Stuart: Thanks.

Stuart: Okay.

Stuart: Yes.

Stuart: Okay.

Stuart: Yes.

Stuart: Okay.

Stuart: Yes.

Stuart: Great.

Stuart: Okay.

Stuart: Yes.

Stuart: [music].

Stuart: Okay.

Stuart: [music].

Stuart: Okay.

Stuart: Yes.

Stuart: Okay.

Okay.

Stuart: Okay.

Stuart: Yes.

Stuart: Okay.

Stuart: Alright.

Stuart: Okay.

Stuart: Yes.

Stuart: Okay.

Stuart: Great.

Stuart: Yes.

Stuart: [music].

Stuart: Okay.

Stuart: [music].

Stuart: Okay.

Stuart: Yes.

Stuart: [music].

Stuart: Okay.

Stuart: [music].

Yes.

Stuart: Okay.

Stuart: Sure.

Stuart: Yes.

Stuart: Okay.

Stuart: Yes.

Stuart: Okay.

Stuart: Yes.

Stuart: Okay.

Stuart: Great.

Stuart: Thank you.

Stuart: Sure.

Okay.

Stuart: [music].

Stuart: Yes.

Stuart: Okay.

Stuart: Yes.

Stuart: Okay.

Stuart: [music].

Stuart: Okay.

Okay.

Stuart: Yes.

Stuart: Okay.

Stuart: Sure.

Stuart: Yeah.

Stuart: Okay.

Stuart: [music].

Stuart: Okay.

Stuart: [music].

Stuart: Yeah.

Peter Grom: But can you maybe just share what's embedded in the guidance from a category perspective? You know, I think you mentioned that the improvement in the back half is more comp driven, but there just doesn't seem to be a lot of visibility in terms of when this inflection to the historical growth rate occurs. So, just to be curious, what's the assumption embedded into the outlook from a category standpoint? Thanks.

Speaker Change #107: Good day, and thank you for standing by welcome to Franco <unk> copper.

Speaker Change #108: <unk> fourth quarter and fiscal year 2024 earnings results Conference call.

Speaker Change #109: At this time, all participants on listen only mode.

Speaker Change #110: After the speaker's presentation, there will be a question and answer session. Just a question. During the session you will need to press star one on your telephone you will then have an automated message advising Yohan <unk> Suisse. Please note that today's conference is being recorded I will now hand, the conference over to your speaker for today.

Leanne Cunningham: Well, I would say from what, What we are looking for in our growth rates is, you know, we shared that it was really going to be driven by developed and emerging international markets, that those will be driving the greatest growth rates. To your point, the tail of two halves that we will have in F-25, which because of disruptions we've had to, you know, have the tail of two halves story now for a couple of years, again, for us in the first half of F-25, it's really going to be about comping against those strong shipments that we had in the first half, conversely, when we just talked about the lower distributor inventory levels, you know, we'll be comping against that in the second half of this year.

Speaker Change #111: Param Vice President director of Investor Relations. Sir Please go ahead.

Leanne Cunningham: As we, you know, when we continue to look at our business, we continue to be on a path back to kind of our long-term growth algorithm. In F25, it'll be another step in that path back to normalization. But again, with what we see right now from the consumer and trade, we're just assuming that we're pretty consistent with where we are until we get some indicators of change as we go through this year. Thanks so much; I'll pass it on.

Param: Thank you and good morning, everyone I would like to thank each of you for joining us today for Brown Forman fourth quarter and fiscal year 2024 earnings call. Joining me today are Lawson Whiting, President and Chief Executive Officer, Liam Cunningham Executive Vice President and Chief Financial Officer. This morning.

Peter Grom: Thank you. And, ladies and gentlemen, that's all the time we have for our Q&A session. I'll now turn the call back over to Sue for any closing comments.

Susanne J. Perram: Thank you, and thank you to Lawson and Leanne, and to everyone for joining us today for Brown Forman's fourth quarter and fiscal year 2024 earnings call. If you have any additional questions, please contact us. As we close, I want to acknowledge an anniversary that the company just celebrated yesterday. On June 4, 1924, in the midst of Prohibition, Brown Forman relocated to its headquarters in the location that we're sitting in today.

Param: 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.

Param: 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.

Speaker Change #113: We issued a press release containing our results for the fourth quarter and fiscal year 2024. In addition to posting presentation materials that Lawson and 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.

Speaker Change #114: <unk> of the risk factors 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 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.

Speaker Change #114: <unk> 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 in the press release and Investor presentation with that I would like to turn the call over to Lachlan.

Susanne J. Perram: Marking a century is another milestone in our 150-year, four-year history, and a reminder of the agility and resilience of this company and its people as we work every day to ensure that there's nothing better in the market. With that, this concludes today's call. Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect. ?? ?? ?? ?? ?? ?? ?? Thanks for watching! ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Good day, and thank you for standing by. Welcome to Brown Forman's Corporation Fourth Quarter and Fiscal Year 2024 Earnings Results Conference Call. At this time, all participants are on listen-only mode.

Sue: Sue and good morning, everyone. Thank you for joining us today as we share Brown Forman fiscal 2024 results before diving into the details I wanted to provide a few high level comments on our performance in my perspectives on the year Brown Forman is a 154 year old company. So we have been through periods of complexity and uncertainty in the past we.

Sue: And what it means to be resilient, we know how to navigate short term challenges while remaining focused on our long term strategy fiscal 2024 has certainly been a challenging year, because we're still operating in a highly dynamic environment, while our business is not immune to the impacts of industry and macroeconomic headwinds Brown Forman and its people have remained agile focused.

Susanne J. Perram: Thank you, and good morning, everyone. I would like to thank each of you for joining us today for Brown Forman's fourth quarter and fiscal year 2024 earnings call. Joining me today are Lawson Whiting, President and Chief Executive Officer, and Leanne 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.

Sue: And committed to the long term growth of our brands and of our business. There is certainly a lot of complexity to our results, which we will walk you through momentarily. However, when you consider our depletion based results, which we believe represents the true health of our business. We're pleased with our fiscal 2020 for performance as it is in line with our long term growth expectations well that's.

Lawson E. Whiting: We know how to navigate short-term challenges while remaining focused on our long-term strategy. Fiscal 2024 has certainly been a challenging year as we're still operating in a highly dynamic environment. While our business is not immune to the impacts of industry and macroeconomic headwinds, Brown Forman and its people have remained agile, focused, and committed to the long-term growth of our brands and of our business. There's certainly a lot of complexity to our results, which we will walk you through momentarily.

Sue: Statement may surprise some of you. This past fiscal year was greatly impacted by changes in consumer retail and distributor inventories. We believe our brands remain healthy we're in the right categories and price points and we're confident in the outlook for our business. So lets discuss all of this in greater detail throughout the year, we've been using the word norm.

Sue: <unk> as we lap the impact of the supply chain challenges and the rebuilding of inventory in the prior year as well as consumers getting back to historical consumption patterns, we expected our organic results to moderate in fiscal 2024. After two plus years of double digit growth. However, as we move through the year conditions changed consumers faced higher inflation an increase.

Sue: Interest rates that made them as well as distributors and retailers reconsider when and how they made purchases in this environment. Our fiscal 2024 results were below our expectations with organic net sales declining 1% and organic operating income decreasing 2% and this is where it gets particularly complex and potentially confusing.

Lawson E. Whiting: We expected our organic results to moderate in fiscal 2024 after two-plus years of double-digit growth. However, as we moved through the year, conditions changed. Consumers faced higher inflation and increased interest rates that made them, as well as distributors and retailers, reconsider when and how they made purchases. In this environment, our fiscal 2024 results were below our expectations, with organic net sales declining 1% and organic operating income decreasing 2%. And this is where it gets particularly complex and potentially confusing, so thank you for allowing me to get into the weeds here a bit.

So thank you for allowing me to get into the weeds here, but as seen in schedule D. The estimated net change in distributor inventory had a very significant influence on our results this year, reducing our organic net sales by 6% and operating income by 14%. The scale of this impact is significant when compared to any other time prior to the pandemic.

Lawson E. Whiting: As seen in Schedule D, the estimated net change in distributor inventory had a very significant influence on our results this year, reducing our organic net sales by 6% and operating income by 14%. The scale of this impact is significant when compared to any other time prior to the pandemic, as the estimated net change in distributor inventory has historically only impacted organic results by one or two points in any given year. The sizable difference in fiscal 2024 between shipments and depletions was driven by several factors converging at one time.

Sue: <unk> is the estimated net change in distributor inventory has historically only impacted organic results by one or two points in any given year. The sizeable difference in fiscal 2024 between shipments and Depletions was driven by several factors converging at one time. This includes the tough comparison against the rebuilding of distributor inventories in fiscal 2023 related to the <unk>.

Lawson E. Whiting: This includes the tough comparison against the rebuilding of distributor inventories in fiscal 2023 related to the glass and supply chain challenges, along with the more recent changes in distributor and retail ordering. We found that the timing and size of orders have fluctuated from their historical patterns to adjust for higher interest rates and moderate changes in consumer demand. We believe our performance is best captured by factoring in the impact of the estimated net change in distributor inventories, which is what I referred to earlier as our depletion-based results. These depletion-based results, which capture the sale of our brands from distributors to retailers, are the way we manage our business internally within Brown Forman and the way we incentivize our leaders.

Sue: Alas and supply chain challenges along with the more recent changes in distributor and retail ordering patterns. We found that the timing and size of orders has fluctuated from their historical patterns to adjust for higher interest rates and moderate in consumer demand. We believe our performance is best captured by factoring in the impact from the estimated net change in distributor inventories, which.

Sue: What I referred to earlier as our depletion based results. These depletion based results, which capture the sale of our brands from distributors to retailers is the way, we manage our business internally within Brown Forman and the way we incentivize our leaders from this perspective, our topline results more closely reflect our longer term trends in our bottom line results were.

Sue: <unk> strong for these reasons, we believe the fundamental health of our brands and our business remains solid we have also been using the word normalization because if we look back over the past five years, which encompasses the numerous impacts of the pandemic. Our five year organic net sales compound annual growth rate of 6%. This is in line with our long term growth algorithm and.

Sue: Demonstrates our strong track record of consistent and sustainable results over the long term I also want to highlight the 150 basis points of reported gross margin expansion that we delivered in fiscal 2024, we benefited from favorable price mix as we continue to execute our long term pricing strategy, along with our enhanced revenue growth management capabilities.

Lawson E. Whiting: I also want to highlight the 150 basis points of reported gross margin expansion that we delivered in fiscal 2024. We've benefited from favorable price mix as we continue to execute our long-term pricing strategy along with our enhanced revenue growth management campaign. We also benefited from the growth of our super premium brands. Price mix, along with the absence of supply chain disruption costs in the prior year period, more than offset higher input costs and unfavorable foreign exchange. We're very pleased with our strong reported gross margin expansion and believe we will continue on this path in the coming fiscal year.

Sue: We also benefited from the growth of our Super premium brands price mix, along with the absence of the supply chain disruption costs in the prior year period more than offset higher input costs and unfavorable foreign exchange. We're very pleased with our strong reported gross margin expansion and believe we will continue on this path in the coming fiscal year now because we did.

Sue: And to the full results of the fiscal year I'll start with our top line performance and share some highlights from our portfolio of brands. Leann will then provide additional details for fiscal 'twenty four before providing our outlook for fiscal 'twenty five the main growth drivers of organic net sales for Jack Daniel's, Tennessee, Apple the Jack Daniel's Super premium expressions, new mix and Glenn glass.

Lawson E. Whiting: The main growth drivers of organic net sales were Jack Daniel's Tennessee Apple, Jack Daniel's Super Premium Expressions, Numix, and Glen Glassaw. We haven't talked much about these brands in the past, but they're examples of how the consumer trends of premiumization, convenience, and flavor continue to drive our business. They also illustrate the value and importance of our portfolio evolution and innovation strategy as well as our continued geographic expansion and route-to-market strategy

Sue: We haven't talked much about these brands in the past, but there are examples of how the consumer trends of premium innovation convenience and flavor continuing to drive our business. They also illustrate the value and importance of our portfolio evolution and innovation strategy as well as our continued geographic expansion and route to market strategy. The work we have done to build a diversified global.

Sue: Mobile portfolio focused on premium and Super premium brands provides us with many opportunities for growth even in a dynamic and challenging times, Jack Daniel's, Tennessee, Apple was a top performer as the brand delivered very strong double digit organic net sales growth and is now almost 909 liter cases. The brand was launched in 2019, just prior to the beginning of the.

Lawson E. Whiting: The brand was launched in 2019, just prior to the beginning of the pandemic when the closure of the on-premise and supply chain disruption significantly impacted our ability to build brand awareness. However, as supply and logistic challenges eased, we were better able to meet consumer demand for the product. Today, we're seeing strong growth in markets such as Brazil and Chile, and we've also continued to introduce the brand into new markets and had a strong launch in South Korea. Collectively, the Jack Daniels Super Premium Expressions also delivered strong double-digit organic net sales growth in fiscal 24. This growth was led by Jack Daniels Sinatra, Jack Daniels Single Barrel Rye Barrel Proof, and the newest member of the bonded series, Jack Daniels Bonded Rye.

Pandemic when the closure of the on premise and supply chain disruptions significantly impacted our ability to build brand awareness, however, supply and logistic challenges eased we were better able to meet consumer demand for the product today, we're seeing strong growth in markets, such as Brazil, and Chile, and we've also continued to introduce the brand into new markets and had a strong launch in south.

Sue: Korea in fiscal 'twenty four collectively the Jack Daniel's Superpremium expressions also delivered strong double digit organic net sales growth in fiscal 'twenty for this growth was led by Jack Daniel's Sinatra, Jack Daniel's single barrel Rye barrel proof and the newest member of the bonded series, Jack Daniel's bonded Ray our exclusive global travel retail offering Jack.

Sue: <unk> American single Malt also contributed to the strong results over the last several years to meet consumer preferences. We are purposefully premium is the Jack Daniel's family of brands and elevated our whiskey credentials through innovation and specialty launches. This allowed us to offer both long term trends of Jack Daniels and new friends the opportunity to explore and discover.

Sue: Within the Jack Daniels family of course, another trend in beverage alcohol is the continued growth of ready to drink beverages, specifically spirit based rtd's. This trend is evident in our fiscal 'twenty four results with new mix, serving as the second largest positive contributor to organic net sales growing to more than 10 million nine liter cases in fiscal 'twenty for the <unk>.

Lawson E. Whiting: This trend is evident in our Fiscal 24 results, with NuMix serving as the second-largest positive contributor to organic net sales, growing to more than 10 million 9-liter cases in Fiscal 24. The brand continued to deliver double-digit organic net sales growth, benefiting from higher pricing and value share gains in the RTD category, despite a challenging environment in March. The third largest positive contributor to overall organic net sales was Glenglassaw, as the brand's awareness and prestige among whiskey connoisseurs continued to grow. Most notably, Glenglassaw Sand End was named the 2023 Whiskey of the Year by Whiskey Advocate Magazine.

<unk> continued to deliver double digit organic net sales growth benefiting from higher pricing and value share gains in the RTD category. Despite a challenging environment in Mexico. The third largest positive contributor to overall organic net sales was Glenn glass off as the brand's awareness in prestige among whiskey comp stores continued to grow most notably Glen glass loss.

Sue: Sand and being named the 2023 whiskey of the year by Whisky Advocate magazine and as we've shared over the last couple of quarters. The brand continued to benefit from task sales, particularly in Asia through its old and rare program. The growth from these brands was almost entirely offset by declines in organic net sales from Jack Daniel's, Tennessee, Whiskey, Jack Daniel's, Tennessee Whiskey.

Sue: <unk>, 5% led by lower volumes in Japan, as we transition to owned distribution, the United States due to slowing consumer demand and the United Arab Emirates, and sub Saharan Africa, both of which had strong comparisons given the significant rebuilding of inventory last year as we shared during our Investor day in March Despite recent short term.

Sue: <unk> in our industry, we believe Jack Daniel's has a significant runway for growth and are confident in achieving our long term ambitions. Jack Daniel's remains one of the most iconic brands in the world with solid brand health and our long term performance track record with the Jack Daniel's family of brands growing volume at a 5% compound annual growth rate over the past 510, and 30 year period.

Lawson E. Whiting: The fact that the brand's five-year growth rate is the same as its 30-year growth rate means that it is not slowing down, and that is impressive for a brand of its size. The Jack Daniels family of brands is a robust portfolio that expands across multiple occasions, price points, and geographies, and we believe we have strategies and plans in place to engage a new generation of legal drinking-age consumers while retaining our core. In addition, we are positioned to capture the global growth of American whiskey as we accelerate the geographic expansion of Jack Daniels.

Sue: The fact that the brands five year growth rate is the same as its 30 year growth rate means that it is not slowing down that is impressive for a brand of its size. The Jack Daniel's family of brands has a robust portfolio that expands across multiple occasions price points and geographies and we believe we have strategies and plans in place to engage a new generation of legal drinking age consumers.

Sue: While retaining our core consumers. In addition, we are positioned to capture the global growth of American whiskey as we accelerate the geographic expansion of the Jack Daniel's family of brands, we continue to support the brand's health and growth through the make it count Global campaign Mclaren Formula one sponsorship and the Jack Daniels and Coca Cola RTD I do.

Lawson E. Whiting: We continue to support the brand's health and growth through the Make It Count global campaign, McLaren Formula One sponsorship, and Jack Daniels and Coca-Cola. However, I do want to acknowledge that the impact of Jack and Coke RTD is difficult to see in our fiscal 24 results, primarily due to the transition to Jack and Coke RTD from our pre-existing Jack and Coke. Even so, we continue to believe Jack & Coke is an iconic brand and a fabulous product and can build a stronger and more global foundation for the Jack Daniels family of companies. Consider, for example, the Jack and Coke RTD grew to four and a half million nine-liter depletions in over 25 markets around the world in fiscal 24, of which two million of the cases were incremental, leading to more than 120 million cans in consumer hands.

Sue: Want to acknowledge that the impact of Jack and Coke RTD is difficult to see in our fiscal 'twenty four results, primarily due to the transition to Jackson Coke RTD from our preexisting Jack in Cola RTD business, even though we continue to believe Jordan Coke is an iconic brand and a fabulous product and can build a stronger and more global foundation for the Jack Daniel's family of <unk>.

Lawson E. Whiting: Brand investment increased significantly in markets where we transitioned from Ancola to Ancoke, with more than half of the increase contributed by Coca-Cola. And very positive consumer response, with greater than 86% of consumers indicating strong intent to repurchase Jack and Coke. Jack and Coke was a significant portfolio enhancement for us, as were the additions of Jinmari and Diplomatico. On fiscal 24, Jinmari and Diplomatico were integrated into the Brown Forman portfolio brands, and I'm pleased to say that both brands delivered strong double-digit organic net sales growth.

Sue: Brands consider for example, the Jack and Coke RTD grew to $4 5 million nine liter depletions and over 25 markets around the world in fiscal 'twenty, four of which $2 million of the cases were incremental and leading to more than 120 million cans in consumer hands brand investment increased significantly in markets, where we transitioned from and coal and coke with more.

Sue: Half of the increase contributed by Coca Cola and very positive consumer response with greater than 86% of consumers, indicating strong intent to repurchase Jack and Coke RTD, Jack and Coke was a significant portfolio enhancement for us as where the additions of <unk> and diplomatic Ho from fiscal 'twenty for Jpmorgan diplomatic over integrated into the Brown Forman.

Sue: Portfolio of brands and I am pleased to say that both brands delivered strong double digit organic net sales growth. These brands have given us scale in Europe and enabled route to consumer changes such as our recent announcement for Italy zone distribution transition and with these brands Brown Forman owns at least one of the top five brands globally and for strong growth categories.

Sue: Super premium American Whiskey Super premium Tequila, ultra premium gin and ultra premium wrong. We believe this portfolio evolution alongside product innovation gives us the best opportunity for long term growth and value creation as I close I want to thank my Brown Forman colleagues around the world for their commitment to our company values and their daily efforts to deliver a long.

Sue: Term ambitions throughout our 154 year history. It has been the strength of our people the health of our portfolio and the breadth of our geographic reach that has enabled us to navigate short term uncertainty and volatility while we experienced a very dynamic operating environment in fiscal 'twenty four we still believe the spirits category and Brown Forman offer attractive growth.

Lawson E. Whiting: While we experienced a very dynamic operating environment in Fiscal 24, we still believe the SPIRTs category and Brown Forman offer attractive growth. We delivered over a 60% gross margin and a 30% operating margin while generating strong cash flows with high returns on capital.

Lam: We delivered over 60% gross margin and a 30% operating margin while generating strong cash flows with high returns on capital and we are well positioned to benefit over the long term from the evolution of our brand portfolio and the investments behind our brands and people Lam I will now turn the call over to you to provide more detail on our fiscal 'twenty four.

Lam: <unk> and our outlook for fiscal 2025.

Lam: Thank you Lawson and good morning, everyone and welcome has thoroughly reviewed our topline growth and the performance of our brands for the fiscal year I will share details on our geographic performance other business results and our outlook for fiscal 2025 first from a geographic perspective emerging international markets and the travel retail channel.

Lam: <unk> delivered mid to high single digit organic net sales growth, respectively, which was more than offset by organic net sales declines in the United States and the developed international markets in the United States organic net sales declined 4% largely reflecting lower volumes due to a negative 4% impact from an <unk>.

Lam: <unk> net change in distributor inventory first I'll speak to the significant amount of noise. If you will created by changes in distributor inventories in the U S market for our business. This fiscal year, we have been sharing with you throughout this fiscal year and our first half we cycled against the significant inventory rebuild during the same period last.

Lam: At year as we entered our second half takeaway trends for total distilled spirits and also for our business move below the historical mid single digit range as consumer demand slowed as consumer takeaway remains below its historical range retailers have adjusted their inventory levels in response to the slower demand and the higher <unk>.

Lam: Interest rate environment distributor inventory levels were largely at normal levels throughout fiscal 2024 with movement to the low end or just below the normal range in our fourth quarter. While we're on this topic I will add here that in our outlook. The expectation is the distributor inventory levels will remain consistent with their current level.

Leanne Cunningham: While we are on this topic, I will add here that in our outlook, the expectation is that distributor inventory levels will remain consistent with their current levels. Now to turn to what we believe are the more important indicators of the health of our business in this market. While total distilled spirits trends continue to be below their historic norms in the low single-digit range, our portfolio of brands is holding share. Consumer demand for U.S. whiskey, particularly super premium, is strong as U.S. whiskey remains one of the largest contributors to total distilled spirits value growth in Nielsen.

Now to turn to what we believe are the more important indicators of the health of our business in this market, while total distilled spirits trends continue to be below their historic norms in the low single digit range. Our portfolio of brands is holding share consumer demand for U S whiskey, particularly super premium as strong as.

Lam: U S whiskey remain one of the largest contributors to total distilled spirits value growth and Nielsen and the whiskey category consumers continue to seek premium ness, which drove the growth in our Super premium Jack Daniel's offerings, such as Jack Daniels single barrel, Rob barrel Crave, Jack Daniel's Sinatra and Jack Daniels.

Lam: Wanted Ray all of which delivered strong growth this growth partially offset the decline in Jack Daniels, Tennessee Whiskey volume. In addition, our founding brand old Forester delivered another year of double digit organic net sales growth driven by strong consumer demand. The Woodford reserve was negatively impacted by an.

Lam: Net change in distributor inventory levels from a depletion based and takeaway perspective, the brand remains healthy with strong consumer demand in our developed international markets collectively organic net sales declined 5% in the fiscal year and was negatively impacted by 6% due to an estimated net change.

Leanne Cunningham: From a depletion-based and takeaway perspective, the brand remains healthy with strong consumer demand. In our developed international markets, collectively, organic net sales declined 5% in the fiscal year and were negatively impacted by 6% due to an estimated net change in distributor inventories. In Germany, our largest developed international market, we have been continuously gaining value share, which drove 7% organic net sales growth. However, growth from Glen Glass Sales Cast Sales in Singapore, the continued launch of Jack Daniels Tennessee Apple in South Korea, and the integration of Diplomatico were more than offset by the decline in Jack Daniels Tennessee whiskey largely related to the route-to-consumer transition in Japan.

Lam: In distributor inventories in Germany, our largest developed international markets, we have been continuously gaining value share, which drove 7% organic net sales growth growth from Glen glass of cash sales in Singapore. The continued launch of Jack Daniel's, Tennessee, Apple and South Korea, and the integration of depth.

Lam: <unk> were more than offset by the decline in Jack Daniels, Tennessee whiskey largely related to the route to consumer transition in Japan, Japan is one of the world's largest spirits markets with a significant footprint and a leading position in premium plus whiskey.

Leanne Cunningham: Japan is one of the world's largest spirits markets with a significant footprint and a leading position in premium-plus whiskey, and we have now transitioned successfully to own distribution on April 1st, 2024, representing the 16th market where we own and operate the distribution of our portfolio.

Lam: We have now transitioned successfully to own distribution on April one 2024, representing the 16th market, where we own and operate the distribution of our portfolio, though there are short term impacts to our P&L as we increase the ownership of our route to market. We believe these investments will lead to unlocking growth for our <unk>.

Leanne Cunningham: Though there are short-term impacts to our P&L as we increase the ownership of our route-to-market, we believe these investments will lead to unlocking growth for our broader portfolio of brands. The travel retail channel, which has returned to its pre-COVID level of 4% of our organic net sales, delivered 6% growth driven by strong double-digit growth from our super premium brands, particularly our exclusive global travel retail offering, Jack Daniels American Single Malt, along with Woodford Reserve and Glen Glass Owl. This growth was partially offset by a decline in Jack Daniels Tennessee Honey.

Lam: <unk> portfolio of brands the travel retail channel, which has returned to its pre COVID-19 level of 4% of our organic net sales delivered 6% growth driven by strong double digit growth from our Super premium brands, particularly our exclusive global travel retail offering Jack Daniel's American Sangamo.

Lam: Along with Woodford Reserve and Glenn glass out this growth was partially offset by a decline in Jack Daniels, Tennessee Honey.

Lam: Wrapping up our geographic commentary with emerging international markets that collectively increased organic net sales by 8% for the fiscal year. Despite a 12% headwind from an estimated net change in distributor inventories, which was largely driven by the lumpiness of how the supply chains were resold in these markets in the second half.

Speaker Change #117: The prior year, Jack Daniel's, Tennessee, Apple drove the organic net sales growth, most notably in Brazil, and Chile due to our ability to meet the strong consumer demand with the return of consistent supply in Mexico as Lachlan mentioned <unk> continued to deliver strong double digit growth as the brand continued to benefit from our <unk>.

Speaker Change #117: Pricing strategy and gained share of the RTD category. This growth was partially offset by declines in our hema door and ore Dura, particularly <unk> ultra largely due to the challenging macro environment, Jack Daniel's, Tennessee Whiskey growth was led by Turkey.

Leanne Cunningham: Jack Daniels Tennessee Whiskey growth was led by Turkia, as momentum in the premium whiskey category continued. Moving to our gross profit growth and gross margin expansion of 150 basis points, for the full fiscal year, reported gross profit increased 1%, with organic growth of 2%.

Speaker Change #117: <unk> momentum in the premium whiskey category continuing.

Speaker Change #117: Going to our gross profit growth and gross margin expansion of 150 basis points for the full fiscal year reported gross profit increased 1% with organic growth of 2%. The successful efforts of executing our pricing strategy and reducing costs led to reported gross margin expansion of 150.

Speaker Change #117: Basis points, which was in line with our expectations and total our favorable price mix and the absence of supply chain mitigation costs more than offset higher input costs and the negative effects of foreign exchange now to operating expenses. Our total reported operating expenses increased 1%.

Leanne Cunningham: The increase was largely offset by the absence of a non-cash impairment charge for the Finlandia brand name in the prior year, as well as the absence of post-closing costs and expenses in connection with the acquisitions of Diplomatico and Genmari in the prior year. Our advertising expenses, as we have shared with you throughout the year, had abnormal seasonality due to the phasing of our investments behind the launch of Jack Daniels and Coca-Cola RTD in the first half of the fiscal year that moderated through the year, with reported and organic advertising expense growth of 4% and 2%, respectively, for the fiscal year. Reported SG&A expenses increased 11% in fiscal 2024, led by higher compensation and benefit-related expenses and our commitment to the Brown-Foreman Foundation to support the vision of transformative community impact.

Speaker Change #117: With organic increasing 7%, which again was in line with our expectations. The increase in reported operating expenses was driven by increased SG&A expense advertising expense growth and the negative effect of foreign exchange. The increase was largely offset by the absence of a noncash impairment charge.

Speaker Change #117: The Finlandia brand name in the prior year as well as the absence of post closing costs and expenses in connection with the acquisitions of <unk> and Gen. <unk> in the prior year, our advertising expenses as we have shared with you throughout the year had abnormal seasonality due to the phasing of our investments behind the launch of Jack Daniel's <unk>.

Speaker Change #117: Coca Cola RGD in the first half of the fiscal year that moderated through the year with reported and organic advertising expense growth of 4% and 2% respectively for the fiscal year reported SG&A expenses increased 11% in fiscal 2024 led by higher compensation and.

Speaker Change #117: Benefit related expenses and our commitment to the Brown Forman Foundation to support division of transformative community impact our organic SG&A expenses grew 7% as we continued to invest behind our people and strategic route to consumer initiatives again, we anticipate that these investments which have.

Speaker Change #117: Short term impacts on our P&L will unlock future growth and total reported operating income increased 25% and organic operating income declined 2% in fiscal 2024. These results led to a 32% diluted earnings per share increased to $2 14 per share.

Leanne Cunningham: And lastly, to our fiscal 2025 outlook, we believe our business is continuing its path back towards our longer-term norms, following the significant multi-year disruption related to our supply chain, two years of exceptionally high demand, and the current impact of higher inflation and interest rates on the consumer and trade. We remain confident in the strength of our portfolio, which is well-positioned to capitalize on the consumer trend of premiumization that excites existing consumers and convenience and flavor that provides access points to new consumers, along with our pricing strategy and the further globalization of our entire portfolio across vast geographies.

Speaker Change #117: And lastly to our fiscal 2020 outlook, we believe our business is continuing its path back towards our longer term norms. Following the significant multiyear disruption related to our supply chain to years of exceptionally high demand and the current impact of higher inflation and interest rates on the consumer and trade.

Speaker Change #117: We remain confident in the strength of our portfolio that is well positioned to capitalize on the consumer trend of premium <unk> that excites existing consumers and convenience and flavor that provides access points to new consumers along with our pricing strategy and the further globalization of our entire portfolio across vast geography.

Speaker Change #117: Fees, we expect that the operating environment ahead, we will remain volatile with global macroeconomic and geopolitical uncertainties.

Speaker Change #117: This environment, we are not forecasting significant changes in trade inventories as the impacts from inflation and higher interest rates on the behavior of the consumer and trade are expected to continue we do believe we have now experienced the majority of the movement in inventories across the distributor or retailer and consumer supply chain.

Speaker Change #117: That we will benefit from having a full year of growth from our outstanding New brands of Gen. Marian diplomatic therefore, we expect organic net sales growth in the 2% to 4% range driven by our emerging and developed international markets similar to fiscal 2024, we expect fiscal 2025 to be a year or two.

Speaker Change #117: And our first half on a year over year basis, we will still be comparing against the strong shipments and a few emerging international markets as well as lapping stronger shipments associated with the execution of our pricing strategy. We expect the second half of the year to be stronger which is reflected in our guidance. We believe we will benefit.

Speaker Change #117: From price mix to the evolution of our portfolio and our revenue growth management activities and well costs will continue to benefit from lower agave prices. We expect the benefit will be more than offset by the impact of inflation on our input costs and lower production volumes our outlook for organic operating expense.

Speaker Change #117: This reflects continued investment behind our brands and our people leading to the growth generally in line with our topline growth based on the above we anticipate organic operating income growth in the 2% to 4% range. We also expect our effective tax rate to be in the range of approximately 21% to 23% we will.

Speaker Change #117: Continued to fully invest behind our business to meet what we believe will be the future consumer demand for our brands over the long term. Therefore in fiscal 2025, we estimate our capital expenditures will be in the range of $195 million to $205 million for the full year and lastly, as a reminder.

Speaker Change #117: Fiscal 2025, we will begin to reflect our equity share of the Doug Horne portfolio's earnings or losses is a line item below the operating income line of our P&L based on the equity method in summary, we believe we have navigated the highly dynamic operating environment in fiscal 2020 for maintaining our <unk>.

Speaker Change #117: <unk> market share in some of our largest markets, including the U S and from a depletion based perspective, our full year results came in in line with our expectations and consistent with our long term growth algorithm. It was great to see many of you in person during our Investor day in March from there you may recall that we shared that we believe our business hotel.

Leanne Cunningham: It was great to see many of you in person during our Investor Day in March. From there, you may recall that we shared that we believe our business is healthy and the issues impacting our top-line growth are temporary and not structural, which we hope we have clearly shared are largely related to changes in inventory levels. We are confident with the support of our 5,700 employees who are incredibly committed to Brown-Foreman and the opportunities we see for our portfolio of brands and our ability to achieve our fiscal 2025 outlook as well as our long-term ambitions.

Speaker Change #117: And the issues impacting our top line growth are temporary and not structural which we hope we have clearly shared are largely related to changes in inventory levels. We are confident with the support of our 5700 employees, who are incredibly committed to brown forman and the opportunities we see for our portfolio of brands.

Speaker Change #117: And our ability to achieve our fiscal 2025 outlook as well as our long term ambitions. This concludes our prepared remarks. Please open the line for questions.

Speaker Change #118: Thank you, ladies and gentlemen to ask a question you wanted to Westar one one on your telephone and wait for your name to be announced to withdraw your question simply press Star One again, please standby, while we compile the Q&A roster.

Speaker Change #119: No first question coming from the line of Bryan Spillane with Bank of America. Your line is open.

Bryan Spillane: Your line is open. Hey, thanks, operator. Good morning, guys. I guess just a couple of quick questions, probably more clarifications, but I guess the first one: can you give me? You mentioned ingredient costs as inflationary for next year. Is that like corn?

Bryan Spillane: Thanks, operator, good morning, guys.

Bryan Spillane: I guess just a quick just a couple of quick quick questions, probably more clarifications, but.

I guess the first one.

Bryan Spillane: Can you give me you mentioned ingredient costs as you know.

Bryan Spillane: Inflationary for next year is that like corn.

Bryan Spillane: I know, we have obsessed so much about agave and barrels but.

Bryan Spillane: Just wanted to kind of clarify just just what it is that's moving against you.

Brian: Yes, so Brian this land and the things that we have going again as a tailwind for us will be the agave, which we've talked about many times is kind of gone from that 28% to 30 Mexican pesos per kilo of at the high <unk>.

Brian: We've now seen down to as low as nine pesos per kilo in June depending on the quality of it and also grain.

Brian: We're continuing to expect lower prices in the shorter term, but still above the pre pandemic averages.

Brian: Where we're seeing some increases are related to our glass, even though we have lower natural gas and diesel prices that are slowing the rate of inflation, we're still expecting that in the U S where the vast majority of our glass comes from it'll be 2% to 3% increase and then again with transportation, that's kind of that's going to be in the low single.

Brian: Double digits. So what will also be what we talked about in our prepared remarks higher inflation on our cost. But then also the cost associated to lower production volumes. That's all about us working to return our to our more normal levels.

Leanne Cunningham: So what will also be what we talked about in our prepared remarks, higher inflation on our costs, but then also the costs associated with lower production volumes, that's all about us working to return to our more normal levels of working capital on our balance sheet. Wood, we've talked about a lot over time.

Brian: Working capital on our balance sheet would we've talked about a lot over time, if the commodity cost content continues to be high with made we've talked about adjustments in our infrastructure that we believe will help to offset some of that commodity cost that we still expect it to be high as well.

Leanne Cunningham: The commodity cost continues to be high. We've made, and we've talked about, adjustments in our infrastructure that we believe will help to offset some of that commodity cost, but we still expect it to be high as well. All right, thanks, Leanne. And then Lawson, maybe, can you just give us a perspective as you're looking forward, I guess, this year, you know, the category has been soft, is your expectation, in terms of, and I'm really more focused on America Whiskey, is the expectation that you know that the current trends will hold for next year?

Alright, Thanks, Lee and then Austin, maybe can you just give us a perspective as youre looking forward I guess this year the category has been soft.

Speaker Change #120: Is your expectation in term and I'm really.

Speaker Change #121: More focused on American whiskey.

Speaker Change #122: Spectation that.

Speaker Change #123: Current trends.

Leanne Cunningham: Do you expect that category to accelerate? And just to tie to that, Lawson, can you talk a little bit about the amount of inventory, you know, the industry's inventory kind of sitting, I guess, aging at this point, and whether we're at risk of, you know, an oversupply situation? We've had that question a couple of times, so it would be great to sort of get your perspective on it.

Speaker Change #123: Kind of hold for next year do you expect the category to accelerate.

Speaker Change #124: And just to tie to that Boston can you talk a little bit about.

Lawson E. Whiting: Thank you. Yeah. All right. Thanks, Brian. I mean, just a few things.

Speaker Change #124: The amount of inventory to be.

Speaker Change #124: Industry inventory kind of sitting I guess aging at this point and whether were at risk of.

Speaker Change #125: An oversupply situation. We've had that question a couple of times, so it'd be great to sort of get your perspective on it. Thank you.

Lawson E. Whiting: One, U.S. whiskey and tequila, which are our two biggest categories, continue to be the healthiest part of TDS. So that, I mean, that is a good thing, but TDS has been bouncing along in that sort of 1% range now for, what, nine months, something like that. So it hasn't really changed a whole lot.

Brian: Alright, Thanks, Brian.

Speaker Change #126: I mean, a few things one U S whiskey and Tequila, which are our two biggest categories continue to be the healthiest part of Tds.

Speaker Change #126: I mean that is a good thing, but Tds has been bouncing along in that sort of 1% range now for nine months something like that so.

Speaker Change #126: It Hasnt really changed a whole lot.

Speaker Change #127: It's obviously been a tough year for the consumer and a tough year for US one thing I think thats important to hit Li answered it a bit in her.

Lawson E. Whiting: So it's, you know, it's obviously been a tough year for the consumer and a tough year for us. I will, one thing I think that's important to hit, Leanne said it a bit in her opening remarks. And I think it's the sort of question of the day, is the changes, is the slowdown structural in some way or another where spirits demand, which, COVID aside, it's been in that 4 to 5% range for decades and decades, or is it largely based on timing, really difficult comps, and the inventory issues, and I do believe, you know, the big three that everyone talks about, GLP-1s, cannabis, and Gen Z, they are headwinds that are looming in the long term.

Speaker Change #127: Opening remarks, and I think it's the sort of question of the of the day.

Speaker Change #128: Is the changes is the slowdown structural in some way or another where spirit's demand which co.

Speaker Change #129: Covid aside was been in that 4% to 5% range for decades, and decades or is it largely based on timing really difficult comps and the inventory issues.

Speaker Change #129: I do believe.

Speaker Change #129: The big three that everyone talks about <unk> cannabis and Gen Z.

Speaker Change #129: They are headwinds that are looming in the long term.

Lawson E. Whiting: But I don't think that really has much, if anything, to do with the current state of the consumer or the current state of the spirits business in the U.S. And the reason I say that is when you look at TDS in, say, Nielsen, I mean, it was going along pretty well. And then late summer, early fall, it fell sharply.

Speaker Change #129: But I don't think that really has much if anything to do with the current state of the consumer or the current state of the spirits business in the U S and the reason I say that is when you look at Tds.

Speaker Change #129: And Nielsen.

Speaker Change #129: I mean, it was going along actually pretty well and then late summer early fall it fell sharply and it caught everyone in our industry, including you all I think everyone got caught up in it.

Speaker Change #129: We're surprised a bit by it but I really do believe that it is really driven by inflation for the most part and then if there was a level of demand that got pulled forward during COVID-19 and that's the consumer element of it that we talked about last quarter a lot on this conference call, where consumers had an extra bottle or two sitting in their cabinet at home and that's <unk>.

Speaker Change #129: Taken some time to.

To work through that and so.

Speaker Change #129: I'm, just not a believer that.

Speaker Change #129: Things like candidates have a lot to do with the current state out there if <unk>.

Speaker Change #129: <unk> went from five to four five to four and you saw the sort of gradual weakening.

Speaker Change #129: I would be quantifying more worried than than I am now based on based on every trend that we can follow up so and then your other question about industry whiskey survive.

Speaker Change #129: I've seen a few people write things about that in the last few months. So it's something we track internally and have been for for a long long time as part of our planning processes.

Lawson E. Whiting: And a lot of it has to do with what you think the demand is going to be going forward, obviously. So, you know, for a long, long time, whiskey wasn't growing in the United States. It has for the last, what, 12 or 13 years. But we went through that 40-year window where it didn't grow at all, and so supply and demand were kind of equal. I think it depends on what you think the forward-looking demand number is going to be. It doesn't seem to be that far out of line for us.

And a lot of it has to do with what you think the demand is going to be going forward. Obviously so.

Speaker Change #129: For a long long time whiskey wasn't growing in the United States. It has for the last 12 or 13 years, but we went through that 40 year window, where it didn't grow at all and so supply and demand were kind of equal.

It depends on what you think the forward looking demand number is going to be but.

Speaker Change #129: It doesn't seem to be that far out of line for us we actually kind of have a different point of view on that that some of the folks that have written that I do think it's important to note to the majority of the inventory that is out there is from the larger suppliers.

Speaker Change #129: There's a lot that's been written about the number of craft producers that have multiplied many times over in the last.

Speaker Change #129: The last decade.

Speaker Change #130: Don't really that's not really what I.

Speaker Change #130: That's not even worried about but that's not where I think the oversupply.

Speaker Change #130: If there is much is coming from it's the big players.

Lawson E. Whiting: I mean, it's the big players that have continued to build for long-term growth, and they're behaving rationally for the most part, and I think, You know, so I just don't see there being that big a discrepancy. That's very helpful. Thanks, Lawson. Thanks, Leanne.

Speaker Change #130: And whiskey.

Speaker Change #130: They are I mean, it's the big players.

Speaker Change #130: That have to continue to build for long term growth and they're behaving rationally for the most part and I think.

Speaker Change #130: So I just don't see there being that big disconnect between supply and demand.

Speaker Change #131: That's very helpful. Thanks, Lawson Thanks Leann.

Speaker Change #130: Yeah.

Speaker Change #132: Thank you.

Lawson E. Whiting: Thank you. And our next question comes from the line-up: Nadine Sarwat with Bernstein and Yolanda Seltzman. Thank you for taking my question.

Speaker Change #133: And our next question coming from the line of.

Speaker Change #134: 19, Starwood with Bernstein. Your line is now open.

Nadine Sarwat: One short-term and one long-term for me. On the short-term, coming back to inventories, obviously, a large headwind in this quarter. Could you talk about how this compares versus your expectations on the last conference call? And what would be the cause for any difference there, and give a little bit more color on where your inventories are today? I understand the sort of moving parts, but do you feel they're fully at the right level, the right size for that right level going forward?

Starwood: Thank you for taking my question, one short term and one long term for me on the short term coming back to inventories, obviously large headwind in this quarter could you talk about how this compares.

Starwood: Versus your expectations on the last conference call and what would have been the cause for any difference there and a little bit more color on where your inventories are today I understand with sort of the moving parts, but do you feel there. So when we get the right level right size to that right level going forward and then my long term question coming back.

Nadine Sarwat: And then my long-term question, coming back to the U.S., what's your best assessment of where underlying spirits net sales growth for the U.S. today is for the industry? Obviously, Niels and Mark are covering some very different channels.

Speaker Change #136: Back to the U S. What's your best assessment of where underlying spirits net sales growth for the U S. Today is for the industry, obviously Nielsen <unk> covering some very different channels and what would you need to see in your opinion for the industry to get back to mid single digits is it.

Nadine Sarwat: And what would you need to see, in your opinion, for the industry to get back to mid-single digits? Is it a more favorable macro environment for the consumer? Is it something else?

Speaker Change #137: More favorable macro environment for the consumer is it something else. Thank you.

Nadine Sarwat: Thank you. Thank you, Nadine. And I'll take the inventory question, again kind of pointing to what we have talked about, that our depletion-based results came in in line with our expectations. First, I'll point you to Schedule B.

Speaker Change #138: Thank you Adrienne and I will take the inventory question again kind of pointing to what we have talked about that our depletion delayed based results came in in line with our expectations.

Speaker Change #139: First I'll point, you to schedule will be for our fiscal 2024 Depletions are ahead of shipments on our full strength portfolio and even to a greater extent than when they then when we reported in our third quarter call.

Leanne Cunningham: For fiscal 2024, depletions are ahead of shipments on our full-strength portfolio and even to a greater extent than when we reported in our third quarter call. In the U.S., we know retailers have adjusted their inventory levels in response to the consumer takeaway trends being below their historic mint single-digit range and with a higher inflation rate environment. We've been talking about for the entire fiscal year that at the distributor level, our distributor inventories have been within that normal targeted range as we have gone through the majority of this fiscal year. However, in the fourth quarter in the U.S., distributor levels did unexpectedly, for us, drop to the low end or just below their normal targeted range.

Speaker Change #139: In the U S. We know rate retailer.

Speaker Change #139: Our retailers have adjusted their inventory levels in response to the consumer takeaway trends being below their historic mid single digit range and with the higher inflation rate environment.

We've been talking about for the entire fiscal year that at the distributor level, our distributor inventories have been within that normal targeted range as we have gone through the majority of this fiscal year. However in the fourth quarter in the U S. The distributor levels did unexpectedly.

Speaker Change #139: <unk> dropped to the low end or just below their normal targeted range, we're continuing to partner really closely with them as we have been all year.

Leanne Cunningham: We're continuing to partner really closely with them as we have been all year, probably even more so now. But I will say we do believe we've now experienced the majority of the movement in inventories across the distributor, retailer, and consumer supply chain. And our thoughts on that were in our prepared remarks. We have that built into the guidance that we've provided. And then I'll turn it over to Lawson for the second part of your question.

Speaker Change #139: Really even more so now but I will say, we do believe we've now experienced the majority of the movement in the inventories across the distributor or retailer and consumer supply chain and our kind of thoughts on that were in our prepared remarks, we have that built into the guidance that we've provided and then I will.

Speaker Change #140: Turn it over to <unk> for the second part of your question.

Leanne Cunningham: Yeah, so the question just being a little bit over the longer term, when and what it's going to take essentially to get the U.S. market back on track again? You know, it's, it's very difficult to predict when what is going to happen with consumer spending. And the one thing we know for sure is the comps are going to get easier. So not only ours, but even in the Nielsen number world, which, as I mentioned earlier, that sort of August, September fall off, you know, we're coming up upon that. And so I hate talking about easier comps, but the reality is that they will ease up.

Speaker Change #141: So the question just being a little bit over the longer term, we are win win and what's it going to take essentially to get the U S market back on track again.

Speaker Change #142: It's very difficult to predict what is going to happen with consumer spending I mean, the one thing we know for sure is the comps are going to get easier so even not only ours, but even in the Nielsen number of world.

Speaker Change #142: As I mentioned earlier that sort of August September falloff will coming up upon that and so.

Speaker Change #143: He talked about easier comps.

Lawson E. Whiting: I do believe, given partially the way you call it underlying or depletion-based results, are better than shipments. This largely is an inventory correction issue that includes the consumer. As we said just a minute ago, the consumer's got to work through its... It's the bottles that are sitting at home and, You know, we talked about this on the last call, and I know a few of you did some analysis on this.

Speaker Change #143: Reality is that they will ease up.

Speaker Change #143: I do believe given partially the way you call it underlying our depletion based results.

Speaker Change #143: Our better than shipments this largely as an inventory correction issue that includes the consumer as we said just a minute ago the consumers got to work through it.

Speaker Change #143: The bottles that are sitting at home and.

Speaker Change #143: We talked about this on the last call and I know a few of you all did some analysis on this.

Lawson E. Whiting: And sort of agreed, I think, with our statements that it was going to take about a year to work through that consumer inventory, and so we're coming up on that year-lapping period in a few months. You know, it's difficult to predict, and consumer spending is going to need to improve across all CPGs, not just spirits. I mean, the consumer's been hurt everywhere, but if you pinned me down and said, what do you really think, I think we would say that sometime in the fall or into the winter that... Transworld.

Speaker Change #144: Agreed I think with our statements that it was going to take about a year to work through that consumer inventory and so we're coming up on that year lapping period in a few months so.

Speaker Change #143: Yes.

Difficult to predict and consumer spending is going to need to.

Speaker Change #143: Improve across all CPG is not even just spirits I mean, the consumer has been hurt everywhere so but.

Speaker Change #143: If you pin me down and said what do you what do you really think I think we would say that sometime in the fall or into the winter.

Speaker Change #143: Trends will improve.

Speaker Change #143: And then the only thing I'll add is and we've said it in our prepared remarks again, but just to emphasize it.

Speaker Change #143: Are you asking some of our other key markets, we have been able to maintain market share in this volatile environment. So we feel good about with all the noise. That's in the system that our brands are maintaining the share.

Speaker Change #143: In the marketplace.

Speaker Change #145: Understood. Thank you very much.

Speaker Change #143: Okay.

Lawson E. Whiting: Thank you. And our next question comes from the line of Robert Moskow with TD Cowen. Your line is open. Hi, this is Seamus Cassidy on behalf of Robert Moskow.

Thank you.

Speaker Change #146: Next question coming from the line of Robert Moskow with TD Cowen Your line is open.

Speaker Change #143: Yeah.

Seamus Cassidy: Thanks for taking the time to answer the question. So given the target that you reiterated at your March Investor Day to double fiscal 22 operating income by fiscal 32, you know, with fiscal 25 expected to be another below-algo year, I'm curious how you see this trending beyond fiscal 25, and maybe where you expect to get operating leverage in the out years, given that you'll need to invest more this year in terms of advertising and promotion. Thank you. Yeah, Well, look, we always knew that ambition was, you know, was not easy.

Jim viscosity: Hi, This is Jim viscosity onto Rob Moskow, Alan Thanks for taking the question.

Speaker Change #147: So given the target that you reiterated your March Investor day to double fiscal 'twenty, two operating income by fiscal <unk> 32, with fiscal 'twenty five expected to be another blow algo year I'm curious how you see this trending beyond fiscal 'twenty, and maybe where do you expect to get operating leverage in the out years, given that youll need to invest more this year.

Speaker Change #148: In terms of advertising and promotion. Thank you.

Speaker Change #148: Yes.

Speaker Change #149: We always knew that ambition was.

Speaker Change #150: It was not easy.

Speaker Change #151: Laughter, you're a little bit.

Speaker Change #151: Particularly the last couple of years or really last year for the most part has been difficult but.

Speaker Change #151: Looked at 2032 is still a fair ways away, we still believe in the portfolio and everything that we're doing has the growth characteristics to deliver on those those goals and so all along we're not changing our long term growth algorithm at all and.

Speaker Change #151: You asked about leverage I know, we are working very hard to get some gross margin leverage around here and so I think thats going to take continued work, but continued you've heard me say before low and slow I want to continue that and everyone is we're all onboard and focused on that right now.

Thankfully even in the current environment that we're in today, we still think that pricing is a lever and all of us to continue to generate growth and it's actually coming through in the numbers and so.

Speaker Change #151: So a little bit of gross margin improvements with expense controls that make sure that our operating expenses don't grow at a rate greater than our sales I mean, that's the model.

Speaker Change #151: We believe in and we will continue to do.

Speaker Change #151: Yeah.

I know, we're only two years into this 10 year plan and so there is there is plenty of time to accelerate.

Speaker Change #152: That's helpful. Thanks, and then maybe just one quick follow up you've sort of talked about your excitement about a return to annual pricing in the spirits industry, but you also sort of called out inflation is something that's been a headwind for consumers. So im curious how youre thinking about that.

Speaker Change #153: In fiscal 'twenty five.

Speaker Change #154: Well look I mean.

We kind of already hit that I mean, the consumer demand is normalizing.

Speaker Change #155: But keep.

Speaker Change #155: Keep in mind, we there's $2 five years' worth of double digit growth.

Speaker Change #155: Sure.

Speaker Change #155: It was difficult to drop all of that to the bottom line because of all the things you all know about but.

Speaker Change #155: It was outstanding for a period of time.

Speaker Change #155: And I think it's just a return to that normalization a little better.

Speaker Change #155: Think if we're honest with ourselves a year ago. We thought that meant there was just the market was going to go back to that 4% to 5% range and stay there and it's taken a year of being below that to sort of correct. This consumer inventory thing so.

Speaker Change #155: <unk>.

Speaker Change #155: Yes.

Speaker Change #155: The timing, we will see but I still feel pretty confident that the long term outlook for spirits. In this country is is excellent and nothing really has structurally changed so.

Speaker Change #155: Okay.

Speaker Change #156: Does that answer your question.

Speaker Change #157: Yes. Thank you.

Speaker Change #156: Okay.

Lawson E. Whiting: Yes, thank you. Thank you. And our next question, coming from the lineup, is from Lauren Lieberman with Barclays. Your line is open.

Speaker Change #158: Thank you.

Speaker Change #159: Next question coming from the line of <unk>.

Speaker Change #159: Lauren Lieberman with Barclays. Your line is now open.

Speaker Change #160: Great. Thanks, so much thank you.

Speaker Change #161: Completely hounding on what you guys have already been talking about but the.

Speaker Change #162: The notion that the inventory clean.

Speaker Change #163: Both the distributors consumers retailers and so on is complete it just very different than what we're hearing from others in the industry. So not taking issue at all with your view loss on the long term health of the industry that nothing structural has changed really just getting at the question of the longevity of the correction in the visibility.

Lauren Rae Lieberman: So, not taking issue at all with your view, Lawson, on the long-term health of the industry, that nothing structural has changed, really just getting at the question of the longevity of the correction and the visibility that there is. I'm just curious, you know, what is it that you guys are seeing or your reasons to believe that the inventory correction throughout the, you know, again, distributor, retailer, and consumer landscape is complete? Thanks.

Speaker Change #163: That there is.

Speaker Change #163: No.

Speaker Change #164: I'm just curious what is it that you guys are seeing or your reason to believe that that inventory correction throughout the.

William: William distributor retailer consumer landscape is complete.

Speaker Change #164: <unk>.

Lawson E. Whiting: And this goes back, Lauren, to what we've been saying for quite some time now with all the disruption that has been in our system that started with the pandemic and the glass supply challenges, and logistics challenges. We continue to be in a significantly different position than most of our competitors because of the glass supply challenges that we have gotten into. We've talked about this over time, how we prioritize brands, we prioritize markets to rebuild and refill our supply chain, and even in 24, there was lumpiness that we had to compare against, especially in the fourth quarter when we were in the prior year when we were reloading our emerging international markets, and we have had to compare against that.

Speaker Change #166: And this goes back to what we've been saying for quite some time now with all the disruption that has been in our system that started with the pandemic and the glass supply challenges logistics challenges, we continue to be in a significantly different position than most of our comp set because of the glass of law challenge.

Is that we have gotten into we've talked about this over time, how we prioritize brands, we prioritize markets to rebuild and resale our supply chain and even in 'twenty. Four there was lumpiness that we had to compare against especially in the fourth quarter. When we were in the prior.

A year, where we were reloading our emerging international markets and we have had to comp against that we've come up too in.

Lawson E. Whiting: We've come up to normal inventory levels where others were in a different place and may be coming down. And so we've really felt like we have been there and been closely aligned with our partners in the U.S. distribution system. For us, it really was about that unexpected drop in their inventory levels in the fourth quarter, as they got kind of down to absolutely the lowest end and below, just below their targeted inventory range. So that was kind of, for us, the myth and what was unexpected.

Speaker Change #166: We've come up to normal inventory levels, where others were in a different place and may be coming down and so we really felt like we had been there and then closely aligned with.

Speaker Change #166: Our partners in the U S distribution system for us It really was about that unexpected drop in there in their inventory levels in the fourth quarter as I got kind of down to the absolutely the lowest and below.

Speaker Change #166: Just below their targeted inventory range. So that was that was kind of for us the most and what was unexpected as we continue to do our work. We continue to believe the vast majority of that movement is now behind us, but we are definitely not saying that all of it is behind us as it relates to the U S. So again.

Lawson E. Whiting: As we continue to do our work, we continue to believe the vast majority of that movement is now behind us, but we're definitely not saying that all of it is behind us as it relates to the U.S. So, again, all of that would be included in our guidance, and we understand the distributor side of it and the retailer side of it. It's fairly clean, and we have data against it. The biggest question is the health of the consumer itself and when that comes back. And look, everybody's going to have a different opinion on that, and I don't have a great crystal ball any more than you do. We're just...

Speaker Change #166: All of that would be included in our guidance.

Speaker Change #166: And understanding the distributor side of it and the retailers.

Speaker Change #166: Clean and we have data against the biggest question is the health of the consumer itself of when that comes back and look everybody is going to have a different opinion on that and I don't have a great crystal ball any better than you do.

Speaker Change #166: We're just a little more.

Lawson E. Whiting: I won't walk through the consumer example again, but we do think that the pantries are not as full as they were a year ago, and it just depends a little bit when the consumer comes back and starts spending in a big way, particularly also, we haven't talked at all about that, which doesn't help overall trends either, but we think that will start to come back too. And again, it was just, you know, one small line in our prepared remarks, but the importance of, you know, what we talked about that, in our outlook, it just assumes that where our inventories are today, it's just, it's going to continue going into the future. And Leanne, actually, I wanted to clarify on that point.

Speaker Change #166: Walk through the consumer example, again, but.

Speaker Change #166: We do think that the pantries are are not as full as they were a year ago.

Speaker Change #166: It just depends a little bit when the consumer comes back and start spending in a big way, particularly also we haven't talked at all about the on premise but.

Speaker Change #166: On premises weakened over the last year in.

Speaker Change #166: That doesn't help overall trends either but.

Speaker Change #166: We think that will start to come back to over the next year.

Speaker Change #166: And then again, there's images GM one small line in our prepared remarks, but the importance of what we talked about that in our outlook. It just assumes that where our inventories are today, it's going to continue.

Speaker Change #166: Going into the future.

Speaker Change #167: Okay, and Leon actually I wanted to clarify on that point should we think about that as the absolute level of inventories.

Lawson E. Whiting: Should we think about that as the absolute level of inventories to distribute inventories or where they should be? So from a growth standpoint, like the next quarter or two, that's still a headwind to growth. But again, like at an absolute level, we're at the right point. Thank you for your follow.

Speaker Change #168: Inventories are where they should be so.

Speaker Change #169: From a growth standpoint, like the next quarter or two that still a headwind to growth.

But again like on an absolute level.

Speaker Change #170: We're at the right point, if you follow what I'm asking.

Lawson E. Whiting: Yeah, so what we're talking about is that in the US, they're kind of at the low end, or just below their levels. In our guidance, it assumes they're going to stay consistent with where they are right now. And that as we move forward, we've talked about in our outlook, we're going to go against strong shipments in the first half. Again, part of it's related to the lumpiness of the shipments in F24 for the emerging international markets, but then also in the U.S. against, as we executed our pricing strategy last year, that would have seen stronger shipments in the first half. And again, all that's built in.

Speaker Change #171: Yes, so what we're talking about is kind of there.

Speaker Change #171: In the U S. They are kind of at the low end or.

Speaker Change #171: Just below their levels.

Speaker Change #171: Our guidance. It assumes we're going to can say assistant with where they are right now and that.

Speaker Change #171: As we move forward, we've talked about in our outlook.

Speaker Change #171: We're going to go against in our first half strong shipments again part of it is related to the lumpiness of the shipments in the prior in F. 'twenty four for the emerging international markets. But then also in the U S against with as we executed our pricing strategy last year.

Speaker Change #171: That would have seen stronger shipments in the first half and again all of that's built into the stronger first half as we look at F 'twenty five and.

Lawson E. Whiting: So the stronger first half, as we look at F25, and then we expect a stronger second half in F25. Okay. Okay, got it. Absolute levels, but then the growth rates are something different, but the absolute levels have kind of points where they need. Okay, I'll pass it along. I have more, but I'll pass it on.

Speaker Change #171: And then we expect a stronger second half in 'twenty five.

Speaker Change #171: Okay.

Speaker Change #172: Okay got it great absolute levels, but then the growth rate there is something different but the absolute levels have kind of reached the point, where they need to be.

Speaker Change #171: Okay.

Speaker Change #171: Generally pass it along.

Speaker Change #173: But I'll pass it on thank you.

Speaker Change #174: Thank you.

Lauren Rae Lieberman: Thank you. Thank you. And our next question, coming from the line of Nick Modi with RBC, your line is open. Thank you. Good morning, everyone.

Speaker Change #175: And our next question coming from the line of Nik Modi with RBC. Your line is now open.

Sunil Harshad Modi: I had two questions. The first was just, on, you know, Jack Daniels, given all the kind of line extensions over the years and different flavor expressions, you know, have you as an organization figured out how to spend behind the Jack Daniels equity and really kind of provide a halo for all the expressions? Because there's a lot of innovation coming out from other players in some of these areas that seems like there's some cannibalization of your business. So just wanted to get your perspective on how you think about Randolph in the long term and then just kind of sticking with Jack Daniels.

Sunil Harshad Modi: Thank you and good morning, everyone.

Sunil Harshad Modi: I had two questions first was just.

Sunil Harshad Modi: On Jack Daniel's given all the kind of line extensions over the years on different Playbooks questions have you as an organization figured out how to.

Sunil Harshad Modi: Spend behind the Jack Daniels equity.

Sunil Harshad Modi: It really kind of provide a halo for all the expression because there's a lot of innovation coming out from other players in some of these areas that seems like there is some cannibalization of your business.

Speaker Change #176: So just wanted to get your perspective on how you think about brand building long term and then just kind of sticking on the Jeff.

Sunil Harshad Modi: Daniels.

Lawson E. Whiting: Mainline brand, we're hearing a lot of, you know, promotional activity from your competitor base, some that's not tracked in the Nielsen or Circona data, you know, instant redeemable coupons, etc. So just wanted to get your perspective on that and kind of how you're thinking about that embedded in your guidance. All right, so hit the jack one first.

Sunil Harshad Modi: Mainline.

Brad: Brad well.

Speaker Change #178: We're hearing a lot of promotional activity from our competitor base some of that is not tracking.

Speaker Change #178: And the Nielsen data.

Speaker Change #179: For example, coupons et cetera. So I just wanted to get your perspective on that and kind of how youre thinking about that embedded in your guidance.

Speaker Change #180: Alright, So first hit the Jack Jacqueline first.

Well for one this is the short term and then I'll take it a little bit longer term, a little bit higher but organic net sales trajectory as Tennessee whiskey Black label.

Speaker Change #181: Was down 5%, but there was an 8% impact from the net change in distributor inventories and so.

Let's not do you think that all of a sudden the brand is in this big decline from a consumer perspective, we still feel very good about that theres just been all it has been so much noise.

Lawson E. Whiting: And we're also comparing against some very high numbers in the prior period. And so when you step back and you look at it, say, on a five-year basis or even longer than that, you know, the brand has maintained the growth rate, I think we just said, the same growth rate on a five-year basis, a 10-year basis, on a 30-year basis is all plus five. So you know, we're not seeing a long-term slowdown even in Tennessee whiskey. I mean, they drive profit in and of themselves, but they're also a halo over the top of the brand or the franchise altogether. The health metrics remain stable.

Speaker Change #181: And we're also comparing against in the prior period prior period.

Speaker Change #181: Some very high numbers and so when you step back and you look at it and say on a five year basis or even longer than that.

Speaker Change #181: The brand has maintained the growth rate I think we just said the same growth rate on a five year basis 10 year basis on a 30 year basis as all plus five so.

Speaker Change #181: We're not seeing a long term slowdown even in Tennessee whiskey as we have introduced we've had the flavors. It's been a few years since we've introduced a new one but we have all of these higher in line extensions that we've been doing on the brand that I do think act.

They drive profit in and of themselves, but they're also a halo over top of the over top of the brand or the franchise altogether.

Speaker Change #181: The health metrics remain stable.

Speaker Change #181: And we just we do believe the Tennessee whiskey is going to normalize over the next year and so.

Speaker Change #181: It's.

Speaker Change #181: Back to the marketing and the brand expense from the levels that we have on all of those kind of things.

Speaker Change #181: Look we've changed up the marketing mix quite a bit over the last few years, we do.

Speaker Change #181: I'm very happy with the state of the brand and some of the communications that we're doing now we're doing a whole lot with Mclaren racing and that's that's been fun and it's been interesting in a different.

Speaker Change #181: Brand building model for the brand but.

Speaker Change #181: Good one of very very premium one and.

Speaker Change #181: So and as far as absolute spend to be able to continue to deliver the kind of growth and momentum we have we're pretty comfortable with where we are and expect.

Speaker Change #181: I think we've said many times before the brand expense is going to grow in something close to.

Speaker Change #181: The brand's top line sales. So so the combination of black label continuing in remaining in growth mode. We will continue to do some innovations our Tds are very popular right now and Jack and Coke, while just getting started as something.

Speaker Change #181: We really believe in and we do have a pipeline of new thoughts on premium offerings and so.

Lawson E. Whiting: So we remain comfortable overall with that. And then, back now to the second question that you asked about the U.S. pricing environment, and maybe you and I were looking at the same thing. I'm actually, I've been a little surprised that some of our competitors have said that, because I'm looking at the data, and I'll just throw out some very basic ones. But TDS pricing, on a 52-week basis is 1.2, and on a 13-week basis is 0.8.

Speaker Change #181: So we remain comfortable overall with that and so and then back now down to the second question that you asked on the U S pricing environment.

Speaker Change #182: Maybe you and I have and maybe we're looking at the same thing I'm actually have been a little surprised.

But some of our competitors have said that because im looking at the data.

Just throw out some very basic ones, but GDS pricing a 52 week basis is one two on a 13 week basis 0.8, so still positive and it's positive across most of the major brands.

Lawson E. Whiting: So, still positive, and it's positive across most of the major brands, particularly American whiskey. You know, I don't know if I'm surprised at this necessarily, but American whiskey pricing is as strong as any, probably the strongest pricing environment of any of the major categories in the U.S., which, you know, bodes well that rational people are maintaining, you know, maintaining a positive price outlook. And we are definitely part of that. We're in that, you know, just even Woodford, for example, is plus 1.9, and Jack is plus 1.3. So, that low and slow thing comes back again, particularly in American whiskey. Tequila's a little different, and we'll see how this plays out over the next year or two or three years.

Speaker Change #182: Particularly American whiskey.

Speaker Change #182: I don't know if im surprised at this necessarily but American whiskey pricing is as strong as any probably the strongest pricing environment or any of the major categories in the U S which.

Speaker Change #182: Bodes well that rational people or maintaining.

Speaker Change #182: Maintaining a positive price outlook and we are definitely as part of that were in that.

Even Woodford for example is plus one nine and Jack is plus one three so so.

Speaker Change #182: That low and slow thing comes back again, particularly in American whiskey.

Speaker Change #182: <unk> is a little different.

Speaker Change #182: We'll see how this plays out over the next year or two or three years. A lot of you have written stuff about the agave cost and what's that going to do the promotional environment, but it's not really happening yet it's not coming through in the numbers and you mentioned I think it was a coupon thing or something that actually don't really know about that but I can say that the big tequila brands.

Lawson E. Whiting: A lot of you have written stuff about agave costs and what that's going to do to the promotional environment, but it's not really happening yet. It's not coming through in the numbers, and you mentioned something, I think it was a coupon thing or something. I actually don't really know about that, but I can say that the big tequila brands, particularly ours and some of the stronger tequila brands, continue to take pretty hefty price increases or they're not discounting.

Speaker Change #182: Particularly hours and some of the stronger to kilo brands continue even over a 13 week basis take pretty hefty price increases or they are not just getting there are a couple of brands that are having a struggle and their weaker and they are starting to discount a little bit more theyre not ours and we hope that.

Speaker Change #182: The industry will maintain sort of that rational pricing perspective.

Don't see it through the numbers now so I'm not sure where everyone is coming up with this the notion that the environment has gotten a lot more promotional driven and the one thing I'll add to that is for <unk>, specifically when you look at brown forman pricing into kilo versus <unk>.

Speaker Change #182: Tds you will see ours is.

Speaker Change #182: Definitely higher and Thats all about the repositioning of our L. Hema doorbrand getting it firmly into that 20 to 29 $99 price tier where we see the fastest growth right now.

Speaker Change #182: And we have a new package that will be coming out that supports that in this year. So we're excited about what we'll see from al Hema door as we move forward with that price repositioning work we're doing.

Speaker Change #183: Thanks, So much I'll pass it on.

Speaker Change #183: Okay.

Speaker Change #184: Thank you.

Lawson E. Whiting: Thank you. And our next question, coming from the line of... Filippo Falorni with Siri, Elena Soltan, Hey, good morning, everyone. I had a question about the developed international and emerging market business. In previous calls, you've talked about some weakness in some European markets. So maybe can you give an update there and also on emerging from Mexico? And then for the second half of the year, Leanne, you mentioned the improvement in the second half. What gives you confidence in the improvement in the second half on the top line?

Speaker Change #185: And our next question coming from the line of.

Speaker Change #186: <unk> with Citi. Your line is now open.

Speaker Change #187: Hey, good morning, everyone.

Speaker Change #188: Had a question on the developed international and emerging market business in the past calls you've talked about some weakness in some European markets. So maybe can you give an update there.

Speaker Change #188: And also in emerging.

Speaker Change #189: Mexico, and then for the second half of the Leon you mentioned the improvement in the second half.

Speaker Change #190: What gives you the confidence in the improvement in the second half on top line is it mainly the kind of the comps on the inventory side or are you. Assuming also an acceleration in category growth in the U S and international markets. Thank you.

Filippo Falorni: Is it mainly the kind of comps on the inventory side, or are you also assuming an acceleration in category growth in the US and international markets? Thank you. I'll start with your last question first because it's the most succinct, which is about what we will be comping in the second half of this year and then going to some of the international markets. In the UK, we're continuing to hold our value share in both the on and off trade.

Speaker Change #191: I'll start with your last one first because it's domestic bank, which is about what we will be comping.

Speaker Change #191: In the second half of this year and then to go to some of the international markets in the U K, we're continuing to hold our value share in both the on and off trade.

Speaker Change #191: Consumer does continue to reduce their spending and trade downs, president and that market for US Germany continues and you can see that in the numbers continues to be really strong and the consumer climate, there we see as improving.

Filippo Falorni: The consumer does continue to reduce their spending and the trade downs present in that market. For us, Germany continues, and you can see that in the numbers, continues to be really strong, and the consumer climate there we see as improving. Poland, we're still growing nicely in that market while consumers are remaining cautious with their spending. And then France, it's just a market, I think, that is a consistent theme we've talked about for the entire year, which is they just continue to down trade and have promotional activities. So maybe having the Olympics this summer will change that a bit.

Speaker Change #191: Poland, we're still growing nicely in that market, while consumers are remaining cautious with their spending and then France and just the market I think is a consistent theme with.

Speaker Change #191: Consistent theme, we've talked about for the entire year, which is they just continue to downgrade and having the promotional activity. So maybe the having the Olympics. This summer well will change that a bit and then as it relates to Mexico. This similar trend is what we have.

<unk> been reporting which is the consumer continues to be.

Speaker Change #191: Slowing down in spending and we've been talking about that in our business and you can see that through <unk> and <unk> performance.

Lawson E. Whiting: Brazil, we continue to deliver low single-digit growth there because our Jack Daniels Tennessee apple is just being really well received by consumers, and it's driving market share gains. And the consumer takeaway there is slowing a bit as well. And it's the competitive environments intensified, but we're actually delivering double-digit or strong growth in Brazil. Hey, let me add one point on the UK, just because if you look at Schedule C, it looks kind of ugly on the UK, down 14 percent in sales.

Speaker Change #191: Brazil, we continue to deliver low single digit growth there because our Jack Daniel's, Tennessee Apple.

Speaker Change #191: It's just being really well received with the consumers and that's driving market share gains and the consumer takeaways, there is slowing a bit as well and if the competitive environment intensified that we're actually.

Delivering double digit or strong growth in Brazil.

Speaker Change #192: Let me add one point on the UK just because if you look at schedule C. It looks kind of ugly on the UK down 14% sales, but very importantly.

Lawson E. Whiting: But they're very important, that is largely driven by Jack and Coke and Jack and Cola. So that was a very big Jack and Cola market, the off-the-shelf. And now we're selling like we do with all the other markets for Coca-Cola. Effectively selling them concentrate, really, which just obviously has a lot lower sales numbers. So it makes the UK look worse than it really does.

Speaker Change #192: That is largely driven by Jack and Coke and Jackson Cola, So that was a very big Jackson Cola market.

Speaker Change #192: But very healthy and a good a good business for us for a long time that is.

Speaker Change #192: Cleanest example, I guess of a market, where we used to sell it directly ourselves and now it's the Coca Cola company is doing and so we've had to pull Jackson Cola off the shelves and now we are selling like we do with all the other markets, where Coca Cola Sin <unk>.

Speaker Change #192: Actively selling them concentrate really.

Speaker Change #192: Which obviously is a lot lower sales number so it makes it makes the UK look worse than it really is.

Filippo Falorni: Great, thank you. That's helpful. And then maybe following up on the gross margin questions previously, is the Q4 decline and performance mainly driven by the lower inventories that you had expected? Or have you already started to see some of those costs and inflation headwinds that you mentioned for next year already playing out in Q4?

Speaker Change #193: Great. Thank you that's helpful. And then maybe following up on the gross margin questions previously.

Speaker Change #194: Is the Q4 decline in performance, mainly driven by the lower inventories than you had expected have you already started to see some of those cost inflation headwind that you mentioned for next year already playing out in Q4, and then thinking about 25 I know you mentioned there is puts and takes a gaba favor.

Leanne Cunningham: And then thinking about 25, I know you mentioned there's puts and takes, Kagawa favorable, some other commodities, inflationary, but overall, are you still expecting some margin expansion, gross margin expansion, in 25? Thank you. So, to answer your first question, the big change in the fourth quarter is really going to be driven by inventory-related costs, as we would call them LIFO, and this is our LIFO calculation on the year-over-year change of what we had in the fourth quarter of 23 compared to the fourth quarter of 24.

Speaker Change #194: Some other commodities inflationary, but overall are you still expecting some margin expansion gross margin expansion in 2025.

Speaker Change #195: Thank you.

Speaker Change #196: So to your first one the big change in the fourth quarter is really going to be driven by inventory related cost as we would call. It LIFO and it's our LIFO calculation on the year over year change of what we had in the fourth quarter of <unk> 23, compared to the fourth quarter.

Of 24, so that that's the extreme change there and then related to gross margin expansion for F. 'twenty five gist.

Leanne Cunningham: So, that's the extreme change there. And then, related to gross margin expansion for F-25, just as we talk about reported gross margin, the change in our portfolio as it relates to the addition of GenMari and Diplomatico and the divestiture of Finlandia and Sonoma-Katrera will provide us with gross margin expansion from a reported perspective. And then, for the rest of our gross margin, we will have that low single-digit favorable price mix, largely driven by price in F-25, but again, that's going to be a little bit more than offset by cost and the work that we will be doing to normalize the working capital on our balance sheet.

Speaker Change #196: As we talk about reported gross margin the change in our portfolio as it relates to the addition of Jim Loree and diplomatic go.

Speaker Change #196: And the divestiture of Finlandia and genomic a chair that will provide us with gross margin expansion from a reported perspective and then for the rest of our gross margin. We will have that low single digit favorable price mix largely driven by price in F. 'twenty.

Speaker Change #196: But again, that's going to be a little bit more than offset by cost and the work that we will be doing to normalize the working capital on our balance sheet.

Speaker Change #197: Okay very helpful. Thank you.

Filippo Falorni: All right. Very helpful. Thank you. Thank you. And our next question comes from the line of Peter Grom with UBS. The line is open. Thanks, Operator. Good morning, everyone. So, Leanne, maybe building on that last question, you kind of touched on this, you know, a tale of two halves, first half more subdued. Can you maybe provide some parameters in terms of how you're thinking about the first half versus the second half in terms of groceries?

Speaker Change #198: Thank you.

Speaker Change #199: Our next question coming from the line of Peter Grom with UBS. Your line is open.

Peter Grom: And then maybe kind of following up to Filippo's question, it seems like one of the primary reasons you were expecting a more challenging first half was due to the tougher shipments. But can you maybe just share what's embedded in the guidance from a category perspective? You know, I think you mentioned that the improvement in the back half is more comp driven, but there just doesn't seem to be a lot of visibility in terms of when this inflection to the historical growth rate occurs.

Peter Grom: Thanks, operator, and good morning, everyone. So.

Peter Grom: Maybe building on that last question you kind of touched on this a tale of two halves first half more subdued can you maybe provide some parameters in terms of how you're thinking about the first half versus second half in terms of growth rate and then maybe kind of following up to <unk> question. It seems like one of the primary reasons, you're expecting a more challenge for us.

Speaker Change #201: That was due to the tougher shipments, but can you maybe just share what's embedded in the guidance from a category perspective.

Speaker Change #202: I think you mentioned that the improvement in the back half is more comp driven.

Speaker Change #203: This doesn't seem to be a lot of visibility in terms of when this inflection to the historical growth rate occur. So just would be curious whats kind of the assumption embedded in the outlook.

Peter Grom: So, just to be curious, what's kind of the assumption embedded into the outlook from a category standpoint? Thanks. Well, I would say from what we are looking for in our growth rates is that, you know, we shared that it was really going to be driven by developed and emerging international markets, those will be driving the greatest growth rates.

Speaker Change #204: From a category standpoint thanks.

Speaker Change #205: Well I would say from what we.

Speaker Change #204: We're looking for.

Speaker Change #204: And our growth rate is.

Speaker Change #206: We shared that it was really going to be driven by developed and emerging international markets that those will be driving the greatest growth rates to your point. The tale of two halves that we will have in F 'twenty five which.

Leanne Cunningham: To your point, the tail of two halves that we will have in F-25, which, because of disruptions, we've had to, you know, have the tail of two halves story now for a couple of years. Again, for us in the first half of F-25, it's really going to be about comping against those strong shipments that we had in the first half. Conversely, when we just talked about the lower distributor inventory levels, you know, we'll be comping against that in the second half of this year.

Speaker Change #206: Cause of disruptions we've had.

Speaker Change #206: The tailor to have story now for a couple of years again for us in the first half of 'twenty five it's really going to be about comping against the strong shipments that we had in the first half Conversely, when we just talked about the <unk>.

Lower distributor.

Speaker Change #206: The inventory levels will be comping against that in the second half of this year.

Speaker Change #206: <unk>.

Speaker Change #206: As we when we continue to look at our business. We continue to be on a path back to kind of our long term growth algorithm and F. 'twenty five it'll be another step in that path back to normalization.

Speaker Change #206: But again with what we see right now from the consumer the trade.

Speaker Change #206: We're just assuming that were pretty consistent with where we are until we get.

Speaker Change #206: Indicators of change as we go through this year.

Peter Grom: Thanks so much. I'll pass it on. Thank you. And, ladies and gentlemen, that's all the time we have for our Q&A session.

Speaker Change #207: Got it thanks, so much I'll pass it on.

Speaker Change #207: Okay.

Speaker Change #208: Thank you.

Speaker Change #209: Ladies and gentlemen, that's all the time, we have for our Q&A session I will now turn the call back over to CEO for any closing comments.

I'll now turn the call back over to Sue for any closing comments. Thank you, and thank you to Lawson and Leanne, and to everyone for joining us today for Brown Forman's fourth quarter and fiscal year 2024 earnings call. If you have any additional questions, please contact us. As we close, I want to acknowledge an anniversary that the company just celebrated yesterday, June 4th, 1924. Amidst the prohibition, Brown Forman relocated to its headquarters in the location that we're sitting in today.

Marking a century is another milestone in our 150-year, four-year history and a reminder of the agility and resilience of this company and its people as we work every day to ensure that there's nothing better in the market. With that, this concludes today's call. Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.

Speaker Change #210: Thank you and thank you to lock in land and to everyone for joining us today for Brown <unk> fourth quarter and fiscal year 2024 earnings call. If you have any additional questions. Please contact us as we close I want to acknowledge and anniversary that the company just celebrated yesterday on June 4th $19 24 in the midst of.

Speaker Change #210: Prohibition Brown Forman relocated to its headquarters in the location that we're sitting in today.

Speaker Change #210: Looking at century is another milestone in our 150 year four year history, and a reminder of the agility and resilience of this company and its people as we work everyday to ensure that there is nothing better than the market with that this concludes today's call.

Speaker Change #211: Ladies and gentlemen that does conclude our conference for today. Thank you for your participation you may now disconnect.

Q4 2024 Brown-Forman Corporation Earnings Call

Request a DemoDemo

BF.B

Brown Forman

Earnings