Q1 2025 Brown-Forman Corp Earnings Call

Speaker Change: Good day, and thank you for standing by. Look to the Brown Formal Corporation for a quarter of fiscal year 2021, 25 earnings conference call.

Speaker Change: At this time, all participants are listening only more.

Speaker Change: After the speaker's presentation, there will be a question and suggestion.

Speaker Change: To ask the question during the session, you need to press start 1-1 on your telephone, you will then hear an automated message, revising your hand is raised.

Speaker Change: to withdraw your question. Please press start one one again. Please provide that today's conference is going to be quoted on either hand the conference over to your first speaker today's superb Vice President's write-to-vodations. Please go ahead.

Speaker Change: [inaudible]

Speaker Change: [inaudible]

Speaker Change: Thank you and good morning everyone. I would like to thank each of you for joining us today for Brown Formans first quarter fiscal year 2025 earnings call. Joining me today are Lawson Whiting, President and Chief Executive Officer and Leanne Cunningham Executive Vice President and Chief Financial Officer.

Speaker Change: This morning's conference call contains board-looking statements based on our current expectations. Rumors, risks, and uncertainties may cause actual results to differ materially from those anticipated or projected in these statements.

Speaker Change: Many of the factors that will determine future results are beyond the company's ability to control or predict.

Speaker Change: 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 to do to new information, future events or otherwise.

Speaker Change: This morning, we issued a press release containing our results for the first quarter fiscal year 2025. In addition to posting presentation materials that Lawson and Leanne will walk through momentarily.

Speaker Change: Both the release and the presentation can be found on our website under the section titled Investors, Events and Presentations.

Speaker Change: 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 10K and form 10K reports filed with a Securities and Exchange Commission.

Speaker Change: During this call, we will be discussing certain non-gap financial measures.

Speaker Change: These measures are reconciliation to the most directly comparable gap 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.

Speaker Change: With that, I would like to turn the call over to Lawson.

Lawson: Thank you so and good morning everyone. It's a pleasure to speak to you today about Brown, Formans 1st Quarter, Fiscal 2025 Results.

Lawson: In June, we shared our outlook for fiscal 25 with the expectation that it would be a year or two half.

Lawson: As you recall, we anticipated the second half of our fiscal year would be stronger than our first half on a year over your basis. As in the first half we are comparing against strong shipments and a few emerging international markets related to the replenishment of inventory, and also lapping stronger shipments that occurred prior to planned pricing crisis.

Speaker Change: The first quarter results we're sharing with you today are in line with our expectations and we're confident in reaffirming our full year growth outlook for fiscal 25. As we move into the details of the quarter, I'll provide an overview of the top line from a brand perspective and share a few insights on gross profit and margin.

Operator: 24, fiscal year 2025, earnings conference call. At this time, all participants are listening only mode. After the speaker's presentation, there will be a question and succession. To ask the question during the session, you'll need to press start 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press start 1-1 again.

Speaker Change: Then I'll turn it over to Leanne who will share additional insights on our geographic performance as well as other financial highlights.

Leanne: Our fiscal 2025 reported in that sales to client 8% with organic net sales decreasing 4% after adjusting for the divestitures of Finlandia and Sonoma Caterer in the prior fiscal year. The negative effect of foreign exchange...

Operator: Please revise that today's conference is being recorded.

Susanne Perram: I'll knock the hand that conference over to your first speaker today is Sue Perram, Vice President, Director of Relations. Please go ahead. Thank you and good morning, everyone. I would like to thank each of you for joining us today for Brown Forman's first quarter, fiscal year 2025, 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.

Leanne: and a change in how we manage our Jack Daniels Country Cocktail business with PAPS for our company.

Leanne: We haven't talked about Jackie Nose Country Cocktails for a while, so let me take a few moments to explain that last point. As you may recall in fiscal 21, we entered into a partnership with the Paps Brewing Company for the supply, sales and distribution of Jackie Nose Country Cocktails in the United States. At that time, Brown Forma continued to produce certain formats of this refreshing, ready-to-drink beverage.

Speaker Change: But during fiscal 24, we transferred production of all Jack Daniels Country Cocktails products to pass brewing company, and as a result, our sales related to Brown Forman produced Jack Daniels Country Cocktails products are significantly lower compared to the prior year period.

Susanne Perram: 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 statements, and except is 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 first quarter, fiscal year 2025, in addition to posting presentation materials that Lawson and Leanne will walk through momentarily.

Speaker Change: In the quarter, Diplomatic O'Rum, Old Forster and Woodford Reserve, along with Jack Daniel's Tennessee Honey and Jack Daniel's Tennessee Apple were the largest positive contributors to organic net sales. This growth was more than offset by a decline for Jack Daniel's Tennessee whiskey.

Speaker Change: First, to our most recent acquisition.

Speaker Change: Diplomatico-Rom delivered very strong results in the first three months of the year, largely related to the timing of ordering patterns in the prior year period, which created an easier comparison. Genmari was also impacted by the timing of ordering patterns in the prior year period, but this created a tougher comparison and led to a slight decrease in organic net sale.

Susanne 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 10K and form 10K reports filed with the Securities and Exchange Commission. During this call, we will be discussing certain non-GAAP financial measures.

Speaker Change: Naturally, there is a higher level of volatility in the trends as the trend only reflects three months of data.

Speaker Change: Importantly, in the first quarter of fiscal 25, shipments are largely in line with the pleations, and we continue to believe that we'll benefit from having a full year of growth from these outstanding super premium brands in our portfolio.

Speaker Change: Old Forster, our founding brand delivered strong double-digit organic net sales growth as the brand benefited from increased volume and our pricing strategy.

Susanne Perram: These measures are reconciliation to the most directly comparable GAAP financial measures, and the reasons management believes they provide useful information to investors regarding the company's financial condition and results of operations are contained in the press release and investor presentations.

Speaker Change: The brand continues to be incredibly popular with whisky consumers, is evidenced by the over 100,000 entries that were received on the first day of the old forest or birthday bourbon sweepstakes, which gives participants a chance to purchase one bottle at $199.99 at the old forest or distillery in the little Kentucky.

Lawson Whiting: With that, I would like to turn the call over to Lawson. Thank you, Sue, and good morning, everyone. It's a pleasure to speak to you today about Brownformans' first quarter fiscal 2025 results. In June, we shared our outlook for fiscal 25 with the expectation that it would be a year of two halves. As you'll recall, we anticipated the second half of our fiscal year would be stronger than our first half on a year-over-year basis, as in the first half we are comparing against strong shipments in a few emerging international markets related to the replenishment of the company.

Speaker Change: The demand is so high for this special release, we were fortunate to be able to increase the number of bottles available, which is probably welcome news to anyone that has been trying to add a bottle of birthday bourbon to their home bar.

Speaker Change: For more than 150 years, we've aspired to uphold George Garvin Brown's founding promise that there's nothing that are in the market. I want to wish good luck to everyone who entered these sweepstakes as I think they will announce winners in downtown Louisville today. I'm also pleased to report that organic net sales growth continued for Woodford Reserve, the number one super premium American with E. Globally. This performance was driven by higher volume in the United States.

Lawson Whiting: The first quarter results we're sharing with you today are in line with our expectations and we're confident in reaffirming our full-year growth outlook for fiscal 25. As we move into the details of the quarter, I'll provide an overview of the top line from a brand perspective and share a few insights on gross profit and margin.

Speaker Change: Even when total distilled spirits trends remained well below historical levels. Of the top 20 total distilled spirits brands in the United States, only two are growing in the past 13 week takeaway results and which would reserve as one of them. This speaks to the strength of the brand, and also the challenges many in our industry are facing in the current environment.

Lawson Whiting: Then I'll turn it over to Leanne who will share additional insights on our geographic performance as well as other financial highlights. Our fiscal 2025 reported net sales to client 8%, with organic net sales decreasing 4%, after adjusting for the divestitures of Finlandia and Sonoma Cattrera in the prior fiscal year. The negative effect of foreign exchange and a change in how we manage our Jack Daniels Country cocktail business with Papst Brewing Company.

Speaker Change: Both Jack Daniel's Tennessee Honey and Jack Taylor's Tennessee Apple delivered mid-single digit organic net sales growth led by Brazil, as well as Turkey A, even as Tennessee Apple is lapping its prior year launching Korea.

Speaker Change: In Brazil, we continued our strategic geographic expansion efforts, investing more efficiently with bolder and bigger activities in high engagement content for the consumer.

Lawson Whiting: We haven't talked about Jack Daniels Country cocktails for a while, so let me take a few moments to explain that last point. As you may recall, in fiscal 21, we entered into a partnership with the Papst Brewing Company for the supply, sales, and distribution of Jack Daniels Country cocktails in the United States. At that time, Brownforma continued to produce certain formats of this refreshing ready-to-drink beverage. But during fiscal 24, we transferred production of all Jack Daniels Country cocktails products to Papst Brewing Company and as a result, our sales related to Brownforma and produced Jack Daniels Country cocktail products are significantly lower compared to the prior year period.

Speaker Change: Turning now to Jack Daniel's Tennessee Whiskey.

Speaker Change: Organic Net Sales declined 6% given by lower volumes led by the United States, the United Arab Emirates, and the United Kingdom, partially offset by an increase in volume and Japan following the transition to own distribution and higher prices in Turkey. As I mentioned in my opening comment, this decline was expected.

Speaker Change: In the year-go period, the United States and the United Kingdom experienced a shift in ordering patterns as inventory was purchased ahead of a price increase in the US and an exercise tax increase in the UK.

Speaker Change: In addition, in the United Arab Emirates, we faced a tough comparison against the strong shipments in the year-go period due to the replenishment of inventory. As you'll recall, with supply chain disruptions we experienced, the emerging markets were among the last of the markets to be replenished.

Lawson Whiting: In the quarter, Diplomatico Rum, Old Forrester, and Woodford Reserve, along with Jack Daniels Tennessee Honey and Jack Daniels Tennessee Apple were the largest positive contributors to organic net sales. This growth was more than offset by a decline for Jack Daniels Tennessee whiskey.

Speaker Change: We continue to believe that Jack Daniels has a significant runway for long-term growth despite the recent short-term headwinds.

Lawson Whiting: First, to our most recent acquisitions. Diplomatico Rum delivered very strong results in the first three months of the year, largely related to the timing of ordering patterns in the prior year period which created an easier comparison. Jin Mari was also impacted by the timing of ordering patterns in the prior year period, but this created a tougher comparison and led to a slight decrease in organic net sales. Naturally, there is a higher level of volatility in the trends as the trend only reflects three months of data.

Speaker Change: We continue to invest behind the brand and have strategies and plans in place to engage in new generation of legal drinking age consumers while retaining our core consumers, including the Make It Count Global Campaign, the McLaren Formula One sponsorship and the Jack Daniels and Coca-Cola RTD.

Speaker Change: We're also investing more in short-term activations within the Auton Off-Fremus channels and events such as music festivals and McLaren races globally.

Lawson Whiting: Importantly, in the first quarter of fiscal 25, shipments are largely in line with the pletions and we continue to believe that will benefit from having a full year of growth from these outstanding super premium brands in our portfolio. Old Forrester, our founding brand, delivered strong double-digit organic net sales growth, is the brand benefited from increased volume and our pricing strategy. The brand continues to be incredibly popular with whiskey consumers as evidenced by the over 100,000 entries that were received on the first day of the Old Forrester birthday bourbon sweepstakes, which gives participants a chance to purchase one bottle at $199.99 at the Old Forrester Distillery in Louisville, Kentucky.

Speaker Change: Music has been an important part of the Jack Daniels relevance in pop culture and was recently featured in the mega hit of our song, also known as Tipsy by singer Shibuzi. The song was released in April and reached number one on the Billboard Hot 100 in the United States and other countries such as Australia, Canada, Ireland, Norway and Sweden.

Speaker Change: Our global sponsorship of McLaren Racing is also on display with a top 3 finish from McLaren in 12 of the 15 races held in calendar 2024 with the cars, race suits, and the team garage featuring increased branding for Jack Daniels.

Lawson Whiting: The demand is so high for this special release, we were fortunate to be able to increase the number of bottles available, which is probably welcome news to anyone that has been trying to add a bottle of birthday bourbon to their home bar.

Speaker Change: There are two upcoming races in the United States, one in Austin and October, and then Las Vegas in November. We'll be cheering on Team of Clarence Victory.

Speaker Change: In addition, we're continuing the geographic expansion of the Jack Daniels family brands and our well-positioned to capture the global growth of American whiskey as evidenced by our share growth and markets such as the United Kingdom, Australia, Poland, Mexico and Brazil.

Lawson Whiting: For more than 150 years, we have aspired to uphold George Garvin Brown's founding promise that there's nothing better in the market. I want to wish good luck to everyone who entered these sweepstakes as I think they will announce winners in downtown Louisville today. I'm also pleased to report that organic net sales growth continued for Woodford Reserve, the number one super premium American whiskey globally. This performance was driven by higher volume in the United States, even when total distilled spirits trends remained well below historical levels.

Speaker Change: Before moving on, I'll provide a brief update on the continued expansion of the Jack Dinos and Coca-Cola RTD.

Speaker Change: Well, growth from the Jack Dinos and Coca-Cola launch continued to be offset by the plan to climb and Jack and Cola, which makes it difficult to evaluate the brand from an external perspective, but we are very pleased as we enter our second year. We continue to add new markets, expanding furthers throughout Europe, as well as launching in South Africa and additional Latin American markets.

Lawson Whiting: Of the top 20 total distilled spirits brands in the United States, only two are growing in the past 13 week takeaway results and Woodford Reserve is one of them. This speaks to the strength of the brand and also the challenges many in our industry are facing in the current environment. Both Jack Daniels Tennessee Honey and Jack Daniels Tennessee Apple delivered mid single digit organic net sales growth led by Brazil, as well as Turkey A, even as Tennessee Apple is lapping its prior year launching Korea.

Speaker Change: We plan to launch an India in September and expect to be in more than 30 markets by the end of calendar 24.

Speaker Change: In addition to geographic growth, we're also innovating. In the U.S., the first displays of Jack and Cote Cherry are beginning to appear. Jack and Cote Cherry will be a limited time offering intended to generate interest and intention for the family of Jack Dinos RTDs, as well as the full strength family of brands.

Speaker Change: We'll also be introducing a variety pack as package formats and flavors are vital to the reddit drink category and further address the consumer trends of convenience and flavor.

Lawson Whiting: In Brazil, we continued our strategic geographic expansion efforts, investing more efficiently with bolder and bigger activities in high engagement content for the consumer. Turning now to Jack Daniels Tennessee whiskey, organic net sales declined 6% driven by lower volumes led by the United States, the United Arab Emirates and the United Kingdom, partially offset by an increase in volume in Japan following the transition to own distribution and higher prices in Turkey.

Speaker Change: The check-downs in Coca-Cola RTD has been a great addition to our portfolio, which, as you know, we have been very strategically reshaping over the past couple of decades to focus on premium and super premium brands. Before turning the call over, Leanne, I'd also like to provide some additional perspective on our gross profit and margin.

Leanne: In the first quarter of fiscal 25, a report grows profit decreased 13% and organic decreased 8% resulting in a gross margin of 59.4%.

Lawson Whiting: As I mentioned in my opening comment, this decline was expected. As you'll recall, with supply chain disruptions we experienced, the emerging markets were among the last of the markets to be replenished. We continue to believe that Jack Daniels has a significant runway for long-term growth despite the recent short-term headwinds. We continue to invest behind the brand and have strategies and plans in place to engage a new generation of legal drinking age consumers while retaining our core consumers, including the Make It Count Global Campaign, the McLaren Formula One sponsorship and the Jack Daniels and Coca-Cola RTD.

Leanne: This gross margin contraction is largely due to timing. As we have shared previously, following the divestitures of Finlandian cinema Gertrera, we entered into a transition service agreement with the buyers to ensure a smooth and orderly transition. These agreements had a negative effect on our overall report of gross margin as the gross margin for these services agreements was significantly lower than the sale of finished goods. This was the main driver of the 140 basis point negative impact from AMD.

Leanne: Overall, cost negatively impacted reported gross margin by 440 basis points largely influenced by inventory levels and the timing of input cost fluctuations.

Leanne: In the first quarter of fiscal 25, we continue to reduce our fish goods and inventories on a year-over-year basis.

Leanne: The finished goods that supported our first quarter sales were at a higher cost compared to the year ago period due to the timing of input cost fluctuations, particularly for our tequila brands as we work through the higher cost inventory. Leanne will share more details regarding our outlook, but I'll share now that we do anticipate the headwinds in the first half will become tailwinds in the second half of the year.

Lawson Whiting: We're also investing more in short-term activations within the on and off premise channels and events such as music festivals and McLaren races globally. Music has been an important part of the Jack Daniels relevance in pop culture and was recently featured in the mega hit, a bar song, also known as Tipsy by singer Shibuzie. The song was released in April and reached number one on the Billboard Hot 100 in the United States and other countries such as Australia, Canada, Ireland, Norway and Sweden.

Leanne: Favorable product mix with price mix contributed to 200 basis points in the first quarter. There was also a positive impact to reported ghost margin of 70 basis points from the recent business model change rejecting its country cocktail.

Lawson Whiting: Our global sponsorship of McLaren racing is also on display with a top three finish for McLaren in 12 of the 15 races held in calendar 2024 with the cars, racists and the team garage featuring increased branding for Jack Daniels. There are two upcoming races in the United States, one in Austin in October and then Las Vegas in November. We'll be cheering on Team McLaren to victory. In addition, we're continuing the geographic expansion of the Jack Daniels family brands and are well positioned to capture the global growth of American whiskey as evidenced by our share growth in markets such as the United Kingdom, Australia, Poland, Mexico and Brazil.

Leanne: This is an example of how we continually look for efficiencies and opportunities to improve our production and supply chain. Please stay a little bit more than offset by the headwinds from A&D in the timing of cost.

Leanne: In summary, the start to our fiscal 25 was as we expected, and we believe we're positioned to achieve our full year guidance. We're still operating in a highly dynamic environment, yet our portfolio remains well positioned, our geographic reaches broad, and our team members are mentally talented and highly dedicated to growing our business.

Leanne: This is enabled us to navigate short-term volatility and uncertainty as we focus on the long-term growth of our business. With that, I'll turn the call over to Leanne and she'll provide more details on our first quarter results.

Lawson Whiting: Before moving on, I'll provide a brief update on the continued expansion of the Jack Daniels and Coca-Cola RTD. While growth from the Jack Daniels and Coca-Cola launch continued to be offset by the planned declines in Jack and Cola, which makes it difficult to evaluate the brand from an external perspective, but we are very pleased as we enter our second year. We continue to add new markets, expanding further throughout Europe as well as launching in South Africa and additional Latin American markets. We plan to launch in India in September and expect to be in more than 30 markets by the end of calendar 24.

Leanne: Thank you, Lawson and good morning, everyone. As Lawson mentioned, I will provide additional details on our geographic performance, other financial highlights, as well as our fiscal 2025 outlook.

Leanne: From a geographic perspective, organic net sales for our developed international markets collectively declined 6% in the first quarter, as growth in Japan was more than offset by declines in the United Kingdom in Germany. As expected, Japan returned to growth following our route to consumer change to own distribution on April 1, 2024. We are now recognizing the benefits of owning our distribution, including the execution of our pricing strategy. We are very pleased with the transition and want to thank all of our dedicated team members for their contribution to this success.

Lawson Whiting: In addition to geographic growth, we're also innovating. In the U.S., the first displays of Jack and Coke cherry are beginning to appear. Jack and Coke cherry will be a limited time offering intended to generate interest and intention for the family of Jack Daniels RTDs as well as the full strength family of brands. We'll also be introducing a variety pack as packaged formats and flavors are vital to the Reddit drink category and further address the consumer trends of convenience and flavor.

Leanne: For the UK and Germany, lower volumes of Jack D'Aus Tennessee whiskey had the largest impact on performance. In the UK, the results of this quarter, compared against higher volumes in the year ago period, related to purchases ahead of the excess tax increase. And in Germany, annual pricing negotiations lasted longer than as typical, but have now been completed as of the end of June.

Lawson Whiting: The Jack Daniels and Coca-Cola RTD has been a great addition to our portfolio, which as you know, we have been very strategically reshaping over the past couple of decades to focus on premium and super premium brands.

Lawson Whiting: Before turning the call over to Leanne, I'd also like to provide some additional perspective on our gross profit and margin. In the first quarter of fiscal 25, a reported gross profit decreased 13%, an organic decreased 8%, resulting in a gross margin of 59.4%. This gross margin contraction is largely due to timing. As we have shared previously, following the divestitures of Finlandian Sonoma Gattrera, we entered into a transition service agreement with the buyers to ensure a smooth and orderly transition.

Leanne: In the United States, Organic Net Sales decreased 4%.

Leanne: As lower volumes of Jack Daniels Tennessee Whiskey were partly offset by growth of wood for reserve in a forester, with both of these brands having take away trends that are outperforming the American Whiskey category.

Lawson Whiting: These agreements had a negative effect on our overall reported gross margin as the gross margin for these services agreements was significantly lower than the sale of finished goods. This was the main driver of the 140 basis point negative impact from A&D. Overall costs negatively impacted reported gross margin by 440 basis points, largely influenced by inventory levels and the timing of input cost fluctuations. In the first quarter of fiscal 25, we continued to reduce our finished goods inventories on a year over year basis.

Leanne: As Lawson has already highlighted the drivers of these brands and his remarks, I will provide a few additional comments on the inventory and consumer environment. Just a quick reminder, from our June call, 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. Consistent with our expectations, distributors are continuing to target the low end of their normal range as higher inflation and interest rates are impacting the consumer and trade.

Lawson Whiting: The finished goods that supported our first quarter sales were at a higher cost compared to the year ago period due to the timing of input cost fluctuations, particularly for our tequila brands as we work through the higher cost inventory.

Speaker Change: from the take away perspective.

Speaker Change: Transfer total distilled spirits.

Speaker Change: As well as Brownformin, remains below the long-term historical rates of growth.

Lawson Whiting: Leanne will share more details regarding our outlook, but I'll share now that we do anticipate the headwinds in the first half would become tailwinds in the second half of the year. Favorable product mix with price mix contributed 200 basis points in the first quarter. There was also a positive impact over reported gross margin of 70 basis points from the recent business model change for Jack Daniels Country cocktails. This is an example of how we continually look for efficiencies and opportunities to improve our production and supply chain. These tailwinds, though, are more than offset by the headwinds from A&D in the timing, of Costs.

Speaker Change: While race of growth are moderating, the premiumization trend continues to persist with higher price tiers continuing to grow value and maintain share as value price brands are losing share to RTDs. The growth in the $40 and above price tiers are driven largely by the US whiskey and telecategories.

Speaker Change: Collectively, organic net sales for our emerging international markets, which lap a 32% increase in the year ago period, declined by 5%, driven by the Cunning Mexico, led by new mix and Articula Portfolio, as the economic environment is decelerating and consumers are trading down. Despite the decelerating conditions, we continue to outperform and gained market share across the channels driven by strong takeaway in RTDs and whisky. We also had lower volumes of Jack Daniels Tennessee whisky in the United Arab Emirates.

Lawson Whiting: In summary, the start to our fiscal 25 was as we expected, and we believe we're position to achieve our full-year guidance. We're still operating in a highly dynamic environment, yet our portfolio remains well-positioned, our geographic reaches broad, and our team members are immensely talented and highly dedicated to growing our business. This is enabled us to navigate short-term volatility and uncertainty as we focus on the long-term growth of our business.

Leanne Cunningham: With that, I'll turn the call over to Leanne, and she'll provide more details on our first quarter results. Thank you, Lawson, and good morning, everyone. As Lawson mentioned, I will provide additional details on our geographic performance, other financial highlights, as well as our fiscal 2025 outlook.

Speaker Change: as we lap the strong shipments from the replenishment of inventory in the year ago period.

Speaker Change: These declines were partially offset by growth in Turkey, driven by higher prices, as well as Brazil, where Jack Daniels Tennessee whiskey, Jack Daniels Tennessee Apple, and Jack Daniels Tennessee Honey, are benefiting from the growth of the premium plus whiskey category.

Leanne Cunningham: From a geographic perspective, organic net sales for our developed international markets collectively declined 6% in the first quarter, as growth in Japan was more than offset by declines in the United Kingdom and Germany. As expected, Japan returned to growth following our route to consumer change to own distribution on April 1, 2024. We are now recognizing the benefits of owning our distribution, including the execution of our pricing strategy. We are very pleased with the transition and want to thank all of our dedicated team members for their contribution to this success.

Speaker Change: Geographic Expansion, and the launch of an additional package size for Jack Daniel's Tennessee Whiskey. And lastly, organic net sales in the travel retail channel decreased 8% as the channel compared against the strong growth from our super premium brands, particularly Woodford Reserve and Jack Daniel's single barrel in the year ago period. Growth of diplomatico, along with our single malt scotches, partially offset the decline. Importantly, consumer takeaway remains strong in global travel retail accounts.

Leanne Cunningham: For the UK and Germany, lower volumes of jacking of Tennessee whiskey had the largest impact on performance. In the UK, the results of this quarter compared against higher volumes in the year ago period related to purchases ahead of the excess tax increase. And in Germany, annual pricing negotiations lasted longer than it's typical, but have now been completed as of the end of June. In the United States, organic net sales decreased 4%, as lower volumes of Jack Daniels Tennessee whiskey were partly offset by growth of Woodford Reserve and Old Forrester, with both of these brands having takeaway trends that are outperforming the American whiskey category.

Lawson: Lawson has shared the details of our gross profit and margin for the quarter, so I will now turn to our operating expenses and operating income. In the first quarter, organic advertising expenses decreased 1%, as we laughed a 14% increase in the year ago period. As a reminder, the increased spend in the first quarter of fiscal 2024 was largely due to the timing of our spend to support the launch of the Jack Daniels and Coca-Cola RTD, which was skewed to the first few months of the fiscal year, and our organic SGNA investment decreased 5%. As we compared against a 12% increase in the year ago period, which reflected higher compensation-related expenses related to or...

Leanne Cunningham: As Lawson has already highlighted the drivers of these brands and his remarks, I will provide a few additional comments on the inventory and consumer environment. Just a quick reminder, from our June call, 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. Consistent with our expectations, distributors are continuing to target the low end of their normal range as higher inflation and interest rates are impacting the consumer and trade.

Lawson: Organizational changes, including our route to consumer expansions.

Lawson: In total, reported inorganic operating income decreased 14% and 13% respectively in the first quarter of fiscal 2025. These results led to a 14% diluted earnings per share decrease to 41 cents per share. And finally, to our fiscal 2025 outlook, which we are reaffirming. We anticipate a return to growth for organic net sales and organic operating income in fiscal 2025, driven by gains in international markets and the benefit of normalizing inventory trends on a year over year basis. This outlook is tempered by our beliefs that the operating environment ahead will remain challenging and volatile, with global macroeconomic and geopolitical uncertainties.

Leanne Cunningham: From a takeaway perspective, trends for total distilled spirits, as well as brown foreman, remain below the long term historical rates of growth. While rates of growth are moderating, the premiumization trend continues to persist with higher price tiers continuing to grow value and maintain share as value price brands are losing share to RTDs. The growth in the $40 and above price tiers are driven largely by the US whiskey and tequila categories.

Lawson: This environment, we are not forecasting significant changes in the level of trade inventories as the impacts from inflation and higher interest rates on the consumer and trade are expected to continue. We also continue to forecast that fiscal 20, 25 will be a year of two halves.

Leanne Cunningham: Collectively, organic net sales for our emerging international markets which lapped a 32% increase in the year ago period, declined by 5%, driven by a decline in Mexico, led by new mix and article portfolio, as the economic environment is decelerating and consumers are trading down. Despite the decelerating conditions, we continue to outperform and gained market share across the channels driven by strong takeaway in RTDs and whiskey. We also had lower volumes of Jack Daniels Tennessee whiskey in the United Arab Emirates as we lapped the strong shipments from the replenishment of inventory in the year ago period.

Lawson: In our first quarter, on a year over year basis, we compared against the strong shipments and a few emerging international markets, as well as lapping stronger shipments associated with the execution of our pricing strategy. In the second quarter, with the majority of the amendments in inventory across the distributor, retailer and consumer supply chain behind us, we believe our results will more closely reflect

Lawson: Total Distilled Spirit Trans.

Lawson: We expect the second half of the year to be stronger as we anticipate that we will benefit from having a full year of growth from our outstanding new brands of Jim Murray and Diplomatico, and we will begin to compare against the softening of total distilled spirits trends in the year ago period. We remain confident in the strength of our portfolio, along with our pricing strategy and the further globalization of our entire portfolio across fast geographies. Therefore, we continue to expect organic net sales growth in the 2% to 4% range, driven by our emerging and developed international markets.

Leanne Cunningham: These declines were partially offset by growth in Turkey, driven by higher prices, as well as Brazil, where Jack Daniels Tennessee whiskey, Jack Daniels Tennessee apple, and Jack Daniels Tennessee honey are benefiting from the growth of the premium plus whiskey category, geographic expansion, and the launch of an additional package size for Jack Daniels Tennessee whiskey. And lastly, organic net sales in the travel retail channel decreased 8%, as the channel compared against the strong growth from our super premium brands, particularly Woodford Reserve and Jack Daniels single barrel in the year ago period. Growth of Diplomatico, along with our single malt scotches, partially offset the decline. Importantly, consumer takeaway remains strong in global travel retail accounts.

Lawson: We also continue to expect reported gross margin expansion in fiscal 2025 with sequential improvement, as we believe we will benefit from price mix through the evolution of our portfolio, which includes the addition of two super premium brands, Jen Murray and Diplomatico and the divestiture of lower margin brands, thinlandia and Sonoma Catrera. Price mix should also continue to benefit from our revenue growth management activities.

Leanne Cunningham: Lawson has shared the details of our gross profit and margin for the quarter, so I will now turn to our operating expenses and operating income. In the first quarter, organic advertising expenses decreased 1%, as we lapped a 14% increase in the year ago period. As a reminder, the increased spend in the first quarter of fiscal 2024 was largely due to the timing of our spend to support the launch of the Jack Daniels and Coca-Cola RTD, which was skewed to the first few months of the fiscal year, and our organic SGNA investment decreased 5%, as we compared against a 12% increase in the year ago period, which reflected higher compensation related expenses related to organizational changes, including our route to consumer expansions.

Lawson: In addition, Transition Services Agreements typically last approximately 12 months, so they should come to an end in our second half, which will remove the A&D headwind that Lawson highlighted in his remarks.

Speaker Change: and, while cost were higher in the first quarter, a fiscal 2025 compared to the year ago period, this is largely due to the timing of input cost fluctuations, particularly for our tequila brands.

Speaker Change: For these brands, we still expect to benefit from lower agave prices for the full year as we work through our higher cost inventory.

Speaker Change: As we previously shared, we continue to expect that the benefit will be more than offset by the impact of inflation on our input cost.

Leanne Cunningham: In total, reported an organic operating income decreased 14%, and 13% respectively in the first quarter of fiscal 2025. These results led to a 14% diluted earnings per share decrease to 41 cents per share, and finally, to our fiscal 2025 outlook, which we are reaffirming. We anticipate a return to growth for organic net sales in organic operating income in fiscal 2025, driven by gains in international markets, and the benefit of normalizing inventory trends on a year over year basis.

Speaker Change: and Leanne Cunningham, and Leanne Cunningham.

Speaker Change: Our outlook for organic operating expenses reflects continued investment behind our brands and our team To unlock future growth leading to growth generally in line with our top line growth Based on the above we continue to forecast organic operating income growth in the 2% to 4% range

Speaker Change: We also expect our effective tax rate to be in the range of approximately 21% to 23% and that our estimated capital expenditures will be in the range of $195 to $205 million for the full year as we continue to fully invest behind our business to meet what we believe will be the future consumer demand for our brands over the long term. And lastly, as a reminder, in the second quarter of fiscal 2020-25, we will begin to reflect our equity shares of the Deque Cornport Folio's earnings or losses as a line item below the operating income line of our P&L based on the equity method one quarter in a rears. In summary, our fiscal 2020-25 started off as we expect.

Leanne Cunningham: This outlook is tempered by our beliefs that the operating environment ahead will remain challenging and volatile with global macro economic and geopolitical uncertainties. In this environment, we are not forecasting significant changes in the level of trade inventories as the impacts from inflation and higher interest rates on the consumer and trade are expected to continue. We also continue to forecast that fiscal 2025 will be a year of two halves. In our first quarter, on a year over year basis, we compared against the strong shipments in a few emerging international markets, as well as lapping stronger shipments associated with the execution of our pricing strategy.

Speaker Change: The first quarter results reflect the current consumer demand environment, along with a few remaining unusual comparisons against the very strong shipments in the year ago period. While our short-term organic results in the quarter were below our historical trends, we believe our brands and our business are healthy. Lawson and I would again like to thank all of our team members for their continued dedication and contributions in navigating the dynamic operating environment that continues to normalize from the historic manner in which we started this decade. As we look ahead to our fiscal year, we remain confident in our ability to deliver our near-term goals, as we continue to focus on executing our long-term strategy and building Brown form and for generations to come.

Leanne Cunningham: In the second quarter, with the majority of the movements in inventory across the distributor, retailer, and consumer supply chain behind us, we believe our results will more closely reflect total distilled spirits trends. We expect the second half of the year to be stronger, as we anticipate that we will benefit from having a full year of growth from our outstanding new brands of Gen Mari and Diplomatico, and we will begin to compare against the softening of total distilled spirits trends in the year ago period.

Leanne Cunningham: We remain confident in the strength of our portfolio, along with our pricing strategy, and the further globalization of our entire portfolio across vast geographies. Therefore, we continue to expect organic net sales growth in the 2% to 4% range, driven by our emerging and developed international markets. We also continue to expect reported growth margin expansion in fiscal 2025, with sequential improvement, as we believe we will benefit from price mix through the evolution of our portfolio, which includes the addition of two super premium brands, Gen Mari and Diplomatico, and the divestiture of lower margin brands, Finlandia, and Sonoma Catrere.

Lawson: Disconclusive Upper Pair remarks, please open the line for questions.

Speaker Change: Thank you, at this time we will conduct the question and session. As a reminder to ask the question, you need to press start one one on your telephone way for your name to be announced. To withdraw your question, please press start one one again. Please give it to yourself to one question. Please stand by while we compile the Q&A roster.

Speaker Change: Lawson Whiting, Leanne Cunningham,

Speaker Change: Our first question comes from a line of Peter Graham of UBS, your line is not open.

Leanne Cunningham: Price mix should also continue to benefit from our revenue growth management activities. In addition, transition services agreements typically last approximately 12 months, so they should come to an end in our second half, which will remove the A&D headwind that lost and highlighted in his remarks. And, while costs were higher in the first quarter of fiscal 2025, compared to the year ago period, this is largely due to the timing of input cost fluctuations, particularly for our tequila brands.

Peter Graham: Thanks, Operator. Good morning everyone.

Peter Graham: So you both mentioned in your touch about it in the release at one key was in line with your expectations but just in the context of a challenging start to the year, we're going to fail down 4%.

Speaker Change: Can you maybe just speak to the competence or visibility you have in achieving the full year target? I totally understand the comparison. Get it here.

Leanne Cunningham: and you always anticipate a growth being stronger in the second half, which just any thoughts and kind of just the key building blocks for maybe from a category perspective or whatnot. And then just Leanne, you mentioned two key growth will be more aligned with category trends, at least in the data that we can see, they still seem pretty challenged.

Leanne Cunningham: For these brands, we still expect to benefit from lower agave prices for the full year as we work through our higher cost inventory. As we previously shared, we continued to expect that the benefit will be more than offset by the impact of inflation on our input cost and lower production volumes. Our outlook for organic operating expenses reflects continued investment behind our brands and our team to unlock future growth leading to growth generally in line with our top line growth.

Speaker Change: is the expectation you would still expect organic sales to be down in the second quarter with a return to growth in the second half, or should we expect maybe better performance in the second half versus maybe what I just outlined. Thanks.

Speaker Change: Alright, great. Thanks, Peter. Again, I'll just start with reiterating a few things. We do expect this to be the year of two halves. We do expect to see, see, quenchful improvements through the rest of the fiscal year.

Leanne Cunningham: Based on the above, we continue to forecast 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% and that our estimated capital expenditures will be in the range of $195 to $205 million for the full year as we continue to fully invest behind our business to meet what we believe will be the future consumer demand for our brands over the long term.

Speaker Change: Our first quarter results were as expected. The second quarter, as you said, we mentioned we do believe them more closely reflect the total distilled spirits and where they are that's more, you know, and from the view, look at the U.S. trends, that's kind of where we are.

Speaker Change: and for the second half, we're going to benefit from the full year impact of January and Diplomatico. Importantly, a few other things we will begin to compare against the softening of the total distilled spirits in the year ago period, which was significant in our second half last year.

Leanne Cunningham: And lastly, as a reminder, in the second quarter of fiscal 2025, we will begin to reflect our equity shares of the DeCorn portfolios earnings or losses as a line item below the operating income line of our P&L based on the equity method, one quarter in a rears.

Speaker Change: are caused from a cause perspective.

Speaker Change: We will continue to move through a higher cost inventory early in the year. That's largely related to our tequila business as our cost of a govay is actually falling faster than we can move through our inventory.

Leanne Cunningham: In summary, our fiscal 2025 started off as we expected. The first quarter results reflect the current consumer demand environment along with a few remaining unusual comparisons against the very strong shipments in the year ago period. While our short term organic results in the quarter were below our historical trends, we believe our brands and our business are healthy. Lawson and I would again like to thank all of our team members for their continued dedication and contributions in navigating the dynamic operating environment that continues to normalize from the historic manner in which we started this decade.

Speaker Change: But we'll get to that benefit and then I think we have to remind ourselves of where there's some absence of some unusual one-time items which for F24 would have been the negative impact of the transition of Jack and Kola out of our system into the Coca-Cola system in the UK.

Speaker Change: Lapping the impact of transitioning of Jack Daniel's country cocktails production, as well as in F-25 it's about the return of our organic growth in Japan with our own distribution.

Leanne Cunningham: As we look ahead to our fiscal year, we remain confident in our ability to deliver our near-term goals as we continue to focus on executing our long-term strategy and building brown form and for generations to come.

Speaker Change: and also lapping some other emerging...

Speaker Change: International Markets, such as the UAE, now that they've got their inventories at more normal levels, and in the year to go period, as we look at our innovation pipeline, the impact that would have.

Leanne Cunningham: This concludes our prepared remarks.

Operator: Please open the line for questions. Thank you. At this time, we look at the question and answer session. As a reminder to ask a question, you need to press start one one on your telephone way for your name to be announced. To withdraw your question, please press start one one again. Please give yourself to one question. Please stand by, we'll be compiled a Q&A roster.

Peter Grom: Our first question comes on line of Peter Grom of UBS. Your line is not open. Thanks operator, good morning everyone.

Speaker Change: Great, thank you so much to all of us.

Speaker Change: Thank you for your next question.

Lawson Whiting: So you both mentioned and you guys touched about it in the release that once you was in line with your expectations, but just in the context of a challenging start to the year, we're going to fail down 4%. Can you maybe just speak to the confidence or visibility you have in achieving the full year target. I totally understand the comparison is getting easier and you always anticipate a growth being stronger in the second and a half, which is any thoughts on kind of just to keep building blocks from maybe from a category perspective or whatnot.

Speaker Change: Our next question, concern line of Andrea Texara of JP Morgan, your line is not open.

Andrea Texara: Thank you, operator, and good morning everyone. I just want to follow up in terms of the cadence and how the inventory levels have been flowing through. I guess you mentioned on the press release and now also.

Speaker Change: The fact that some of your wholesalers have been more cautious and keeping inventory levels low. What are you seeing on the trade and also what are you seeing from an on-premise and off-premise perspective, right? So part of the inventory buildup is also on the pantry. So can you talk about how you felt the quarter evolve that if you get into the fiscal second quarter in the balance of the year, how we should be thinking of those dynamics from a consumer take away to standpoint? Thank you.

Lawson Whiting: And then just Leanne, you mentioned two few growth will be more aligned with category trends, at least in the data that we can see, they've still seen pretty challenged. So if you expectation, you would still expect organic sales to be down in the second quarter with a return to growth in the second half or in my or should we accept maybe better performance in the second half versus maybe what I just outlined.

Speaker Change: I'll start with the first part of your question Andrea and we believe in general again our distributors are continuing to target the low end of their normal range.

Lawson Whiting: Thanks. All right, great. Thanks Peter. Again, I'll just start with reiterate a few things of this. We do expect this to be the year of two halves. We do expect to can see sequential improvement through the rest of the fiscal year. Our first quarter results were as expected. The second quarter, as you said, we mentioned we do believe them more closely reflects the total distilled spirits and where they are. That's more, you know, and from the view look at the US trends.

Speaker Change: and the retailers have adjusted their inventory levels and response to the consumer take away remaining below its historical ranges and of course in the high interest rate environment.

Speaker Change: You can see on our schedule these for us, our depletions are in mind with our shipments, so you know, really now it's continued to say this, it's really about, you know, consumer demand as they pull the inventory through from supplier to distributor to retailer.

Lawson Whiting: That's kind of where we are. And for the second half, we're going to benefit from the full year impact of January and diplomatic. Importantly, a few other things of we will begin to compare against the softening of the total distilled spirits in the year ago period, which was significant in our second half last year. Our cost from a cost perspective, we will continue to move through a higher cost inventory early in the year.

Speaker Change: We'll say in the U.S. we're working, we can, we have been and we continue to work really, really closely with our distributor partners. And as we said, we're not forecasting any significant changes in the level of trade inventories.

Speaker Change: As we expect the impact on the consumer and the trade to continue as it has then.

Speaker Change: I'll just finish out on inventory as in Europe, we own the greatest part of our own distribution. So our levels there are normal and we feel good with where we are also in Latin America.

Lawson Whiting: That's largely related to our tequila business as our cost of agave is actually falling faster than we can move through our inventory, but we'll get to that benefit. And then I think we have to remind ourselves of where there's some absence of some unusual one time items, which for F-24 would have been the negative impact of the transition of Jack and Cola out of our system into the Coca Cola system in the UK.

Speaker Change: from a Brown Foreman Internal Perspective.

Speaker Change: from a year-over-year basis, we have made progress in reducing our finished-to-edge weapon role material on a year-over-year basis in the joy levels.

Lawson Whiting: Lapping the impact of transitioning of Jack Daniel's country cocktails production as well as an F-25 is about the return of our organic growth in Japan with our own distribution and also lapping some other emerging international markets where such as the UAE now that they've got their inventory that more normal levels. And in the year to go period, as we look at our innovation pipeline, the impact that would have. I think it's important to note that, and we were intentional about saying we believe our growth will come from international markets and when we look at how we're thinking about that, all of them are below what we would consider our long-term growth algorithm.

Speaker Change: Yeah, me add on a little bit, just obviously didn't enjoy levels particularly if it is super level

Speaker Change: have been jumping around and we spent a lot of time last quarter talking about that and I know a number of you wrote about it. But where we are today I think is interesting. So another talk, this is about the U.S. first and then we can go down the European path if you want to.

Speaker Change: So total steel spirits in the U.S. Right now, Nielsen and Napa are both flat, essentially.

Speaker Change: Last, this time last year, Neilson was at plus 5.7, so it has gone from 5.7, and it got to 0. It felt like overnight, last fall, and contributed to what was the very weak Christmas that the industry and Brown Forman had last year, but it is still interesting how quickly it fell off.

Peter Grom: Thank you so much, y'all pass it on.

Speaker Change: In our last call, we talked a lot about why and went through the big three of the cannabis, the GLP ones in Gen Z and why we feel those are not the key drivers that these are not structural changes.

Operator: Thank you, one moment for our next question.

Andrea Teixeira: Our next question comes from a line of Andrea Teixeira of JP Morgan. Your line is now open. Thank you operator and good morning everyone. I just want to follow up in terms of like the cadence and how the inventory levels have been flowing through. I guess you mentioned on the press release and now also the fact that some of your wholesalers have been more cautious and keeping inventory levels low. What are you seeing on the trade and also what are you seeing from a known premise and off premise perspective, right? So part of the inventory build up is also in the pantry.

Speaker Change: But it really comes down to consumer spending, consumer inventories and...

Speaker Change: We still believe those are the two biggest factors that have impacted what has happened over the last year.

Speaker Change: Now, as far as Brown Forman take away in the USA, I do think there's kind of so many unusual things in this corner But...

Speaker Change: One of them is Nielsen and Napke, I said that flat in the industry, Brown Forman is essentially flat to down one in Napke, but Nielsen looks much worse, more like down mid-single digits.

Speaker Change: That the primary reason for that is the launch of Jack and Coke last year in Q1. So, when we launched Jack and Coke in the US, it was a huge chain.

Lawson Whiting: So can you talk about how you felt the quarter evolved as you get into the fiscal second quarter and the balance of the year, how we should be thinking of those dynamics from a consumer? Thank you. I'll start with the first part of your question, Andrea. We believe in general, again, our distributors are continuing to target the low end of their normal range and that retailers have adjusted their inventory levels in response to the consumer takeaway remaining below its historical ranges.

Speaker Change: You know, Laws, Control States.

Speaker Change: which would have been the napkin that obviously was much slower and so.

Speaker Change: You've got this big push that happened right at the beginning of Q1 with Jack and Coke and that factor alone is about half the difference, that 5 point difference between number and another half of it is just Jack and Coke.

Speaker Change: The other half, which is much more positive, and interesting, is in the napkin data, which captures on-premise.

Lawson Whiting: And of course, in the high interest rate environment, you can see on our schedule B for us, our depletions are in line with our shipments. So, you know, really now we continue to say this is really about consumer demand as they pull the inventory through from supplier to distributor to retailer. We'll say in the US we're working we have been and we continue to work really, really closely with our distributor partners.

Speaker Change: The other half of that Delta is driven by Woodford and Old Forster in the on-premise, which, from Honest, I didn't expect to see that, but both Woodford and Old Forster are really having strong runs on the on-premise right now. Well, of sort of...

Speaker Change: You know, total still spirits in the on-premise, which is pretty weak. It's down between one and two. So, we're bucking the trend there and with two of our strongest brands that are actually moving the needle and making a difference.

Lawson Whiting: And as we said, we're not forecasting any significant changes in the level of trade inventories as we expect the impact on the consumer and the trade to continue as it has been. I'll just finish out on inventory as in Europe, you know, we own the greatest part of our own distribution. So our stock levels there are normal. And we feel good with where we are also in Latin America from a brown form an internal perspective from on a year over year basis.

Speaker Change: Thank you.

Speaker Change: Thank you, we'll move it for our next question.

Speaker Change: Lawson.

Speaker Change: Our next question, concern line of Ericsson Roto and Morgan Stanley, your line is now open.

Lawson: Great, thanks for taking the question.

Lawson: Leanne, and Lawson, I hope you can give a little bit more color into the comment Leanne made earlier that you've made some progress year on year and reducing your finish goods and raw material inventories.

Lawson Whiting: We have made progress in reducing our finished goods with and raw material on a year over your basis and enjoy levels. Yeah, let me add on a little bit is obviously inventory levels, particularly if the consumer level have been jumping around and we spent a lot of time last quarter talking about that. And I know a number of you wrote about it, but where we are today, I think is interesting. So, and I'm going to talk this is about the US first and then we can go down the Europe path if you want to, but so total still spirits in the US right now, Nielsen and Napka are both flat essentially last this time last year.

Speaker Change: Does that mean that there is further reduction still to come as you look at the second half and...

Speaker Change: How is it?

Speaker Change: You know, what would, how are you looking at the impact in terms of...

Speaker Change: of that in terms of gross margin.

Speaker Change: The second question is sort of related to inventories but longer term.

Lawson Whiting: Nielsen was at plus 5.7. So it has gone from 5.7. It got to zero. It felt like overnight last fall and contributed to what was the very weak Christmas. That the industry and brown form and had last year, but it is still interesting how quickly it fell off. In our last call, we talked a lot about why and went through the big three, the cannabis, the GLP ones and Gen Z. And why we feel those are not the key drivers that these are not structural changes.

Speaker Change: It would be awesome any update in terms of your thinking about the level of inventories, maturing stocks out there for the industry, you know, the 12. something million barrel Beijing in Kentucky, and I'm sure a lot in Tennessee, how are you thinking in terms of how the next few years?

Lawson Whiting: But it really comes down to consumer spending and consumer inventories and we still believe those are the two biggest factors that have impacted what has happened over last year. Now, as far as brown form and take away in the US, I do think there's kind of, there's so many unusual things in this quarter, but one of them is Nielsen and Napka, I said they're flat in the industry. Brown form and it's essentially flat to down one in Napka, but Nielsen looks much worse, more like down mid single digits.

Speaker Change: Yeah, so Eric, I'll start with the first part of your question.

Speaker Change: So from Barrow Whiskey, like we always talk about, that's about our future growth expectation of our age products. So as we look at, we continue to see demand in the future, we should always expect that to grow. But to my comment on Finnish goods, web and raw material on a year over your basis.

Speaker Change: With the volatility that was created by the COVID cycle and a strong demand and the supply chain constraint.

Lawson Whiting: Roberts, that the primary reason for that is the launch of Jack and Coke last year in Q1. So we launched Jack and Coke in the U.S. It was a huge chain, you know, launch, control states, which would have been the napkin that obviously was much slower. And so you've got this big push that happened right at the beginning of Q1 with Jack and Coke. And that factor alone is about half the difference, that five-point difference to e.g., half of it is just Jack and Coke.

Speaker Change: We've been intentional and we share that on our last call to reduce our finished good whip and roll material. In the Tory levels on a year over year basis, we have accomplished that.

Speaker Change: There is one piece of you look at from April 30, or year-end, it's our finished goods is up a bit, and that is all about as proactively preparing for a variety of care related scenarios.

Lawson Whiting: The other half, which is much more positive, and interesting is in the napkin data, which captures on premise, half of the other half of that delta is driven by Woodford and Old Forrester in the on premise, which, from honest, I didn't expect to see that, but both Woodford and Old Forrester are really having strong runs in the on premise right now, well, above. Sort of, you know, totals still the spirits in the on premise, which is pretty weak. It's down between one and two.

Speaker Change: and then to your point on how it related to Gross Margin. Again, we talked about that.

Speaker Change: As we think about our cost for the full year and where we kind of expected to be.

Speaker Change: What's happening in the first couple quarters of the year is more related to timing as we move through some inventory.

Speaker Change: But that we were specific to say that we would still have and that would be offset by the impact of inflation on our input cause and our lower production volumes.

Lawson Whiting: So we're bucking the trend there, and with two of our strongest brands that are actually moving the needle and making a difference.

Andrea Teixeira: Thank you.

Speaker Change: as we are continuing to focus on returning to more normal levels of our working capital. So that is all factored into our gross margin guidance for the year.

Operator: We'll move it for our next question. Our next question comes from the line of Eric Sarota and we're going to stand here. Your line is now open. Great. Thanks for taking the question. Leanne and Lawson, hoping you can give a little bit more color into the comment Leanne made earlier that you've made some progress year on year in reducing your finished goods and raw material inventories. Does that mean that there is further reduction still to come as you look at the second half?

Speaker Change: Yeah, so the question around industry supplies and the performance supplies, you know, it's interesting first of all, this.

Speaker Change: Back up a year ago, the conversation was all about, do we have enough?

Operator: And, you know, how are you looking at the impact in terms of that in terms of gross margin? The second question sort of related to inventories, but longer term, would be Lawson any update in terms of your thinking about the level of inventories, maturing stocks out there for the industry. You know, that's 12 points, something million barrel, aging, and Kentucky. And I'm sure a lot in Tennessee, how are you thinking in terms of how the market absorbs that as it reaches the maturity over the next few years? Yeah.

Speaker Change: So the conversation has gone 180 in the period of a year.

Speaker Change: So, I tend to not.

Speaker Change: You know, overreact to those because it's so sensitive to demand and just a little bit of change.

Speaker Change: Obviously can, you know, make the industry survive, you're up and down pretty drastically. So a few things though, though.

Speaker Change: Within, we're talking American whiskey for the most part here.

Speaker Change: We feel pretty good about it right now, the big suppliers of the ones who still control the vast majority of the sales of American whiskey and while everyone has been building their inventories

Speaker Change: They're still building for sales growth rates that seem pretty reasonable and we think are going to work its way out and but there are levers that we can pull and things get long and short and we've been doing this for.

Speaker Change: On an empty more years of managing supply, and I think we've gotten pretty good at figuring all that stuff out. So I just don't consider the whiskey supply to be the bigger risks, and we're not seeing it in terms of pricing and the promotional environment.

Speaker Change: You're not seeing that flow through either in the United States at all, so as I say, I think we feel pretty good about the supply situation.

Eric Sarota: So, Eric, I'll start with the first part of your question. So from barrel whiskey, like we always talk about, that's about our future growth expectation of our age product. So, you know, as we look at, we continue to see demand in the future. We should always expect that to grow. But to my comment on finished goods, whip, and raw material on a year over your basis. With the volatility that was created by the COVID cycle and strong demand and the supply chain constraints, we've been intentional and we shared that on our last call to reduce our finished good whip and raw material inventory levels on a year over your basis.

Speaker Change: Great, and then I just want more shorter term follow up one of my fasts.

Speaker Change: One of my favorite quotes from last year from you, Lawson was a Christmas stunk. Seems a little silly to be asking about the holiday period with Labor Day weekend, fast approaching, but you know, the holiday still in will certainly be.

Speaker Change: Approaching as well. So, how are you thinking about, you know, there's various, you know, comps and inventory movement and things like that, but how are you thinking about and planning for demand for this holiday season?

Eric Sarota: We have accomplished that. There is one piece though. If you look at from April 30, our year end is our finished goods is up a bit and that is all about as proactively preparing for a variety of tariff-related scenarios. And then to your point on how it related to gross margin, again, we talked about that as we think about our cost for the full year and where we kind of expected to be, what's happening in the first couple quarters of the year is more related to timing as we move through some inventory, but that we were specific to say that we would still have and that would be all set by the impact of inflation on our input cost and our lower production volumes as we are continuing to focus on returning to more normal levels of our working capital. So I hope that is all factored into our gross margin guidance for the Yeah.

Speaker Change: Well, look, that is a tough question. The same old, the comps, this seems to be the answer to everything because the comps are going to be much easier on this Christmas when they were last year. Last year is really was a...

Speaker Change: I'll say it was a surprise. I mean, it's not just for Brownfarlane. I mean, the industry was surprised at how rapidly everything seemed to fall off. So we've already said that the second half of the year is going to be our stronger, and even Q2 should incrementally be stronger than Q1. And so that includes a better Christmas than last year.

Speaker Change: I'm really nervous to try to lay out a prediction on...

Speaker Change: You know how good it's going to be.

Speaker Change: And I think one thing we can build on that is one thing that we know is while we do continue to see a stretch to consumer that is seeking to stretch their discretionary income.

Speaker Change: Premiumization Trends are continuing, and we feel like our portfolio is incredibly well positioned in for that premium premiumization trend to continue, which I think you can see by the strong performance of what's the reserve and what's the first order.

Lawson Whiting: Yeah, so the question around industry supplies and the Brown Forman supplies, you know, it's interesting, first of all, if it back up a year ago, the conversation was all about, do we have enough? So the conversation has gone 180 in the period of a year. So I tend to not sort of overreact to those because it's so sensitive to demand and just a little bit of change, obviously can, you know, make the industry survive go up and down pretty drastically.

Speaker Change: Great, thanks so much for your insights on past rounds.

Speaker Change: Thank you for the next question.

Speaker Change: Good.

Speaker Change: Our next question comes from the line of Nadine Sauward of Pernstein Airlines now open.

Lawson Whiting: So a few things though, the within, we're talking American whiskey for the most part here. We feel pretty good about it right now. The big suppliers are the ones who still control the vast majority of the sales of American whiskey. And while everyone has been building their inventories, they're still building for sales growth rates that seem pretty reasonable. And we think they're going to work its way out and look, there are levers that we can pull when things get long and short.

Nadine Sauward: I thank you very much. What's in the end maybe if I asked my first question in putting the lumpiness of the distributor in the trees to one side that we've had over many quarters now. And I look at what the implied underlying net sales growth was. I think it's the weakest now that we've seen in probably about four years.

Speaker Change: So, well below that medium term growth, Algo, if only appreciate your comment on.

Speaker Change: sort of this being a year to have. But could you help us understand what you believe are the underlying drivers of thought, weakness, and how you expect that to develop over the remainder of the fiscal year? Again, focusing on that underlying number rather than injury.

Lawson Whiting: And we've been doing this for 154 years of managing supply. And I think we've gotten pretty good at figuring all that stuff out. So I just don't consider the whiskey supply to be one of the bigger risks. And we're not seeing it in terms of pricing in the promotional environment. You're not seeing that flow through either in the United States at all. So as I say, I think we feel pretty good about the supply situation.

Speaker Change: And then second question related to that, what are you assuming in terms of the health of the American consumer in your guidance versus perhaps what are you serving today in terms of the health of that consumer? Thank you.

Speaker Change: Okay, so if we focus on sort of what are the factors in Q1 and I'm...

Lawson Whiting: Great. Then just one more shorter term follow up. One of my, one of my favorite quotes from last year from you, Lawson, was Christmas stunk. Seems a little silly to be asking about the holiday period with Labor Day weekend fast approaching, but, you know, the holiday still in will certainly be approaching as well. So how are you thinking about, you know, I know there's various, you know, comps and inventory movements and things like that, but how are you thinking about and planning for demand for this holiday season?

Speaker Change: I said, I'll leave inventory out of it. I want to, I don't know if it's stuck out from our comments that we made earlier, but the price increases last year, which hit August 1, last summer, so that we buy in in June July ahead of that.

Speaker Change: That's not in material, and the same thing with the UK.

Speaker Change: St Timing, but it was tax increases and you had the dementia buying ahead of that. So some of this is, you know, timing of all those kind of stuff and that impacts, you know, or depletions and things like that. So, but if we're focused on the US consumer himself,

Speaker Change: I mean, look, obviously the consumer is weaker, TDS is down there at zero, both in napkin, meals and that's even, as we said, that's a pretty stop deep drop off.

Lawson Whiting: Well, look, I mean, yeah, that is a tough question. You know, the same old, the comps, this seems to be the answer to everything because the comps are going to be much, much easier than this Christmas than they were last year. Last year's really was a, I'll say it was a surprise. I mean, it's a surprise, not just for Brown Farman. I mean, the industry was surprised at how rapidly everything seemed to fall off.

Speaker Change: But I do think that things are going to improve, this business has gone through these cycles where it drops off.

Speaker Change: and then it comes back very, very pretty quickly and we're not betting on quickly necessarily in our guidance but we are saying that we think it'll be so much, so much better.

Lawson Whiting: So we've already said that the second half of the year is going to be our stronger and even Q2 should incrementally be stronger than Q1. And so that includes a better Christmas than last year, but I'm really nervous to try to lay out a prediction on, you know, how good it's going to be. And I think one thing we can build on that is one thing that we know is while we do continue to see a stretched consumer that is seeking to stretch their discretionary income, premiumization trends are continuing.

Speaker Change: for each quarter of us for now. And then some of the things we'll talk about here in 18 is as we look forward.

Speaker Change: In the first quarter, we know like France and Germany were impacted by the lengthy price negotiations that we have that have now closed, we're continuing to, in the short term, we were losing share there as we look out, we think we'll continue to be more competitive as we have

Lawson Whiting: And we feel like our portfolio is incredibly well positioned in for that premium, premiumization trend to continue, which I think you can save out a strong performance of what for preserve an old source during the course.

Speaker Change: Closed those negotiations. In the UK, we continue to work to gain share versus the year ago period, even while the consumers seeking value, their brand will, they are waiting for their brand to go on promotion and they're looking for deals online.

Lawson Whiting: Thank you so much for your insights, I'll pass it on.

Speaker Change: As this in again, another market like Brazil, we are gaining share, we've got strong double-digit growth, it's with Jack James Tennessee Whiskey as well as Apple and Honey Insider through our geographic expansion that we have there, our shift.

Operator: Thank you, one moment for our next question.

Nadine Forward: Our next question comes from a line of Nadine Forward of Bernstein Airlines now open. Hi, thank you very much. Once in a minute, I asked my first question, you know, putting the lumpiness of the distributor inventories to one side that we've had over many quarters now. And I look at what the implied underlying that failed growth was. I think it's the weakest now that we've seen in probably about four years. So well below that medium term growth, I'll go, it's only appreciate your comment on sort of this being a year to half, but could you help us understand what you believe are the underlying drivers of that weakness and how you expect that to develop over the remainder of the fiscal year, again, focusing on that underlying number rather than injuries.

Speaker Change: We are strategically shifting from grocery to cash and carry to be where the consumer is and we've launched a new pack size that connects with that consumer.

Speaker Change: and also in Mexico it's a decelerating market but we're gaining value share there across whiskeys and our RTDs even in environment where we've got weaker consumer confidence. So we had our ideas throw in Australia, we're continuing to gain share with Jack Daniel's Tennessee whiskeys so in a lot of these markets we are continuing to see.

Speaker Change: Pockets where even with the changing dynamics of the market, we are gaining share in a lot of our international markets. And that's why we make the comment as we look into the year to go where we're looking for that growth from our international market.

Nadine Forward: And then second question related to that, what are you assuming in terms of the health of the American consumer in your guidance versus, you know, perhaps what are you serving today in terms of the health of that consumer. Thank you.

Speaker Change: Yeah, let me add on to Leanne, just set about France and Germany too, because those are two very large markets around Poland.

Lawson Whiting: Okay, so if we focus on sort of what are the, you know, so what are the factors in Q1 and I'll, as I said, I'll leave inventory out of it. What two of the, I don't know, maybe I don't know if it stuck out from our comments that we made earlier, but the price increases last year, which hit August 1 of last summer. So there was buy-in in June, July ahead of that.

Speaker Change: We haven't been in that proverbial penalty box at a while.

Speaker Change: But it's a sign that we continue to be persistent in our goal of getting low and slow pricing freezes and Europe has always been the challenge with the big retailers and pricing. But through different revenue growth management techniques and different negotiations you stick it out, it hurt the quarter.

Lawson Whiting: That's not in material. And the same thing with the UK, same timing, but it was tax increases and you have the commensurate buy-in ahead of that. So some of this is, you know, timing of all this kind of stuff and that impacts, you know, or depletions and things like that. So, but the, if we're focused on the US consumer himself, I mean, look, obviously the consumer is weaker. If TDS is down there at zero, both the napkin meals and that's, as we said, that's a pretty stop.

Speaker Change: But the nice thing is that stuff should come back in due to and beyond and so that's just one more reason to believe that we can accelerate from this point forward

Speaker Change: Lawson Whiting, Leanne Cunningham, Susanne Perram,

Speaker Change: How did it end up on what you're assuming in terms of the health of the American teamer in your guidance? Are you expecting that to pick up in the second half of the year? Or are your guidance assuming you've status quo from here?

Speaker Change: Yeah, overall, we're in the effort that you as consumer specifically, we are not expecting a significant change in the consumer trends or behavior.

Lawson Whiting: You drop off. But I do think that things are going to improve. This business has gone through these cycles where it drops off and then it comes back very, very pretty quickly. And I, we're not betting on quickly, necessarily in our guidance, but we are saying that we think it'll be sequentially better for each quarter this point out. And then some of the things we'll talk about here, and Nadine is, as we look forward, in the first quarter, we know like France and Germany were impacted by the lengthy price negotiations that we have that have now closed.

Speaker Change: Thank you very much.

Speaker Change: Thank you, one more one for a nice question.

Speaker Change: Our next question comes on line of Philippe Ophalonii of City, your line is now open.

Lawson Whiting: We're continuing to, in the short term, we were losing share there as we, as we look out, we think we'll continue to be more competitive as we have closed those negotiations. In the UK, we continue to work to gain share versus the year ago period, even while the consumers seeking value, their brand will, they are waiting for their brand to go on promotion and they're looking for deals online. And so then again, in other markets like Brazil, we are gaining share.

Philippe Ophalonii: Hi, everyone. I'm going to ask a few follow-ups on the gross margin. Maybe we had first Kim Break, Kim Break down the cough impact, the 4.4 points on the gross margin.

Kim Break: From commodities versus way of the ocean, so for my inventory, organizational impact, we can hire cost inventory flowing through.

Speaker Change: and then looking forward to the next slide that even though you continue to, and then the margin expansion to the leading way to the second half, for the four year or two years, some employment already in the second quarter. Thank you.

Speaker Change: Yes, specifically on the 440 basis points of cost again, like we said, we've largely timing.

Lawson Whiting: We've got strong double-digit growth. It's with Jack Daniel's Tennessee whiskey as well as Apple and Honey and Fire through our geographic expansion that we have there, our shift. We are strategically shifting from grocery to cash and carry to be where the consumer is, and we've launched a new pack size that connects with that consumer. And also in Mexico, it's a decelerating market where we're gaining value share there across whiskeys and our RTDs, even in an environment where we've got weaker consumer confidence.

Speaker Change: in the first quarter. If you remember last year, our gross margin started higher and we kept trying to to guide others down to where we inevitably landed at 60.5 this year. It's going to be the inverse as we have.

Speaker Change: Higher Costs in this period due to those inventory cost fluctuations again related largely to our tequila brands as we kind of work through that higher cost inventory we do think that was largely in the first quarter we'll get some of that in the second quarter as well. So it's really the second half.

Lawson Whiting: So I can throw in Australia, we're continuing to gain share with Jack Daniel's Tennessee whiskey. So in a lot of these markets, we are continuing to see pockets where even with the changing dynamics of the market, we are gaining share in a lot of our international markets. And that's why we make the comment as we look into the year to go. We're looking for that growth from our international markets.

Speaker Change: which will be the absence of that impact or will be to the benefit of our lower cost inventory.

Speaker Change: Impact from inflation on our input costs and our lower production volumes will for the full year still.

Speaker Change: When we're thinking about cost and total work and we're kind of in that low single digit range, low to low mid single digit range for our full year.

Leanne Cunningham: Yeah, let me add on to William, just said about France and Germany too, because those are two very large markets for Brown Forman. We haven't been in that proverbial penalty box in a while, but it's a sign that we continue to be persistent in our goal of getting low and slow pricing increases, and Europe has always been the challenge with the big retailers in pricing, but through different revenue growth management techniques and different negotiations you stick it out.

Speaker Change: [inaudible]

Speaker Change: Thank you very much.

Speaker Change: I'm sorry, go ahead. Just a quick follow-up on the transition service agreement. Is that, should we continue to expect a happy and cute two from the agreement and then that to go away or to potentially turn to a tailwind in the second half?

Leanne Cunningham: It hurt the quarter, but the nice thing is that stuff should come back into you too and then beyond, and so that's just one more reason to believe that we can't accelerate from this point forward. So I didn't know what you're assuming in terms of the health of the American consumer in your guidance, are you expecting that to pick up in the second half of the year, or is your guidance assuming you've status quo from here? Yeah, overall, we're in the US consumer specifically, we are not expecting a significant change in the consumer trends or behavior. Understood, thank you very much.

Speaker Change: Correct, they are planned to end as we go into our second half. So again, that's part of our tale of two have from a gross margin perspective. We expect those to be absent as we go into the second half.

Operator: Thank you, one moment for a nice question.

Speaker Change: Thank you, bye bye.

Speaker Change: Thank you all for our next question.

Speaker Change: Our next question comes from a line of Robert Moscow, a TDK one, your line is not open.

Robert Moscow: I, thanks for the question. I wanted to ask about just the marketing efforts on Jack Daniels in general. You talked to your investor day about a lot of plans to improve it trends.

Robert Moscow: Boost the image of the brand.

Philip Opharone: Our next question comes on line of Philip Opharone of city, your line is now open. Hi everyone, I wanted to ask a few folks on the gross margin, maybe the first can break, he breakdown the cost impact with 4.4 points of gross margin from commodities versus what you actually saw from an inventory evaluation impact with the kind of higher cost inventory flowing through.

Speaker Change: How do you think it's going? Because, you know, you look at the tracking data and it's...

Speaker Change #100: It indicates, you know, continued declines. Do you feel like these efforts are strong enough to re-acquaint the brand or strengthen the brand in a mainstream manner and offset what I think is happening, which is more shifts to premium offerings.

Speaker Change #101: Yeah, we'll look, I mean, the check-down is brand.

Speaker Change #102: is still one of the largest and strongest brands in the world, and we very much believe that we've gotten creative out there, that I'm going to clear and racing partnership that we have and everyone would do in there. I mean, getting back.

Leanne Cunningham: And then looking forward, should expect that inventory impact to continue to you and then the margin expansion to be really waited for the second half for the four year or to see some improvement already in the second quarter, thank you. Yeah, so specifically on the 440 basis points of cost again, it's like we said, it's largely timing, getting largely in the first quarter. If you remember last year, our gross margin started higher and we kept trying to guide others down to where we inevitably landed at 60.5 this year is going to kind of be the inverse as we have a higher cost in this period due to those inventory cost fluctuations.

Speaker Change #102: are not back into, but continuing our efforts in pop culture is one of the most important things that we can possibly do. We talked a little bit about Shibuzi, but that type of thing, and I can tell you, the brands in lots and lots of particularly country music these days, but

Speaker Change #102: Staying relevance in that pop culture and being able to recruit new consumers every year.

Speaker Change #103: I don't know what we get there for, I mean, that's what we're doing so while it is challenging, I would cite that one.

Speaker Change #104: If you step back and look beyond any thing beyond one year of the check, Daniel's brand, his remained very, very healthy. Over the last five years, the check trademark is delivered somewhere between four and five percent sales growth. And so, if we can replicate that four or five percent sales growth sale over the next five or ten years,

Leanne Cunningham: Again, related largely to our tequila brands, as we kind of work through that higher cost inventory, we do think that was largely in the first quarter, we'll get some of that in the second quarter as well. So it's really the second half, which will be the absence of that impact or will be to the benefit of our lower cost inventory. Impact from inflation on our input cost and our lower production volumes will for the full year still when we're thinking about cost in total and we're kind of in that low single digit range, low to low single digit range for our full year. I'm sorry, go ahead.

Speaker Change #104: This company is very locked and loaded for at least those medium and longer-term algorithms that we've used were because the rest of the portfolio has so much strength and was it?

Speaker Change #104: For the most part in double visit growth mode until COVID and all the chaos of the last few years. So we do think the math, you know, overall works and we're going to continue to...

Speaker Change #105: Continue to grow the Jack Daniels' reign on the way that we've done for many, many, many years. So as part of that though, we are...

Speaker Change #105: That last quarter we talked about the super premium Jack Daniels extensions, they were actually one of the bigger contributors to our sales growth last year. So we continue to unveil those, they're unique, they're strong, they speak to the...

Leanne Cunningham: Just a quick follow up on the transition service agreement. Is that should we continue to expect that I have to include two from the agreement and then that to go away or to potentially turn to tailwind in a second. Correct, they are, they are planned to end as we go into our second half. So again, that's part of our tale of two have from a gross margin perspective. We expect those to be absent as we go into the second half. Thank you.

Operator: Thank you, one moment for our next question.

Speaker Change #105: to the whisky geeks as we like to call them, but they do form an umbrella over the entire trademark and help us to continue to grow. So we really are looking at these trends of the last 12 months to be a bit of a...

Speaker Change #106: You know the exception to the rule or a bearing and...

Speaker Change #107: As I said earlier on one of the other questions, I don't really want to predict when the month that that's going to turn, but we feel like you're going to start to see some improvements and in fact, to be fair with the U.S. numbers, Jack is off the bottom, we're just starting to get a little bit better.

Jack James: Slow, but it's getting, but it isn't proven.

Robert Moskow: Our next question comes from a line of Robert Moskow, Teddy Cowan, your line is now open. Hi, thanks for the question. I wanted to ask about just the marketing efforts on Jack Daniels in general, you talked to your investor about a lot of plans to improve trends, boost the image of the brand. How do you think it's going because you know you look at the tracking data and it indicates, you know, continued declines.

Jack James: You mentioned you kind of nailed it there that the key here is to get younger consumers too.

Speaker Change #109: Reengage with the Jack Daniels brand, bring new consumers to that brand. Like, what metrics do you follow to see if like those young consumers?

Speaker Change #110: are watching these ads that the message is resonating with them and that it's starting to change their perception of the brand.

Robert Moskow: Do you feel like these efforts are strong enough to to reacquaint the brand or strengthen the brand in a mainstream manner and offset what I think is happening, which is more shifts to premium offerings. Yeah, we'll look, I mean, the Jack Daniels brand, still one of the largest and strongest brands in the world and we, you know, we very much believe that we've gotten creative out there, the more clear and racing partnership that we have and everything we're doing there.

Speaker Change #111: Yeah, look, I mean, as you would expect, we have a very full set of consumer insights and data that we track

Speaker Change #111: and literally monthly, I think they would probably say that. And we can break that down by age and we do spend a lot of time debating the recruitment versus retention debate that basically all big brands have.

Speaker Change #111: And you know, look, and so with this new campaign we believe the one that back in black is kind of what we call it internally, but having that song

Speaker Change #111: is more relevant to everybody, kind of knows it, and so we think we know we're making progress there, and it indeed does show up in our statistics. Something I forgot about, to mention, a minute, it came through in our prepared remarks.

Robert Moskow: I mean, getting back or not back into but continuing our efforts in pop culture is one of the most important things that we can possibly do. We talked a little bit about Shabuzie, but that type of thing and I can tell you the brands and lots and lots of particularly country music these days, but staying relevant in that pop culture and being able to recruit new consumers every year is kind of what we get paid for.

Speaker Change #112: I find it, if you look at the U.S. and you look at the 20 largest brands of the U.S. the fact that only two of them are growing.

Woodford: To me, it's pretty incredible and we said I'm a called Woodford as one of the two.

Robert Moskow: I mean, that's what you're doing. So while it is challenging, I would cite that one, if you step back and look beyond anything beyond one year of the Jack Daniels brand has remained very, very healthy. Over the last five years, the Jack trademark is delivered somewhere between four and five percent sales growth. And so if we can replicate that four or five percent sales growth sale over the next five or 10 years, this company is very locked and loaded for at least those medium and longer term algorithms that we've used where because the rest of the portfolio has so much strength and was for the most part in double digit growth mode until COVID and all the chaos of the last few years.

Woodford: But you look at the biggest brands of the US, the other ones who look the worst.

Woodford: and these neals and trends, which speaks to the argument we made.

Woodford: Last Quarter, which is the biggest brand for the one that everybody was buying during COVID in the post-COVID boom years. Those are the ones that are sitting in a consumer's cabinet and have taken them while to move through. So I think it just provides a little more evidence with that.

Woodford: To some extent we don't really know the extent it's very hard number to pin down, but it contributes to why you're seeing such lowdown trends on the very biggest brands.

Speaker Change #114: Okay, thank you.

Speaker Change #115: Thank you all for our next question.

Robert Moskow: So we do think the math, you know, overall works and we're going to continue to continue to grow the Jack Daniels brand in the way that we've done for many, many, many years. So as part of that though, we are, I think that last quarter we talked about the super premium Jack Daniels extensions, they were actually one of the bigger contributors to our sales growth last year. So we continue to unveil those.

Speaker Change #116: Our next question, concerned line of negative mode of RBC, the line is not open.

Speaker Change #116: Yeah, thank you. Good morning, everyone. Lawson Whiting was hoping you can just.

Lawson Whiting: Share your perspective, I mean feedback in the trade.

Lawson Whiting: in August would suggest you know pretty steep drop off at the industry level and just curious you know kind of what you guys are observing just broadly and why why there could have been some sort of precipitous drop from July to August and then just kind of

Robert Moskow: They're unique. They're strong. They speak to the the whiskey geeks as we like to call them, but they do form an umbrella over the entire trademark and help us to continue to grow. So we really are looking at these trends over the last 12 months to be a bit of a... The exception to the rule a little bit. And as I said earlier on, one of the other questions I don't really want to predict when the month that's going to turn, but we feel like you're going to start to see some improvements.

Speaker Change #118: You know, piggybacking on that, I mean, you know, the more we hear about, you know, do you sell to nine On cannabis beverages and, you know, how fast they're selling out on when they're on display and, you know, I know you kind of dismissed It last quarter, but I'm just curious, like, have you seen?

Speaker Change #119: Some traction for some of those products and maybe infringing on some of the beverage alcohol occasions.

Robert Moskow: And in fact, to be fair, with the US numbers, Jack is off the bottom. We're just starting to get a little bit better slow, but it's getting, but it isn't proven. You mentioned, you nailed it there that the key here is to get younger consumers to engage with the Jack Daniels brand, bring new consumers to that brand. What metrics do you follow to see if those younger consumers are watching these ads that the message is resonating with them and that it's starting to change their perception of the brand?

Speaker Change #119: Thanks.

Speaker Change #120: Alright, well the first one July August, I mean I...

Speaker Change #121: took me on if I don't know, I had not heard that, I've not heard that from our own teams either so.

Speaker Change #121: I'm not sure what the source is or if I don't know, I really can't comment on it but on the cannabis and the specifically beverages in cannabis.

Speaker Change #121: I think I've said this in a few different times on these calls.

Speaker Change #121: Cannabis has been around for a long time, just because it's gone from their legal legal hasn't read them, I mean I know it's

Speaker Change #121: We've gummies and all that kind of stuff were certainly exploding compared to where it was, but I just I don't believe that has much of anything to do with the current trends. I do not see cannibalization, say, between a cannabis beverage and a spirit brand. So, now people!

Robert Moskow: Yeah, oh, look, I mean, as you would, as you would expect, we have a very full set of consumer insights and data that we track literally monthly. I think they would probably say that. So, and we can break that down by age and we do spend a lot of time debating the recruitment versus retention debate that basically all big brands have. And, you know, look, and so with this new campaign, we believe the one that back in black is kind of what we call it internally, but having that song is more relevant.

Speaker Change #122: You know, people have said and studied this stuff that beer is much more apt to getting.

Speaker Change #122: If there is some cannibalization between cannabis and beverage alcohol, the beer is the one that's at risk. And I...

Speaker Change #123: I kind of can believe that, I mean, it makes logical sense, I think, and spirits in particular would be the least affected by that. So we'll have to see, I just still can't picture beverages, cannabis beverages.

Robert Moskow: Everybody kind of knows it. And so we think we know we're making progress there. And it indeed does show up in our statistics. Something I forgot about to mention a minute ago, it came through in our prepare remarks, but I find it, if you look at the US and you look at the 20 largest brands in the US, the fact that only two of them are growing to me is pretty incredible.

Speaker Change #123: Look at my opinion, so there's no difference from it, but I just don't see that being a big business.

Speaker Change #124: There's just too many other ways you can take, you don't need to sit and sip it and there's only so much you can sip anyway It's not like it's you're going to sit there and drink a six pack of stuff so I just think it is a business opportunity to I'm in the campus it's pretty limited

Robert Moskow: And we said on the call, Woodford is one of the two, but you look at the biggest brands in the US, those are the ones who look the worst in these Nielsen trends, which speaks to the argument we made last quarter, which is the biggest brands for the ones that everybody was buying during COVID. But in the post COVID boom years, those are the ones that are sitting in a consumer's cabinet and it's taken them while to move through.

Speaker Change #125: And then the only thing I'll add to that from a consumer research perspective, we, where our findings are that spirituals have preferred alcoholic beverage type among the individuals who use cannabis in the past month. So that's what our consumers are telling us.

Robert Moskow: So I think it just provides a little more evidence with that. To some extent, we don't really know the extent. It's a very hard number to pin down, but it contributes to why you're seeing such slow down trends on the very biggest brands.

Lawson Whiting: Okay, thank you.

Lawson Whiting: Thank you, one more for our next question.

Speaker Change #126: Okay, thank you very much for that perspective.

Speaker Change #127: Thank you, woman for next question.

Speaker Change #128: The Lawson Whiting, Leanne Cunningham, Susanne Perram,

Steve Powers: Our next question comes on line of steep powers of despair, your line is now open.

Nick Modi: Our next question comes from a line of Nick Modi of RBC. The line is not open. Yeah, thank you.

Speaker Change #130: The distributor inventory is tick up, you have three points in the U.S. and four points in developed international, you know, and just relative to your comments, you're not really expecting much improvement in the...

Lawson Whiting: Good morning, everyone. Well, I was hoping you can just share your perspective. I mean, a feedback from the trade in August would suggest, you know, pretty steep drop off at the industry level. And just curious, you know, kind of what you guys are observing just broadly and why there could have been such a precipitous drop from July to August. And then just kind of, you know, piggybacking on that, I mean, you know, the more we hear about, you know, do you still deny and when cannabis beverages and, you know, how fast they're selling out on when they're on display.

Speaker Change #131: Consumption Run Rate, especially in the U.S. I mean, is there a risk there that that kind of one quarter build on lines as we go into TQ or the remainder of the year? How are you thinking about that?

Speaker Change #132: Our comments really is about a year over a year perspective and it's about laughing the softening of the total distilled spirits trends that we saw in the year ago period So when we think about our year to go and again we'll have to look at the largest benefit of that laughing in our second half That's really a year over a year of comment

Lawson Whiting: And, you know, I know you kind of dismissed at last quarter, but I'm just curious, like, have you seen some traction for some of those products and, you know, maybe infringing on some of the beverage alcohol occasions. Thanks. All right, well, the first one, July to August, I mean, I don't know, I have not heard that, I've not heard that from our own teams either, so I'm not sure what the sources are, I don't know, I really can't comment on it, but on the cannabis and the specifically beverages in cannabis, I mean, I think I've said this a few different times on these calls.

Speaker Change #132: Because again, what was distributors and our...

Speaker Change #133: On our outlook of their inventory levels, it continues to be that we are not a forecasting and outlook that has significant change. We're continuing to believe that the trade and consumer behavior will be similar to what it is now.

Speaker Change #134: Right, okay, I just mean, you know, consumption is down versus year-go inventory levels that you know sequentially came down to reflect the theory in consumption and now consumption isn't improving and inventory levels are going up. So it just seems like there's some risk built in there, but we can like a follow-up later.

Lawson Whiting: Cannes has been around for a long time, just because it's going from Italy to the legal hasn't really, I mean, I know it's gummies and all that kind of stuff for certainly exploding compared to where it was, but I just, I don't believe it has much of anything to do with the current trends, I do not see cannibalizations, they between a cannabis beverage and a spirit brand. So now people, you know, people have said and studied this stuff that beer is much more apt to getting, if there is some cannibalization between cannabis and beverage alcohol, the beer is the one that's at risk, and I kind of can believe that, I mean, it makes logical sense, I think, and spirits in particular would be the least affected by that.

Speaker Change #135: The second question would be, you know, you talked about France and Germany being headwinds in the quarter but sort of

Speaker Change #136: You know, normalizing as we go forward, as you've gotten through those retailer negotiations as a benefit to the remainder of the year. You also talked about full-year contributions of growth on Genmari and Diplomatico as kind of being...

Speaker Change #137: and notable contributors to the, especially the second half improvement in your outlook, is there a way to quantify the impact of those dynamics as you move from one Q and to two Q and then two H?

Lawson Whiting: So we'll have to see, I just, I still can't picture beverages, cannabis beverages, look, this is just my opinion, so others may differ from it, but I just don't see that being a big business. There's just too many other ways you can take, you don't need to sit and sip it, and there's only so much you can sip anyway, it's not like you're going to sit there and drink a six pack of stuff.

Speaker Change #138: I think what we can say that there's all implied in our guidance and in what we've said first half, second half, the Department of Organic Perspectives.

Speaker Change #139: Again, with the shipment base for January and Diplomatico, compared to where we were last year. We believe we're going to have a benefit in this year. We're not want to find that specifically. Or...

Lawson Whiting: So I just think it is a business opportunity, I'm in the camp that it's pretty limited. And then the only thing I'll add to that from a consumer research perspective, we, where our findings are that spirits are the preferred alcoholic beverage type among the individuals who use cannabis in the past month, so that's what our consumers are telling us.

Speaker Change #139: Quantifying the benefit that we believe that in our year to go period now that we have concluded our pricing negotiations in Germany and France, but again, we believe that we...

Speaker Change #139: We had the biggest impact from those negotiations specifically with Germany and France in the first quarter that now will not be present as we go forward.

Lawson Whiting: Okay, thank you very much for that perspective.

Speaker Change #140: Okay, okay, and I don't know if I can squeeze in a third here if you're generous, thank you, in advance. But, Tequila.

Operator: Thank you, one moment for our next question.

Steve Powers: Our next question comes online of Steve Powers of Dutch Bank, your line is now open. Hey guys, good morning, thanks. So in the quarter, we saw, you know, distributor inventories take up three points in the US and four points in developed international, you know, and just relative to your comments, you're not really expecting much improvement in the consumption run rate, especially in the US.

Speaker Change #140: Notably weak this quarter, it was soft last quarter as well.

Speaker Change #141: If you stand on Y, it wasn't just before that we were talking about tripling to Kila as we look out into the future and I'm sure that's still the ambition. Just trying to understand why the softness so cutely in these past couple of quarters and how to think about that as we go forward.

Speaker Change #142: Yeah, okay, I'll take that. A couple things one before I hit our own. I just, I find these two statistics pretty interesting. This is an IWSR thing, but they said that in this calendar year in 2024.

Leanne Cunningham: I mean, is there a risk there that that that kind of one quarter build on lines as we go into TQ or the remainder of the year, how are you thinking about that? Our comments really is about a year over year perspective, and it's about laughing, the softening of the total distilled spirits trends that we saw in the year ago period. So when we think about our year to go, and again, we'll have the largest benefit of that laughing in our second half.

Leanne Cunningham: That was really a year over a year of comment, because again, with distributors and our on our outlook of their inventory levels, it continues to be that where we are not a forecasting an outlook that has significant change. We're continuing to believe that the trade and consumer behavior will be similar to what it is next. Now. Right.

Speaker Change #143: To Keylo is going to surpass vodka, is the largest value category in the United States.

Speaker Change #143: For anybody that's been in his business for a few years, that to me is pretty incredible It's the hell rapidly that has grown The other part of it are contributing to that I guess that 22 to 24 year olds are just as likely to be drinking to heal as they are beer Which that also

Speaker Change #143: Laws me a little bit that that has grown that much. So a lot of art to kill a week this one is a lot of its Mexico.

Speaker Change #144: We are pushing price very, very hard down there.

Speaker Change #144: Now we're pushing price in the United States, too, and that is a...

Speaker Change #145: You know, that is a competitive thing we're doing right now, while the U.S. totals of spirits pricing is still holding together, it's very, very low single digit, to kilos actually gone a little bit negative, not massively, but I think it's done a point or something like that. So, and now we're up to like three points. And so, we are...

Leanne Cunningham: Okay, I just mean, you know, consumption is down, versus year-go inventory levels that, you know, sequentially came down to reflect the theory and consumption, and now consumption isn't improving, and inventory levels are going up. So it just seems like there's some risk built in there, but we can, I can follow up a little later.

Speaker Change #145: We're sort of keeping our head down a little bit and continuing to push the price button whenever you know, a lot of other brands are going the other way.

Leanne Cunningham: The second question would be, you know, you talked about France and Germany being headwinds in the quarter, but that sort of, you know, normalizing as we go forward as you've gotten through those retailer negotiations as a benefit to the remainder of the year. You also talked about full-year contributions of growth on Genmare and Diplomatico as kind of being notable contributors to the, especially the second half improvement in your outlook. Is there a way to quantify the impact of those dynamics as you move from 1Q into 2Q and then 2H?

Speaker Change #145: Now, I don't, if we look, the categories still one of the strongest categories out there in spirits. And we've, while we've not kept up with some of the famous brands that are out there.

Speaker Change #146: Error in particular is one of the sort of core, most important brands in our portfolio. We haven't done great, but I can tell you over the last two quarters, but our growth rates in the last few years have all been kind of double digit or a very high single digit.

Speaker Change #146: While we're a bit critical these days of the steal of trends right now, we've got to remember they haven't been a drag on the company's growth rate, they've actually been, you know, in that positive so it's a very, very competitive category now. There's a lot of brands in there. We have one of the...

Leanne Cunningham: I mean, I think what we can say that there's all implied in our guidance, and in what we've said first half second half, you've formed an organic perspective, again, with the shipment base for Genmare and Diplomatico compared to where we were last year. We believe we're going to have a benefit in this year. We're not quantifying that specifically or quantifying the benefits that we believe that's in our year-to-go period now that we have concluded our pricing negotiations in Germany and France, but again, we believe that we have the biggest impact from those negotiations specifically with Germany and France in the first quarter that now will not be present as we go forward.

Speaker Change #146: We have one of the best we still believe it and we're going to continue to push forward. The other, you know, there's been a fair amount of talk, I guess, about the internationalization of the category.

Speaker Change #146: and El Hiemador is actually pretty well positioned to be able to go after that. It's one of the biggest brands in a bunch of markets like the UK, like Australia, like Brazil, some other stuff. It's kind of a, people don't really know that or follow that, but it is a growth opportunity for us.

Speaker Change #147: Thank you, which includes the question and session. I'll now like turn back to Superram for causal marks

Steve Powers: I don't know if I could squeeze in a third here if you're generous. Thank you in advance. But Tequila, notably weak this quarter, it was soft last quarter as well.

Superram: Thank you, Marvin, and thank you, Lawson and Leanne and thank you to everyone for joining us today for Brown Formans first quarter fiscal year 2020 25 earnings call. If you have any additional questions, please contact us.

Lawson Whiting: Can you stand on why? It was just before that we were talking about tripling Tequila as we look out into the future. I'm sure it's still the ambition. Just trying to understand why the softness, so cutely, in these past couple of quarters and how do I think about that as we go forward. Yeah, okay, I'll take that.

Superram: We look forward to participating in the Barclays Global Consumer Staples Conference next week and hope to see many of you. For those of you unable to attend, our Fireside Chat will be made available as a webcast, accessible via the Brown Forming Corporate website under the section titles, investors, events and presentations.

Lawson Whiting: A couple things won before I hit our own. I find these two statistics pretty interesting. This is an IWSR thing, but they said that in this calendar year in 2024, Tequila is going to surpass vodka as the largest value category in the United States, which for anybody that's been in his business for a few years, that to me is pretty incredible as to how rapidly that has grown. The other part of it or contributing to that, I guess, is that 22 to 24 year olds are just as likely to be drinking Tequila as they are beer, which that also floors me a little bit that that has grown that much.

Speaker Change #149: We wish everyone an enjoyable weekend, particularly those in the United States that are celebrating the Labor Day holiday. And on Monday September 2nd we hope you will join us in raising a glass as we say happy birthday to our founder, George Garvin Brown, and good luck again to those of you who entered into the birthday, bourbon, sweetstakes.

Speaker Change #149: With that, this concludes our call.

Speaker Change #150: Thank you for your participation in today's conference. There's a conclude program you will now disconnect.

Lawson Whiting: So a lot of our Tequila weakness one is a lot of its Mexico. We are pushing price very, very hard down there. Now we're pushing price in the United States too. And that is a competitive thing we're doing right now. While the US total still spirits pricing is still holding together. It's very, very low single digit. Tequila is actually gone a little bit negative, not massively, but I think it's down a point or something like that.

Lawson Whiting: So, and now we're up like three twice. And so we are sort of keeping our head down a little bit and continuing to push the price button whenever a lot of other brands are going the other way. Now, I don't, look, the category is still one of the strongest categories out there in spirits. And we've, while we've not kept up with some of the famous brands that are out there, Erider in particular is one of the sort of core most important brands in our portfolio.

Lawson Whiting: We haven't done great, but I can tell you over the last, not the last two quarters, but our growth rates in the last few years have all been kind of double digit or very high single digit. And so, Well, we're a bit critical these days of the skill of trends right now. We've got to remember they haven't been a drag on the company's growth rate. They've actually been, you know, a net positive.

Lawson Whiting: So, it's a very, very competitive category now. There's a lot of brands in there. We have one of the, we have one of the best we still believe it, and we're going to continue to push forward.

Speaker Change #150: [inaudible]

Lawson Whiting: The other, you know, there's been a fair amount of talk, I guess, about the internationalization of the category, and El Humidor is actually pretty well positioned to be able to go after that. It's one of the biggest brands in a bunch of markets like the UK, like Australia, like Brazil, some others. So, it's kind of a, people don't really know that or follow that, but it is, it is a growth opportunity for us. Thank you.

Speaker Change #150: [inaudible]

Susanne Perram: This concludes the question answer session. I'll now turn back to Superm for closer remarks. Thank you, Marvin. And thank you, Lawson and Leanne. And thank you to everyone for joining us today for Brown Forman's first quarter fiscal year 2025 earnings call. If you have any additional questions, please contact us. We look forward to participating in the Barclays Global Consumer Staples Conference next week and hope to see many of you. For those of you unable to attend, our fireside chat will be made available as a webcast accessible via the Brown Forman corporate website under the section titled investors events and presentations.

Speaker Change #151: The Lawson Whiting, Leanne Cunningham, The Lawson Whiting, Leanne Cunningham, Susanne Perram, Susanne Perram,

Speaker Change #151: The Lawson Whiting, Leanne Cunningham, Susanne Perram, [inaudible]

Susanne Perram: We wish everyone an enjoyable weekend, particularly those in the United States that are celebrating the Labor Day holiday. And on Monday, September 2nd, we hope you will join us in raising a glass as we say happy birthday to our founder George Marvin Brown. And good luck again to those of you who entered into the birthday bourbon sweepstakes with that.

Operator: This concludes our call. Thank you for your participation in today's conference.

Speaker Change #151: The Lawson Whiting, Leanne Cunningham, Susanne Perram, [inaudible]

Operator: This concludes the program. You will now disconnect. Thank you. . Dr. Dr. Dr. Dr.

Speaker Change #151: [inaudible] Perram, Susanne Perram,

Speaker Change #151: The Lawson Whiting, Leanne Cunningham, Susanne Perram,

Speaker Change #152: The New Year's Eve

Speaker Change #152: [inaudible]

Speaker Change #152: Dr.

Speaker Change #152: The Lawson Whiting, Leanne Cunningham, Susanne Perram, Susanne Perram, [inaudible]

Speaker Change #152: The Lawson Whiting, Leanne Cunningham, Susanne Perram, [inaudible]