Brown-Forman Stock Analysis (BF.B, BF-B) – Another Round?

Brown-Forman Stock (BF.B) Basic Data, Overview

Brown-Forman Corporation (BF.B) is an American spirits giant founded in 1870 by George Garvin Brown in Louisville, Kentucky. It is still headquartered there today and employs nearly 5700 people worldwide. The company started with a groundbreaking idea, the first bottled whiskey for medicinal purposes, and has remained independent ever since: the Brown family still holds a significant stake. This independence is an important strategic advantage, as they can think long-term, not operate according to the logic of quarterly profit maximization.

Brown-Forman's profile is the production and global distribution of premium and super-premium alcoholic beverages, especially in the whiskey, tequila and liqueur segments. Its best-known and largest brand is Jack Daniel's Tennessee Whiskey, one of the most popular whiskeys in the world. It also owns premium brands such as Woodford Reserve, Old Forester, BenRiach and Glendronach (single malt Scotch whiskies), as well as Herradura and El Jimador tequilas. The portfolio is also complemented by liqueurs such as Chambord and the US distribution rights to Baileys. The company clearly builds on premiumization, and addressing emerging markets, female consumers and young adults plays a prominent role in its long-term growth strategy.

Market capitalization: 13.2 billion USD (2025-07-17)
Investor relations: https://investors.brown-forman.com/investors/overview/default.aspx
iO Charts share subpage: BF-B

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📒Table of Contents📒

I have created a table of contents to make it easier for you to navigate the longer articles:

• Brown-Forman (BF.B) specialties
• How does Brown-Forman (BF.B) make money and what market advantages does it have?
• Brown-Forman (BF.B) metrics
• Brown-Forman (BF.B) acquisitions
• Brown-Forman (BF.B) management
• Competitors: Brown-Forman (BF.B) opponents
• What risks does Brown-Forman (BF.B) face?
• Brown-Forman (BF.B) valuation
• Major news and the last quarter
• Other interesting facts about Brown-Forman (BF.B)

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〽️Market segment analysis〽️

In this section, I examine the dynamics of the market segment, how it operates, who the main players are, and what tailwinds or headwinds the players in the given market have to deal with. I will not analyze companies in depth, but I will touch on the market share of individual companies.

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‼️The analysis of Brown-Forman (BF.B) relies heavily on previous stock analysis of Diageo (DEO) (Diageo (DEO) Stock Analysis), since the two companies compete against each other in the same market segment. That is why it is strongly recommended to read it, because I have shortened the same parts in several places, but of course I have left the essence in the Brown-Forman (BF.B) analysis.‼️

Alcohol consumption and the production of fermented beverages in general are almost as old as humanity. Although the manufacturing mechanism has advanced a lot in technological terms, the end product itself has essentially remained unchanged for centuries. It is a very traditional industry, where brand power plays a huge role, most companies can trace their origins back hundreds of years. This is a very mature, stable segment, it is not for nothing that it is called the defensive consumption sector. Basically, the alcohol market, which is a $1.7 trillion industry per year according to Grand View Research (Alcoholic Drinks Market Report), is made up of large, concentrated players, but this is also divided into sub-segments. Since the pricing power of these alcohols differs, some companies have tried to separate themselves from each other. According to this, there are:

• market for distilled spirits: vodka, whiskey, including Tennessee, Scotch, cognac, gin, tequila, etc.
• wine and champagne market
• low-alcohol beverages, such as beer, seltzer, and the emerging pre-mixed RTD drinks, etc.

*RTD = ready to drink, any drink that is made from two other drinks, such as Jack & Coke, which is a mix of Jack Daniel's and Coca-Cola.

💡Of the above, companies have the greatest pricing power in premium spirits, including those whose distillation takes many years.

For example, Diageo's (DEO) Johnny Walker Red Label is followed by Black Label and then Blue Label, which have much higher margins than their lower-priced equivalents, but so is Brown-Forman's (BF.B) Jack Daniel's Tennessee whiskey. Of course, there are premium-priced products in the beer market, with Guinness being a typical example. 

One of the characteristics of the premium spirits market is that it is more cyclical than, for example, the beer market, as drinking alcohol is not a necessity, which is why consumers tend to postpone purchasing premium beverages. It is also worth separating companies according to each subsegment:

• alcoholic beverages: Diageo (DEO), Brown-Forman (BF-B), Remy-Coientreau (RCO), Pernod Ricards (RI), LVMH (MC) with Henessy cognacs
• low alcohol drinks: AB In-Bev (BUD), FeverTree etc., Diageo (Guinness)
• champagne: LVMH-Diageo (Moet, Dom Perignon)

A common feature of the big guns in the spirits market is that each company has a wide moat, practically a few large players dominate the market, unlike, for example, beer manufacturers, where everyone makes craft beer and builds plants. Another thing that follows from this is that entering the spirits market is significantly more complicated than just making beer. The reason for this is the following:

• tradition (or lack thereof): A reliable, premium brand that is difficult to reproduce is very important to consumers.
• production process: Since there are maturation processes that can last for decades, the alcohols need to be stored, and the end result, if there is an error in the process, will be uncertain. In other words, it depends not only on the right raw materials and storage capacity, but also on expertise.
• distribution network: Marketing products to the right customers is not that easy. A Johnnie Walker Blue Label costs $200, consumers won't buy it from the corner store, but there are even more expensive products, the most expensive JW is almost $30!

☝🏻Spirits are a mature market, meaning that relatively small but stable volume growth and price increases are to be expected. In the longer term, low single-digit growth of 3-5% is to be expected in the premium segment. 

The market is dominated by established stars, disruptive technologies are unlikely to emerge, the method has been the same for hundreds of years, and the lack of tradition is what prevents new names from breaking into the market. Within the entire alcohol market, the spirits subsegment is growing faster than the others, and within this, the growth of premium brands is even greater.

The figure below is worth looking at, which shows that although alcohol consumption is decreasing overall, it is being heavily premiumized. As people become wealthier and the population expands, the amount of premium alcoholic beverages purchased increases. This also means that each sub-segment is growing at a different rate compared to the aggregate 3-5% growth. Companies whose portfolios focus on premium spirits will obviously benefit from this. These include whiskey varieties, rum, gin, vodka, tequila and cognac.

🥂Annual growth of alcoholic beverage categories

Segment	CAGR (%)	Comment
RTD cocktails	15.4	Outstanding growth, premium RTD pull
Canned/boxed alcoholic beverages	11.7	A prominent trend in the USA and APAC regions
Premium alcoholic beverages	10.2	Premiumization is the main driver
General RTD drinks (average)	7.1	Average growth across the entire RTD category
Total alcohol market (average)	3.5	Stable but moderate market
Non-premium, mass-market drinks	1.0	Saturated, low-margin segment
Low-end spirits	-0.5	Displaced due to the rise of quality drinks

This is supported by the second table, which is also shown in the IWSR 2025 study (5 shifting trends in the Alcohol Market) that the higher the prestige of the product, the more its segment grows. You can see the expansion of the other segments in the summary table below.

🍷Growth of alcoholic beverage categories

Segment	Volume CAGR	Value CAGR	Trend / Note
non-alcoholic beverages	+7%	-	Strong growth
RTD	+2%	+5%	Premium RTD pull
Tequila	+2%	+3%	Growing globally
Scotch whiskey	+4% vol.	-	India, Turkey
Premium-plus beer & cider	+2–3%	-	Mature growth
Wines	–1%	-	Declining volume, premium can save you
Total alcohol market	–1% vol.	+3% value	It is growing primarily in developing regions

In contrast, the “prestige plus” category could grow by up to 15% according to a previous IWSR analysis, which is a huge difference compared to traditional categories. Diaego (DEO) and Brown-Forman (BF-B) are mostly interested in the super-premium/ultra-premium/prestige/prestige plus categories, but the former's portfolio contains approximately 60% of these, while the latter reaches a staggering 90%!

🥃IWSR price ranges for spirits

Price category	Retail price (75cl USD)	Features
Value (default)	<$23	Entry level, mass market, low margin
Standard	$10-$25	Average quality, traditional brands
Premium	25-31 USD	Tangible quality improvement, the beginning of premium brands
Super-Premium	>$31	For committed premium consumers and trend followers
Ultra-Premium	$45-100	Luxury level, limited editions, artisan quality
Prestige & Prestige Plus	Prestige: $100-$199 Prestige Plus: >$200	True luxury products – high status, exclusive channels

What do we consider premium spirits? On the one hand, those whose pricing justifies it, and on the other hand, those where the quality of the materials used and the length of the maturation process justify it. A very good example of this is the Johnny Walker brand owned by Diageo (DEO) or the Jack Daniel's brand owned by Brown-Forman (BF.B), whose products can be classified as shown in the table above, this is called the price ladder. As you can see, the price increases proportionally with the maturation time, because the supply is much narrower and the prestige is greater:

🍾Price ranges of Diageo Johnny Walker products

Product	Price category (IWSR)	Maturation time	Approximate price (USD)
Red Label	Standard	none (NAS)	25 USD
Black Label	Premium	Year 12	40 USD
Green Label (15 Years)	Premium	Year 15	65 USD
Aged 18 Years / Platinum Label	Super Premium	Year 18	90 USD
Blue Label	Ultra-Premium / Prestige	mixed (25–60 years)	$180–$450
Master's Edition 50 yo	Prestige Plus	Year 50	25000 USD

The bottom line is that the more expensive a spirit is, the greater the growth you can expect in the long term. Not to mention that even if it doesn't lead to alcoholism, drinking alcohol definitely causes a pleasant feeling, so it has a strong retention effect.

Finally, an interesting fact from a previous Morningstar analysis: it is not only possible to gain a price and cost advantage through plant size, but also by having a premium product create its own niche market, built around a specific brand that no one else can reproduce:

"Small brands can command a price premium, depending on scarcity and the consumers' perception of product quality. For example, The Balvenie is a Speyside single malt, the second largest brand of privately held William Grant & Sons, behind Glenfiddich. Its volumes are roughly half of those of The Singleton, Diageo's comparable single malt. The Balvenie 12 Year-Old, a Speyside single malt, retails at a 67% price premium to The Singleton 12 Year-Old, according to our sample data. Very little financial data is available for William Grant & Sons, but a healthy 16% net income margin, according to PitchBook, indicates that the much smaller business is almost as profitable as Diageo, which generates a net income margin in the low-20% range."

The above seems extremely positive, but it is worth looking at the headwinds and tailwinds that companies competing in the alcohol market have to deal with. What is clearly visible is that the market for beers and wines in the standard segment, which are consumed in large numbers by average people, is shrinking, while the market for premium alcohols is growing. This dual effect may have arisen due to the following:

❌Headwinds in the alcohol market

• ❌sin stock: Many people do not like to invest in stocks that are not socially useful or harmful. These include the alcohol and tobacco industries, the extraction of polluting raw materials such as the oil industry, addictive substances such as alcohol, cannabis, gambling, or the weapons industry geared towards destruction.
• ❌Alcohol consumption is decreasing and a healthy lifestyle is becoming more popular: The health-damaging effects of alcohol are proven by countless studies. Since exercise and a healthier diet are constantly gaining ground, alcohol consumption does not really fit into this, and in addition, the partially positive effect of wine, its antioxidant status, seems to be declining, but at least it is controversial as an advantage. As for reduced alcohol consumption, this is not only related to a healthy lifestyle, but also a generational issue: members of Generation Z simply consume less alcohol. They are currently the age group in their 30s, who are now reaching the peak of their salaries and careers.
• ❌Alcohol purchase is a deferred expense: In an uncertain economic situation, consumers postpone their consumption, this is especially true for more expensive spirits, unlike cheap beer and wine, which fluctuate much less.
• ❌GLP-1 drugs: GLP-1 drugs, such as Eli Lilly's products (LLI) and Novo Nordisk's Ozempic, Wegovy, Mounjaro – Novo Nordisk stock analysis) poses a real risk to alcohol consumption and, with it, the entire alcohol industry. This is not just speculation: IWSR, Morgan Stanley and LVMH have already reacted to this trend. To put it very simply, these are drugs that act on the brain's reward system. They dull dopamine receptor pathways, so the desire for alcohol is reduced, similar to overeating or smoking.

✅Tailwinds in the alcohol market

• ✅tradition: A tradition that can be traced back hundreds of years does not really wear out. The prestige of a brand name that is hundreds of years old continues to grow stronger with time, and it feels more and more premium. Perhaps the strongest brand in this respect is Brown-Forman (BF.B), where the Woodford Reserve whiskey brand has been produced in a distillery that has been operating since 1812!, while the Old Forester whiskey brand has been produced since 1870!, so it survived alcohol prohibition.
• ✅the rise of alcoholic beverages at the expense of other types of beverages: It's an interesting question why this happens, but typically the consumption rate of vodka/tequila/cognac/rum increases at the expense of the others. I don't see this connection as so clear, it's possible that, for example, beer consumption would decrease even if spirits didn't increase.
• ✅the number of wealthy people is increasing: The world is becoming more and more wealthy and this wealth is distributed relatively unequally. The wealthy are more likely to buy higher-priced alcohol than the poorer classes. Moreover, these actors are less likely to curb their consumption in a recession, because their income is higher. But importantly, there are two types of products in the premium and luxury market: soft and hard luxury goods, the former of which includes alcohol. Soft luxury products typically provide consumable, wearable, experiential luxury that wears out or runs out over time. These are less resilient to economic recession.
• ✅representative tool: There are many countries, such as China, where it is a matter of prestige in business, where it is a matter of prestige in business, what kind of alcohol they offer their customers. For example, Kweichow Moutai, which sells only premium Chinese drinks. In many cases, these actors cannot afford not to buy such products when making a deal.

Comparing the two, it can be seen that manufacturers with little pricing power face much greater competition than prestige manufacturers and grow at a slower rate, and in fact, often decline, than players in the premium segment. Based on this, four+1 companies and premium brands can be highlighted in the market:

🪧The most important premium alcohol companies

Company	Main premium alcohol brands
Diageo (DEO), English	Johnnie Walker Gold & Blue Label, Lagavulin, Talisker, Mortlach, Don Julio, Tanqueray No. TEN, Cîroc, Ketel One, Ron Zacapa, Baileys Luxe, Guinness
Brown-Forman (BF.B), American	Jack Daniel's Single Barrel, Woodford Reserve, Glendronach, BenRiach, Herradura, El Jimador, Diplomático, Finland, Gin Mare, Chambord
Pernod Ricard (RI), France	Chivas Regal, Royal Salute, The Glenlivet, Aberlour, Jameson, Redbreast, Martell, Havana Club, Absolut, Beefeater, Perrier-Jouët, GH Mumm
Kweichow Moutai, Chinese	Moutai Baijiu (Feitian, 15 Year, Prince, special reserve and limited editions)
LVMH (MC), France	Moët & Chandon, Dom Pérignon, Veuve Clicquot, Krug, Ruinart (champagne), Hennessy (cognac), Glenmorangie, Ardbeg (single malt whisky), Belvedere (vodka), Volcan De Mi Tierra (tequila), Château d'Yquem (wine)

In fact, it is quite difficult to buy Chinese Kweichow Moutai directly, but the other 4 companies should definitely be considered by any investor thinking about the premium alcohol market. LVMH is actually a conglomerate, alcohol accounts for a small part of its revenue, so investing in the alcohol market is probably not the easiest way to invest through them.

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🙋‍♂️Brown-Forman (BF.B) specialties🙋‍♂️

In this section, I examine what specialties the analyzed company has, what its position is in the market, and whether it does anything differently than its competitors. If so, what and how, and what impact does this have on their operations.

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Brown-Forman (BF.B) is perhaps the most traditional company in the spirits market, tracing its history back to 1870, when George Garvin Brown and his accountant George Forman founded the company in 1870, hence the name. They have not changed much in their philosophy over the past 150 years, essentially the same creed, which is very strongly tied to tradition. The Brown family still holds 70% of the voting rights, primarily through Class A shares with greater voting rights.

Brown-Forman's first brand was Old Forester whiskey, introduced in 1870 by company founder George Garvin Brown. It was the first American whiskey to be sold in a medical-grade bottle, with a signature to guarantee quality and authenticity, a revolutionary innovation at the time, as most spirits were served from casks. The past 150 years have a particularly interesting story to tell, tied to the American prohibition era, and which Brown-Forman (BF.B) has survived as a spirits company.

Prohibition in the United States lasted from January 1920 to December 1933, through the 18th Amendment and the Volstead Act. During this time, the production, transportation, and distribution of alcohol was prohibited, although its consumption was not considered a crime in itself. Prohibition dealt a serious blow to the American liquor industry, with many distilleries and breweries going bankrupt or being forced to operate illegally.

Brown-Forman, however, survived Prohibition legally, as one of the few exceptions. The key to its survival was its federally licensed ability to sell bottled whiskey for medicinal purposes. One such product was Old Forester, which was available in pharmacies by prescription for colds and nervousness. This exclusive right allowed the company to continue production and maintain its market presence while many of its rivals were forced to close. The continued operation and brand building that resulted provided a long-term competitive advantage in the post-Prohibition era.

⚔️Brown-Forman (BF.B) competitors and European alcohol restrictions

📌Diageo

Diageo did not exist during Prohibition, the company was formed in 1997 from the merger of two British giants, Guinness and Grand Metropolitan. However, several brands that are now part of Diageo, such as Johnnie Walker, Guinness and Tanqueray gin, existed long before Prohibition and were active in international markets. As a British company, Diageo was not directly affected by the US Prohibition, but the loss of US export opportunities had a noticeable impact on their turnover.

📌Remy Cointreau

Rémy Cointreau is a French company that was formed in 1990 from the merger of two family businesses, Rémy Martin (cognac) and Cointreau (orange liqueur). Rémy Martin itself was founded in 1724, and Cointreau in 1849, so they were around during Prohibition, focusing mainly on the European and Asian markets. Due to the American Prohibition, these brands were pushed into the background in the USA, but their global presence remained.

📌Pernod Ricard

Pernod Ricard was also the result of a later merger, formed in 1975, when the Pernod (founded in 1805) and Ricard (1932) brands merged. During Prohibition, the two parent brands operated separately, mainly in the absinthe and anise liqueur lines, but absinthe was banned in France in 1915. As a result, Ricard, for example, developed an alternative anise liqueur. Although they were only indirectly affected by the American prohibition, the tightening of the French market had a more direct impact.

🇪🇺 Was there a similar alcohol ban in Europe?

Nationwide prohibitions similar to the total prohibition of alcohol in the United States were not common in Europe. Some countries (e.g. Norway, Iceland, Finland) had temporary or partial prohibitions in the 1910s and 1920s, mainly on spirits or products with a high alcohol content. However, the spirits industry remained operational in most European countries, so brands such as Rémy Martin, Chivas Regal, or Martini did not disappear, and in fact, they strengthened in global competition during the American break.

👌🏻From the above, it is clear that these are very traditional companies, which can look back on a history of several hundred years. Among them, Brown-Forman (BF.B) stands out in that this company was the only one whose activities were specifically prohibited by law, yet it was able to survive this period, and it is the only American whiskey distillery that existed even before the prohibition of alcohol. 

The world's most famous Tennessee whiskey, Jack Daniel's, only came under the control of Brown-Forman (BF.B) in 1956, the company became a major corporation from the revenues of the Old Forester brand. 💡Interestingly, in the USA and Ireland the drink is called "whiskey", while in Scotland and Canada it is called "whisky", I stick with the latter, except when it comes to the American product specifically.

📚What is the Lindy effect?

The Lindy effect is a mental model that states that the longer something has existed, the more likely it is to persist in the future, and I think this can be fully applied to the Brown-Forman (BF.B) as well. So lifespan does not decrease over time, but increases over time, at least the expected future lifespan.

• The term originated at a restaurant in New York called Lindy's Deli, where comedians observed that comedians' careers were longer the longer they stayed active.
• It was made famous in economics and philosophy by Benoit Mandelbrot and later by Nassim Nicholas Taleb (author of “The Black Swan”).

Examples of the Lindy effect:

• A book read 2000 years ago (e.g. Plato) is more likely to still be read 100 years from now than a 1-year-old bestseller.
• Classical music (e.g. Bach) is more likely to survive the future than a recent pop hit.
• A company that has been in operation for several decades (e.g. Coca-Cola, Brown-Forman) is more likely to survive than a startup.

I think an excellent example of the above is the more than 150-year history of Brown-Forman (BF.B), where even fateful events could not remove the company from the market.

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💰How does Brown-Forman (BF.B) make money and what market advantages does it have?💰

In this section, we examine what exactly the company does to generate revenue, what products and services it has, how indispensable they are. Does it have any competitive advantage (economic moat), how defensible is it, and whether the trend is decreasing or increasing, and what is likely to happen in the long term.

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Although Brown-Forman (BF.B) is essentially a spirits producer, it actually thrives on its very strong whiskey portfolio, which accounts for ~70% of its revenues. These are primarily Tennessee and Kentucky bourbon brands, which are made within a given territory using a special process.

📌Tennessee whiskey is a legally and technologically separate category of whiskey, this trademark can only be used if certain conditions are met. The most famous Tennessee whiskey is undoubtedly Jack Daniel's, but it also includes George Dickel.

✅ Tennessee whiskey requirements:

1. 🇺🇸 Must be made in the state of Tennessee
   This is the basis, the geographical restriction. Only whisky made here can bear this designation.
2. 🥃 Same basic requirements as for bourbon
   So:
   • At least 51% corn is the base grain (therefore, its price determines the price of the whiskey)
   • Up to 80% alcohol when distilled
   • The barrel can be filled with up to 62.5% alcohol
   • Aged only in new, charred oak barrels
   • May not contain added coloring or flavoring
3. 🪵 Mandatory use of Lincoln County Process
   This is the most important difference compared to bourbon:
   • After distillation, but before maturation, the whiskey is passed through a thick layer of charcoal, made from maple wood (this is charcoal mellowing).
   • This results in a milder taste and less rawness.
   • It is named after Lincoln County, where the technique was originally used.

📌In contrast, Kentucky bourbon is not an official legal category, but a quality and marketing label used as a designation of origin, designating those bourbons made in the United States that are produced and often matured in the state of Kentucky. Most famous bourbons do indeed come from there, so the term “Kentucky Straight Bourbon Whiskey” has become synonymous with classic American whiskey in the eyes of many.

🏞️ What makes Kentucky bourbon special?

Although bourbon can be made anywhere in the US, distilleries in Kentucky have gained an outstanding reputation, in part due to:

• Natural limestone water sources that provide calcium-rich, iron-free water, ideal for yeast and grain processing.
• Humid, warm summers and cold winters that help the whiskey “breathe” in the barrel.
• Over 200 years of distilling tradition and well-established yeast strains.
• It is the birthplace of brands such as Jim Beam, Wild Turkey, Maker's Mark, Woodford Reserve, Four Roses.

📜 Legally

"Kentucky bourbon" is not a separate legal category, but the term "Kentucky Straight Bourbon Whiskey" is legally regulated:

• Must be made and matured in the state of Kentucky
• It must be aged for at least 2 years if it is to be called "straight"

The above means several things, one is the very deeply embedded heritage and territorial monopoly, the other is that Brown-Forman's (BF.B) production is very concentrated, practically limited to two states. Brown-Forman (BF.B) has a total of about 20 production facilities, mostly concentrated in Tennessee and Kentucky, so it's not hard to guess that not only does whiskey distillation but also storage take place here. Here's the gist in numbers:

🔢 Brown-Forman (BF.B) facilities: number and capacity

Region	Number of facilities	Main capacities/styles
Kentucky (USA)	2 distilleries + barrel factory	– Brown-Forman Distillery (Shively, Louisville): approx. 5 fermenters and double distillation; 7 maturation warehouses – Woodford Reserve Distillery (Versailles): super-premium bourbon; annual volume: 1.4 million 9-liter barrels (2019) – Cooper's Craft Cooperage (Louisville): barrel production, ~60 thousand barrels/year capacity (until 2014, since outsourced)
Tennessee (USA)	1 distillery	– Jack Daniel's Distillery (Lynchburg): US leading capacity, 6 distilleries, with approximately 1.9 million barrels maturing in the facility's hundreds of warehouses
Scotland	3 single malt distilleries	– GlenDronach: 1.3 million l/year – BenRiach: 1.3 million l/year – Glenglassaugh: smaller capacity (I couldn't find any data)
Ireland	1 distillery	– Slane Distillery (Slane): no public capacity

📌 Total: Brown-Forman (BF.B) has 7–8 distilleries/breweries + barrel factories, a total of 20+ production facilities worldwide, but the individual whiskey distilleries are geographically concentrated. The whiskeys are matured in 150-200 liter barrels, but on the settlement side, 9 liter barrels are used, which are later bottled in 0.75 liter glass bottles. That is why they say that a 12-pack, which contains 12 0.75 liter bottles, is exactly the amount of whiskey in one barrel. Not only do the distilleries, storage facilities and barrel factories have to be located in roughly the same place, but for logistical reasons, bottling also has to take place. So it is not that easy to organize the supply chain, which is also quite concentrated.

🥤Brown-Forman (BF.B) not only uses its own distribution network, but also, for example, Coca-Cola (KO) network, as the two companies also produce pre-mixed RTD drinks. One example is Jack and Coke, a pre-mixed cocktail mix and one of the most well-known and most ordered cocktails in the world. Since I mentioned in the discussion of the market segment that the RTD market is growing faster than other alcoholic sub-segments, this was a logical decision on the part of the companies. People have been drinking the two drinks spontaneously for years, and Brown-Forman (BF.B) and Coca-Cola (KO) have practically made it official.

🫤What's at Brown-Forman (BF.B) beyond whiskey?

I included the Top 10 ranking of major alcoholic beverages in my Diageo stock analysis (Diageo (DEO) Stock Analysis), I'm specifically selecting from the brands in the Brown-Forman (BF.B) portfolio, but if you're interested in the full list, jump to that article (the value in parentheses indicates the position in the Top 10):

• 🥃Whiskey:
  • 🥃Jack Daniel's (7.) – Tennessee whiskey, 14.6 million cartons per year (one carton contains 9 liters, 12 0.75-ounce bottles), but if we only consider premium brands, it usually ranks first or second in terms of quantity sold.
  • 🥃Woodford Reserve – Kentucky bourbon, 1.4 million cases per year, the world's leading "super-premium" American whiskey, both in volume and value.
  • 🥃Old Forester – Kentucky Bourbon, their oldest super-premium brand, does not provide specific sales figures.
  • 🥃 Slane – Irish whiskey, not significant
  • 🥃Single malt Scotch whiskies – BenRiach, GlenDronach, Glenglassaugh (Scotland): niche but premium Scotch whisky brands.
• 🍸Gin:
  • 🍸Gin Mare: super-premium category.
  • 🍸Fords gin: super-premium category.
• 🍹Rum:
  • 🍹Diplomatico: super-premium category.
• 🌵Tequila:
  • 🌵Herradura: 2 million cartons, 18 million liters/year.
  • 🌵El Jimador: (9th) is the largest tequila brand in Mexico. They have a tequila-based RTD drink called El Jimador New Mix.
• 🍸Liqueur:
  • 🍸Chambord: Loire Valley super-premium liqueur, based on black raspberries and forest fruits, a luxurious cocktail base.
• 🧊🍸Vodka:
  • Finlandia: sold to Coca-Cola HBC AG in 2023 for USD 220 million and exited the market

From the above, it can be seen that Brown-Forman (BF.B) is very strong in the whiskey segment and in the premium and super-premium sub-segments of the gin, rum and tequila segments, but in terms of volume, these lag behind the larger brands. This is not a problem in principle, as it is not the volume that matters, but the market positioning and the profit that can be achieved from them. Brown-Forman (BF.B) has a gross margin of around 60%, just like Diageo (DEO) and Pernod Richard (RI), so even though they sell more, due to the variance in profits achieved in each alcoholic beverage category, all three competitors operate with roughly similar margins, but BF-B's portfolio is of the highest quality.

But before you think this is a diversified portfolio, unfortunately it is not, Jack Daniel's is overwhelmingly dominant in terms of revenue and profit. In the past 15 years, five new Jack Daniel's flavors have been introduced, including Honey, Cinnamon, and Crisp Green Apple, plus two pre-mixed RTD flavors, which are low-calorie, low-alcohol drinks. These new flavors have generally been successful, with Jack Daniel's Tennessee Apple seeing double-digit growth a few years ago. Jack Daniel's has been the best-selling American whiskey for years, and including the Woodford Reserve and Old Forester brands, these three whiskeys account for 35% of the premium/super-premium category in the $27.5 billion US whiskey market.

💡In other words, Brown-Forman is the clear market leader in this segment, ahead of Japan's Suntory, which has 28% of the market, and Diageo (DEO) with 8%. This is also advantageous because the American whiskey market is predicted to grow by around 6% annually over the next three years, while 4% in the spirits category. Consumption is clearly shifting from beer to whiskey. In 2000, this was 27%, while last year spirits accounted for 42%, in line with the previously mentioned "drink less, but better quality" trend.

I've read in several places that Brown-Forman is the same as the Jack Daniel's brand, meaning that the company's future is heavily dependent on the performance of a single product line. I can give examples of this type of concentration from other industries, for example, Merck in the pharmaceutical industry (MRK) company's KeyTruda drug comes to mind, but there are also similar examples from the luxury industry. One example is Kering (KER.PA) and the Gucci brand, i.e. Brown-Forman (BF.B), are not alone in this problem, but that doesn't make it a lucky combination. You can find stock analyses of the mentioned companies here.

🏰Economic moat🏰

In this segment, I examined whether the company has any economic competitive advantage, which Warren Buffett referred to as an “economic moat,” which deters competitors from besieging the company’s fortress, i.e. its business, and taking over its market. In the case of Brown-Forman (BF.B), these could be the following:

• 🫸Cost/scale advantage: definitely yes. And it's growing. Because a larger producer can negotiate with its suppliers much better because of larger order volumes, it can keep prices down. Brown-Forman (BF.B) also has less exposure to raw material prices than its competitors, because the cost of producing whiskey depends less on the price of grain than, say, tequila depends on the price of the blue agave plant. While Brown Forman isn't the largest, it's big enough to have a cost advantage over smaller players.
• 🫸Switching cost: somewhat yes. However, it is not nearly as strong as in other industries, but brands with a long history do have staying power. However, many people drink all kinds of alcohol and they can be relatively easily substituted for each other, here taste dominates rather than other switching costs. There is no particular hassle in replacing alcohol brands as desired. However, it is no coincidence that Jack Daniel's has been the market leader in the Tennessee whiskey category for years.
• 🫸Network effect: none.
• 🫸Intangible assets, know-how, trademark: yes. Brand power and production know-how are also difficult to reproduce, as is the heritage of brands. This is especially true in the case of whiskey, since not only is the past unreproducible, but it is also territorially limited, for example, the place of production of Tennessee whiskey, the water used for it, and I could list more. Just as scotch and tequila cannot be produced anywhere.
• 🫸Barriers to entry: high. Although since the beer revolution many people think that anyone can make craft beer, this is not true for the premium spirits segment and especially not for long-aged products. The fact that some whiskey varieties in the premium segment need to be aged for up to 10 years, or in the case of scotch up to 50 years, severely limits the possibilities. Even if someone were able to do this, it would still require a huge investment in the distillery, storage, barrel making, and we haven't even talked about the expertise. It is no coincidence that new and new brands do not grow out of the ground in the traditional whiskey industry, instead pre-mixed, RTD drinks are released, or maybe new flavors. This further strengthens the existing mega-corporations. That is why acquisitions are more typical than organic growth, there is little truly significant disruptive effect.

I think the above well supports Brown-Forman's (BF.B) wide moat, but it should also be added that it is far from alone among spirits producers. Diageo (DEO) and Pernod Richard (RI) can also demonstrate a similar competitive advantage, while there are countless narrow moats in the industry, such as Rémy-Cointreau (RCO) or Constellation Brands (STZ). This clearly highlights that the alcohol market is a polarized sector, consisting of many small, specialized sub-segments, where someone can be very strong in their own segment, but breaking into other segments is incredibly difficult, companies typically buy into these through acquisitions.

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🎢Brown-Forman (BF.B) metrics🎢

In this section, I examined what metrics characterize the company, how it stands on the revenue side, what margins it operates with, whether it has debt, what the balance sheet shows. I look for items that are extreme – too high debt, high goodwill, etc. - what return on capital the company works with, what its cost of capital is, how the revenue and cost sides are structured. I also examine trends, owner value creation, and how the company uses the cash generated.

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📈What is the S&P 500 yield?📉

Compared to previous tests, I have introduced a new section to compare the metrics below. Since many people use the US stock market index as a benchmark and also buy S&P 500 ETFs, it is worth looking at what companies are doing in aggregate (of course, you should be happy if the company you are analyzing exceeds these values).

S&P 500 2024 data:

• SP&500 revenue growth: +7%
• SP&500 profit growth: +10%
• SP&500 gross margin: 45%
• SP&500 net margin: 13%
• SP&500 ROE: 15%
• S&P 500 ROIC: 12%
• S&P 500 ROCE: 11%

🪵Not selling, but maturing

Before we dive into evaluating financial metrics, we need to understand that alcoholic beverage companies have a specialty, and that is the issue of sales or aging. In order for a whiskey to be sold as Tennessee whiskey, there are quite a few requirements that must be met. One is that the mash must be aged in oak barrels for at least 3 years, but this is only the first step to being called whiskey at all. The more premium a spirit is, the longer the aging process takes. Let's stay with the most famous Tennessee whiskey brand, Jack Daniel's:

• Jack Daniel's No.7, alias Black Label – 4-5 years of aging
• Jack Daniel's Single Barrel Select – 5.5-8 years of aging
• Jack Daniel's Single Barrel Rye – 6-7 years of aging
• 10-Year Tennessee Whiskey – 10 years of aging
• 12-Year Tennessee Whiskey – 12 years of aging

💡Tennessee whiskeys are not usually aged for more than 12 years, but among Scotch, there are whiskeys that are as old as 40-50 years.

What happens if, for example, there is not enough demand? Brown-Forman (BF.B) does not bottle its current whiskeys, but rather extends the aging process, which gives the drink a premium, but in return, it ties up a lot of capital in the aging process. This means $1.6 billion in inventory this year, and accounting records it as inventory. This is better for the company in the long run, but results in worse metrics in the short run.

This is especially bad if there is price inflation, for example, the price of packaging materials increases (this was an acute problem in the post-COVID period, when they could not bottle because there were not enough bottles), then this means double stress for the company. This is also true the other way around, because if there is enough stock in storage and demand increases, then the high-value-added drinks already in stock can be sold very expensively, as we have seen during the 3 years of COVID, meaning that companies operating in the premium and super-premium segments have pricing power. These periodic fluctuations can also be observed in some places in the revenue data of alcoholic beverage manufacturers.

How do you know if you are currently stocking up or selling at a higher volume? The so-called inventory turnover rate, which can be calculated relatively easily, is divided by the cost of goods sold, or COGS, by the average inventory. You don't have to do this, because I have already calculated it, as you can see in the picture above.

💪🏼It is therefore very important that if an alcohol producer reduces sales volume and increases the length of maturation, the turnover rate will still decrease, but this is not a problem, and in fact, it can be a strategic advantage over other industries, as this way they can create value in the long term, in exchange for short-term disadvantages.

For example, a clothing manufacturer, where analysts also track inventory turnover, cannot do this because it will result in a loss of value and is expected to be reflected in price cuts. On the contrary, it will have to spin out the accumulated inventory, which in turn erodes pricing power, as I wrote about in my Nike analysis (Nike Inc. (NKE) Stock Analysis). This is why luxury clothing manufacturers like Louis Vuitton and Burberry used to destroy their products by burning them. (LVMH, BRBY), which in most cases now provokes strong social protest, even if it is not prohibited by law in most cases.

There is another effect that needs to be considered, and that is the change in the price of the raw materials for the given alcoholic beverage. What is it made of?

• 🌾whisky: Grain-based products, corn, rye, barley, wheat, can be harvested in about half a year.
• 🌵tequila: blue agave, which needs to be grown for 7-10 years and the quantity produced is decreasing (along with brutal price fluctuations), but tequila is not usually aged for long.
• 🥃rum: Sugarcane, can be harvested quickly, molasses is the basis, but rum is aged for 1-15 years.
• 🍸gin: grain spirit, wheat, barley, corn, etc., redistilled with juniper berries and other plant aromas, usually not aged.
• 🥂vodka: grain, usually wheat, rye, corn, potatoes, sugar beets, etc. no maturation, freshly distilled.

As you can see, the predominance of whiskey in the case of Brown-Forman (BF.B) is fortunate in that it can be harvested quickly and the cost of the final product is relatively low compared to, say, tequila. So, in the case of Brown-Forman (BF.B), concentration is often a disadvantage, but the predominance of whiskey is also an advantage in some cases.

Drink / Category	Alapanyag	Maturation?	Typical maturation time
Vodka	Any fermentable base (grains, potatoes, etc.)	nincs	Year 0
Tequila – Blanco	100% blue agave (or mixto)	None (max 2 months)	0–2 months
Gin	Neutral grain spirit + plant extracts	Usually not	0–1 year
Rum – White	Molasses or sugarcane juice	Rarely	0–1 year
Tequila – Reposado	100% blue agave	Yes	2–12 months
Whiskey – Rye	Min. 51% rye	Yes (required)	2–6 year
Whiskey – Bourbon	Min. 51% corn	Yes (required)	2–12 year
Tequila – Añejo	100% blue agave	Yes	1–3 year
Whiskey – Irish	Barley + other grains	Yes (required)	3–10 year
Rum – Matured	Molasses or sugarcane juice	Yes	3–15 year
Tequila – Extra Añejo	100% blue agave	Yes	≥3 years (often 4–6 years)
Whiskey – Tennessee	Min. 51% Corn, Lincoln Co. Process	Yes (required)	4–8 year
Whiskey - Scotch (single malt)	100% barley	Yes (required)	10–25 year

When it comes to Brown-Forman's (BF.B) metrics, one of the problems is that the company doesn't really make revenue data transparent within each of its brands, only reporting them as a broad average. Based on these, total revenues were up until the end of COVID, but have been on a downward trend since then. If you average this out, you get an average annual increase of around 3%, but this is a mature industry, you can't expect a big jump.

Breaking down the above, it is clear that roughly 44% of revenues can be attributed to the US market, and since most products are manufactured here, the impact of expected tariffs may be more favorable for them than for their competitors, but the international exposure of 60% is still not insignificant. The full breakdown is as follows:

• 🇺🇸USA: 44%
• 🇲🇽Mexico: 7%
• 🇩🇪Germany: 6%
• 🇦🇺Australia: 5%
• 🇬🇧UK: 4%
• 🌍Other: 33%

One more figure, but still about revenue: as I mentioned earlier, Brown-Forman (BF.B) essentially lives off of whiskey sales, which accounted for 71% of revenue according to the latest data. The second category is the pre-mixed, RTD drinks category, with 12.3%, but these are essentially whiskey and tequila-based drinks, but they also have something else in them. The tequila and wine segments are roughly 7% and 5%, respectively, everything else is negligible.

As I mentioned earlier, the gross margin of major alcohol companies is around 60%, but I think what's more exciting is how much money the companies have left at the end. For comparison, I have also included the data for Diageo and Pernod Richard in the picture. As you can see, the three companies move almost together, but it is telling that in 2016 Brown-Forman (BF-B) still had a gross margin of 69.4%, but it has fallen a lot since then, and this drop can also be seen in the net margin, with the difference that you could already see a similar net margin around 2017. This also means that essentially these companies are of similar quality and operate with similar efficiency.

As I wrote in the Diageo analysis (Diageo stock analysis), the business requires a lot of capital, and the acquisition of individual brands is also quite typical in the industry, which these companies usually cannot cover with their own cash. What is the solution in such cases? They either issue shares and dilute them, or they take out loans. Fortunately, the latter is typical in the spirits industry, which is why Brown-Forman (BF-B) also has significant debt:

• revenue: 3980 million USD
• Cash: 444 million USD
• net debt: 2390 million USD (60% of revenue)
• net debt/EBITDA: 1.9
• interest coverage, EBIT/interest: 9.5

As you can see, Brown-Forman (BF.B) has a lot of debt, but it's not sky-high, and Diageo (DEO) and Pernod Richard (RI) are both much worse off. I don't think this level is terrible at all, of course I prefer companies where this metric is practically zero, but in this industry it's considered good, especially since it's been at this level since about 2018, while revenue has been growing.

Looking at BF.B's cost structure, the SG&A segment, i.e. selling, advertising and other costs, consume a significant portion of the nearly 4 billion USD in revenue, amounting to 1.23 billion USD this year and 1.36 billion USD last year. Of this, advertising costs are USD 480 million this year, or roughly 40% of SG&A. It's no coincidence that when you watch TV, you'll almost certainly see at least 1 alcohol commercial within a commercial block, and more around the holidays. So not only is maintaining production expensive, but you also have to spend a lot on advertising. Of course, this is a variable cost and could be cut back for cost reduction/debt repayment reasons, for example, but I think this would be a counterproductive activity.

🧮What do ROIC and ROCE metrics show?🧮

ROIC – Return on Invested Capital – shows how efficiently the company uses its total invested capital to generate profit. Read more here.

• It shows the company's fundamental value creation capability.
• It filters out the impact of the financing structure.
• If ROIC exceeds the cost of capital (WACC), the company is creating value.

ROCE – Return on Capital Employed – shows how efficiently the company uses its long-term financing sources. Read more here.

• It measures the profitability of business activities.
• It does not take into account tax effects.
• A good basis for comparison between different industry players.

Indicator	What does it measure?	Who is it useful for?	When is it considered good?
ROCE	Total return on capital	Long-term investors	If higher than the industry average
ROIC	Return on invested capital	Equity investors	If higher than WACC
ROE	Return on equity	Shareholders	If stable and sustainably high

Let's look at the internal rate of return, as always. I think the picture speaks for itself, declining metrics, and not small, but at a slowing rate. Although I didn't examine every year separately, the return on equity, ROE, fell by almost a third, but the return on invested capital also fell by almost half. Of course, these are still values above the S&P500, but the trend itself is not very encouraging. What is true is that the 23.1% ROIC is much higher than the company's average cost of capital, which is about 7.2%, meaning the company is still creating value.

Before anyone thinks that competitors' metrics might be better, they will be surprised to see similar numbers there. Diageo (DEO) is slightly ahead, while Pernod Richard (RI) is significantly behind Brown-Forman (BF.B) in this regard. And here the point may be clear for many of you: Among the listed spirits companies, Diageo (DEO) and Brown-Forman (BF.B) stand out and are very similar in most of their metrics.

Ownership value creation at Brown-Forman (BF.B)

On the owner value side, I usually look at how the company uses the free cash generated. Basically, a company can do the following things with cash:

1. funnel it back into the business
2. reduces debt
3. pays dividends
4. buys back shares
5. buys up other companies

Brown-Forman (BF.B) has been paying back its previous loans nicely and has returned to a net debt/EBITDA level of around 2, as you will see in the share buyback yield in the chart below. But before I get into that, I will show you an interesting fact, which shows how the effect of share buybacks is mitigated by stock options, and what it looks like when they are in an ideal ratio. The picture shows that last year they bought back shares opportunistically for 400 million USD, when the exchange rate was low, because they were able to create much more value here than elsewhere, in contrast to the 28 million USD stock compensation, which is almost nothing, 0.6-0.7% of revenue. Counterexample: Veeva Systems (VEEV) where the same is 16%, meaning that the management of Brown-Forman (BF.B) makes excellent decisions in this area.

Returning to owner value creation:

• 〽️share buyback: opportunistically, last time last year 400 million USD (about 2% of shares)
• 💰dividend payment: 3.5%, with a payout ratio of 48.3%
• 🫰🏼debt reduction

Based on the above, the company has generated a rarely seen, high shareholder return, which in this case is 6.18%. The dip in the blue curve shows debt issuance, then rebounds with debt reduction, while the yellow line represents buybacks. The image also shows that these are opportunistic, not pre-allocated amounts. One more thought about the graph: Since this is a mature company, it is not very possible to extract a high average return from market growth and price increases, so the low valuation component is also necessary, from which the share price can return to a higher level. This is compounded by dividend yields and share buybacks. In other words, the more of these the company does, the higher the expected return will be.

🇭🇺For Hungarian investors🇭🇺

The American Brown-Forman (BF.B) is an American company, therefore its dividends are taxed much worse than, for example, the English Diageo (DEO). There is a 30% withholding tax on the former, and a zero tax on the latter, so if someone were to buy the shares with such a focus, they should take this into account, if only because BF.B pays a 3,5% dividend, while DEO pays a 4,1% dividend in July 2025.

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💵Brown-Forman (BF.B) Acquisitions💵

In this section, I examine how acquisitive the nature of the company is and what impact each acquisition had on the life of the company, if any.

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Acquisitions and in some cases divestitures are quite common in the spirits industry, usually for portfolio cleansing reasons. The table below shows that, except for the sale of Finlandia vodka, the rest are all acquisitions and expansion of the premium and super-premium segments, where the profit margins are much higher than on standard products.

🛍️ Acquisition Summary (2015–2024)

Ev	Acquisition / Purchased brand/company	Total Amount	Comment / Rating
2015	Slane Castle Irish Whiskey Ltd.	~50 million USD	For the construction of a new distillery in Ireland
2016	BenRiach Distillery Co. (BenRiach, GlenDronach, Glenglassaugh)	~£285 million	Scottish premium in a single acquisition
2019	Ford's Gin	~22 million USD	Premium gin brand
2020	Part Time Rangers (RTD) – New Zealand	~14 million USD	Ready-to-drink portfolio expansion
2023 Q3	Gin Mare Brand, SLU (Gin Mare)	undisclosed (~$30–50 million tip)	Entering the premium Mediterranean gin market
2023 Q3	Diplomático Rum (multiple subsidiaries)	undisclosed (~$100–150 million tip)	Introduction to the premium rum category
2023	Finlandia vodka (sale)	220 million USD	Portfolio optimization
2024	Herradura & El Jimador tequila (Grupo Industrial Herradura acquisition)	776 million USD	Big leap on the tequila front + logistics expansion

Of course, to judge the above acquisitions, you need to know one more thing, and that is the revenue generated by the brands, so by dividing this by the purchase amount, we can calculate the P/S value. Of course, it would be better if there were exact profit data for each acquisition, but I couldn't find such, because Brown-Forman (BF.B) does not publish this. Overall, I think that Brown-Forman (BF.B) used its cash prudently, there was little overpayment in connection with the acquisitions, and basically these are expanding the range of high-margin, premium, and super-premium brands.

Brand	Revenue (USD million)	Purchase value (USD million)	P/S ratio
Herradura + El Jimador (tequila)	300	776	2.59
Gin Mare	45	50	1.11
Ford's Gin	22	22	1.00
BenRiach + GlenDronach + Glenglassaugh	60	418	6.97
Slane Irish Whiskey	15	50	3.33
Diplomatic Rum	70	120	1.71

But what are Brown-Forman's (BF.B) premium and super-premium brands? Let's break down their offerings a bit by revenue:

🏆 Super-Premium whisky

• Woodford Reserve + Jack Daniel's Single Barrel, Gentleman Jack, Bonded, Sinatra Select and similar special JD releases.
• The premium whiskey category accounts for approximately 55-60% of total revenue, or ~2.2–2.4 billion USD.
• The super-premium portion accounts for 10–15% of this, or approximately USD 440–600 million.

🥇 Premium products

• These include: Jack Daniel's Old No. 7 + flavors (Honey, Fire, etc.), Old Forester, Herradura, EL Jimador, Scottish single malts (BenRiach group), Slane, Gin Mare, Fords Gin, Diplomático Rum.
• These make up another 30–40% of the portfolio, but keeping in mind that the standard JD soda and RTD portion (~10–15%) also belongs here.
• It is estimated that this group generates approximately 1.2–1.6 billion USD in revenue.

📉 Standard / RTD

• The remaining 10–15% (~$400–600 million) is realized through lighter, everyday products (e.g. RTD, Old No.7 volume products). However, the RTD market is a high-growth segment, so even if this is not where the company earns the most, the volume can compensate for this.

Everyone should consider the above as a STRONG ESTIMATE, because it is very difficult to find specific data in such a breakdown, but the proportions are roughly right, more than 90% of Brown-Forman's (BF.B) revenues come from premium or higher-class products. Based on these, the company's already quite premium spirits offering has been augmented by the recent acquisitions, at a fairly good price in my opinion. They have also diversified a bit, as no new brand has appeared in the Tennessee whiskey category, instead gin, rum, tequila and other whiskey varieties have been introduced.

👌🏻It seems that the management is rightly trying to diversify the offering and expand into other sub-segments to reduce the huge share of whiskey, but they are not compromising on quality either. Overall, I think this is a particularly good capital allocation.

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🤵Brown-Forman (BF.B) Management🤵

In this section, I examine who runs the company and how. What is the bonus system, how much risk – skin in the game – do the managers take on while running the company? Is there a family connection, or perhaps a special “heritage” factor?

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When examining the management of Brown-Forman (BF.B), it is important to note that the Brown family owns approximately 70% of the voting rights through a dual share structure. This is typically a family business, managed by the original founders, even if they are not involved in the day-to-day operations of the company.

🏛️ The role of the Brown family

• The Brown family owns more than 70% of the voting rights through its distinguished Class A shares.
• The family is in a governing role, with frequent board memberships (e.g. Campbell, Elizabeth, Marshall, Stuart, Augusta).
• Family members actively influence strategic decisions as chairmen and board members, while independent directors ensure control. To maintain balance, the board of directors consists of 11 members, 7 of whom are independent. These are typically retired or currently reigning company executives.

🌟 Senior executives

• Lawson E. Whiting – President & CEO, since 2019, total compensation in 2024: USD 13.5 million
  • Base salary: ~1.5 million USD, ~10%
  • Bonus + stock options: $12 million, ~90%
• Leanne Cunningham – Vice President, CFO, total compensation ~$3.78 million
• Marshall Farrer – Vice President, Chief Strategic Growth Officer, $3.66 million compensation
• Additional: Mike Carr (GC), Tim Nall (Supply Chain), Diane Nguyen (People), Yiannis Pafilis (EMEA), Crystal Peterson (Inclusion), Jeremy Shepherd (CMO)

The above numbers are about average for companies of this size, the management is not overpaid, but I wouldn't say they earn little either. However, the company has managed to put together a fairly complex compensation strategy (compensation strategy), which is a 76! page document member and consists of the following:

• basic salary: fixed element, not tied to performance, but the ratio is low
• Year-end bonus: since the employee has held the position, it can actually be considered a loyalty bonus
• short-term incentives (STI): corporate metrics provide the basis and are in line with the company's interests
• long-term incentives (LTI): locked-in stock options based on 3-year shareholder returns tied to operating income, and uses the S&P500 consumer price index as a benchmark, which BF.B must beat in performance.

To elaborate on the above, Brown-Forman (BF.B) uses TSR, or total shareholder return, and is basically supposed to outperform the S&P 500 consumer staples index, which it has failed to do at all over the past 5 years. The other metric is tied to net sales and operating income, which is used to calculate the compensation of the CEO and other executives. Let's take a look at a new, non-accounting, but industry-specific metric, DBOI, which stands for "Depletion Based Operating Income" and roughly translates to sales-based operating income.

💡The term “depletion” in the spirits industry refers to the actual movement of products from the wholesaler, meaning when a drink reaches a retailer, restaurant or bar. This is a more accurate reflection of consumer demand than simple sales or production figures.

The ratio of the salary components is actually interesting, for example, in the case of the CEO, 13% is base salary, 16% is short-term incentive and 71% comes from long-term incentives, meaning that if the company is doing poorly, the managers also earn poorly, which is very much in line with the interests of the owners. It's an excellent system, it's hard to find problems with it.

📋 Board of Directors

• Campbell P. Brown – Chairman of the board, a member of the Brown family, his compensation is 739000 USD, but he will soon give up his position as chairman and continue to serve as a board member. He owns 1.41% of the company, worth 189.3 million USD.
• Elizabeth M. Brown – former president, member of the Brown family.
• Independent members: Mark Clouse (former Campbell Soup CEO), Michael Roney (former Bunz plc. CEO), Jan Singer (former J.Crew CEO), Tracy Skeans (COO Yum! Brands), Elizabeth Smith (former Bloomin' Brands CEO), Michael Todman (former Whirlpool chairman), W. Austin Musselma (founder of Ashbourne Farms, owns shares worth $131.8 million)

The board is made up mostly of veterans, including two Brown family members, but there are also many independent directors. Insiders collectively own $420.8 million worth of shares, or 3.14% of the company but 70% of the voting power.

Overall, the company's management is in excellent balance, which is rare.

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🆚Competitors: Brown-Forman (BF.B) opponents🆚

In this section, I examine who the competitors of the analyzed company are, what is their market position, whether they are in a subordinate, secondary or superior role. What is their market share and what is their specialty? Are they losing or gaining market share to their competitors?

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In my analysis of Diageo, I have already identified the main competitors in the industry (Diageo (DEO) Stock Analysis), but I'll also include the competitors' table from the Brown-Forman (BF.B) Morningstar analysis here, on the right side of the table you can see the numbers for Pernod Richard (RI):

I don't think Constellation Brands (STZ) is a direct competitor to Brown-Forman (BF.B), and I would have put Pernod Richard (RI) in the picture instead. If I were to create a subjective industry ranking of quality, premium, and super-premium spirits producers, the list would include the following names:

1. Diageo (DEO): the largest and most diversified company in terms of size, market leader in many areas, strong in scotch, tequila, gin, rum
2. Brown-Forman (BF.B): Smaller in size than Diageo and not as diversified a portfolio, but better quality, the strongest Tennessee whiskey, in which it is a world leader
3. Pernod Richard (RI): roughly the size of Brown-Forman (BF.B), more diversified but less high-quality portfolio, lags behind the first two in metrics
4. Rémy Cointreau (RCO): a much smaller company selling premium drinks, with much worse metrics
5. LVMH (LVMH): Louis-Vuitton is the world's largest luxury conglomerate, but it's not really a spirits-focused company, but given its size, it's still worth considering. Its wines and spirits category is of extremely high quality, including Moet&Chandon, Dom Perignon, Veuve Clicquot, Krug champagnes and Hennessy cognac. This segment generated EUR 5.86 billion in revenue, of which JAS Hennessy & Cie's revenue three years ago alone was EUR 2.12 billion, leaving the rest of the portfolio at around EUR 3.74 billion, comparable to the revenue of Brown-Forman (BF.B).

The chart above shows that the entire industry is trading at a very depressed valuation, so this is not so much about individual stock stories, but rather global, industry-wide problems. I usually only invest in the best, and less often the top two, companies in an industry, but in the spirits segment they are complementary to each other. That is why, if you want to play the spirits market, you can buy both Diageo and Brown-Forman, they are good complements to each other, just pay attention to the position sizing. If you want physical, hard, luxury industry exposure, then Louis-Vuitton is a very good target for this, which also has an alcohol leg.

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⚡What are the risks of Brown-Forman (BF.B)?⚡

In this section, I examine all the risks that could affect the company's long-term future. Currency, regulatory, market disruption, and so on.

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Brown-Forman's (BF.B) risks are largely the same as those of Diageo (DEO), but due to its more concentrated portfolio and American roots, they still differ in some places.

📉 1. Macroeconomic cycles

• Decrease in willingness to consume during a recession.
• Inflationary pressure → increase in raw material prices (grain, glass, energy).
• Change in interest rate environment → increase in financing costs.

Brown-Forman (BF.B) is in a better position in that its whiskey is largely made from grain, which is harvested much faster than, for example, the blue agave used in tequila, which takes years to grow. But this very concentration creates another problem: when whiskey consumption falls, Brown-Forman's revenue typically falls as well. Margins can be pressured by disruptions in supply chains or shortages of raw materials like glass. I think Brown-Forman has plenty of pricing power in the premium and super-premium segments to pass on inflation to customers in the form of price increases.

💱 2. Concentrated production assets, currency risk

• A significant portion of distilleries and storage facilities are concentrated in the states of Tennessee and Kentucky.
• Whiskey accounts for a significant portion of revenue and profit, with inventory of $1.6 billion.

Brown-Forman (BF.B) has incredibly concentrated revenues, with 71% of its revenue coming from Tennessee whiskey, and US consumption accounting for more than 40% of total consumption. With production largely concentrated in two states, a natural disaster could significantly set the company back. Earthquakes and hurricanes are common in the US, which can destroy concentrated production facilities, inventory, or disrupt supply chains.

Brown-Forman also has some currency risk, as most of its revenue is not recorded in dollars.

🧬 3. Lifestyle change and health awareness

• Spread of alcohol-free lifestyle
• The rise of healthier alternatives (kombucha, mocktails, low-calorie drinks)
• Tightening sugar and alcohol taxes

It is most typical of Generation Z that they consume 20% less alcohol than Generation Y (Gen Z Alcohol Consumption Decline). However, the proportion of alcohol consumers is not smaller, but larger, they only consume less in volume, but more premium and RTD drinks. The health-conscious trend is also very strong, many people do not drink alcohol at all. However, I am not convinced that this will not result in a decline in the revenues of commercial producers, while strengthening the consumption of premium brands.

⚖️ Substitution effect

It is also worth mentioning the substitution effect, which Brown-Forman (BF-B) specifically mentioned in one of its quarterly reports, and this applies to cannabis consumption:

• It is common for medical cannabis users to consume less alcohol, with a reported reduction in alcohol consumption of approximately 40–60%.
• A New Zealand survey found that 60% of people consumed less alcohol after using cannabis.
• In California, a 15% reduction in alcohol consumption was measured after cannabis legalization, and medical cannabis has also been shown to replace alcohol in other US states.

💊 4. GLP-1-based weight loss drugs

• Research suggests they may reduce cravings for alcohol.
• If they become widespread, they could cause a permanent decline in demand.
• Investors like Terry Smith are already taking this impact into account.

GLP-1 is a peptide produced by the gut, which is mimicked by GLP-1-based weight loss drugs. These reduce the desire to drink alcohol by about 40%, which means they hurt sales for alcohol companies. Currently, about 40 million people have access to them, but the market is roughly 2 billion! people, so we are at about 2%, and consumption is growing rapidly. The question is, how many people are there who are overweight, want to lose weight with the help of medication, and are also premium alcohol consumers?

I think the risk of this is very difficult to estimate at the moment, but since drugs like Wegovy are quite expensive, they will initially be used by the wealthier classes, who also consume premium and above-premium alcoholic beverages. So there is definitely an overlap between the two, and although I estimated with ChatGPT what percentage it could affect, according to them currently 5 million premium alcohol consumers, the numbers are very uncertain. I think this is a typical disruptive situation for the alcohol market and the outcome is completely unpredictable. Fortunately, the uptake of GLP-1 drugs is still relatively long, but this impact must be taken into account.

⚖️ 5. Regulatory and tax risk

• Restrictions on alcohol consumption (e.g. marketing or advertising ban, labeling)
• Increase in excise taxes
• Action against industrial concentration

There have been several proposals to impose special taxes on alcohol, as they did on energy drinks and chips, or to introduce advertising restrictions similar to the tobacco industry. Another real risk is the deterrent effect of stickers warning about the dangers of alcohol consumption, although this has not really worked for cigarettes either. Since the alcohol industry is quite prone to acquisitions, the authorities could put up obstacles in their way, although I think this is unlikely in such a fragmented market.

As a US company, Trump's tariffs will likely have less impact on Brown-Forman (BF.B), unless other countries' "counter-tariffs" have similar effects. For example, the EU has imposed a 25% tariff on American whiskey, and since there is a significant export dependence on Europe, this will likely have an impact on prices. Since Brown-Forman only collects 29% of its revenue from non-whiskey, Mexican tequila production and Scottish scotch production will not be subject to these punitive tariffs, but American ones will. The big question is exactly how and to which products the tariffs will apply. Since Trump already imposed a 30% tariff on Mexico this year, which he withdrew and then re-promulgated, in principle tequila would also be affected by the tariff. So there is a lot of uncertainty on this issue.

🚫 6. Counterfeiting and the grey economy

• Especially in emerging markets (e.g. Africa, Asia)
• Reputational damage + undermining price competition
• Copycats like Lonehand

There were several precedents for the above:

• Jack Daniel's – Lonehand Whiskey Case (2018)
  Brown-Forman sued the Texas manufacturer of Lonehand Whiskey for its resemblance to Jack Daniel's square bottle and black label. They claimed several claims: trademark infringement, deceptive advertising.
• Asian and online affairs
  The company regularly takes action against counterfeiters who copy bottles and logos. In 2013, a Chinese party settled a lawsuit over a counterfeit JD bottle.
• Online product counterfeiting
  There have been lawsuits against online stores (e.g., Texas, New Jersey) that sold counterfeit JD T-shirts, shot glasses, or even products without recommended ingredients.

Brown-Forman (BF.B) is struggling with roughly similar problems as Diageo (DEO).

🌡️ 8. Climate risk and raw material exposure

• Agave (tequila): It is grown in Mexico and is highly susceptible to drought, warming, and pests, and its price has fluctuated between 1 and 30 pesos over the past decade. Fortunately, this means little to Brown-Forman (BF.B), as its Herradura and El Jimador brands are not very high-volume (about 7%).
• Grains (whisky): Due to the hotter climate in Texas, this is perhaps less likely than with Scotch, and the maturation time is also shorter.
• Water: Distilling and beer production are water-intensive, so water restrictions or increases in water rates are a direct cost risk, and in the case of the Kentucky Wine Region, the water also passes through special limestone soil, and a decrease in yield can cause problems.
• Sugarcane (rum): with volatile yields and strike risk due to climate stress and labor issues. Also has small exposure to Brown-Forman.

Given how strongly the impact of climate change is felt in the weather, this risk will certainly arise, if not in the short term, then in the medium and long term. The big question is how much warming will affect the yield of certain grains, such as corn, which is one of the raw materials for whiskey. One thing really surprised me, and that was the volatility of the price of blue agave, the raw material for tequila:

📊 Blue agave price fluctuations

Period / Season	Price (pesos/kg)
Period of Abundance (2007–10)	~2 pesos
Stable growth (2016–17)	18–21 pesos
Peak (2022)	~34 pesos
Post-correction period (2023–24)	5–11 pesos

🪻🌽I think the 2-34 pesos, or seventeen times! spread in prices is brutal, during the same period the price of corn spread between 2.4-6.9 USD per bushel, which is a special unit of measurement for grains and corresponds to 35.29 liters of crop. The same was the case for barley, 7-10 USD, so these are significantly less volatile raw materials.

From the above, I see the biggest threat in the decreasing consumption of Generation Z and the effect of GLP-1 drugs on reducing alcohol consumption, because these are quite sector-specific problems. The rest is true for pretty much every other industry, like customs, counterfeiting, supply chains, and the like, but this can be solved by quality management.

I made a self-check list that confirms the thesis about the company:

1. low or zero debt: YES/PART/NOT
2. significant economic advantage that can be protected in the long term: YES/PARTLY/NO
3. excellent management: YES/PARTLY/NO
4. excellent indicators, significant owner value creation: YES/PARTLY/NO
5. The majority of the total return comes from reinvesting the cash generated, not from dividends: YES/PARTLY/NO
6. appropriate share valuation: YES/PARTLY/NO

Based on the above, taking into account the incredibly long-standing legacy, but not underestimating the risks, the alcohol industry will be fine for another 10-20 years or so, but we need to pay particular attention to the GLP-1 drugs that seem disruptive. It is important to note that I would not consider Brown-Forman (BF.B) stock if it were not significantly undervalued, thus referring back to point 6 above.

Because there is little growth in the alcohol market, premiumization would probably not be enough to generate a return exceeding the S&P500 from share buybacks, dividends, market growth, and the company's pricing power, especially considering the many headwinds. The current state of the alcohol market is somewhat reminiscent of the early tobacco industry, from which Philip Morris (PM) has performed quite well despite the adverse trends, representing a return of approximately +216% over the past half decade, adjusted for dividends.

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👛Brown-Forman (BF.B) Valuation👛

In this section, I will examine the company's current valuation compared to historical values ​​and consensus fair values.

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Rating metrics

In the two rows below you can see valuation metrics. The first row shows the current valuation, the second row shows the historical valuation. Although I don't think these metrics are particularly good - they hide a lot - they can be used as a benchmark.

• Share price (2025-07-18) 28.92 USD; P/E: 15.72; EV/EBITDA: 24.28; P/FCF: 31.75 (Based on Finchat.io)
• Historical median valuation (10-year average): P/E: 34.01; EV/EBITDA: 12.38; P/FCF: 44.78 (Based on Gurufocus)

Why don't you see a DCF model in this segment? Because each input data produces a huge variance in the output, and most of the data is an estimated value. Therefore, the valuation will never actually be a single exact number, but rather a range can be defined where the current valuation falls.

You should apply a margin of safety to this price range, according to your risk appetite. 

So don't expect an exact price, no one can say this for a stock. However, there are fair value prediction services, almost every major stock screening site has one, I've aggregated them below. However, if you want a good stock support service, subscribe to The Falcon Method (The Falcon Method), entry prices are given for the stocks analyzed there.

Rating

• Wall street estimates: 38.43 USD (I took into account the Alphaspread, the average of the two extreme values:)
• Peter Lynch Median P/E: $57.57
• Morningstar: $42 (5 stars)
• Gurufocus: $53.58
• AlphaSpread: 35.22 USD (18% undervaluation compared to the base case)
• SimplyWallst: $52.88

Average (based on 6 reviews): $46.61 (38% underrated)

How to interpret the numbers? The above "margin of safety" rule should be applied according to your convictions, so if you really believe in the company, you can buy it at fair value, but if you proceed in 10% increments (whose convictions are strong), the math would look like this:

• 10% margin of safety: 46.61*0.9=41.9 USD
• 20% margin of safety: 46.61*0.8=37.3 USD
• 30% margin of safety: 46.61*0.7=32.7 USD
• 40% margin of safety: 46.61*0.6=28 USD
• 50% margin of safety: 46.61*0.5=23.3 USD

Of course, the list could be continued indefinitely, but the point is that the right purchase price for you is determined by the level of your conviction.

As you can see in our Diageo (DEO) stock analysis, spirits companies are quite undervalued by investors, and their suffering has been going on for some time. Brown-Forman (BF.B) has also been falling since about 2022, and the suffering seems to last for a while. In return, the stock can be bought terribly cheaply, and since it is a dividend-paying stock, the dividend is also attractively high. In addition to the low valuation, an attractively high future yield can be mixed in. And it's hard not to see in the alcohol market that people will still be drinking alcohol in 10-20 years, after having been doing so for roughly 10000 years. The only question is how much.

Since I also included Interactive Brokers' not-so-recent EVA data in my Diageo (DEO) stock analysis, I'm including it here as well. It's not the exact numbers that are important, but understanding the trend and the underlying content. In the image you can see how much added value the company can create with the capital invested in the business, marked in blue. The gray bar shows future expectations. The lower this gray area is, the less future additional growth the market is pricing in. As you can see, the gray and red lines practically meet, so the market's future expectations for the companies are zero, so they didn't overpay for the shares. In contrast, for example, in the case of Games Workshop, which I also analyzed, the market is pricing in high future growth (Games Workshop analysis), so you have to pay much more than the fair value of the stock. In summary: Both Brown-Forman (BF.B) and Diageo (DEO) look cheap at their current valuations.

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🌗Significant news and the last quarter🌗

In this section, I will examine what happened in the last quarter, whether there were any significant news/events. If the company reports semi-annually, we examined this period.

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Below I summarize Brown-Forman's (BF.B) latest Q42025 results, focusing on the most significant numbers, trends and strategic commentary:

📉 Brown Forman (BF.B) Latest Quarter (2025 Q4) – April 2025

• Net sales: USD 894 million, -7% year-over-year (-3% organic)
• Operating result: USD 205 million, -45% (-2% organically)
• EPS: 0.31 USD, -45% year-over-year, which is quite a significant difference

📌In practice: Unfortunately, these are not good results, but almost every company in the alcoholic beverage industry blames weak consumption for this. It does not seem to be a company-specific problem, but rather a weakness affecting the entire segment.

🔍 Brand performance

• Whiskey: stable (~0%), +1% organically. Woodford Reserve (+8%) and JD Tennessee whiskey grew, but super-premium JD exports declined.
• Tequila: –14% (–12% organically), sales declined at the El Jimador and Herradura brands due to weak Mexican and American demand.
• RTD (pre-mixed drinks): –6% (+5% organically), RTDs increased slightly, but Jack Daniel's & Coca-Cola decreased.
• Other portfolio: –33% (–2% organically), mainly due to the sale of Finlandia and Sonoma-Cutrer, but this is completely normal.

📌In practice: Since the whiskey portfolio is the main driver of revenue and profit generation, the quarter was practically stagnant. The decline in the tequila and vodka portfolios did not have much of an impact on the overall picture, and the increase in RTD showed welcome organic growth.

📅 FYE 2025 (ending April 30)

• Net sales: USD 4 billion, -5% (+1% organically).
• Operating result: USD 1.1 billion, -22% (+3% organically).
• EPS: 1.84 USD, -14% annualized.
• Gross profit: –7% (–2% organically), margin –150 basis points to 58.9%.
• SG&A cost: –10% (organically –6%).
• Continuing 23 years of annual dividend increases: USD 420 million in dividends.
• Sale of part of the company: USD 350 million from the sale of the Duckhorn stake, USD 300 million in debt repayment.
• Operating cash flow: USD 598 million (–7.6%)
• Free cash flow: USD 431 million (+2.9%) – provides a stable source for dividends and investments
• Capex: USD 167 million (–26.8%), as part of operational restraint and cost reduction
• Debt reduction, net debt/EBITDA ~1.9x – a sign of financial stability, but this is ensured by one-off items and not by their fantastic cash generation ability.

The company sold its minority stake in Duckhorn Wine Company, which generated approximately $350 million in proceeds, using the proceeds to reduce debt. Brown-Forman had previously purchased a minority stake of less than 20% in The Duckhorn Portfolio, a premium American winery, a decade earlier. Duckhorn is well known for its Napa Valley wines, particularly its Merlot and Cabernet Sauvignon. Duckhorn went public in 2021 (NYSE: NAPA), making BF.B's stake a liquid asset. The sale fits into the company's strategy to focus on premium spirits, not wine.

The company announced a lot of things regarding reducing operational costs:

• 12% staff reduction: 648 people, annual savings of 70-80 million USD
• Louisville barrel manufacturer closes: using an external supplier instead, revenue of USD 30 million is expected from the sale of the assets
• restructuring costs: ~$63 million savings
• Cutting SG&A costs: This means a reduction in advertising costs of USD 480 million, for example for Jack & Coke
• Structural transformation: appointment of new CMO and CSO

📌In practice: Overall, I think that instead of the usual whining, the company has proactively responded to market issues and has cut costs by about $150-200 million, which can be used for innovation. I'm curious to see what impact this will have in the next few quarters, but I can't really complain about the measures.

🧭 Executive commentary & outlook

Lawson E. Whiting – CEO

• "Throughout fiscal twenty twenty five, Brown Forman navigated the extremely challenging and uncertain operating environment by remaining focused on the long term, leveraging our strengths and executing our business strategies with a focus on improving our route to consumer in several markets, evolving our workforce to simplify and streamline our organization, allowing us to become more agile and efficient, and growing our portfolio of brands through sponsorships, media campaigns, innovation."
• "Putting our fiscal twenty twenty five results into the longer term view, our five year organic net sales compound annual growth rate was 6% reflective of our historic trends."
• And if you look at the Nielsen takeaway trends for the top 20 spirits brands by value for the fifty two weeks ending in April, Woodford Reserve was one of only three growing brands. This reflects the strength of Woodford Reserve, but also the exceptionally challenging environment our industry is navigating right now.”
• "New Mix continued its impressive growth in fiscal twenty five leveraging innovation to capitalize on consumer trends of flavor and convenience. The brand had another year of double digit organic net sales growth, surpassing 11 million 9 liter cases and continuing to gain market share in Mexico." Here, the CEO is referring to El Jimador tequila pre-mixed drink.
• "I'm excited to announce the launch of Jack Daniel's Tennessee Blackberry later this summer. Blackberry is a globally recognized, well established flavor trend, and naturally complements the flavor of Jack Daniel's Tennessee whiskey."
• "Turning to The United States, organic net sales decreased 2% with growth from Woodford Reserve, Old Forester and Jack Daniel's RTDs more than offset by declines from Jack Daniel's Tennessee Whiskey and Corbel California Champagne."
• "From a takeaway perspective, three month rolling value trends for total distilled spirits are down approximately 3%, reflecting the continued macroeconomic and geopolitical uncertainties negatively impacting consumer confidence and spending. The slowdown is widespread across categories and price tiers."
• "Yet the higher price tiers are continuing to gain market share, particularly in the $40 and above tier within The U.S. Whiskey category."

Overall, the more I read the Q report, the more convinced I became that the company is doing what it needs to do, pushing Jack Daniel's and El Jimador RTD drinks, launching new JD flavors, sponsoring big events like Formula 1, but they simply don't have much room to maneuver in the current market. Regarding El Jimador, it's important to remember that a significant portion of the population in the southern states is Hispanic, who are big consumers of tequila-based RTD drinks.

Next report date: 2025-08-27

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✨Other interesting facts about Brown-Forman (BF.B)✨

Everything that was left out of the previous ones, or if there is any special KPI - key performance indicator - or concept that needs to be explained, is included here.

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DBOI: DBOI stands for Depletion-Based Operating Income. DBOI is a non-GAAP measure used by Brown-Forman that projects operating income based on actual outgoing sales, rather than traditional revenue or shipments.

Barrel (cask): Whiskey or tequila is typically matured in 180–200 liter barrels (e.g. American “standard barrel”), yet industry statistics and reports refer to 9 liter units. A 9 liter “case” is the industry standard unit of measurement for sales volume, which is equal to 12 0,75 liter bottles or 9 1 liter bottles.

Maturation: Whiskey is typically aged in new or re-filled charred oak barrels, such as American white oak, while tequila is usually aged in used American whiskey or bourbon barrels, sometimes French oak. Brandy and Cognac are aged in French oak barrels, stored in cellars at high humidity, while vodka and gin are aged in steel tanks and are typically not aged.

Ital	Barrel	Storage type	Length of maturation
Whisky	Oak	Warehouse, climatic	2–30 year
Tequila	Oak (used)	Ground floor, cool	0–5 year
Rum	Oak	Tropical, warm	2–15 year
Vodka, gin	Steel tank	Warehouse	0 years (not maturing)

🥃Single malt whisky: Single malt whisky is a spirit made from malted barley at a single distillery and distilled using a copper pot still. The "single" in the name refers to the fact that it is not a blend of products from multiple distilleries, while "malt" refers to its exclusively barley-based origin, meaning it does not contain corn or wheat. Single malt is typically a complex, layered drink, and is particularly prestigious in Scotland, Japan, and Ireland.

🔸Tennessee whiskey: Tennessee whiskey is a legally protected American designation of origin that can only be made in the state of Tennessee, under strict regulations. Technically, it meets the requirements for bourbon (at least 51% corn, new charred oak barrels, minimum 2 years of aging), but in addition, the famous Lincoln County filtration process must be applied: the drink is freshly distilled and filtered through charcoal, usually maple wood, before being put into barrels. This gives Tennessee whiskey its particularly soft, smooth character. The trademark is protected by both Tennessee state law and US federal regulations, so brands such as Jack Daniel's and George Dickel can only use this name under these conditions.

🏴Scotch whisky: Scotch whisky is a strictly regulated, geographically protected drink that can only be made in Scotland. The name “Scotch” is legally protected in the EU, the UK and many other countries, under the Scotch Whisky Regulations 2009. To be considered “Scotch”, a whisky must have been aged in oak casks in a Scottish warehouse for at least 3 years, be made exclusively from water, malted barley, sometimes mixed with other grains, and yeast, and be free of artificial additives or flavourings. Single malt, blended and grain are all subject to these rules. The protection is intended to preserve quality and prevent imitations.

🌵Tequila: Tequila is a Mexican spirit with a protected origin, produced exclusively in the state of Jalisco and some neighboring regions, from the blue agave plant (Agave tequilana Weber, variety azul). The name tequila is registered as an international trademark by the Mexican government, and production is strictly controlled by the Consejo Regulador del Tequila (CRT). The product must be made from at least 51% blue agave (100% agave is labeled separately) and can only be bottled in designated areas of Mexico. The tequila trademark is protected not only domestically, but also through global trade agreements, similar to Champagne or Scotch whisky.

🔑Key Performance Indicators (KPIs)🔑

Whiskey sales rate: Since Brown-Forman (BF.B) makes a large portion of its revenue from whiskey sales, it's worth watching how that stacks up against everything else. In the long run, it's good to diversify the portfolio, which is what the company has been trying to do with its acquisitions.

Premium/super premium sales ratio: Similarly to the above, an increase in the proportion of premium products would be beneficial for the company. Unfortunately, this is not clearly disclosed by Brown-Forman (BF.B), so you will need to do quite a bit of research if you want to follow it.

RTD increase: The market for pre-mixed drinks like Jack and Coke is growing much faster, so launching such products has been very lucrative so far. This also strengthens BF.B's position, as in many cases it can also use the resources of companies like Coca-Cola.

Clearance rate: The clearance rate is a key metric in the alcohol industry, showing how much product has actually been sold to retailers or hospitality establishments by distribution partners, such as wholesalers or distributors. This reflects actual consumer sales rather than direct shipments from the manufacturer, and is much closer to end-user demand. The clearance rate is particularly important for large brands, as it helps to judge whether the drinks delivered to warehouses are actually being sold or just gathering dust on the shelves, making it a demand-based performance indicator that can be used to gauge trends and growth potential.

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Summary of Brown-Forman (BF.B)

Summary of the analysis, drawing lessons.

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Brown-Forman (BF.B) is one of the truly mature companies in the spirits market, a particularly high-quality company at a beaten-down price. Its main problem is slow growth and the relatively high headwinds that plague the alcohol market, but this is a general, sectoral problem. What is company-specific, however, is that Brown-Forman's (BF.B) portfolio is extremely concentrated, practically living off the sale of Tennessee whiskey. That's why the company alone can't really cover the alcohol market, but it is a great complement to a name like Diageo (DEO), the analysis of which can also be found here blog-on: Diageo (DEO) Stock Analysis

It is very important that the only way to generate a decent total return in the case of Brown-Forman (BF.B) and Diageo (DEO) is to trade at depressed valuations. These are not growth stocks, and while they do create value for investors in the form of dividends and share buybacks, they need to be priced low to make these types of stocks worth buying. But think about whether the spirits industry is heading down the same path as the tobacco industry, which is bad news globally, but really outstanding companies usually survive everything, even the biggest headwinds.

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Frequently Asked Questions (FAQ)

Which broker should I choose to buy shares?

There are several aspects to consider when choosing a broker - we will write a complete article about this - but I would like to highlight a few that are worth considering:

• size, reliability: The bigger a broker, the safer it is. Those with a banking background – Erste, K&H, Charles Schwab, etc. – are even better, and well-known brokers are typically more reliable.
• expenditures: Brokers operate with various costs, such as the account management fee, the portfolio fee - which is the worst cost -, the purchase/sale fee and the currency exchange cost (if USD is not deposited in the brokerage account)
• Availability of instruments: It doesn't matter which broker has which market available, or whether they add the given instrument upon request and how quickly.
• account type: cash or margin account, the latter can only be used for options. For Hungarian tax residents, having a TBSZ account is important, but citizens of other countries also have special options – such as the American 401K retirement savings account – which are either supported by the broker or not.
• surface: is one of the most underrated aspects, and it can be a real pain. Anyone who had an account with Random Capital, a now-defunct Hungarian broker, knows what it's like to work on a platform left over from the 90s. Erste's system is lousy slow, Interactive Brokers requires a flight test, and LightYear believes in simple but modern solutions.

Based on the above, I recommend the Interactive Brokers account because:

• the world's largest broker with a strong background
• a few million instruments are available on it, and shares listed on multiple markets – e.g. both the original and the ADR – of a single share are often available
• Interactive Brokers a discount broker, they have the lowest prices on the market
• you can link your Wise account to them, from which you can quickly transfer money
• Morningstar's analyses are available for free under the fundamental explorer (good for analysis)
• EVA framework data is available under fundamental explorer (useful for analysis)
• they have both cash and margin accounts, Hungarian citizens can open a TBSZ
• you can use three types of interfaces: there is a web and PC client and a phone application

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What data sources did you use to analyze stocks?

For quantitative analysis, we primarily use various stock screening sites, and for qualitative analysis, we use company reports and other analyses, such as the Substack channel, podcasts - Business Breakdowns - and similar sources.

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What matters: value or quality?

The answer is both, but quality is more important. It is much better to buy a very high-quality company at a fair price than to buy shares of a cheap but poor-quality company.

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What is the best time frame to buy shares?

The minimum is 5 years, but you should consider the time horizon from 10 years to infinity. Our approach is typical "buy and hold", the emphasis is on selection, then we try to hold the shares for as long as possible, which requires conviction. We rarely sell, mainly if we feel that the thesis we set up has been broken or if we have made a mistake.

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Which is better: individual stocks or ETFs?

There is no truth to this question. It is very easy to track the market with an S&P 500 ETF, and it is worth doing for beginners, because it can be done with a little knowledge and practice. Analyzing individual stocks requires 30-50 hours per company, so we do not recommend it to those who do not like it.

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Do you hold the shares in a TBSZ account?

Yes. As a Hungarian citizen, the tax advantage over a traditional cash-based account is so great that it is worth opening a new TBSZ account every year, and then the withdrawal of money is also solved (but if you do not want to withdraw anything from it, you can extend these)

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Why don't you specify a specific purchase price for the shares in your analyses?

We do not set purchase prices for several reasons: firstly, because it is impossible to calculate the exact value of a company. Secondly, because we cannot give investment advice, these analyses are only made to support the decisions of others. That is why we use fair value estimates from other services, as well as a certain margin of safety. Ultimately, your conviction will decide how much a company is worth to you.

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Which stock price will rise or fall?

Nobody knows, because there is no magic bullet that can tell. It can be based on mathematical probabilities. The prices of high-quality companies that have growing sales, are able to reinvest the cash generated into the business, and have high intrinsic value creation tend to rise in the long term. But in the short term – a few years – the market and the price can move anywhere.

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