Brown-Forman Corporation (BF.B - Free Report) has inked a deal with Sazerac Company to sell Early Times, Canadian Mist and Collingwood brands, and the Canadian Mist production assets. The transaction is anticipated to be concluded by the second half of this summer. Further details of the deal remain under covers. This move is in sync with the company’s strategy to improve focus on its premium brands.
With the sale, Brown-Forman will officially exit the Canadian whiskey business, which was acquired in 1971. This marks the company’s second partnership with Sazerac. In 2016, the New Orleans-based company sold Southern Comfort and Tuaca to Sazerac.
Per sources, the addition of Canadian Mist to Sazerac’s portfolio is likely to help expand its presence in the whiskey category. Prior to this, the company collaborated with Diageo (DEO - Free Report) to buy Canadian whiskeys — Seagram’s VO, VO Gold, Seagram’s 5 Star and Seagram’s 83.
Coming back to Brown-Forman, the company remains focused on streamlining its portfolio by exiting underperforming brands. In this regard, its Jack Daniel's Tennessee Whiskey has been the key contributor to growth in the United States. Encouragingly, management has increased investments toward broadening the Jack Daniel’s family of brands and expanding the fast-growing premium spirits categories.
Further, the company is on track with accelerating growth of two fast-growing spirit categories, bourbon and tequila. The Woodford Reserve and the Old Forester trademarks are mainly driving growth in the bourbon category in the United States. Further, the tequila portfolio in the United States is gaining from strong performance for the Herradura and the el Jimador brands. Additionally, it is witnessing double-digit gains in underlying net sales in aggregate for Woodford Reserve, Old Forester, Jack Daniel’s RTDs, Herradura and el Jimador in the United States.
However, the company, which shares space with Constellation Brands (STZ - Free Report) and Molson Coors (TAP - Free Report) , is reeling under the impacts of the coronavirus pandemic. The outbreak led to nationwide lockdowns, stay-at-home orders and shutdown of bars and restaurants across major markets, which affected the on-premise channel that represents 20% of its global business. Hence, the company did not provide guidance for fiscal 2021.
All said, the company’s initiatives to focus on core brands by exiting the underperforming businesses is likely to add momentum to this Zacks Rank #3 (Hold) stock in the near term. We note that shares of this company have gained 13.6% in the past three months compared with the industry’s growth of 22.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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