Aiming to strengthen its organizational focus and making optimum use of its resources in the huge Asia Pacific (APAC) region, Brown-Forman Corporation (BF.B) has decided to split the operations of this region into two parts. Beginning Nov 1, 2013, the company’s Asia Pacific region will be operational as Australia, New Zealand, and Southeast Asia region (ANZSEA) and the North Asia region (NA).
As part of the restructuring efforts, the company has appointed Michael McShane as the managing director, ANZSEA and Trevor Smith as managing director, NA. McShane will spearhead operations from Sydney, while Smith from Hong Kong.
Prior to this, McShane served as senior vice president, managing director, Asia Pacific, stationed in Hong Kong. He has been associated with the company for some time and possesses considerable experience in Asian operations. Over this term with Brown-Forman, he has occupied various positions, including managing director, North Asia, and managing director, Australia. He has also presided as the chairman of the Distilled Spirits Industry Council of Australia and continues to be an active member in industry meets across the Asia Pacific region.
On the other hand, the new NA managing director, Smith, previously worked as vice president, director, finance, Asia Pacific, based in Hong Kong. He also served as a significant contributor to the APAC leadership team. During his tenure at Brown-Forman, Smith has occupied numerous leadership positions, including director of Internal Audit.
Additionally, the company stated that following the reformation, Marshall Farrer, who is currently the managing director of Australia, New Zealand, will go back to the company’s headquarters in Louisville, Ky. Farrer has successfully led the company for four years at its second largest market measured on the basis of net sales.
Brown-Forman, which competes with Diageo plc (DEO) is one of the leading producers and distributors of premium alcoholic beverages in the world and commands a strong portfolio of globally-recognized brands. The company’s portfolio consists of more than 25 premium brands, including Jack Daniel’s –the flagship spirits brand – followed by Southern Comfort liqueur, Canadian Mist whiskey, Finlandia vodka as well as Fetzer and Korbel wine brands.
We remain impressed with the company’s pricing strategy, product innovation, and penetration into the emerging markets to boost its operational performance and bolster its well-established position in the market. We believe Brown-Forman’s consistent focus on developing its premium Jack Daniel’s brand through innovation and packaging changes has paid off, making it a thriving company.
Apart from expanding the market share of its flagship Jack Daniel’s in developed and emerging markets, the company seeks to expand the sphere of its other brands, such as Gentleman Jack, Jack Daniel's Single Barrel and Jack Daniel's ready-to-drink within the Jack Daniel’s brand.
However, disappointing fiscal first-quarter 2014 earnings results on the back of higher input costs and increase in operating expenses have hurt investor sentiment. Therefore, Brown-Forman currently holds a Zacks Rank #4 (Sell).
On a positive note, however, the company reaffirmed its fiscal-2014 outlook, still projecting earnings in the range of $2.80–$3.00 per share, a 9%–11% increase in operating income and a high-single-digit rise in sales.
Other stocks worth considering in the alcoholic beverage industry are Constellation Brands Inc. (STZ) and Boston Beer Co. Inc. (SAM). Constellation Brands holds a Zacks Rank #1 (Strong Buy) while Boston Beer has a Zacks Rank #2 (Buy).
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