Brown-Forman Analyst Day 75 th Anniversary of the Repeal of Prohibition. December 5, 2008

Transcription

1 Brown-Forman Analyst Day 75 th Anniversary of the Repeal of Prohibition December 5, 2008

2 Agenda Welcome Strategy and Performance Opportunities and Resource Allocation Route-to-Consumer Strategy Building Strong Consumer Franchises Wrap-Up Ben Marmor AVP, Director of Investor Relations Paul Varga Chairman & Chief Executive Officer Don Berg EVP, Chief Financial Officer Jim Bareuther EVP, Chief Operating Officer Mark McCallum EVP, Chief Brands Officer Paul Varga Chairman & Chief Executive Officer

3 Our Mission Enrich the experience of life, in our way, by responsibly building beverage alcohol brands that thrive and endure for generations.

4 Forward-Looking Statements This presentation contains statements, estimates, or projections that constitute "forward-looking statements" as defined under U.S. federal securities laws. Generally, the words "expect," "believe," "intend," "estimate," "will," "anticipate," and "project," and similar expressions identify a forwardlooking statement, which speaks only as of the date the statement is made. Except as required by law, we do not intend to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. We believe that the expectations and assumptions with respect to our forward-looking statements are reasonable. But by their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors that in some cases are out of our control. These factors could cause our actual results to differ materially from Brown- Forman's historical experience or our present expectations or projections, including but not limited to the risks listed below and the risk factors described in the company's Annual Report on Form 10K for its fiscal year ended April 30, 2008, and the company's Quarterly Reports on Form 10Q and Current Reports on Form 8-K filed since then. Limitations and restrictions on distribution marketing our products, including advertising and promotion, from stricter governmental policies in the U. S. or our other major markets Changes in consumer preferences, societal attitudes or cultural trends that results in the reduced consumption of our premium spirits brands or our ready-to-drink products Changes in distribution or agency arrangements in major markets that temporarily disrupt our business, reduce our sales, limit our ability to market or sell our products, or entail exit costs Adverse impacts as a consequence of our acquisitions, acquisition strategies, integration of acquired businesses, or conforming them to the company s trade practice standards, financial controls environment and U.S. public company requirements

5 Strategy and Performance Paul Varga Chairman & Chief Executive Officer

6 The B-F Arrow

7 Be the Best Brand Builder in the Industry, Period! SUSTAINABLE GROWTH Gross Profit Operating Income Earnings Per Share VALUE CREATION Total Shareholder Return INDEPENDENCE The advantage of our long-term view perpetuated through family control Our End Game is Ensuring that the Game Never Ends

8 Top 10 U.S. Suppliers 1950s to Today 1950 s Top U.S. Suppliers 1. Seagram s 2. Schenley 3. National 4. Hiram Walker 5. Publicker 6. American 7. Pack & Tilford 8. Glenmore 9. BROWN-FORMAN 1970 s Top U.S. Suppliers 1. Seagram s 2. National 3. Hiram Walker 4. Heublein 5. Schenley 6. BROWN-FORMAN 7. Renfield 8. Bacardi 9. Fleischmann Today s Top U.S. Suppliers 1. Diageo 2. Beam Global W & S 3. Bacardi USA 4. Pernod Ricard USA 5. BROWN-FORMAN 6. Constellation Brands 7. Moet Hennessy USA 8. Heaven Hill 9. Skyy Spirits USA 10. Sidney Frank

9 Strong, Consistent Earnings from Consistent Investment 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 35 yr CAGR since yr CAGR since yr CAGR since yr CAGR since yr CAGR since yr CAGR since 2005 Gross Profit 9% 7% 8% 9% 13% 14% Advertising 9% 7% 8% 9% 13% 12% SG&A 9% 7% 8% 9% 12% 12% Operating Inc 9% 6% 8% 10% 15% 15% EPS 12% 9% 10% 12% 17% 9% Results as of Fiscal Restated growth for continuing operations only

10 Measuring Performance Operating Income Growth 30% 25% 20% 15% 10% 5% 0% -5% F06 F07 F08 1H F09 Reported Underlying

11 Healthy Balance Sheet

12 Cumulative Cash to Shareholders Since FY1998 $ Millions $2,250 $2,000 $1,750 $1,500 $1,250 $1,000 $750 $500 $250 $0 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 YTD Dividends Repurchases Other

13 Brown-Forman Total Shareholder Return 14% 12% 10% 8% 6% 4% 2% 0% Compound Annual Growth in Total Shareholder Return (As of November, assuming reinvested dividends) -2% 20-year return 15-year return 10-year return 5-year return Brown-Forman 12% 13% 6% 6% S&P 500 Index 8% 6% -1% -1% Source: Bloomberg - Total return over the holding period is calculated assuming reinvestment of all realized dividends.

14 Brown-Forman Total Shareholder Return 20% Compound Annual Growth in Total Shareholder Return (As of November, assuming reinvested dividends) 10% 0% -10% -20% -30% -40% Brown- Forman S&P 500 Index 20-year return 15-year return 10-year return 5-year return 1-year return 12% 13% 6% 6% -22% 8% 6% -1% -1% -37% Source: Bloomberg - Total return over the holding period is calculated assuming reinvestment of all realized dividends.

15 11/1/93 11/1/94 11/1/95 11/1/96 11/1/97 11/1/98 11/1/99 11/1/00 11/1/01 11/1/02 11/1/03 11/1/04 11/1/05 11/1/06 11/1/07 11/1/08 Attractive Valuation 30 BF.B Trailing PE Ratio Year Average PE ~20x 15 10

16 Opportunities and Resource Allocation Don Berg EVP, Chief Financial Officer

17 The Opportunities Ahead of Us 100% B 9L Cases B-F B 9L Cases 75% 50% 25% Top 25 All Other B B 0% Brown-Forman Market Cap

18 How We Think About Opportunities and Resource Allocation Long-term investment horizon Managing risks to produce excellent rewards Many medium bets vs. few large bets

19 Portfolio Strategy Current Brand Opportunities BMUs New Brand Opportunities Multiregional vs. local brands Market Opportunities

20 Resource Allocation is Consistent, Thoughtful, Investment 70% 60% 50% 40% 30% 20% 10% 0% FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 Reported Figures Spending as % Of Gross Profit

21 Resource Allocation is More Than A&P

22 % of Brand Profit Growth Resource Allocation is Like an Investment Portfolio Growth & Development Growth & Income Review Brand Profit Income

23 % of Brand Profit Growth Resource Allocation is Like an Investment Portfolio Growth & Development Growth & Income JD Russia JD Romania JD France JD UK JD China JD US JD Japan Review Brand Profit Income

24 B-F Continues to Invest in Markets Around the World

25 B-F Continues to Invest in Markets Around the World

26 Example of Market Assessment Mexico India 27M Target Population 4M 16M cases Addressable Market 6M cases 66.4 (moderately free) 08 Economic Freedom Index (closer to 100 is more free) 54.2 (mostly unfree) S-T Investment Horizon L-T

27 Market Climate Market size and growth Market Assessment: Next 3-5 Years MEXICO INDIA

28 Market Climate Market size and growth Market Assessment: Long-Term MEXICO INDIA

29 Brown-Forman s BRIC P R I M A R Y F O C U S B M U S oland ussia ndia exico rgentina omania oung adults amilies of brands n and off premise hina kraine outhern Europe razil en LDA to 29 globally S. Hispanic outh Africa

30 Route-to-Consumer Strategy Jim Bareuther EVP, Chief Operating Officer

31 International Growth Net Sales 100% 80% 60% 93% 78% 48% Domestic 40% 20% 0% 52% 22% 7% FY1988 FY1998 FY2008 International

32 Route-to-Consumer Strategy Forward integration in selected areas and activities Leverage multi-market partnerships and alliances where advantageous Retain flexibility to adapt to changing circumstances and employ various RTC models Influence. Innovation. Adaptability.

33 B-F Strengths Market Climate Market size and growth Market Assessment Approach Prioritization Considerations Is it worth our while? When is it a short-term or long-term opportunity? What is our plan for growth?

34 Poland Key Success Factors Market Size & Growth High per capita vodka consumption Premiumization and import trends Market Climate EU accession Local economy development with low tax rates B-F Strengths People Route-to-Consumer Portfolio Focus on Execution 20

35 International Route-to-Consumer Depth of Influence Key Activity General Management Marketing Direction Local Brand Management Brand Management (Execution) Sales Direction Field Brand Activation Trade Marketing Key Account Management Field Sales On Field Sales Off Wholesaler Activities Logistics/Fulfillment B-F Driving B-F Influence Distributor Wholesaler

36 International Route-to-Consumer Distribution Ownership Spectrum Agency Commissionaire Cost Sharing Joint Venture Owned Full distributor margins paid on sale Limited influence of sales process Commission (margins) paid for select services Some influence of sales process No margin paid, shared cost of sales force Significant control of sales process Share in the profits and expenses Shared control of sales process B-F captures full margin and incurs all the expenses Complete control of sales process 1998 (% of Business) Excluding U.S (% of Business) Excluding U.S. Commissionaire Agency Agency Cost Sharing Owned Joint Venture Owned Hybrid Ag/Own Joint Venture

37 International Route-to-Consumer Agency Commissionaire Cost Sharing Joint Venture Owned

38 Route-to-Consumer Variety Ukraine Hungary Mexico Australia

39 International Expansion # of Countries with +50,000 cases #of Countries with +100,000 cases

40

41 Key Takeaways Significant global opportunity exists Utilize a range of business models Influence critical drivers of success Establish global infrastructure in a selective and consistent manner 20

42 Building Strong Consumer Franchises Mark McCallum EVP, Chief Brands Officer

43

44 The B-F Way Ideas Execution Insights

45 Changing Consumer Behavior

46 Channel Differences ON OFF Number of brands Medium High Consumer involvement with package Low High Importance of Price Low High Total purchase Low High Promotion type Interactive Static

47 The Jack Daniel s Portfolio

48 Paint it Black

49 New Packages

50 Repeal of Prohibition

51 US Result Volume % Jack Daniel s Total Distilled Spirits 0.0 3/10/07 5/5/07 6/30/07 8/25/07 10/20/07 12/15/07 2/9/08 4/5/08 5/31/08 7/26/08 9/20/08 11/15/08 (3 months rolling) Source: Nielsen

52 US Result $ Value % Jack Daniel s Total Distilled Spirits 0.0 3/10/07 5/5/07 6/30/07 8/25/07 10/20/07 12/15/07 2/9/08 4/5/08 5/31/08 7/26/08 9/20/08 11/15/08 (3 months rolling) Source: Nielsen

53 New Package Old New

54 Sonoma-Cutrer

55 The Fastest Growing Global Spirit Brand?* *Source: the Spirits Business, March 2008, CAGR

56 Packaging Innovation

57 Finlandia Shelf Presence

58 9L Cases (000) Finlandia Vodka Global Volumes 3,000 2,800 2,600 2,400 2,200 2,000 1,800 1,600 1,400 1,200 May-03 May-04 May-05 May-06 May-07 May-08

59 el Jimador Innovation Old: 51 % agave New: 100 % agave

60 el Jimador US, Rolling 52 Weeks (ACNielsen) 16% 14% 12% 13.8% el Jimador % Chg PY 10% 8% 6% 4% 5.5% Tequila % Chg PY 2% 0% 12/15/07 02/09/08 04/05/08 05/31/08 07/26/08 09/20/08 11/15/08

61 The B-F Way Ideas Execution Insights

62 Wrap-Up Paul Varga Chairman & Chief Executive Officer

63 Brand Building (amounts in 000s of depletions) Acquisitions Year Acquired Initial Volume TTM OCT 08 Volume Jack Daniels ,500 Southern Comfort ,650 2,400 Fetzer Wines ,900 2,850 Tuaca Sonoma-Cutrer Finlandia ,600 2,900 New Products Year Launched Gentleman Jack Bonterra JD & Cola ,150 Woodford Reserve

64 Herradura

65 Brown-Forman Total Shareholder Return 14% 12% 10% 8% 6% 4% 2% 0% Compound Annual Growth in Total Shareholder Return (As of November, assuming reinvested dividends) -2% 20-year return 15-year return 10-year return 5-year return Brown-Forman 12% 13% 6% 6% S&P 500 Index 8% 6% -1% -1% Source: Bloomberg - Total return over the holding period is calculated assuming reinvestment of all realized dividends.

66 Risk vs. Reward Managing Risks Knowing the Business Consistency of Investment Diversification Conservative Debt Strong Credit Rating Long-Term Perspective Producing Excellent Rewards Build Great Brands Superior Growth & Returns Strong, Consistent Earnings and Cash Flow Investment Flexibility Company Independence

67 Analyst Day 75 th Anniversary of the Repeal of Prohibition