2016 Brown-Forman Investor Day Jay Koval, VP Investor & Community Relations

Transcription

1 2016 Brown-Forman Investor Day Jay Koval, VP Investor & Community Relations

2 Forward-Looking Statements This press release contains statements, estimates, and projections that are forward-looking statements as defined under U.S. federal securities laws. Words such as aim, anticipate, aspire, believe, continue, could, envision, estimate, expect, expectation, intend, may, plan, potential, project, pursue, see, seek, should, will, and similar words identify forward-looking statements, which speak only as of the date we make them. 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. By their nature, forward-looking statements involve risks, uncertainties and other factors (many beyond our control) that could cause our actual results to differ materially from our historical experience or from our current expectations or projections. These risks and uncertainties include, but are not limited to: Unfavorable global or regional economic conditions, and related low consumer confidence, high unemployment, weak credit or capital markets, budget deficits, burdensome government debt, austerity measures, higher interest rates, higher taxes, political instability, higher inflation, deflation, lower returns on pension assets, or lower discount rates for pension obligations Risks associated with being a U.S.-based company with global operations, including commercial, political and financial risks; local labor policies and conditions; protectionist trade policies or economic or trade sanctions; compliance with local trade practices and other regulations, including anti-corruption laws; terrorism; and health pandemics Fluctuations in foreign currency exchange rates, particularly a stronger U.S. dollar Changes in laws, regulations, or policies - especially those that affect the production, importation, marketing, labeling, pricing, distribution, sale, or consumption of our beverage alcohol products Tax rate changes (including excise, sales, VAT, tariffs, duties, corporate, individual income, dividends, capital gains) or changes in related reserves, changes in tax rules (for example, LIFO, foreign income deferral, U.S. manufacturing and other deductions) or accounting standards, and the unpredictability and suddenness with which they can occur Dependence upon the continued growth of the Jack Daniel s family of brands Changes in consumer preferences, consumption or purchase patterns - particularly away from larger producers in favor of smaller distilleries or local producers, or away from brown spirits, our premium products, or spirits generally, and our ability to anticipate or react to them; bar, restaurant, travel or other on-premise declines; shifts in demographic trends; unfavorable consumer reaction to new products, line extensions, package changes, product reformulations, or other product innovation Decline in the social acceptability of beverage alcohol products in significant markets Production facility, aging warehouse or supply chain disruption Imprecision in supply/demand forecasting Higher costs, lower quality or unavailability of energy, water, raw materials, product ingredients, labor or finished goods Route-to-consumer changes that affect the timing of our sales, temporarily disrupt the marketing or sale of our products, or result in higher implementation-related or fixed costs Inventory fluctuations in our products by distributors, wholesalers, or retailers Competitors consolidation or other competitive activities, such as pricing actions (including price reductions, promotions, discounting, couponing or free goods), marketing, category expansion, product introductions, or entry or expansion in our geographic markets or distribution networks Risks associated with acquisitions, dispositions, business partnerships or investments - such as acquisition integration, or termination difficulties or costs, or impairment in recorded value Inadequate protection of our intellectual property rights Product recalls or other product liability claims; product counterfeiting, tampering, contamination, or product quality issues Significant legal disputes and proceedings; government investigations (particularly of industry or company business, trade or marketing practices) Failure or breach of key information technology systems Negative publicity related to our company, brands, marketing, personnel, operations, business performance or prospects Failure to attract or retain key executive or employee talent Our status as a family controlled company under New York Stock Exchange rules For further information on these & other risks, please refer to the Risk Factors section of our annual report on Form 10-K and quarterly reports on Form 10-Q filed with the SEC. 2

3 Investor Day Agenda 1:00PM Jack Daniel s Experience Jack Daniel s Team Members 2:00PM Presentations 2:00-2:10PM Paul Varga Chairman and Chief Executive Officer 2:10-2:40PM Mark McCallum EVP, President, Jack Daniel s Brands 2:40-3:00PM Lawson Whiting EVP, Chief Brands and Strategy Officer 3:00PM Break 3:15PM Presentations 3:15-3:35PM Jane Morreau EVP, Chief Financial Officer 3:35-3:50PM Geo. Garvin Brown IV Chairman, Board of Directors 3:50-4:00PM Paul Varga Chairman and Chief Executive Officer 4:00PM Q&A Session 5:00PM Cocktails, Whiskey Tastings & Jack Daniel s Experience

4 2016 Brown-Forman Investor Day Paul Varga, Chairman & CEO

5 The Jack Daniel s Growth Opportunity Portfolio Growth & Development ShareholderFriendly Capital Allocation

6 Brown-Forman A Leading Global Spirits Company Jack Daniel s - A Global Growth Opportunity Premium, Focused Portfolio Track Record of Brand Building Financial Attractiveness Shareholder- Friendly Capital Allocation The Brown Family and our Long- Term View 6

7 Why American Whiskey? 7

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9 The Jack Daniel s Growth Opportunity Mark McCallum, EVP, President Jack Daniel s Brands

10 30 Year CAGR for Jack Daniel s FOB of 5% JD FoB 10yr CAGR = 3% JDTW 10yr CAGR = 3% JD FoB 10yr CAGR = 5% JDTW 10yr CAGR = 5% JD FoB 10yr CAGR = 6% JDTW 10yr CAGR = 4% 20 m 18 m 16 m 14 m 14 brands 8 brands +240% +288% 12 m 10 m 15 brands 8 m 6 m 3 brands 2 brands +54% 4 m 2 m m 2 brands Source: IWSR 2015 Volume Full Strength Portfolio JD FoB Johnny Walker FoB Jim Beam FoB 10

11 Confident In Future Opportunities E arth B irth 1.5 billion new middle class consumers globally by 2025* G irth W orth *Source: OECD 11

12 Growth Through Evolved Global Footprint 1M+ United States United Kingdom Source: IWSR, 9L Depletions

13 Growth Through Evolved Global Footprint 1M+ 501K 1M Germany France Australia Global Travel Retail Source: IWSR, 9L Depletions

14 Growth Through Evolved Global Footprint 1M+ 501K 1M 201K 500K Canada Poland Mexico Japan Brazil Source: IWSR, 9L Depletions

15 Growth Through Evolved Global Footprint 1M+ 501K 1M 201K 500K 50K 200K South Africa Indonesia Belgium Emerging Africa Netherlands Switzerland Czech Republic Source: IWSR, 9L Depletions 2015 Russia Bulgaria Austria Romania Turkey Ukraine U.A.E. Greece China India Chile Spain Italy Philippines 15

16 Thoughtful Innovation

17 Continued Thoughtful Innovation 17

18 We Predict Continued Opportunity For Growth JD FoB 10yr CAGR = 3% JDTW 10yr CAGR = 3% JD FoB 10yr CAGR = 5% JDTW 10yr CAGR = 5% JD FoB 10yr CAGR = 6% JDTW 10yr CAGR = 4% JD FoB 10yr CAGR = see below 10yr CAGR +3.4% 10yr CAGR +6.3% 5% 4% 3% 10yr CAGR +1.6% 10yr CAGR +1.4% JD FoB Scenario 1 Scenario 2 Scenario 3 Source: IWSR and Internal Scenarios; 9L depletions; JD FoB adjusted for RTD equivalents 18

19 What Makes Jack Special ICONIC NAME AND PACKAGE GLOBAL CONSUMER CONNECTION AND BRAND PASSION A SPECIAL PRODUCT TRADEMARK GIRTH REAL STORIES FOCUSED AND DEDICATED RTC DISTINCT VOICE EXCELLENT BUSINESS MODEL 19

20 Jack Daniel s His Way Video

21 Jack Daniel s Our Town Video

22 We Send Them All Over! 22

23 Portfolio Growth & Development Lawson Whiting, EVP, Chief Brands and Strategy Officer, B-F Brands

24 Disciplined Approach to Brand Value Creation Active Portfolio Management Premium Spirit Focus History of Excellent Brand Building Seeding For The Future 24

25 10+ Years of Active Portfolio Management - Dispositions 25

26 10+ Years of Active Portfolio Management 26

27 Focused, Premium Portfolio $40 $30 $20 $ Source: ISWR

28 History of Excellent Brand Building 28

29 Woodford Reserve Video 29

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31 Woodford Reserve Net Sales 21% 29% 26% 32% 27% 27% CAGR 2012 to Und Net Sales YOY Growth Source: Company information. See appendix for additional details on non-gaap disclosures. 31

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33 Old Forester Net Sales 52% 39% 20% 22% CAGR 2012 to % -2% Und Net Sales YOY Growth Source: Company Information. See appendix for additional details on non-gaap disclosures. 33

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35 Herradura Tequila Net Sales 21% 9% 15% 16% 12% CAGR 2012 to % Und Net Sales YOY Growth Source: Company Information. See appendix for additional details on non-gaap disclosures. 35

36 El Jimador Tequila Net Sales 8% 7% 4% 4% CAGR 2012 to % 1% Und Net Sales YOY Growth Source: Company Information. See appendix for additional details on non-gaap disclosures. 36

37 9L Depletions Creating the Next Woodford-Like Growth Drivers 500k 3 year CAGR 26% 400k 5 year CAGR 25% 300k 10 year CAGR 19% 200k 100k Source: WR FOB Internal Data; 9L Depletions k F97 FY97 F98 FY98 F99 FY99 F00 FY00 F01 FY01 F02 FY02 F03 FY03 F04 FY04 F05 FY05 FY06 F06 FY07 F07 FY08 F08 FY09 F09 FY10 F10 FY11 F11 FY12 F12 FY13 F13 FY14 F14FY15 F15FY16 F16 37

38 Seeding for the Future 38

39 Seeding for the Future 39

40 Seeding for the Future 40

41 Disciplined Approach to Brand Value Creation Active Portfolio Management Spirit Category Focus History of Excellent Brand Building Seeding For The Future 41

42 Excellent Business Enables Shareholder-Friendly Capital Allocation Jane Morreau, EVP, Chief Financial Officer

43 An Excellent Business for Shareholders Consistent, Balanced Growth Industry- Leading Margins Capital Efficiency Shareholder- Friendly Capital Allocation 43

44 Consistent Revenue Growth Brown-Forman CAGRs 5 Year CAGR vs. Benchmarks 3% +7% Underlying 3% 5% 6% 5% 4% +4% Reported 4% 4% 4% 2% 35-Year 25-Year 10-Year 5-Year S&P500 Staples Comp Set B-F 44

45 Balanced Geographic Growth Drivers 8% US Developed Emerging +7% 6% 2% 4% 2% 2% 3% 0% 5 Year CAGR Source: Factset and company information. The competitive set is a weighted average based upon the last five fiscal years sales growth, and includes Diageo, Pernod, Campari, and Remy. See appendix for additional details on non-gaap disclosures. 45

46 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 ROIC Strong and Improved Operating Margins Brown-Forman Reported Operating Margin ( ) Financial Attractiveness 30% 35% 30% 15% CONSUMER STAPLES 25% S&P 500 COMPETITIVE SET 0% 0% 20% Operating Margin 40% Source: Factset and company information. The competitive set is a weighted average based upon the last five fiscal years sales growth, and includes Diageo, Pernod, Campari, and Remy. See appendix for additional details on non-gaap disclosures. ROIC is defined as the sum of net income (excluding the gain on the sale of Southern Comfort and Tuaca) and after-tax interest expense, divided by average invested capital. Invested capital equals assets less liabilities, excluding interest-bearing debt. 46

47 Consistent Investments Behind Brands and People Underlying A&P and SG&A Growth 6% 5% A&P SG&A 5 YEAR 5 Yr CAGR Source: Factset and company information. The competitive set is a weighted average based upon the last five fiscal years sales growth, and includes Diageo, Pernod, Campari, and Remy. See appendix for additional details on non-gaap disclosures. 47

48 Consistent Long-Term Operating Income Growth Brown-Forman CAGRs 5 Year CAGR vs. Benchmarks 5% +10% Underlying 5% 6% 7% 7% 5% +5% Reported 4% 5% 2% 2% 35-Year 25-Year 10-Year 5-Year S&P500 Staples Comp Set B-F Source: Factset and company information. The competitive set is a weighted average based upon the last five fiscal years sales growth, and includes Diageo, Pernod, Campari, and Remy. See appendix for additional details on non-gaap disclosures. 48

49 Generating Significant Cash Over the Past Decade Share Repurchase = $2.4B $5.6B Special Dividends = $1.2B $8.1B Regular Dividends = $2.0B Acquisitions = $1.0B $2.5B Capex & Working Capital = $1.5B Sources of Cash Uses of Cash Source: Company information (FY07 FY16) 49

50 Reinvesting To Support Future Growth Million $s $3,000 Gross PP&E W/C $2,000 +$376 +$867 $1,000 Free cash flow yield should improve as capex returns toward historic levels after FY18 $- FY06 FY11 FY16 Source: Company information 50

51 Shareholder-Friendly Capital Allocation Average Annual Yield of 4.3% Over Last Decade; 43% Return of Capital Million $s $1,500 Return % of Mkt Cap 10% $1,250 $1,000 7% 7% 7% $750 $500 3% 4% 4% 3% 4% 5% $250 2% 1% $0 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 0% Dividends Special Dividends & Distributons Share Repurchases Annual Yield Source: Factset and company information 51

52 Driving Top-Tier, Long-Term Returns for Shareholders $350 $300 $250 Brown-Forman, $319 Consumer Staples, $290 Competitive Set, $245 $200 S&P500, $195 $150 $100 $50 $0 Source: Factset, as of April 30, 2016, in local currency, assuming dividends reinvested. Note the Competitive set is a weighted average based upon each competitor s LTM sales.

53 2025 Aspirations Expect mid single-digit growth from Jack Daniel s FoB and even faster growth from other brands Expect growth outside of the U.S. to outpace U.S. growth -Emerging Markets approaching 30% of total revenues -Route To Consumer - continued investment opportunity Strong margins and consistently high ROI High single-digit growth in Operating Income and expanding free cash flow margins Continued Shareholder-Friendly Capital Allocation & top-tier TSR 53

54 2025 Aspirations 54

55 Family Perspective Geo. Garvin Brown IV Chairman of the Board Remarks only.

56 Closing Comments Paul Varga, Chairman & CEO

57 Brown-Forman A Leading Global Spirits Company Jack Daniel s - A Global Growth Opportunity Premium, Focused Portfolio Track Record of Brand Building Financial Attractiveness Shareholder- Friendly Capital Allocation The Brown Family and our Long- Term View 57

58 10 Year and 20 Year Total Shareholder Return CAGR 10 Year TSR (CAGR) 20 Year TSR (CAGR) BFB 12% BFB 14% Consumer Staples 11% Pernod 12% Diageo Campari Comp Set Remy 11% 10% 9% 8% Comp Set Diageo Consumer Staples 11% 10% 10% S&P 500 7% Remy 9% Pernod 7% S&P 500 8% Source: Factset, as of April 30, 2016, in local currency, assuming dividends reinvested. Note the Competitive set is a weighted average based upon each competitor s LTM sales. 58

59 2016 Brown-Forman Investor Day