American Spirit Global Opportunity Barclay s Back-to-School Consumer Conference Jane Morreau EVP and CFO September 4, 2014
Forward-Looking Statements This presentation 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, will continue, 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 other factors include, but are not limited to: Unfavorable global or regional economic conditions, and related low consumer confidence, high unemployment, weak credit or capital markets, sovereign debt defaults, sequestrations, austerity measures, higher interest rates, 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 Changes in laws, regulations or policies - especially those that affect the production, importation, marketing, 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 (e.g., 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 brown spirits, our premium products, or spirits generally, and our ability to anticipate and react to them; bar, restaurant, travel or other on-premise declines; 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, input materials, 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 Insufficient protection of our intellectual property rights Product recalls or other product liability claims; product counterfeiting, tampering, 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 Our status as a family controlled company under New York Stock Exchange rules Business disruption, decline or costs related to organizational changes, reductions in workforce or other cost-cutting measures, or our failure to attract or retain key executive or employee talent 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
Leading Portfolio of Premium Spirits Brands
Consistent Long-Term Performance 10% 8% 6% 4% 2% 0% 35-Year since 1979 10-Year since 2004 5-Year since 2009 Ending April 30, 2014 Net Sales 6% 7% 4% Gross Profit 7% 7% 6% Operating Income 7% 10% 8% As reported (excluding Lenox); Not adjusted for the sale of the Hopland based wine brands. Source: Company Information 35-Year since 1979 10-Year since 2004 5-Year since 2009
refocusing on our spirits heritage while diversifying our business drivers Multi-Industry U.S. centric Declining Core Category A Decade of Transformation 2004 2014 Pure-play, premium spirits portfolio Global Rapidly Growing Core Category Higher sustainable growth Lower cyclicality Higher margin Higher capital efficiency Superior cash generation Premium Multiple
A Return to Brown-Forman s roots as a Pure-play Premium Spirits Company Conglomerate 2004 $2.6 B Pure-play spirits portfolio 2014 $3.9 B 22% 4% 14% 64% 96% Spirits Wine Consumer Durables Spirits Wine Source: Company Data - As of FY14, Sonoma Cutrer remains Brown-Forman s only non-spirits brands and the company distributes Korbel
(Retail Sales Value $B) (Retail Sales Value $B) Premiumization Provides Opportunity for Global Growth % Premium & Above $120 Developed Markets $80 +7% $40 +3% $0 2003 2005 2007 2009 2011 2013 $200 $150 Emerging Markets +14% 0 25 50 75 100 $100 $50 +10% $0 2003 2005 2007 2009 2011 2013 Premium and Above Standard and Below Source: IWSR 2013 Note: Developed markets include US, Canada, UK, Western Europe & Central Europe, Australia, New Zealand and Japan (and each country s duty free channel) 7
Diversifying Brown-Forman's Geographic Drivers 2004 Sales 2014 Sales Non-US 36% US 64% Non-US 59% US 41% Source: Company Information
Over the past 10 years, we have continued to increase route-to-consumer influence in key markets Share of Non-US Net Sales 2004 2014 78% 49% 51% 22% "Controlled" RTC Arms-length Source: Company Information
Suntory buys Beam Woodford Distillery Expansion Underway 600,000 visit Bourbon Trail More barrels of whiskey in Kentucky than people Jack Daniel s 86 th Most Valuable Brand
Well-positioned to benefit from Whiskey Resurgence 160 140 120 100 80 60 40 20 American Whiskey Global Volumes The Golden Age The Dark Ages A Return to Growth 1952 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2009 2010 2011 2012 2013 Whiskey Non-Whiskey Source: Beverage Information Group Handbooks, DISCUS MSDB (9L cases in millions)
Traditional Heritage Quality Acquired Taste Broad Price Spectrum Global Modern Stylish Mixability/Variety Flavored Line Extensions Ready to Drink Regional
Traditional Heritage Quality Acquired Taste Broad Price Spectrum Global Modern Stylish Mixability/Variety Flavored Line Extensions Ready to Drink Regional
Jack Daniel s: Fastest Growing Spirits Brand Family Brand Family Owner 2013 Retail Value ($B) 5 yr CAGR (volumes) 1. Johnnie Walker Diageo $7.3 5% 2. Smirnoff Diageo $5.3 1% 3. Jack Daniel s B-F $4.4 6% 4. Hennessey LVMH $4.0 3% 5. Bacardi Bacardi $3.7 (0%) 6. Absolut Pernod $3.0 1% 7. Captain Morgan Diageo $2.5 5% 8. Chivas Regal Pernod $2.3 1% 9. Martell Pernod $2.3 5% 10. Jaegermeister Mast Jaeger $1.9 2% Source: IWSR 2013 14
Global 750ml equivalent price Rarified Air $25 Source: IWSR 2013 10M 9L Global Volume in Millions 15
Jack Daniel s Tennessee Honey F14 depletions topped 1M cases Grew net sales 32% in fiscal 2014 20 th largest brand over $25 per 750ml bottle 1 Successful global rollout to markets representing over 90% of Jack Daniel s Tennessee Whiskey s sales 1.4 million Facebook fans, half new to the Jack franchise 1 IWSR 2013 16
Woodford Reserve Family Expanding our Leadership in American Whiskey; Gain share in US and expand outside of the US GROW Category & Gain Share BUILD $35M Distillery and Warehouse Expansion CAPTURE Additional Share of Super/Ultra Premium Category EXPAND Woodford Reserve Trademark Outside of the United States 17
Southern Comfort The Original Flavored Whiskey New Campaign Innovation Year round communications New Packaging 18
Millions of 9L cases Finlandia Vodka Leadership Position in Eastern Europe and Russia Brand Depletion Growth New Occasions Extensions 4 3 2 1 0 2004 2014 Source: 2004 & 2014 company depletions 19
Family of Tequilas Focus on key US markets and Mexico; Selectively grow Rest of World GROW Category & Gain Share DRIVE Growth & Expansion and Utilize Innovation CAPTURE Our Share of Super/Ultra- Premium Category EXPAND el Jimador New Mix in Mexico 20
Brown-Forman s 10-Year Cash Allocations (2004 2014) Billions $6 $5 $4 $3 $2 $1 $- Increase in Net Debt $5.4B Cash from Cash from Business Business Cash from Business B-F's 10 Yr Cash Allocation $1.7B Net Net Acquisitions Acquisitions Capital Investment Capital Investment Share Repurchases $3.7B Share Special Repurchase Dividends / Lenox Distribution Special Dividends / Lenox Distribution Dividends Dividends Available Capital Reinvested in Business Returned to Shareholders * Negligble Change in Net Debt $44M 21
Disciplined Approach to Acquisitions The Four A s: Attractive Affordable Available Advisable Given Our Organic Growth Ambitions, Acquisitions are an Opportunity Rather Than a Necessity 22
A Long Runway for Growth Brown-Forman has <1% Share of Global TDS 100% Brown-Forman 75% 50% Top 25 All Other 25% 0% 2003 2013 Source: IWSR 2013 2.1B 9L Cases 3.1B 9L Cases 23
Delivering Industry-Leading TSR (as of 4-30-14) 10 Year TSR BFB Campari Diageo Remy Comp Set Pernod Consumer Staples S&P 500 Beam 0% 5% 10% 15% 20% Source: Factset 24