The COVID-19 pandemic has been one of the most devastating events in modern times. It forced people all over the globe to quarantine for months, leaving some with little to no contact with loved ones and causing many to struggle with their mental health on their own.
Consuming alcoholic beverages became some people's go-to self-medication tactic to make the grueling times a bit easier to swallow. As terrible as it may sound, many liquor manufacturers benefitted from this rise in consumption, which led to one of the highest peaks in the industry's sales.
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According to a 2020 study by the National Institute of Health (NIH), heavy alcohol consumption in the U.S. rose mainly due to stress, with 29% of people reporting an increase in drinking during the COVID-19 pandemic.
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However, everything that goes up has to come down at some point, and the spirits and wine markets are experiencing this harsh fall firsthand. Now that people aren't forced to stay isolated, liquor sales have been dropping, causing multiple manufacturers and distributors to suffer the consequences.
The spirits and wine industry suffers sales declines and a slowdown in consumption
The spirits and wine industry has struggled post-pandemic for the last few years, as consumers have begun to cut back their liquor spending, especially those with a pricier price tag due to inflation and an uncertain economy.
In its latest reported earnings, Brown-Forman (BF.B) reported a 5% sales decline for the first six months of the fiscal year compared to the year prior, with diluted earnings per share down 3% to $0.96.
The company saw a 6% drop in Jack Daniels family whiskey unit volume at retail stores during the period, resulting in a 3% drop in shipments to retailers.
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Brown-Forman is one of the largest family-controlled companies in the spirits and wine business in the U.S. (Members of the founding Brown family control 66% of the class A voting shares.) It has served customers for 155 years and owns multiple premium liquor brands, including Jack Daniel's, Woodford Reserve, Herradura, el Jimador, and others.
Following the disappointing results, Brown-Forman is restructuring its business to return to growth.
Brown-Forman makes a major restructuring announcement for its business
On Tuesday, Brown-Forman announced various strategic initiatives included in a restructuring plan it hopes will accelerate growth and get the company's finances back on track.
“Today’s announcement will ensure we have the structure and teams in place to continue on this path, while also making investments that we believe will facilitate growth for generations to come,” said Brown-Forman CEO Lawson Whiting.
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As part of this restructuring plan, Brown-Forman will readjust its executive leadership team, reduce its global workforce of approximately 5,400 employees by 12%, or 648 jobs, and close its hometown barrel-manufacturing plant. Once the restructuring plan is complete, the company expects to save up to $80 million annually.
The Brown-Forman Cooperage, founded in 1945, is the company's barrel-making plant in Louisville, Kentucky, with over 200 employees that help produce around 2,500 handcrafted barrels daily. The cooperage is essentially a historical monument since it's one of the longest-standing in the state and the second largest in existence.
Unfortunately, Brown-Forman announced that the iconic cooperage would close its doors and cease operations by April 25 this year, leaving around 210 employees jobless. After receiving over $30 million in the sale of its barrel-making plant, the company will source its barrels from external suppliers that meet its standards.
"We are committed to supporting them through this transition and are confident that these strategic initiatives will ensure the company endures for generations to come."
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