BF.B to Make Barrels in Alabama
Concurrent to its announcement of a 3-for-2 stock split, liquor maker Brown-Forman Corporation (BF.B – Analyst Report) came up with its plan to build a new cooperage for manufacturing barrels for Jack Daniel’s Tennessee Whiskey, given the growing global demand for the whiskey. The company plans to put up the new facility in Decatur, Alabama.
The company believes barrel-making is an important ingredient of making quality whiskey as it adds to the taste of the product. The company is the only major distiller, who makes its own barrels.
The new Alabama facility will be the second Brown-Forman cooperage – the first one is operational in Louisville, Kentucky. The new facility, which is expected to be operational by May 2014, will double the company’s barrel making capacity. The facility is expected to employ about 200 workers.
Brown-Forman’s barrel-making facility is ideally located close to the Jack Daniel Distillery in Lynchburg, Tennessee and at the centre of the two mills that supply wood for the barrels.
Apart from Jack Daniel’s Tennessee, leading distiller Brown-Forman possesses a fine quality beverage alcohol brands, such as Finlandia, Southern Comfort and Canadian Mist. This strong portfolio of globally recognized brands provides the company a competitive edge and bolsters its well-established position in the market.
Moreover, we believe Brown-Forman’s strategy of expanding Jack Daniel’s market share in developed markets, such as France and the U.S., and emerging markets including Russia, Poland and Mexico, where the whiskey category is in early stages of development will boost its top line.
Brown-Forman is in direct competition with Beam Inc. (BEAM – Snapshot Report), Constellation Brands Inc. (STZ – Analyst Report) and Diageo plc (DEO – Analyst Report). Currently, Brown-Forman has a Zacks #4 Rank, implying a short-term Sell rating. We maintain our long-term Neutral recommendation on the stock.
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