Bourbon slowdown is officially and undeniably real

Brown-Forman cuts signal whiskey industry slowdown is undeniable

On Jan. 14, a press release arrived bearing this headline: “Brown-Forman announces series of strategic initiatives for growth. Company to restructure globally, Louisville cooperage to close.”

Translation: Here come the cuts.

B-F said it will restructure its executive leadership team, implement a 12 percent reduction of its global workforce and close its Louisville-based Brown-Forman Cooperage.

The debate is over. The American whiskey industry slowdown has officially become undeniably real. Regardless of whatever causes you prefer to attribute to the ongoing sales decline and inventory pileups at distributors and retailers, when you see one of the world’s largest whiskey makers cutting jobs (which means reduced production) and closing its last of two cooperages (the other was sold to Independent Stave Co. last year), you know the situation isn’t pretty. Not DEFCON 1 by any stretch, but certainly some number on that multicolored scale reflects this concerning news.

If you’re a bourbon enthusiast who not only enjoys the spirit but is attuned to news surrounding its production, you’re likely the type to notice what many in the Bourbon & Banter community discuss in our Discord channel. Members located all over the USA are reporting similar news: Bottles on retail shelves that gathered dust last year are even dustier this year—and not in the good colloquial sense of “dusty.” Bottles formerly tagged in the $70 range are slipping into the $40s—and still not selling. NDP bottles priced stupidly high and sold on dubious marketing stories also remain unbothered behind the counter or closed glass doors.

Whether viewed from the 10,000 foot perspective of a publicly traded global company or the grass roots of 'Merica, the story is the same. The whiskey industry that we’ve fallen in madly in love with—and sometimes hatefully mad at—is no longer the juggernaut it was 10 years ago.

And I use 10 years as a measure rod because of its relevance to Brown-Forman. At the end of 2015, its stock traded at around $40 per share. In 2020, it reached its all-time high of $81. At that same time, B-F’s market cap was almost $39 billion.

After the restructuring was announced this morning, its stock price was just under $35 and its market cap was a tad over $16 billion. That’s a stock price drop of 57 percent and a market cap slide of 59 percent in five years!

Now, to be fair, B-F is a diversified company with lots of assets that have been shuffled around its own board or off to the boards of other companies. Just look at it sales of Finlandia vodka, Early Times bourbon and Sonoma-Cutrer wines to get an idea of transactions that reduced its market cap at least some. Those declines shouldn't be considered directly reflective of broader declining sales in American whiskey. But with regularly reported sales declines of mega-brand Jack Daniel's, it's likely other companies are suffering similarly.

Murmurings about job cuts at other Kentucky distilleries have been going on for some time now. And what my B&B friends are seeing elsewhere in retail stores, I’m seeing here in the Bourbon Bluegrass: overstocked shelves sagging like overused hammocks.

Prices for barrels of mature whiskey are falling faster than they rose in the overheated buying binge of the past half dozen years, and yet there are large distilleries under construction here which are betting on contract whiskey to get their stills hissing.  

Back to B-F. Speaking of shuffling, this is how large public companies work when they're eager to please angry investors whose stock cost them $81 per share, but which now is worth only $34. The cuts and restructuring will, in year one, cost the company almost as much as it expects to save. And projected savings are, in this current whiskey business climate, no more than well-informed bets that top line sales will increase to the point that they generate actual savings.

“Collectively, these actions are projected to deliver approximately $70 to $80 million in annualized cost savings, a portion of which is expected to be reinvested to accelerate growth,” the release read. “In addition, the company will receive more than $30 million in proceeds in connection with the sale of the cooperage assets. The company expects to incur approximately $60 to $70 million in aggregate charges for severance and related costs associated with the workforce reduction and cooperage closing.”

A 12 percent workforce reduction means about 650 of B-F’s 5,400 employees around the globe will lose their jobs. Almost one-third of that lot—210 salaried and hourly employees—working at the Louisville Cooperage will be unemployed.

Now, when many who read this start salivating over the chance to get bourbon at lower prices, try stifling that glee now that you know these B-F unemployment numbers are likely just a part of the industry-wide layoff number. There are job casualties in these maneuvers, and as I wrote before, where B-F goes, the industry, by and large, follows.