LOUISVILLE, Ky. (AP) — Spirits giant Brown-Forman Corp. announced Tuesday that it is reducing its global workforce by about 12% and closing its barrel manufacturing plant in Louisville. These cost-cutting measures come as U.S. whiskey producers face serious challenges from changing consumer trends and new tariff threats.
These actions are expected to generate between $70 million and $80 million in annualized savings, some of which are expected to be reinvested as part of the company’s growth strategy, said Louisville-based Brown-Forman, whose flagship brand is Jack Daniel’s Tennessee Whiskey. .
The company’s cooperage, where barrels are made to store and age its spirits, will close by April 25, affecting about 210 hourly and salaried employees, he said. The closure is part of an overall 12% reduction in the company’s global workforce of 5,400 employees. Brown-Forman said it will source barrels from an outside supplier and expects to receive more than $30 million from the sale of cooperage assets.
Laid-off workers will receive severance packages, outplacement services and other benefits, the company said.
Brown-Forman also announced changes to its management team, including the appointment of Jeremy Shepherd as chief marketing officer. Shepherd previously led its commercial division in the United States and Canada.
These actions reflect the venerable company’s “steady focus on evolving our strategy, portfolio and organization to grow and prosper,” said Lawson Whiting, president and CEO of Brown-Forman. “Today’s announcement will ensure we have the structure and teams in place to continue on this path, while making investments that we believe will facilitate growth for generations to come.”
Last month, Brown-Forman reported a 5% decline in net sales for the first six months of its fiscal year compared to the same period last year. This decline is largely due to the divestitures of Finlandia and Sonoma-Cutrer, the company said. Whiting said the results came against a backdrop of “difficult economic conditions”, but he predicted a stronger performance in the second half. Brown-Forman’s many brands also include Woodford Reserve and Old Forester bourbons as well as Herradura and el Jimador tequilas.
The company’s budget cuts come as the entire U.S. whiskey industry faces headwinds that coincide with massive inventories of aging whiskeys that will one day hit the market. In Kentucky, a record 14.3 million barrels of bourbon are aging, the Kentucky Distillers’ Association said last month.
Industry-wide challenges include indications that young adults are drinking less alcohol and the threat of American whiskey becoming embroiled in a new trade war. Meanwhile, US Surgeon General Vivek Murthy said recently that Americans should be better informed about the situation. link between alcohol and cancer. The risk should be clearly marked on the drinks Americans drink, Murthy suggested.
Republican President-elect Donald Trump has threatened to impose new tariffs with his return to the White House. During Trump’s first term, American whiskey distillers found themselves caught in a transatlantic trade war, causing sharp declines in exports to the European Union, the industry’s largest foreign market. The EU imposed retaliatory tariffs on these spirits in 2018 in response to Trump’s decision to impose tariffs on European steel and aluminum. A 2021 deal suspended those tariffs on U.S. spirits, and U.S. distillers began to reclaim lost market share in the EU.
However, the EU is set to reinstate tariffs on U.S. spirits at a rate of 50% in March if nothing is done to prevent it, the Kentucky Distillers’ Association said. Retaliatory measures imposed by the EU and other countries have cost Kentucky’s bourbon industry half a billion dollars in exports since 2018, according to the report. Kentucky and Tennessee, where Jack Daniel’s is made, overwhelmingly supported Trump in last year’s election.
“We face a triple threat of punishing tariffs, snowballing taxes and changes in consumer trends that have slowed sales,” Eric Gregory, president of the distillers association, said recently.
