Brown-Forman Corp – Risk Profile
- As per GlobalData's proprietary risk methodology, Brown-Forman's overall risk score is 3.52, signifying a solid risk profile
- The country, industry, and operational risk pillars have boosted the overall risk profile of the company
- A higher proportion of debt on the balance sheet has negatively impacted the financial risk score
Brown-Forman Corp (Brown-Forman) has a solid risk profile and is one of the top ten companies based on our proprietary risk assessment of the alcoholic beverages sector in the consumer industry. Due to the company's diversified operational network, leading market position, and strong financial performance, the company's operational risk score is better than the sector average. However, dependence on Jack Daniel's brand portfolio of products for generating a significant portion of revenue and a higher proportion of debt on the balance sheet remains a cause for concern.
About the Company
Brown-Forman is a global provider of spirits and wines. It manufactures, bottles, imports, exports, and markets a range of alcoholic beverages that comprise whiskies, tequila, vodka, liqueur, scotch, and wine. Its products are marketed under various brands, including Jack Daniel's, Early Times, Finlandia, Woodford Reserve, Canadian Mist, Collingwood, Herradura, El Jimador, Korbel, and Chambord.
Brown-Forman is one of the leaders in the alcoholic beverages industry, with reported revenue of $3.4billion in 2022, which showed an increase of 2.91% from 2021. Net income increased by 9.19% in 2022 over that of 2021.
Risk Pillars
Our proprietary risk assessment uses a combination of four risk pillars – Country, Industry, Operational, and Financial. Scores are based on a scale of 1 to 5, 1 being the lowest risk and 5 being the highest.
Brown-Forman's overall risk score is better than the sector's average. Companies like WuliangyeYibin Co Ltd, Kweichow Moutai Co Ltd, and Lu Zhou Lao Jiao Co Ltd are the leaders in the sector.
Country Risk:
Brown-Forman derives a majority of its revenue from the United States (50.25%), followed by the United Kingdom (5.35%), Germany (5.08%), Australia (4.61%), and Mexico (4.61%). Presence in diverse territories insulated it from the risk of operating in a single economy. It has resulted in a country risk score of 4.79.
Industry Risk:
The company generates 96% of its revenues from the alcoholic beverages sector, characterized by higher profit margins and high growth projections compared to other sectors. This has resulted in a high industry score of 4.0.
Operational Risk:
The company has a moderate operational score of 3.42, primarily attributed to its business positioning. Though Brown-Forman produces and supplies 40 ready-to-drink (RTD) cocktail, wine, and spirits brands, it generates a significant portion of the revenue from its Jack Daniel brand portfolio of products. Any significant damage to Jack Daniel's brand equity could adversely affect the company's revenue and performance. A small customer base is a cause for concern for the company. However, mid-30s profitability margins and higher returns have positively impacted the overall operational score.
Financial Risk:
Brown-Forman's financial score of 2.78 is less than the industry average. A good liquidity position places Brown-Forman at an advantage, enabling it to capture potential opportunities arising in the market. However, higher debt levels have negatively impacted the leverage and cash flow ratios.
About our Methodology:
GlobalData risk scorecard for a sector provides the analysis of various risks a company is vulnerable to. Our risk framework comprises four pillars – country, industry, operational and financial. The country risk for an entity signifies the risk of operating in a particular country. GlobalData's proprietary country risk assessment framework is used to calculate the risk for individual countries. Industry risk is an integral part of risk analysis, and it implies the riskiness and stability of the industries in which a company operates. The operational and financial risk profile comprises a company's risk and returns potential based on its key operational and financial metrics. Our scores are based on an average of the latest three fiscal year data.
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