管理層發言
Thank you, and good morning, everyone. I would like to thank each of you for joining us today for Brown-Forman's First Quarter Fiscal Year 2026 Earnings Call. Joining me today are Lawson Whiting, President and Chief Executive Officer; and Leanne Cunningham, Executive Vice President and Chief Financial Officer. This morning's conference call contains forward-looking statements based on our current expectations. Numerous risks and uncertainties may cause actual results to differ materially from those anticipated or projected in these statements. Many of the factors that will determine future results are beyond the company's ability to control or predict. You should not place undue reliance on any forward-looking statements, and except as required by law, the company undertakes no obligation to update any of these statements, whether due to new information, future events, or otherwise. This morning, we issued a press release containing our results for the first quarter fiscal year 2026 in addition to posting presentation materials that Lawson and Leanne will walk through momentarily. Both the release and the presentation can be found on our website under the section titled Investors, Events, and Presentations. In the press release, we have listed a number of the risk factors you should consider in conjunction with our forward-looking statements. Other significant risk factors are described in our 2025 Form 10-K and from time to time in our Form 10-Q report filed with the Securities and Exchange Commission. During this call, we will be discussing certain non-GAAP financial measures. These measures, a reconciliation to the most directly comparable GAAP financial measures and the reasons management believes they provide useful information to investors regarding the company's financial conditions and results of operations are contained in the press release and investor presentation. With that, I would like to turn the call over to Lawson.
Thank you, Sue, and good morning, everyone. I'm glad to be with you to share the highlights and drivers of our first quarter fiscal 2026 top line performance with a focus on our geographic performance, a few unique headwinds to our business and strategic innovation. Then I'll turn it over to Leanne who will share additional insights on other financial highlights, including gross margin and operating expenses before she wraps up with comments on our full year fiscal 2026 outlook, which we are reaffirming. But before I begin, I wanted to take this opportunity to recognize Leanne and her 30-year career at Brown-Forman. As you likely read in our news release earlier this week, Leanne has made the decision to retire on May 1, 2026. She's been a respected colleague for the past 3 decades and a valued partner of mine since she joined the executive leadership team 4 years ago. I've seen the impact she's made not only on our business results and culture, but on the many people at Brown-Forman that she has mentored and developed over the years. Leanne, on behalf of the entire organization, thank you for everything you've done for Brown-Forman. You will be missed. So now on to our results. Overall, I'm pleased with the start to our year. Our first quarter fiscal 2026 reported net sales declined 3%, but organic net sales increased 1% after adjusting for the A&D impact related to Sonoma-Cutrer, Finlandia and Korbel as well as the negative effect of foreign exchange. From a geographic perspective, our organic net sales growth was led by the emerging international markets, which grew 25%, and the Travel Retail channel, which increased 7%. This growth was partially offset by a 9% decline in the developed international markets collectively and a 2% decline in the United States. While there are a number of markets influencing these results, I'm going to focus on a few emerging and developed markets as well as the United States, which highlights some key successes, challenges and transformations that we're driving across the business. I'll start with key emerging international markets where we have positioned ourselves for strong growth. The economic environment in Mexico remains challenging with consumers trading down. But despite this, our organic net sales increased 22%. In addition, we gained market share in the RTD and Whiskey categories and continue to outperform in the takeaway results. Within RTDs, we've continued to lead the category in Mexico with the world's first tequila-based RTD New Mix. In an environment where consumers are seeking value, convenience and flavor, we're well positioned, having leveraged innovation to fuel our growth and attract new consumers while continuing to engage our current consumers. Brazil is another key growth driver of our emerging markets where organic net sales grew 30%. This is a result of many years of strategic focus on building the Jack Daniel's family of brands in the city of Sao Paulo. With this strong foundation in place, we've been expanding our geographic reach, increasing distribution for Jack Daniel's Tennessee Whiskey, along with Jack Daniel's Tennessee Apple, Honey and Fire. In addition, we believe premiumization is an opportunity in the market. Through additional focus on our super premium whiskey portfolio, we've driven increased distribution for brands such as Woodford Reserve, Jack Daniels Single Barrel and Gentleman Jack. While off a small base, these brands are growing at a very strong double-digit rate. Turning to our developed markets. I want to focus on Europe, where consumer sentiment and confidence remain pressured in most European economies. Despite this, premiumization is still evident in some countries, and we're gaining share of the whiskey category in 7 of the 8 top European markets. Organic net sales in Germany declined 13% as economic conditions remain challenging for consumers and tariff uncertainty caused disruptions in ordering patterns from retailers, which negatively impacted the year-over-year trends. While total distilled spirits trends are in the mid-single-digit decline and the competitive environment is intensifying, Jack Daniel's Tennessee Whiskey grew value share in the market. We also saw double-digit growth for super premium brands such as Gentleman Jack and Diplomatico Rum. Similar to Germany, economic conditions in the U.K. are negatively impacting consumer spending, contributing to an organic net sales decrease of 16%. While total distilled spirits trends, including the whiskey category, are in mid-single-digit decline, Jack Daniel's Tennessee Whiskey again gained market share. The tequila category remains a bright spot, growing double digits with el Jimador gaining share. El Jimador remains the #1 premium 100% agave tequila in the United Kingdom. We continue to see el Jimador as a key introduction to consumers globally on how mixable and great-tasting a 100% agave tequila can be. I'll wrap up my market comments with the United States where the decline in total distilled spirits trends remain in the low single-digit range. While organic net sales declined 2%, the results were ahead of our depletion-based results and takeaway trends. This was largely influenced by the launch of Jack Daniel's Tennessee Blackberry and the U.S. distributor transitions, which were effective on August 1. I'll talk more about Jack Daniel's Tennessee Blackberry in a few moments. But before I do that, I'd like to share a few thoughts on the distributor transitions. As you may recall, this is the first time in 60 years we had made a significant change to our distributor partners in the U.S. We began our work on the RFP process over a year ago with the goal of driving improved performance and a material impact to our business in the U.S. And while we're very much in the initial stage of the transition, we're pleased with the early signs from our distributors and believe these changes will unlock growth, strengthen our distributor partnerships and position us to compete effectively in the evolving U.S. beverage alcohol industry. Key outcomes of the RFP process, whether our relationship with the distributor is new or existing, include increased dedication, updated business relationship terms and expanded relationships and diversification. The increased dedication comes from an almost 3x increase in headcount dedicated to the Brown-Forman portfolio, dedicated selling divisions and dedicated roles in those divisions, which will bring greater focus and coverage to our brands. We have also updated our ways of working, investment and margin expectations with an increase in distributor investment and improved margin structure. I'll turn now to a couple of items that are somewhat unique to Brown-Forman, used barrel sales and the trade dispute between the U.S. and Canada, which created significant headwinds to our first quarter organic net sales results. Organic net sales for used barrels decreased over 40% with demand and pricing reflective of the current industry operating environment, particularly the Scotch and Irish whiskey suppliers. Canada's organic net sales declined nearly 60% as beverage alcohol products produced in the United States remained off the shelves in the majority of the Canadian provinces. While our non-U.S. brands, such as Diplomatico and el Jimador continued to deliver growth, they were not able to offset the decline of our brands that are produced in the U.S. That said, we remain optimistic based on our recent developments related to tariffs under the USMCA. Finally, let me provide a few thoughts on strategic innovation, particularly for the Jack Daniel's family of brands, which saw the launch of Jack Daniel's Tennessee Blackberry in the U.S. a few weeks ago. When it comes to innovation, our goal is to extend the brand's appeal to new consumers and capitalize on new occasions while strengthening the parent brand. The launch of Blackberry has been incredibly promising and was based on insights such as innovation, particularly from flavored whiskey and U.S. whiskey being the largest growth contributor to total distilled spirits. Jack Daniel's has a proven track record of leveraging our global footprint and capabilities to extend the impact of new flavor launches. Blackberry is a globally relevant flavor trend across food and beverage categories. In consumer testing, Jack Daniel's Tennessee Blackberry had high consumer appeal resonating with a very broad audience. Distributors are excited with shipments already exceeding our expectations, and we're getting wonderful feedback and buzz on the new product from existing fans, new consumers, customers and the media. While we're excited about the start, we remain cautiously optimistic. Our work isn't done yet, and we need to fuel this excitement to drive continued momentum and strong consumer takeaway. While we're certainly proud of our strong track record of innovation, the long-term growth and resilience of the Jack Daniel's family of brands is also fueled by strategic relationships, such as our McLaren Formula One and music sponsorships. We're also leveraging an evolved on-premise strategy and our new media campaign to engage a new generation of legal drinking age consumers while remaining intently focused on retaining our core consumers. As a result, compared to a year ago, we are seeing improvements in brand health driven by young adult spirit drinkers. Across key measures of penetration, affinity and uniqueness, we see significant positive shifts in brand performance over the last year, in particular, among legal drinking age to age 34 consumers but also among consumers aged 35 and above. These positive shifts across both age categories affirm that our strategic actions are reaching new consumers while not alienating those who have been friends of Jack for years, and we will continue to take bold actions to further enhance the health and growth of Jack Daniel's. We look forward to sharing more on this during our upcoming Investor Day on October 15, where our focus will be entirely on Jack. While in-person attendance is limited, the presentations will be webcast. Details regarding the live webcast of the presentation along with the Q&A session will be shared in the next few weeks. Overall, I'm pleased with the start to our fiscal 2026 and believe we are still positioned to achieve our full year guidance. During the first quarter, we focused on strategically growing our portfolio of brands globally through a strengthened route to consumer and thoughtful innovation to help navigate the difficult short-term conditions. We're benefiting from our streamlined and simplified workforce structure, which will increase our agility in responding to this dynamic operating environment, and I'd like to thank our Brown-Forman employees for their efforts and dedication.
Thank you, Lawson, and good morning, everyone. As Lawson mentioned, I will provide additional insights on other financial highlights, including gross margin and operating expenses. I will then conclude our prepared remarks with comments on our full year fiscal 2026 outlook. First, to our gross margin. In the first quarter of fiscal 2026, our reported gross profit decreased 2%, resulting in a reported gross margin of 59.8%. Our gross profit margin expanded by 40 basis points due to a 240 basis point A&D benefit largely related to the absence of the prior year transition services agreement for Sonoma-Cutrer and Finlandia. This benefit was partially offset by points of higher costs, largely due to the impact of inflation on our input cost and lower production levels, 50 basis points of unfavorable price mix due to the strong growth of New Mix and lower used barrel sales, and the 50 basis points of negative effect of foreign exchange, driven primarily by the strengthening of the Mexican peso. Continuing with our other financial highlights, I'll turn to our operating expenses. In the first quarter, organic advertising expense decreased 3% as our long-term philosophy is to align A&P spend with our depletion-based top line trends and we are thoughtfully managing controllable expenses in this dynamic environment. We continue to believe our level of brand investment is healthy, which is evidenced by how we have increased our brand investment at a 4% CAGR over the last 5 years and that the strength of our brands enables us to remain competitive in the current environment. Our organic SG&A investment decreased 7%, which reflected lower compensation-related expenses related to our workforce restructuring initiative we announced in January. Our new structure creates a more streamlined organization, leveraging greater synergies and enhanced ways of working, which we believe will enable us to fuel the growth of our brands, our business and our people at a more rapid pace. In total, reported operating income decreased 7% and organic operating income increased 2% in the first quarter of fiscal 2026. In addition to the $19 million nonoperating postretirement expense, these results led to a 13% diluted earnings per share decrease to $0.36 per share. Now that we have been through our financial highlights for the first quarter of fiscal 2026, I'd like to turn the attention to our full year fiscal 2026 outlook, which, as Lawson shared, we are reaffirming. The operating environment remains volatile as the geopolitical and global macroeconomic conditions have created sustained levels of consumer uncertainty. We continue to expect that the behavior of the consumer and the level of trade inventories will not change meaningfully during the fiscal 2026 year. While the global trade environment remains dynamic and fluid, our guidance assumes the current tariff impact on our products will remain unchanged. We strongly believe that the strength of our portfolio, the benefits of our route-to-consumer transitions and our evolved workforce structure, as well as strategic innovation, will help us in navigating these short-term cyclical disruptions. From a geographic perspective, we expect continued growth in our emerging markets and the depletion-based trends in the U.S. and developed international markets to remain similar to fiscal 2025 with the exception of Canada. While we are encouraged by recent discussions, American Spirit products have been off the shelf in Canada for months. This had a significant impact on our first quarter of fiscal 2026, which will impact our full fiscal year results and has been included in our full year guidance. In addition to Canada, the other cyclical driver is the year-over-year change in our used barrel sales. Our used barrel sales are returning to levels that are more typical and challenging an uncertain operating environment for our industry. We still expect used barrel sales to be lower by more than half of fiscal 2025 level, which is a significant year-over-year headwind. We continue to execute our long-term pricing strategy and expect to benefit from our revenue growth management activities and strategic innovation, particularly Jack Daniel's Tennessee Blackberry, while anticipating product mix headwinds due to the faster growth of our RTD portfolio and agency brands as we ramp up these businesses in Japan and Mexico. As we prepared for the launch of Jack Daniel's Tennessee Blackberry and the transition to our new distributors in the U.S., we experienced unusual phasing in the first quarter of fiscal 2026, leading to higher shipments compared to the year-ago period. We continue to anticipate that shipments will roughly equal depletions in fiscal 2026, which will result in higher depletions and lower shipments as we progress through the remainder of the first half of our fiscal year. As our new distributors become fully integrated and the initial launch of Jack Daniel's Tennessee Blackberry concludes, we anticipate that ordering patterns in the second half of the year will normalize to reflect more typical seasonality. For fiscal 2026, based on the currently known factors, we expect a low single-digit decline in organic net sales and reported gross margin expansion as we believe price/mix will largely offset cost and that we will benefit from A&D. While input costs will continue to benefit from lower agave cost, we project higher costs compared to the prior year period, largely driven by the impact of inflation and lower production volumes. In addition, as we shared previously, following the divestiture of Finlandia and Sonoma-Cutrer brands, we entered into transition services agreements, which had a negative impact on our overall reported gross margin. The TSAs have ended, resulting in a positive impact on a year-over-year basis. Also, the absence of Korbel is expected to benefit reported gross margin. Our outlook for organic operating expenses in this challenging environment continues to reflect investment behind our brands, utilizing our long-term brand expense philosophy to align A&P spend with our depletion-based top line growth. We also continue to expect a reduction in SG&A related to our strategic workforce restructuring initiative. Based on the above, we are forecasting organic operating income to decline in the low single-digit range. We also expect our effective tax rate to be in the range of approximately 21% to 23%. And then our estimated capital expenditures will be in the range of $125 million to $135 million for the fiscal year. While this range is lower than previous years, we have completed a number of projects and expansions and continue to fully invest behind our business. In addition to lower capital expenditures compared to fiscal 2025, we also continue to focus on reducing our finished goods inventory, which should further reduce our working capital and significantly improve cash generated. Our first quarter was a good start to fiscal 2026. While volatility and uncertainty will likely be words we continue to use throughout this fiscal year, we have taken actions focused on our geographies, our portfolio and our people that we believe will enable us to navigate the short-term challenges as well as position the company to deliver long-term growth. Before opening the call to Q&A, I also wanted to take a moment to say thank you. It's impossible to put into words what the last 3 decades of Brown-Forman has meant to me. This journey has allowed me to travel the world, build some of the most iconic spirits brands and work with the most talented teams in the industry. My greatest accomplishments are not personal achievements. They are the shared success that comes from working with exceptional people who are passionate about making a difference. I look forward to working with Lawson and the entire executive leadership team to ensure a thoughtful seamless transition to my successor and remain committed to delivering our fiscal 2026 ambitions. While my career at Brown-Forman will conclude next May, I will forever wear the titles of long-term shareholder, brand ambassador and proud consumer of our highest quality Premium Plus portfolio. This concludes our prepared remarks. Please open the line for questions.
分析師問答
Our first question comes from Peter Grom of UBS.
Leanne, congratulations. Thank you so much for all the help over the years and best of luck moving forward. I guess I just wanted to follow up quickly just on kind of the distributor inventory impact. Clearly, a nice tailwind to sales in the first quarter. But I just want to understand and clarify kind of how you see that evolving as we move through the balance of the year. I think you mentioned, Leanne, that it would be largely complete by the end of the first half. So I just wanted to clarify that. As we look out to the second quarter, would you anticipate a 400 basis point headwind to organic sales? Or did I mishear that? Or am I misunderstanding that?
Yes, for the entire fiscal year, we expect shipments and depletions to be aligned, particularly in the U.S., where we do not foresee significant changes in trade inventories. During our June call, we mentioned potential shipment disruptions due to transitions in the U.S., making it challenging to predict some figures. However, we believe our distributors will continue to maintain inventory at the lower end of the normal range that retailers typically require. For the first quarter, our shipments exceed depletions, which is primarily attributed to the launch of Jack Daniel's Tennessee Blackberry, the new el Jimador package, and the distributor transitions in the U.S. There is a 6% increase in the net change of distributor inventories in the U.S., along with a 10% increase in our emerging international markets. This increase is a result of comparison phasing from the previous year in the UAE and rebuilding inventory in Paraguay and Uruguay, affected by importation disruptions in fiscal '25. For the full year, we expect shipments and depletions to stay in line. Importantly, we anticipate that our results for the first half will align with our full-year guidance from a top line perspective.
Our next question comes from the line of Nadine Sarwat of Bernstein.
Lawson and Leanne. I'd like to focus my question on the U.S. I perfectly appreciate the distributor inventory build and the disruption that causes. So I'd like to look through at the underlying growth rate, which was down 8% weaker than what you had in Q4 and Q1 last year. So 2 questions on that. First, on the quarter, in particular, exiting the quarter, was the trend the same weaker, stronger and the distribution. Second question is, given the underlying performance, has your view on whether the weak U.S. alcohol trends, are they driven by structural or cyclical? I appreciate this question. It feels like we're beating a dead horse every quarter. But I'm sure you can appreciate, it is a crucial question. Would love to get any updated thoughts that you have on that.
Take the beginning of that.
Yes, do you want to go ahead and start with the second part on weak cyclical?
Yes, Nadine, that's a fair way to describe it. I don't think my answer will differ much from what we've said in the past, but let me take a moment to elaborate. We were aware this was coming, and there are some new pieces of information to consider, but this will be a lengthy response, so bear with me. The discussion around structural versus cyclical issues has been ongoing for about 18 months. On the cyclical side, there are definitely challenges related to consumer buying power. We've addressed this previously, but inflation and rising interest rates are certainly affecting consumers. There’s also uncertainty regarding tariffs, which has been a global issue, not just a U.S. one, but it hasn't helped. If I had to highlight the strongest factor indicating that this is mainly a cyclical issue, I would refer back to where we were two years ago. At that point, TDS was still showing growth of about 5% or 6%, which is hard to believe considering how much has changed in just two years. The timing is crucial: we were at 5% or 6% growth at the end of summer 2023, and by Christmas, it had dropped to 0%. As we moved into calendar year 2024, growth turned negative, reaching about minus 2% to minus 3% for much of that year, and it has remained in that range since. I maintain that nothing could cause a market to shift from plus 6% to minus 2% so rapidly without being primarily cyclical. Structural factors such as cannabis and health and wellness trends do not decimate a market in such a short time. While there may be a combination of cyclical and structural influences, I believe the cyclical aspect is more significant. Regarding moderation in health and wellness, which is frequently discussed in the media, it’s true that some people are drinking less often, or fewer drinks per occasion, and some are gravitating towards lower alcohol or non-alcohol options. However, the idea of drinking less but better is longstanding, and I believe we've managed well in that area. The shift from beer and wine to spirits continues even in recent quarters, which has been a trend for a long time. What are we doing about it? We've adjusted our portfolio to prioritize premium and super premium products, believing this long-term strategy will benefit us. A Gallup poll recently indicated that the percentage of Americans drinking is at an all-time low, and while I won't dwell on that, we prefer to rely on IWSR, Nielsen retail data, and shopper panels, which offer mixed results. While there has indeed been a decline in Americans drinking, that poll may have overstated the situation; it's not that many are leaving the category entirely but rather consuming less. Concerning GLP-1 medications, their growth has slowed recently. I don’t want to dwell too much on that as I don’t see it as a major headwind compared to what it might have been a year ago. Likewise, the effects of cannabis are often exaggerated regarding their impact on spirits consumption. We haven't touched much on the hemp-derived beverages that emerged due to a regulatory loophole. While there are concerns about regulatory frameworks and consumer safety, I don't think they significantly affect our market share. On the positive side, the conversation has shifted away from the advantages we have and is focused more on the negatives. Gen Z is notably affected by these cyclical challenges, and that makes sense. Most are in their 20s, facing financial pressures from rent and living costs, and they typically drink more than other age groups. Yet, looking longer term, the growth of Gen Z and the rising legal drinking age globally should create a tailwind for us. The middle-class demographic continues to expand worldwide, which is encouraging, and there remains a trend of more women entering the spirits market. In conclusion, while this response has been lengthy, it reflects the complexity of the situation. We acknowledge that both cyclical and structural factors play a role, but I urge caution against overemphasizing the structural side. This is the longest response I've given in my over 50 earnings calls, and I apologize for that, but I believe it's crucial for understanding the long-term health of our industry.
And then hard to follow. But to your first question, Nadine, back to the U.S. and the exit rate. What we would say is we've got 13, 14 states, including California and transition. Every state has been unique. Collectively, we probably did decelerate as we neared the August 1 transition date, there's noise even in our depletion-based business due to these transitions. We do see in some of these states where there's a gap where takeaway is stronger than depletions. And as we think about where we will be for the remainder of this first half, we would expect depletions to accelerate and shipments to lower, again, coming in line with more of our full year guidance.
Yes, I believe that will happen fairly quickly. We shipped a significant amount of Blackberry in the first quarter and haven’t seen much depletion yet. The depletions are starting to occur, and I believe we will see normal levels in a relatively short time.
And our next question comes from the line of Andrea Teixeira of JPMorgan.
Leanne, I want to express my admiration for you and wish you all the best. I appreciate your patience in teaching us more about Brown-Forman. I’d like to revisit the segmentation of Jack Daniel's specifically. Lawson, you mentioned that you don’t see any secular trends, but when considering premiumization, there seems to be a solid volume in mainstream Jack Daniel's. While it's a premium product, I’m curious about how to engage younger consumers and LDA consumers in the long term, especially in light of the fragmentation and the strong RTD offerings you have. How has this impacted consumption trends recently, particularly in relation to Jack Daniel's performance?
I believe that if you're asking about consumer perception of Jack compared to TDS or whiskey or other categories, we've been steadily closing the gap. It really depends on your perspective, but we feel we're making progress against TDS. If you search for a positive sign, and it's a minor one, you might find it hard to see, but TDS has shown slight improvements over the past four to five months. We're not seeing major increases, but we have noticed some improvements. Interestingly, when examining Nielsen data by price point, particularly in the $20 to $29 range, our performance aligns closely with that. We're planning to extensively analyze TDS through various lenses. Currently, we're down about 4% to 5% in that price point, and TDS is significantly boosted by RTDs. We're managing well in that segment. Among the top brands in the U.S., Jack Daniel's is performing adequately and is around average compared to others. There are only three brands in the top 20 that are experiencing growth, and Woodford is one of them, which is encouraging. Regarding the health of Jack Daniel's Tennessee Whiskey and attracting new consumers, we've revamped our consumer communications recently with our new campaign, "That's What Makes Jack, Jack." So far, the initial feedback has been very positive and successful. I won't go into detail about all the consumer metrics, but the most significant one, in my opinion, is the improvement in scores for the brand. Jack Daniel's has a unique set of attributes that we weren't emphasizing enough, and we're now focusing more on that, which is crucial for the long-term health of the brand. We also mentioned in our prepared remarks about McLaren and our renewed focus on music. While we never completely stepped away, we are prioritizing it more than before. We have a songwriter camp three times a year in Lynchburg, and for those who appreciate country music, Jack Daniel's is frequently mentioned in songs. The number of references has significantly increased. We remain relevant among consumers, especially in the country music and rock & roll scenes. Jack's Garage has become a popular experience worldwide, and I believe we are making the right moves. Another key initiative is revitalizing the on-premise efforts, not just in the U.S. but in our larger markets as well. We've added resources, particularly a dedicated team known as the Jack Pack, focused on the on-trade in major U.S. cities. Additionally, we have new distributors eager to promote Jack Daniel's Tennessee Whiskey. It's a substantial brand, and any salesperson in America will want to be associated with it. Although we just completed the transition three weeks ago, I advise caution in drawing conclusions from the first quarter. There is a lot of variability, but I believe the situation will stabilize in the coming months, and we'll see how things progress. It's our responsibility to regain consumer interest.
Our next question comes from the line of Andrea Pistacchi of Bank of America.
I wanted to revisit the Jack Daniel's Blackberry, which has been in circulation for a few weeks now. You seemed quite positive about the launch in your prepared remarks. Could you provide more details on the response from the trade and the rollout pace? What are your ambitions for Blackberry? Do you believe it has the potential to be as successful as other flavor launches, such as Apple Fire, which achieved around 200,000 to 400,000 cases? You mentioned in your prepared remarks the possibility for the brand to expand into different regions. Do you see similar potential for Blackberry as we have with other flavors?
Yes, I'll start with that, and Lawson can build on. For Blackberry, we are off to a really strong start. And to your point, we have only the second half of July, started to get those shipments out there in preparation for the launch. So there's really not a lot of depletion-based information or consumer takeaway that we can comment on yet, but we can say that there is a significant amount of excitement in the system from our distributors. There's a lot of wonderful feedback and buzz that we're getting from both existing and new consumers, customers, media, as we thought about this strategic innovation and we consider Blackberry. Again, it is a natural flavor. It is found largely around the world. It fits with consumers' palates. And 1 thing we believe that we're strong here at Brown-Forman is globalizing these flavors utilizing our existing network as we've done with Honey and we've done with Apple. And if you've seen, we actually had really strong results on Tennessee Apple for this quarter as well. So we do believe this is a brand that we can globalize, and then it will resonate well. Outside the U.S., there's not as much competition in flavored based whiskey. So we're excited about what we'll be able to do with that. And again, all of that will layer in over time because we're just now in our very first weeks of shipping in the U.S.
Yes, to add to that, the global aspect is different from most of our competitors in this space, and that is significant. We plan to leverage this as a long-term growth driver over multiple years. It’s not just about Q1; this fiscal year, we aim to roll this out in various sizes and markets. We are optimistic about its potential as a multiyear growth driver. Additionally, one challenge in flavored whiskeys is finding suitable mixers. While many brands focus on shots, there haven't been many effective natural mixers for most of them. This one pairs well with lemonade, and I can say that Blackberry and Lemonade is an exceptional drink. It’s one of the best flavored whiskeys I’ve ever tasted, and it works well. We needed this to support our long-term growth, and I believe we have found it.
Our next question comes from the line of Filippo Falorni of Citi.
Leanne, congrats and thank you for all the help throughout the years. So maybe a question for you, Leanne, just on the gross margin. You had a 40 basis points of gross margin expansion in the quarter. Is the expectation for the year of still seeing some gross margin expansion on a full year basis? And maybe you can walk us through the components, how to get to the expansion. It seems acquisition and divestiture should be the biggest benefit. And then on the other side, if you can look to the cost side both on the commodity part, but also the used barrel sales' negative impact on margins, that would be helpful.
Okay. So first of all, I would say we're off to a really strong start for our fiscal year. Our margins are well positioned with 40 basis points of expansion in the first quarter to 59.8%. We've given you kind of the breakdown for that, so I won't go back through that. From a full year perspective for '26, yes, we're going to continue to benefit from the absence of Finlandia and the Sonoma-Cutrer. The absence of those TSAs as well as the absence of Korbel. We do believe our price mix will largely offset our cost. And then as we said in our prepared remarks, our costs are really driven by the impact of inflation on our input costs and then lower production volumes. We are still benefiting from some lower agave costs, but that's being offset by the 2 things that I just mentioned. As it relates to used barrels, again, we are coming off 3 very strong years of sales, F'25 being our strongest year. So now as we normalize that high-margin business and the absence of that, all of that is built into the guidance that we have provided for the full year.
Our next question comes from the line of Eric Serotta of Morgan Stanley.
Leanne, congratulations. It's been a pleasure working with you and looking forward to toasting down in Lynchburg in October. Question for Lawson. What are you seeing in terms of the competitive and promotional environment, last quarter, you commented I think that surprisingly, everyone had been pretty rational thus far. I know first quarter typically isn't a heavy promo period, but any additional color would be helpful. And then sort of as a consumer I'm seeing more allocated bourbons on the shelf. I'm not talking like the $200 suggested retail price bottles that would sell for a few thousand marked up. I'm talking bottles in the $30 to $60 range that for the past few years, you couldn't find or if you did, they were a couple of hundred dollars. Are you seeing that in terms of your and competitor allocated products, leaving Birthday Bourbon aside? And b, is that having any impact, do you think, on brands like Woodford and Old Forester?
That's a great question. If I take a moment to reflect, I'll answer directly. As we’ve mentioned in previous calls, American whiskey and tequila are the two categories that offer the best opportunities for super-premium and ultra-premium line extensions, particularly American whiskey due to the versatility of the barrel. We see ourselves as leaders in this area and have introduced many unique and successful innovations over time. You’re correct that major brands have recognized the potential of higher-end line extensions, with Double Oaked being our most successful line extension to date. There's much excitement in that space. Jack Daniel's has its 10-year-old, 12-year-old, and 14-year-old offerings, all highly sought after, with demand far exceeding supply. The same goes for Woodford and Old Forester, including highly coveted offerings like Birthday Bourbon and President's Choice. We expect to continue seeing these line extensions, and we are keen on this price point, which we believe will perform well. Regarding your shorter-term question, while there are more brands competing on the shelves, pricing has remained relatively stable. Tequila appears to be the most aggressive due to obvious factors, but American whiskey is holding steady as well. Overall, the category is flat with stable pricing, as seen in the last 13 weeks of Nielsen data. Despite previous concerns about supply potentially affecting pricing, the market remains rational, and we haven't observed much change in pricing quarter-over-quarter, which we see as positive news. As for industry supply, while many entrepreneurial brands are struggling and some are going out of business, the shelves are still crowded with both American whiskey and tequila. However, I believe this crowding will lessen over time, and we appreciate regaining some shelf space. The smaller brands never captured significant market share, and it remains dominated by the top five or six companies that control the industry supply. Everyone has scaled back significantly, and I think you'll be surprised at how quickly the situation can stabilize, especially if we see volume growth. Overall, the risks in terms of supply are less than they were six months ago.
And our next question comes from the line of Kevin Grundy of BNP Paribas.
Leanne, I want to offer my congratulations and best wishes to you on your retirement. I have a question for both of you. Looking at things from a broader perspective, Lawson, how are you approaching growth in the portfolio geographically? I appreciate the insights you've shared about your successes in Brazil and emerging markets. As the market reflects on your potential to return to long-term growth targets, there's noticeable skepticism. This strategy seems to rely more heavily on emerging markets than previously. Is there a chance to speed up this growth? How do you view investment levels in relation to the portfolio, particularly when considering the U.S. and developed markets? The market seems to believe this situation is more structural than cyclical. I would like to hear your thoughts on how you plan to focus on emerging markets and increase growth, and what that means for achieving your long-term guidance. I know that’s a lot, but I'm interested in your perspective.
That's a great question. We are spending a lot of time considering this internally. In the established large markets, I don’t see them as declining. I don’t believe that’s the medium-term outlook. However, whether it returns to a growth rate of 4 to 5 percent is tough to say, and I don’t have a clear answer. While some are making predictions, I prefer not to do that. We've discussed how to manage our portfolio in a lower growth environment and the potential adjustments we might make. Regarding different regions, we plan to allocate more resources to emerging markets since growth isn't limited to Brazil; Turkey and the UAE are also strong, and we’re particularly interested in Asia, especially India, where we see significant growth potential. That doesn't mean we're pulling back from the U.S. market, which remains the most profitable. We still believe our offerings align well with U.S. consumers, and we want to capture our share of that market. In terms of emerging markets, we’ve had the most success in Mexico and across South America in the past few years, and we intend to maintain that momentum.
Our next question comes from the line of Bonnie Herzog of Goldman Sachs.
Congrats and best of luck, Leanne. I wanted to ask a couple of things. First, shipments, as we've discussed, we're well ahead of depletions in Q1. As a result, this was certainly a benefit to organic sales in the quarter, but could you quantify for us the EBIT impact of that load-in in Q1? And then second, I guess I was hoping for some more color on your price/mix in the quarter. I think it was down around 5%. So could you maybe just touch on the drivers of that? And again, how we should maybe think about price/mix for the rest of the year?
To your first question, if you look at the bottom of Schedule D, we provide that information throughout the P&L. You can find the details you need there. Regarding price and mix, much of it relates to the higher growth of New Mix and the decrease in lower used barrel sales, which was somewhat balanced by the launch of our Jack Daniel's Tennessee Blackberry.
I think I may have misheard you, Bonnie, but regarding the gross margin slide in the deck, the price/mix impact on gross margin was 0.5%, not 5%.
This concludes the question-and-answer session. I would now like to turn it back to Sue Perram for closing remarks.
Thank you. And thank you, Lawson and Leanne, and thanks to everyone for joining us today for Brown-Forman's First Quarter Fiscal Year 2026 Earnings Call. If you have any additional questions, please contact us. We look forward to participating in the Barclays Global Consumer Staples Conference next week and hope to see many of you. For those of you unable to attend our fireside chat on Wednesday will be made available as a webcast, accessible via the Brown-Forman corporate website under the section titled Investors, Events, and Presentations. To wrap things up, the story of Jack Daniel's begins on a day in September about midway through the 19th century, but no one can agree on exactly what day he was born. One thing we do agree on, though, is that Jack's birthday is certainly something to celebrate and since we don't know the exact date, we choose to celebrate any day in September. So we hope you'll join us in raising a glass, which every day you choose, as we say happy birthday to Jack. With that, this concludes our call.
Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.