Brown–Forman

Gross and operating margins are structurally high for staples, reflecting brand power. FY25 reported net sales declined 5% but organic grew 1%, with operating margin at 27.9%. Price/mix contributed positively, yet elasticity appeared in developed markets (U.S., Germany) as consumers traded down and tequila softened.

Over a cycle, the company has demonstrated the ability to pass through inflation and premiumize line extensions (e.g., Woodford family, super-premium Jack expressions), and RTDs broaden reach.

We see latent pricing power remaining, but we mark down for near-term elasticity signals and tequila category normalization, as well as FX and local tax/tariff pass-through limits.