Brown-Forman Corporation (BF.B)

Investor Day 2012

← View all transcripts

Dec 12, 2012

Everyone, and welcome to Brown Forman's 2012 Investor Day. We really appreciate each of you taking time out of your calendars to come here and learn more about Brown Forman, a company we truly believe is special in a great industry. We've got a full afternoon planned today. So let's move on to a quick review of Safe Harbor language and then go into our agenda. Today's investor presentations contain forward looking statements based on our current expectations. This page highlights some of the risk factors you should consider in conjunction with our forward looking statements. Other significant risk factors are described in our Form 10 ks, 10 Q, 8 ks, all filed with the Securities and Exchange Commission. I also wanted to point out that today's meeting is being webcast for investors who aren't able to attend in person, and these slides have been made available on the website under www.brownformann.com, entitled Investor Relations. Turning now to the agenda. Paul Vargo will kick off our presentations, which will run from 1:30 to 3 p. M, followed by a short 15 minute break. Then we'll return for some additional presentations from Don Berg and Garvin Brown before opening up the event to a formal Q and A. And then we'll wrap up the day with some whiskey tastings. So with that, I'm proud to introduce Brown Forman's Chairman and CEO, Paul Varga, who I might add just celebrated his 25th anniversary with the company. Paul? Well, thanks, Jay, and thanks to all of you for being here. We've got a cast that's up here in this front row, and we're all thrilled to be here with you. When we think about a session like this, we do it every couple of years. We really hope that we can fill a room like this and have the kind of evident, I think, by your attendance. We don't take it for granted. And we know, as you can see from the agenda, that it's a real serious commitment to go give an afternoon to hear about Brown Forman's story. I thought I'd the names that were on that agenda, just one thing that's in your books here, everybody should have them in front of you at your seat. There are in the back, I mean, of course, the presentations are in here, but in the back, we added some profiles of the people you're going to hear speaking throughout the course of the day. So we won't go into long introductions about any one of us, but one thing as I was scanning through it that I noticed that I thought you might find informative and helpful is that of the 9 people who will share the stage with me today, the experience at the company adds up to over 150 years of experience at Brown Forman. So that's, on average, greater than 15 years per person and something that we're really proud of. And we think it helps us collectively and individually to make really, really good decisions on behalf of our shareholders. So if you get a chance, just I'll give you a minute if you get on a break or even after the conference, a chance to look at some of the people who are behind Brown Forman's success story that we're going to talk to you about today. My job is really to introduce the day and to talk to you about not only who's going to be speaking with you but also what we are as a company. Many of you would be familiar with Brown Forman story and I've already talked to a couple of you who go back with the company quite some time. If nothing else, what we hope we get from today is just to get current on Brown Forman here in the winter of 2012. So on the screen behind me, you'll see a handful of items that we would if you had to put on one page a descriptive of Brown Forman Corporation today, it's a leading portfolio of premium distilled spirit brands with a very targeted focus. One thing we often when we contrast ourselves versus others in the industry, you don't hear a lot of people talking about Brown Forman's long tail, for example. I think that in terms of trademark families, the company has less than 20 trademark families in total. So it's a pretty focused company by comparison to most of the mid- and large sized companies in our industry. Of course, we're known for our ownership of both the Jack Daniel's trademark and the distillery that supports it, so something that are 2 of the greatest assets of the corporation. If you follow the company over the years, you will have observed a growing geographic diversification in a variety of models we call RTC, which is route to consumer to support that, oftentimes deployed market by market based on the circumstances and the strategies and hopes we have for each of those individual markets. You all would be the judges as to whether or not the company is in good financial health, but our view on it is that both our current and historic performance would point to that, the company's industry leading return on invested capital, the total shareholder return metrics, some of which I'll share with you here in a moment. Our stewardship of capital, you all would have noticed here just in the last month a number of announcements around both dividend and special dividend. And then also, we work very hard to think about company's future. And when we make decisions about it, we do a lot of work on the risks for the rewards we get. And we try to tip that balance in favor of the shareholder when we approach decision making at Brown Forman. And it might be an opportunity for you to observe some of that through the presentations today. And very importantly and something we haven't always brought into these sessions, which we're going to do today, is the Brown family's control and the perspective they bring to the company, which we think is an advantage. Later on today, you'll hear from Garvin Brown on some of that. Now shown more visually, what you do, sometimes we show Barton, what a great industry, right? I mean, you get to show your charts on cosmopolitans and mint juleps and hurricane glasses. So it's one of those types of industries that are fun. But as you go through the day, I would ask you to think about what are you seeing that reinforces Brown Forman's prospects for growth? What are you how might you understand better the company's growth story? You're going to be hearing through the variety of presentations various elements surrounding how the company has grown and how we continue to have really high hopes for the continuation of the growth story that we've been able to report to you over the last many years. Additionally, we'll talk, particularly in Don's section, I think, later in the afternoon about the financial strength of the company. We'll get into more detail on it. And very importantly, we'll make reference to but won't go deeply into what we call our Brown Forman 150 strategy. A couple of years ago when we gathered at a similar investor conference across town, we got into this pretty deeply. But through the course of the while we won't go into it in great detail today, you'll hear various people in front of you refer to BF150. And I think the thing I always like to comment on as it relates to that strategy is that it's length and orientation. When we first unveiled it in 2,009, it was intended to point us toward a milestone, which was the company's 150th birthday in the year 2020. But that being really only a mile marker on something that we refer to as we use the letters of the company BF for Building Forever. We like to think of this as an enduring exercise. And one of the things that you have to do if you're going to have an enduring company is invest behind it. And so through the course of today, you'll hear varying programs about investing in our brands. You'll hear about investing in the marketplaces where we see so much opportunity. You will have observed investments in our assets, the most noteworthy of that in the last year, expansions at the Jack Daniel's Distillery. And then very much the group that's in front of you and that we represent at Brown Forman, investments we make behind what we think is the most important ingredient in all this where are the people that come up with the ideas and make the decisions that make Brown Forman continue to grow. A chart we've used several times since the close of our fiscal year last year back in really through this early summer and up to our shareholders meeting, we're very proud of the consistency of our performance against even different backdrops. Here, you'll see in the good times from we were all observing how wonderful the marketplaces were around the world in from 2,002 to 2,007. It's probably evident here in this S and P 500 benchmark that a 9% growth accumulated during that 5 year period of time in Brown Forman, was able to outpace it at 13%. Even more noteworthy from 'seven 12% the following 5 year period, which for purposes of this, we'll label bad times. We actually accelerated our growth rate and compared very favorably to the S and P and of course the 10 year, which show an 8 point differential ending last April for the 10 years. So it's all the stuff that's underneath this story that I've highlighted for you that you're going to hear from people. And to kick that off, somebody that has been around Brown Forman for a number of years and actually worked in this arena a bit, who's going to follow me, who's now our Chief Brands Officer, and that is Lawson Whiting. Lawson is joining most directly from as the Head of our Western European business, but has worked across the company in finance, brand leadership, regional leadership in both the United States and in the international marketplace. And so we're very excited to have him now taking over the leadership role of the company's brands and portfolio. So Lawson Whiting. Thank you very much. All right. Thank you, Paul. Very glad to be back. As Paul said, it's been it's actually been over 10 years since I was involved in the Investor Relations function. But it's wonderful to be back here today and get the chance to really talk to you about our portfolio and some of the things that we see going forward. I must say even in the sort of the 10 minutes before we got this presentation going, just the number of faces and names that I recognize and remember is quite frankly, it's almost amazing how many people both on the buy side and the sell side have been involved with Brown Forman in one way or the other for a long time and particularly those that have been making investments in the stock. I think you've been well rewarded over the last 10 years and hope that some of the things we're going to share with you today give you a lot of belief that we can do the same thing again going forward. So this company has changed in these 10 years quite a lot. We've exited a number of businesses that were lower growth or lower returns and really reinvested or innovated into higher growth categories into what we think of as better businesses with better rates of return. So the result is we've created what we think is one of the best growth stories out there. It's a more focused story than it was 10 years ago and one where we see loads of opportunity going forward. To take a quick look at the portfolio, this basically breaks down our fiscal 2012 volumes. You can see that Jack Daniels represents about half the company. It is very healthy and growing brand. It remains one of if not one of certainly if not one of the best spirit brands in the world. Today, we're going to have or after me, we're going to have John Hayes come up here and he's going to talk about the Jack Daniel's family. I'm going to focus most of my comments on what we have going on in the rest of the portfolio. So as Paul just discussed, one objective that we have for this company is to basically take that the top half of that pie graph and accelerate the rate of growth on it. We're trying to accelerate obviously the entire company, but one of the ways we can do that is to take that upper half of that pie graph and get it really going again. And we've taken that from what would have been say a year ago a low single digit growth rate to today is more like a high single digit growth rate. So that is one of the things where we're benefiting and is helping to drive the entire company forward. We feel pretty good about that. And I'm going to try to talk a little bit more specifically about what parts of that are really driving that better portfolio growth. Southern Comfort is the 2nd most profitable brand of Brown Forman. It has won it's been a challenging brand over the last few years as probably many of you know. Mike Keyes is going to come up actually in a few minutes and he's also going to talk more specifically on what we're doing with Southern Comfort in the United States. But I will tell he and his team have gotten out the brand growing faster than total distilled spirits, which is quite an achievement where compared to where it was just a couple of years ago. We have really revamped the entire program on Southern Comfort. We've come up with a new TV campaign. We've really gone deep into social media. We've unveiled a number of line extensions. A lot of different things have changed on it, all of which we think are helping to benefit the brand. I'm going to show you here is a TV commercial that we began running about 2 months ago in the United States and it's also running in the UK. K. It's actually running quite heavily right now at this Christmas season. We think it's having a lot to do with some of the recent performance. This is a TV commercial, but it's getting talked about. It's getting talked about in a lot of different places, and it's one that you wouldn't think with this brand that you're going to put a middle aged, rather overweight man walking down the beach in a very small bikini or bathing suit with a song that was written in 1970 and a commercial that you don't see what even what brand that we're talking about until the very end. Yet it has cut through the clutter unlike any commercial that I've seen particularly on Southern Comfort. But I think it's really cut through to the clutter better than most spirit brands that would be out there today. And we are seeing the results. It's a very it's only been out for a couple of months. It's too quickly to necessarily judge victory. But I think we feel pretty good that we've found something there and that it's a campaign that whatever is comfortable that we can take into new things. And so we feel all feel pretty good about what's changing on the Southern Comfort brand. Vodka is obviously a very large category around the world and it's what I would call one of the quieter success stories at Brown Forman. We've had a sort of a long term 10 year growth rate of about 6% on largely driven by Finlandia. Finlandia is about 3,000,000 sorry, I thought that was a microphone, is about 3,000,000 cases today, making one of the top 10 global premium vodka brands in the world. Most of that or while most of it is really from Central and Eastern Europe where it's got an excellent position. It's the number one imported premium vodka in both Russia and Poland, which are 2 very big vodka markets and very important markets. So quite proud of that. We've also recently made the acquisition of the Maximus brand which you can see on the slide there. We've launched Little Black Dress Vodka and then Chambord Vodka in the U. S. So there's a lot of different things going on in the vodka space and one where we feel pretty good that we've got some good growth opportunities going forward. Tequila is another big category for us. We acquired the Casa Herradura portfolio in 2007. And since then, that well, that really gave us a platform to be able to grow not only in Mexico but also in the United Herradura is the ultra premium brand that you can see on the far left there where we really feel confident that we can continue to grow that very nicely. It's growing at a double digit rate right now and it's priced just below Petrone. So it has a very nice margin to it. So we feel pretty good about that. El Jimador, which is a really, really big brand in Mexico, is also really starting to move in the United States. We've essentially doubled the volume since we bought it and feel comfortable that that brand really has a very good association. It's particularly strong in Latino population. And we feel pretty good about the growth rate for that going forward. Outside of the Americas, tequila is much smaller, yet we do see sort of more niche opportunities in places like Russia, Brazil and Australia. So some good opportunities on that. Then of course North American whiskey, which really is Brown Forman's heritage and where our roots are with this company. We believe we have the best North American whiskey portfolio in the world, obviously anchored by Jack Daniel's, but we have a number of other brands that we have a lot of strong belief in and can see some opportunity. Outside of Jack Daniels, it really is about Early Times and Canadian Mist right now. Those are the 2 largest of the rest of portfolio. And Early Times which has been in the Brown Forman portfolio for a long, long time has had up and down years. But right now, it is back growing again in the United States, and we feel pretty good about that. It's also growing in Russia. We've seeded it there, and it's going well. And it's got a decent business in Japan. So all pretty good. And once again, a much better performance over the last year than it had had in the prior years before that. Although North American whiskey's penetration is relatively low, particularly if you exclude Jack Daniel's, it is relatively low in the international markets. That's something that we want to make sure we retain a leadership position in. We have really big ambitions and there's a lot of work going on right now to find out how to really play the North American whiskey area. 1 of the or the brand I think that we will lead that with at least on the premium side of the things is Woodford Reserve. Woodford is our ultra premium bourbon the company created back in the 1990s. So this is one that we created from scratch as opposed to buying. It is what we think that we kind of call it the proverbial tipping point in the United States. It's really starting to accelerate. It's getting really strong growth rates right now. It's priced in the low 30s. So it's also got a very decent margin to it. It's got line extensions. You can see the one on the far right there, it's called Double Oak, which is more like a $50 bottle of bourbon. And then in the middle is a much smaller, but the Woodford Reserve Masters collection is more like $100 a bottle. And we sell out every single one of good good portfolio of premium whiskey brands that we really can do something with. Finally, let's wrap back into the Jack Daniel's brand, which it still remains the core and the biggest most important brand in the company. This chart here will show you. It's now got it's the 4th largest brand. This is IWSR data that you're looking at here. And we are almost ready to overtake Bacardi to become the 3rd largest brand in the world by value. So we may get there even this year. But I also point out then, of the top 10 largest brands, if you look at that far right, in the last 5 years, Jack Daniel's the fastest growing brand of the largest ten. So it's been a really good solid success story and one where we continue to see a whole lot of potential going forward. So with that, I'm going to have John Hayes come up and he's going to talk about the Jack Daniel's family of brands. It's the president. He needs you permission. No. I'm retired. You want to do a couple shots? Let's go. Jack and I had a very good relationship, and it's a curious one. What is your one go to item on the plane? Probably Jack Daniels. You recorded it where Frank Sinatra at Capitol Records? At Capitol Records with with Sinatra's microphone. Still smelled of starlet perfume and Jack Daniels? The story of Jack Daniel is the story of America. Good afternoon, everybody. Pleasure to be here. And obviously, it's a great brand that we all work on. And we like to tell stories at Jack Daniel's. So I'm going to tell you a story about Jack Daniel's and some of the reasons for our success being one of these great global power brands. Behind me on this slide, just showing some of the pictures of what we call the history and the maker's world of Jack Daniel's. The story of Jack Daniel's, of course, begins in Lynchburg, Tennessee, a dry county of all things, where Jasper Newton Daniel founded his distillery, America's oldest registered distillery in 18/66. Now it's a good thing for us that he had a nickname Jack because calling for a Jasper and Coke just doesn't quite sound the same. Mr. Jack Daniels did set up his distillery at our famous Cave Spring and insisted on charcoal mellowing his whiskey drop by drop true to one principle. He said, every day we make it, we make it the best we can. And it's a tradition we proudly continue. Jack Daniel's gets its credibility from a real history. It's made by real people in a real place. We have multi generational employees who take great pride in their job, creating a unique tasting whiskey unlike any other. And another interesting fact is that we get over 300,000 people a year that come out of their way 70 miles south of Nashville to visit our distillery from all around the world. And now as you saw in the video, over the years, the rich legacy of Jack Daniel's has made it a fixture in popular culture. Now this is something we did not go and chase. We did not pay Paul Newman to appear in HUD many years ago. It's just for directors and writers and TV shows, Jack Daniels makes a statement about the character. So we don't chase you let it happen, but you can see that it's created all kinds of visual imagery. And it's an iconic brand with enormous equity value and awareness worldwide, not only from our story of Lynchburg, but as you can imagine through American pop culture, through movies and music that plays all around the world has been a great asset for us. So it's independence, it's integrity and it's authenticity. And consumers feel passionately about these values and access them through the brand as the authentic masculine badge. So going all the way back to Bogart and Sinatra, up through Richards and Jagger, today, Zach Brown and Eric Church in the country music arena and even women. Lana Del Rey, you can see in the bottom left wearing a Jack Daniel shirt in her concert. And even this week, we saw in the U. K. Paper, Rihanna was with her friends with a bottle of Jack Daniel's. So the culture continues on as well as you can see in the movies with great actors who say a lot about the brand, whether it's Paul Newman, Jack Nicholson, Al Pacino or Tom Cruise, has been a great factor for us on the brand. And what this has all led to is this powerful brand equity and Jack Daniel's is certainly a power brand in the world, not only of beverage alcohol, but we believe in the world of all consumer products. And as you can see here, we've gone from Wherein the lifespan of brands, frankly, is not that long ago. But back then, we were just selling about 200 1,000 cases in a few states in the United States. So as you see throughout this great ride that we've been on, we're now selling over 12,000,000 cases in over 160 countries around the world. And what this has done is create what I like to call is just a good challenge for us, because there's a lot of balance required in what we do with Jack Daniel's. So obviously, we built the brand from these early days with a lot of the small town special value sort of an undiscovered brand to obviously today when you're 12,000,000 cases around the world, you have the risk of becoming much more of a mainstream brand. So we work very hard to reinforce the specialness of Jack a to popular culture today. So we'd like to say in many ways, Jack Daniel's is the small town hero from the United States, who's made it big on a world stage. Now to take that a little bit further, we also think that we live outside of just the whiskey segment in the world. Now naturally, we are a whiskey and so we're thought of as a whiskey. And outside of the United States, whiskey by and large is scotch whiskey. And so we, of course, have many of the qualities associated with Jack Daniel's, the Scotch does. I mean, it's a very traditional brand. There's a lot of heritage with the brand. It's a quality product, just like many of the scotches are. Being a whiskey, it's an acquired taste. And also, in particular, there's a broad price spectrum that we like to, especially in the scotch, use Johnnie Walker as example, all the way from red label through the colors, the blue label to now even they've got $1,000 products that are out there. So it gives that trademark room to expand if they choose to both below and above. And finally, scotch is really the world's truly global category where it is a by and large big in every country in the world. Now we also compete in an area, probably the 2nd biggest category in the world, which is the vodka category. And so if you look at the cues coming through, vodka being much more of a associated with modern products, more of a stylish, especially with its packaging and its advertising. Vodka is, of course, by its nature, very mixable with a lot of variety. Vodka has been very successful in extending into flavored line extensions. There's dozens of them today. Vodka would have been at the forefront of the RTD category. For example, Smirnoff Ice years ago, very successful in creating a very successful business ready to drink. And vodka, unlike whiskey, it's still very large, but it tends to be more regional, although growing in most places around the world. So the thing about Jack Daniels, we like to say that it's really at the intersection of these two categories. So if you look about it, Jack Daniel's could encompass all of these that are going on here through again, back to my point on Maker's World and the tradition of whiskey cues, but we've been able to incorporate a lot of the vodka world, particularly an example of Jack and Coke and mixability, Jack Daniel's Tennessee Honey in our flavored extension. We have a tremendous ready to drink business. So we like to say that Jack Daniels is competing in both of these worlds. With that, I'd like to now take you through an example from those 2 worlds, from Maker's World and contemporary culture and show you how we're actually bringing Jack Daniel's to life around the world through I have 3 commercials that I'm going to show you right now that, we're very proud of all 3, but you'll see that they're very different from each other. What do you have to do to get a drink around here? Well, a lot, actually. This is a dry account, which means you can't buy it. You'll have to make it yourself. And here that means doing a lot of extra things. Things that are considered too difficult or costly in other places. Lynchburg, Tennessee. It's a hard place to get a drink of whiskey. But it's the only place to make Jack Daniels. He sat in on countless legendary recordings. He was Sinatra's right hand man. So that last one is an ad from Mexico, obviously, but it's running in different languages around the world. Again, it's not scotch, it's not bourbon, it's Jack. Simple message that is very powerful. Saw the music spot. We spend a lot of money around the world on music platforms. And so we wanted to take advantage of that as well as our place in music. And that's a brand new spot that's just hitting the air in a number of countries as well as obviously our traditional Lynchburg advertising that we've been running for many, many years that we were very proud of and continue to update and tell that story. The great thing about this digital world that we're in right now is that one of the oldest sayings that we had at Jack Daniels is the simple encouragement to tell our story, not to sell our story. Jack tells a story, it doesn't sell a product. And we have many stories to tell. And we've been doing it frankly since we've had a Tennessee Squire program since the 1950s that we believe is probably one of the first consumer relationship marketing programs that was with our most loyal consumers around the world. Today, we're having tremendous success connecting with people in the digital world. We have a database of over 13,000,000 fans, including over 8,000,000 on Facebook, and more than half of these reside outside of the United States. So we're able to take the same Jack Daniel's message we've had for all these years in our understated manner, very quietly confident with our friendly knowing smile and a sense of humor than inviting consumers to tell our story and for them to tell their stories back to us. And just a little plug, this is a chart from eMarketer Magazine and Jack Daniels has been recognized as having the highest consumer engagement rates in the adult beverage category. That's beer, but a higher engagement rate. So if you ever get on, I encourage you to friend Jack Daniels on Facebook and just follow the conversation, because it really is consumers all around the world. We like to say we're actually hosting a virtual cocktail party from around the world. So that's been a lot of fun for us in helping to continue to build this great brand. Moving a little bit here now into how we've evolved as a brand. So what you're seeing here is our depletions on the left back to 1990 up to today at the bottom axis. And what you can see is in 1990, essentially we were a one SKU brand from the standpoint of Black Label Tennessee Whiskey. We had just introduced Gentleman Jack a few years earlier. So you can see then fast forward to today with the introduction of principally our RTD business, Gentleman Jack and most recently Jack Daniel's Tennessee Honey, our portfolio now represents 12% of our volume is actually outside of Jack Daniel's black label. It's a similar true story here on our geographic mix. Again, so you'll see cases on the left, the calendar our fiscal years on the right. And you can see in 1990, 80% of Jack Daniel's business was here in the United States. Now you fast forward the business. And although the United States has continued to grow nicely for us, the green bar has actually a few years ago went ahead of the blue bar and now 54% of our Jack Daniel's business is outside of the United States. So very proud of that. Just to touch on a few countries here, I've just selected a few of our developed markets. And again, the access here being millions of 9 liter cases, again, the years beyond that. And we've been doing business in markets like the United Kingdom, Germany, France, Australia and Japan essentially since about the mid to late '80s excuse me, '70s in a very small way and have accelerated that over the years and have been very successful. Obviously, United Kingdom being our biggest market outside of the United States. We're the number one whiskey in the entree in the U. K, which we always find amusing in the land of scotch. We actually outsell them. Germany has been a great story for us for many years. And since we've made our move to our own route to consumer with our own company in Germany, our growth rate has been accelerating. France is one of our most recent success stories in accelerating growth for the last 3 to 5 years in a very large whiskey market. In Japan, which is the 2nd largest whiskey market in the world after the United States, we're very excited about our move to Asahi, which is taking place here on January 1 and looking to continue to grow that business. And finally, Australia has always been sort of our foundation of international growth from the early years, and we continue to do great business there and again with our own company. Now moving to just a few of the emerging markets. We're seeing rapid growth in many emerging markets, especially Russia, Poland, Brazil, Turkey and Mexico. And the interesting thing with this is that, again, the route to consumer, Mexico being a great example, we acquired Casa Herradura. Yes, we wanted to get into the tequila business there. But probably almost as importantly, we wanted to be able to build Jack Daniels in that market. And we've really taken off since we've had our own company there. And the same now we're seeing signs. We've tried for years in Brazil, started our own company there 2 or 3 years ago, and it's now one of our fastest growing countries. Poland, again, because of our Finlandia business, we've been growing nicely. And Russia is now really one of our true exciting short term. We've just really started to get going there with our relationship with Coca Cola Hellenic. So it's early days in all of these markets, which was very exciting for us and we're very excited about the growth prospects for the future. This next strategy, I'm now moving into a little bit of going forward. Where are we going with Jack Daniels? And this is just a nice snapshot to show that at our highest level, we say we want to make every adult around the world a friend of Jack's. And to do this, we need to create satisfying brand experiences that nurture a relationship for life. In order to do this, we need to recruit new consumers and increase loyalty among our current consumers. We need to reach more segments in more markets and participate in more occasions, categories and price points. So the 2 that you see here is we need to grow our existing portfolio as well as introducing new Jack Daniel's products. So I'm going to take you briefly through all 4 of these. The first, of course, is old number 7, black label. This will continue to be the driver of Brown Forman and our portfolio, and we tend to accelerate the value growth of this very special and powerful unique brand. We've recently, after the global financial crisis, been very focused on you've heard about us improving our margins, increasing prices. We've reduced our depth and frequency of discounting. This has gone on around the world. We're still in early days, but we're very encouraged by that our growth continues. We've also been very focused this year and we'll continue on making sure that we're reinforcing the specialness of Jack Daniel's and getting more and more of our investment behind what we call above the line directly to the consumer, telling our story, in particular, in the digital world. As far as accelerating the rest of our portfolio, Gentleman Jack would have been our first line extension back in 1987. It's a charcoal mellow twice before it goes in the barrel and after it goes in the barrel. And you can see by this chart, again, a great acceleration, not only here in the United States, but over the last few years, we've been introducing it and developing it in many countries around the world. And in fact, now 30 5% of Jack Daniel's volume is outside of the United States. This brand really again was essentially developed for sometimes drinkers want to trade up or show off a little bit and do something different and Gentleman Jack is there for them on that status occasion. Another line extension we did in the 1990s was Jack Daniel's single barrel. It's our ultra premium line extension. And again, you can see by the graph, it's performing very well. It sells for about twice the price of Black Label. And the interesting thing on this one is over 60 percent of single barrel is sold outside of the United States and does very well in places like Australia, France and the United Kingdom in particular. The very high margin whiskey for us is aimed at discerning drinkers and it reinforces our whiskey making credentials at Jack Daniel's. As you can see here, we've been doing a lot of innovation over these years. So it's not new to us. So our Jack Daniel's ready to drink business, such as Jack Daniel's in Cola and Jack Daniel's Country Cocktails continue to be very successful. And the one thing on this one, 90% of the volume of our RTD business is outside of the United States, an extremely big and profitable business for us in Australia, do very well in Germany and more recently in Mexico and the United Kingdom. We've seen tremendous success. These RTDs offer consumers more refreshing and convenient ways to enjoy Jack Daniel's, And we particularly go after what we call the beer occasion. And we like to say as well, this has sold a lot of it at events, sporting events, on premise at concerts, but it's a badge in the hand that we really like to have out there. And another example on this one is, it's more innovation is we've just launched a Gentleman Jack RTD in Australia where the super premium RTD segment has been evolving. Moving on to our latest and most successful introduction, Jack Daniel's Tennessee Honey. Jack Daniel's, as you can see here, was the number one new product introduced in the United States according to Schenken publication through MarketWatch and Impact. The reason we got into this really, obviously, a great business decision, but we know that many consumers have a genuine affinity for what Jack Daniel's stands for. But sometimes, quite frankly, they just don't like the taste of full strength whiskey, particularly in women, where we've had tremendous success. So Jack Daniel's Tennessee Honey offers the Jack Daniel's experience and character, but at a more drinkable flavor experience. And you're going to hear more about Tennessee Honey from Mike Keyes when he talks about the United States. But we have begun to roll this out. This year, we've expanded to the United Kingdom, Australia, South Africa, Poland and a few other international markets. And we are very encouraged and excited by the reception and plans are underway to expand to more markets this coming year. I'd like to now introduce our latest innovation and new brand from Jack Daniels. On stage, meet the spotlight, it was with him, made it his own in New York City. It would become a staple of late Las Vegas nights and a mandatory at country club afternoons. When he traveled, his jet carried it to foreign lands. And in the end, the man in the black and white tuxedo was laid to rest with a bottle of it. That's why his name is obviously Well, we didn't plan this today, but we in hindsight, Saul, he's born here across the river in Hoboken. I don't know if you're aware of this, but today, December 12, is Frank Sinatra's birthday. It would have been his 97th birthday today. That's one of the reasons we did this is his 100th birthday is coming up obviously in a few years. We have done this in partnership with the Sinatra family. They've been very supportive and excited in helping us out with this new brand. It is a bold, smooth and classic whiskey that Frank would have loved. We in fact it is a different one that you're going to have the opportunity to taste here tonight, which is very rare for you all because it's still not on sale here in the United States other than we've launched it at the Las Vegas airport in the duty free store in Las Vegas, which we thought Rat Pack in Las Vegas, it was a good place to start, but you have to leave the country in order to buy it. It's retailing for $150 a bottle at this and we are selling. It's been there for 2 weeks and I've heard from our duty free people, it's selling very, very well. We're going to be rolling it out in a slow expansion because frankly, this is a limited product we've created and you'll hear more about it afterwards. But these are special barrels that we set aside that are called Sinatra barrels. We don't have an unlimited supply of them. So we're being careful on how we bring it out. It'll roll out into some more duty free stores next month, Heathrow, Dubai, Singapore and Sydney are on the docket. We're also launching it at one of our most profitable stores in the whole world, which is our visitor center in Lynchburg, Tennessee. So if you want to go down there next month, you can buy a bottle. But we're really excited about this marriage of 2 great international icons. It's a true story. Frank in popular in popular culture and the conversation. We did research and Frank is still very cool to young and old around the world. So we're really excited about this new brand from Jack Daniel's. So I'm closing here with 2 slides that really talk about the future and why we're so excited about the future. The first one I'm going to talk about is the unique value of Jack Daniel's. And you'll see here on the right, you're going to see a few brands of the global volumes according to IWSR is what's on the bottom and on the left is what the price points average about on a global basis that IWSR would say for a few of the big spirit brands that we admire frankly around the world. So you can start with the 2 largest international spirit brands, Smirnoff and Bacardi. Now they both sell 12, I think Smirnoff's probably closer to 20,000,000 cases, very successful brands, but sold at a price point that you can see here depending on the country where it's going to be sort of in the $10 to $15 range, which we would call the standard price range. And they've been very successful at doing so. Now you can also go high priced like Johnnie Walker Black Label and Chivas Regal. So super premium brands, very successful that sell for around $35 a bottle, give or take, around the world. And they're considered very special with status and they're selling in that sort of $5,000,000 to $6,000,000 case range, again, extremely successful brands. However, we believe that Jack Daniel's is we know it is the number one selling whiskey brand as an expression. So, Johnnie Walker as a family, yes, is bigger as a trademark family. But if you look exclusively at Black Label, we're the number one selling whiskey in the world. And if you say, you put this into the perspective of on average Jack Daniel's around the world, $25 to $30 a bottle price point, usually in the somewhere 30% to 50% range more than the standard price category. And you can see where you're seeing we're selling around 11,000,000 cases. Now to put that into perspective, a brand like Jim Beam, 5,000,000 cases Jameson, about 3,500,000 cases and Maker's Mark, which we're all hearing about from this bourbon renaissance, but selling about 1,000,000 cases around the world. Even Hennessy, a fabulous brand at high price point sells about 5,000,000 cases. So you're looking at Jack Daniel's, what we like to somewhat say is in rarefied air at a very high price point with very high volumes. And this, we believe, back to the saying of Lem Motlow that said, all goods worth price charged. And we're very proud of this statement that we're making. And finally, as far as the future, we're in the beverage alcohol business, so it's growing around the world. We are in the whiskey business. We've demonstrated to you that this is a global category. And as you see on the left, it is a growing global category. What you're seeing here is what we call standard plus whiskey depletion. So this is essentially standard price whiskey. We're not including lower priced local whiskeys like the Indian whiskeys that would be in here. So a growing category. Now Jack Daniel's share within that category, we're doing well. In 2,001, we had a 7% share of this whiskey category. Fast forward 10 years, all that growth we've had, we've grown share, but it's only 2 points. Very proud of that, but the exciting thing for us is we're going after that other 91% and that is where the opportunity goes for us in the future. So we frankly just think that we're scratching the surface on what Jack Daniels can be with enormous potential ahead. So with that, I'm closing with since it is the Christmas season, I wanted to close with our ad that we've created for this holiday season. We launched it last for the United States. It triggered a lot of emotion around the United States. We've now taken it to some markets outside of the United States. And we believe it's again showing the emotional connection this brand brings. And then you'll see how we're taking that into the United Kingdom to close it out. It's not what's under the tree that matters. It's who's around it. We are here in Covent Garden, smack bang in the center of London, and we're building the Jack Daniel barrel tree. It's got a strong tradition back in Lynchburg. Every year around the festive period, the distillery guys get together, start building this amazing monument. There's a crew of 9 who are going to be busy rolling barrels, screwing them in, getting on cherry pickers, telelifters, forklift trucks, all sorts of things going on. There's a lot of wiring involved, lights, garlands, pine cones and berries, all to add that sort of festive touch. Something that no one in the UK has seen before, apart from on a poster in Lynchburg. And to see it in Covent Garden every day for a month is going to be incredible. Well, we want to bring a taste of Lynchburg, Tennessee to the folks here in London. We brought over a 140 barrels from our distillery in Lynchburg to erect trees to celebrate Christmas when you find folks here in London. These are authentic barrels that we use in Lynchburg. If you were to take the bung out of the bung holder, you'd smell authentic whiskey inside that barrel right now. The build's gone really well tonight. The guys behind me have spent last 4 or 5 hours just getting up there, getting all the barrels on. And then they'll be back tomorrow night to do all the decorations. This is the 1st barrel breed that has ever been built outside of the US. And what a great place to put it is here in the Rondeau. It's all about the people around the tree. It's all about Christmas time. Win with your families, your friends, and enjoy Christmas. And that's what it's all about. We got Covent Garden this year. We're hoping to have it out here in Times Square next year. So thank you very much. With that, I'm going to turn it over to Mark McCallum. Thank you. Well, thank you, John. It's always difficult after a 30 minute Jack Daniels' immersion not to just marvel at the strength of that story. I think, John, you could probably just go on tour, do that presentation and have some fun. But in addition to that story on Jack Daniels and the story that Lawson shared with you in regard to our vodka, tequila and other brands in our portfolio, we want to spend the next 45 minutes bringing to you a perspective of Brown Forman's performance through the lens of our markets or the geography, geographic strategy that we've been deploying. And myself and 3 of my teammates from around the world will share with you some of this story. So I will start with a global oversight of our geographic journey of expansion And then Anje, Jill and Mike will share with you some more interesting specific insights into 3 market types, 3 market stories that underpin the validity of this strategy. Let's just reprise the 20 year international growth story of Brown Forman. The pie charts on the screen here will show from 1992, the 10 year run through 2002 out to 2012. Moving from 86% of Brown Forman's business, this is a net sales share. 86% of our net sales generated in the U. S, 14% everywhere else and all the way through now to last year 2012 where 42% of our sales generated in the U. S. And the balance 58% elsewhere in the world behind this purposeful strategy of internationalizing the Brown Forman Company. It was born in the mid-90s, a purposeful strategy developed by the leadership team at the time to take Brown Forman behind the trademark Jack Daniels to the world. Over this period of time, the compound net sales growth of the company over the 20 year period was around 5%, and in behind that, the U. S. Growing around 1% compound over that 20 years and the international business growing somewhere around 13% compound over that same 20 years. Maybe the last observation from this chart, which you won't see from the numbers here though that from 2,002 to 2012 are more than doubling of the net sales of Brown Forman to the current $3,600,000,000 last year. So it is a journey of internationalizing the company and it has been a purposeful journey, which was turbo boosted even more so in this past 10 years. Another way to look at it perhaps is in terms of the scale of business that we have beyond just the U. S. And what you're looking at here over the same 20 years is the number of markets of scale or what we would say of sufficient scale to begin to encourage competitive positioning enough for us to be confident in the future of our business within that market. So from a handful of markets, 6 just 20 years ago to around 40 markets today that we would declare of scale. Now some of the stories in behind the ability to do that, if I look particularly at the last 10 years, I would say, of course, that the addition I guess the international movement started with Jack Daniels. It's such an incredibly strong trademark to be able to take out to the world and interest third parties in helping us sell market and distribute the Jack Daniel's brand. Then early in the last 10 years, the acquisition of the Finlandia business has certainly fueled our ability to grow internationally, particularly in Central and Eastern Europe. And then 6 years ago, the acquisition of the Carcera Dura business, bringing also to us an ability to grow our business beyond just the trademark Jack Daniels. And so the story of developing markets of scale and internationalizing continues. So it's the brands that are causing it and enabling it. As Paul said in the early, the story of developing markets of scale and internationalizing continues. So it's the brands that are causing it and enabling it. As Paul said in the early lead in here, the people that we've been adding to our business internationally have been a huge and leading part of the capability of this international expansion. And also the route to consumer or the way we go to market in any particular country has been one of the primary enablers of our ability to demonstrate the performance and expansion that we've been showing. What you're showing what you're seeing on these two pie charts is it's a 10 year spread 2,002 to 2012. It's net sales again. It's represented by strip net sales. And it's talking about the type of or the method of going to market that we have been using. If I start with the 2,002 pie chart on the left, Agency, 88% of our international sales, this is excluding the U. S. Here, of our international sales was generated through 3rd party agency business. And again, it was relatively easy to go and find partners in countries elsewhere in the world who were interested in Jack Daniels as a brand, certainly in terms of the ability for Jack Daniels to add margin to their own operations in those markets, but also the ability of Jack Daniels to lead the development of some of their own brands as Jack Daniels grew in the on and off premise around the world, brands in the portfolios of Bacardi and Diageo and other partners that we were using 10 years ago were benefiting as well. So it was a very successful model to begin this rapid internationalizing of Brown Forman. Although now over the last 10 years with the acquisition of our vodka brand Finlandia and the additions to that vodka portfolio Lawson spoke of and the addition of our tequila portfolio and the innovation and creation of some of our own whiskey brands, it's harder for us to get the attention of a third party distributor to develop brands that they may also have competitive offerings of. So vodka brands, all our competitors have vodka brands. Tequila brands, most of our competitors have tequila brands. So we have set about a deliberate move to ensure that we get sufficient competitive influence in markets that are important to us to be able to grow our business beyond just Jack Daniel's. And so the movement you see from 88% of our business in the hands of 3rd party distributors, mostly competitors actually distributing our brands back then to today 34% of our net sales generated internationally through the same third party arrangements. And we have moved purposefully in a number of these markets into our own distribution model, which now 52% of our international sales, we control within that market the sales marketing, distribution and general management of the business in those markets. The cost sharing segment that you see there principally speaks to the U. K. Where we have a very favorable or a very good partnership with Bacardi in a very important market to us. And so the journey of our route to consumer strategic evolution has been a fascinating one for us over the last 10 years and has as its core, the basic need. It is not that everything will eventually move to owned because there are models in certain markets that particularly suit our business and our balance of risk and reward at the moment. I think Paul had said that it depends on the market as to how we may set our models up. But we're very pleased with the ability to do it. And mostly, we want to be sure that in the priority markets that we have, that we have the influence needed to be competitive in that market. The slide you're looking at here on the horizontal axis declares the key priority markets that underpin our Brown Forman 100 and 50 strategy. And in each of those markets, the blue column illustrates the size of the total distilled spirits business in that country and the red line indicates the Brown Forman Company's market share in that market. A couple of observations I would make or offer to you here. As you look at this collection of markets, there are some commonalities in that collection with a number of our global competitors. So just like others who we compete with, the United States remains the most valuable, the most competitive spirits market in the world. I might just refer to that asterisk on the China market there. We put that asterisk there because all the other market sizes are directly sourced from IWSR. We're in some very healthy discussions with IWSR about our view that IWSR has not yet found a way to accurately quantify the Chinese spirits market. In fact, we believe it's somewhat overstated in the IWSR world, but not a large point just to say China is a hugely important market with a varying number of sources of who believes how big that spirits market really is. But getting back to observations of the actual markets themselves, as I said, many of our competitors would have the same, the United States and the obvious emerging markets, the brick markets and Turkey. But there aren't many of our competitors who would have on a set of a dozen key priority markets for a 10 year strategy markets like France, Germany, U. K, Australia, maybe even Poland, you could argue. And so what we would say is that this representation of our priority markets has commonality, but is also somewhat unique to ground foreman. And we believe because of the fact that we have been able to evolve our route to consumer model in a number of markets around the world, we're only at the early stages in a number of these markets of realizing the opportunity that they present. In a minute, you're going to hear about 3 of those markets. You're going to hear about 1 of our classic emerging markets, Russia. You'll hear about one of our very interesting markets where we have our own distribution via Carcera Dura acquisition in Mexico. And then Mike is going to talk to you, of course, about the world's most valuable spirits market here in the U. S. But one of the other observations of this chart that we like to make is that our market share, no matter which model or which market you look at, our market share is below 10% in every single market. And in the markets where over the last few years, we have been able to gain that full influence over the development of our business, we have inexorably been able to increase our market share. So this chart fuels our belief that through the market lens, our Brown Forman 150 strategy offers great optimism to us in regard to our future and our ability to continue to grow internationally. And with that, I'll pass it off now to Andrzej Genota, who is here from Warsaw, Poland, has English as his third language and, has responsibility for the growth of our business in Poland, Russia, the CIS markets and some others of the Central Eastern European area. So, Anze, welcome to the stage, and we look forward to hearing your story about Russia. That's a fast story. I think that's Russia. I think that's Russia, yes. Okay. So, Marc, thank you and welcome to the cold Russia. Just to give you kind of information, it's -ten right now in Russia Moscow, so it's yet and it's snowing. So it's good to be here in New York. So as you know, Russia is the largest country in the world as with a population of almost 150,000,000 people. But Russia is also one of the biggest spirits market in the world. Russia is by far number 1 vodka with 222,000,000 cases, and that's even a lot for the Polish person. Russia is also the 3rd biggest tequila market in the world as well as very nicely growing whiskey market. Russia, of course, is a priority market for Brown Forman because we observe a strong interest of the consumers into growing categories, which fits well into our brown formulant portfolio of brands. So in today's presentations, I'm going to talk about 3 areas. First of all, I would like to give you a headline about the spirit category and the premiumization trend. Secondly, I would like to talk about how the portfolio is positioned to capitalize on the growth of the premium categories. And finally, I will talk about the role of the role to consumer. It's quite a busy slide, but it showed basically the dynamics of the spirits category in Russia. This is what you can see here that the spirits category, which is around 2 62,000,000 cases has been declining 1% over the last 10 years. But the decline was driven by the sub premium categories. We can observe that over the last 10 years, a strong premiumization trend and the premium category has been growing by 14% on the annual basis, has been shifting its size to 3,600,000 cases. If you look into the share of the premium category and to the structure, the biggest part of the premium category in Russia is premium vodkas. It represents around 17% 70% has been growing around 13% on a year basis. The 2nd biggest category is whiskey and the 2nd biggest premium category and the fastest category is whiskey, which is around 367,000 cases and is growing around 24% on an annual basis over the last 10 years. And finally, the key loss. The key loss has been growing around 19% and is around 167,000 cases. But it's worth to note that tequilas in Russia are premium tequilas. Tequilas market in Russia, 40% is represented by the premium tequilas. It's very interesting. So let's have a look how we are doing, how we are performing on that market. So we have a very strong portfolio of brands, which is very, very nicely working on the Russian market. Starting with vodka. Columbia Vodka is number one vodka number one imported vodka in Russia. It's also been outperforming the category over the last decade. And our goal is to continue the outperformance over the next couple of years. We would like to grow parent brand as well to concentrate on the launching new innovations. Like this year, we have launched Glendaya Vodka Platinum, which enable us to capture the opportunity in the super premium vodka category. Super premium vodka in Russia is 350,000 cases, a huge category. 2012 is also the 1st year of our quest of the tequila in Russia. We believe that we have a strong portfolio of brands with Herradura, which can play a significant role in the superpremium tequilas. And with Eric Himador, which can play a role in the standard in the premium tequilas as well as papillopes, we can become a very strong player on the market over the next couple of years. And finally, whiskey. Drag Dani is number 1 premium whiskey in Russia That's based on the H. C. News October August, September results from H. C. Nielsen. Jack Daniel's is also number 1 American Whiskey in Russia. And Drak Daniels is what still has huge potential to grow. But as the appetite for the American whiskey is growing in Russia, we decided to launch Early Times Kentucky Whiskey. Early Times will enable us to kind of capture the opportunity of a standard whiskey category in Russia. So we have very strong brands, which are very relevant to the kind of the categories and the consumer interest in Russia. But it's also very important to have a very strong road to consumer. So let me kind of put this a bit into historical perspective what has happened over the last 10 years in Russia. We started the business in Russia only in 2004 and followed then 3 years by the ban on imports. Afterwards, we've been growing the market pretty much the business pretty much in line with the market until 2010 when we decided to kind of explore opportunity of a partnership with the biggest Coke bottler in Europe, Coca Cola Clinic. In 2011, we decided to go together with Coca Cola Hellenic. That give us a great opportunity because Coca Cola Hellenic can give us the access direct access to around 60,000 stores in Russia, which are spreaded around on this great huge territory of the country. So and the first results of that are really very promising. We've managed to we are currently approaching 500,000 cases, which is 60% more prior to the year before transition. So having a very strong portfolio of brands and having a very strong route to consumers, we also very work very much on building a strong team in Russia. We have a very strong brand from organization, which is responsible for creating the strategy as well as building the right brand building activations for our brands. In closing, we have a strong brand. We have very strong road to consumers, and we have a strong dedicated team, which I believe will give us a great potential for the further growth. With this, I would like to move from the cold Russia into sunny Mexico, the biggest tequila markets in the world, where Jim Jones will show us a bit of the color how the brands are going there. Thank you very much. It's Jean Monje. Thanks, Anjay, and thanks for joining us today so I can talk to you about our successes and our opportunities in Mexico. Today, I want to talk to you about 3 main topics. First, I want to talk about the size and the composition of the spirits and ready to drink market and the recent growth trends. And then I want to talk about the power of our portfolio the key brands we have to grow with and then I want to talk about leveraging distribution that we acquired with our tequila brands that have helped us grow Jack Daniel's. First of all, many of you may know that Mexico right now is going through a bit of a renaissance. There was a great section in the recent Economist about how well Mexico is doing, so I won't belabor it. But I will say a couple of things. It is currently the 11th largest economy with a population of about 120,000,000, much of it skewing young, so that's very favorable for Brown Forman. Now as well, on the slide you see, the left side of the slide shows the spirits market and the composition by type of spirit. It's a 22,000,000 case market, and the largest segment is at the bottom. It's 7,800,000 tequila. It's the number one spirits market, and it's growing at 5%. We have the we're the number 2 player in tequilas. Also noteworthy, if you look at whiskey, growing at 20%, of course, as much as around of the world, Jack Daniel's is iconic and aspirational for Mexico as well, and it's helping us gain market share there. If you look at the right side, the ready to drink category is 11,000,000 cases. You see at the bottom the yellow, and that 5,000,000 cases is our brand, new mix, which is a ready to drink that's made with our el Jimador tequila, and it's been growing at 12%. Now ready to drinks are only 1% to 2% of the Mexican beer market, so we think we have a lot of room to grow and have only begun to tap into the potential with our Jack Daniel's and Finlandia entrants into this category. So I'm going to talk a little bit about our portfolio in Mexico. So our tequilas. We have the number one super premium brand in Herradura that has been benefiting from premiumization trends that have allowed us to grow double digits. In fact, this year, net sales are up 22% over and above last year that also had nice growth. We also have a strong regional brand in the premium segment called Antiguo. It's the 1 on premise brand in Guadalajara, and we believe it can expand nationally. In the mainstream category, we have El Jimador, which is the 2 brand by value and volume. In the RTD segment, I mentioned that our new mix is the number one brand, and we've been able to leverage that knowledge and our position in the market to introduce Jack Daniels. We introduced the Jack Daniels RTD in 2,009, and it is already the 1 premium RTD, the 4 RTD overall. We also introduced Finlandia Frost, our Finlandia based RTD, and it is the 2nd largest vodka based RTD, and it is growing faster than its competitor. Of course, everyone loves Jack Daniel. Mexico's loves Jack Daniel's. It's a Tennessee whiskey, as you know, growing in a scotch dominated market. And we believe it can play in the super premium category, and we have whiskeys that can play in the mainstream. And if you notice at the top, in the super premium category, we have Jack Daniel's Single Barrel, Gentleman Jack and Woodford, all that we believe can do nicely in the Mexican market. In the aggregate, this portfolio has returned to growth mode over the last 2 years and allowed us to grow at 13% in fiscal 2012 10% year to date. So let's look specifically at the success we've had leveraging our distribution to grow Jack Daniel's. If you look at this chart, I'm going to kind of walk you through it. We've converted fiscal year 2,001 to our base year, and we have it at 100. The brown bars are our spirits volume, and then the blue bars sitting on top of the brown bars are our RTD volume. And then the green line represents our net sales. Now until 2,008, we were with a third party agency doing our distribution. In 2,008, we brought Jack Daniel's into our Mexican distribution that we acquired with our tequila brands, and you can see the inflection point there. You can see that we grow from if you just look at 2,008, we get up to something that would be 50 6x what it was in the base year of 'one. But if I just kind of eyeball it here versus when we moved it in, in 'eight, you see a significant growth, I'm going to say at least 10x. So you can see that we have a great portfolio in a growing market with a good economy, a good owned distribution, and we have wonderful people that we believe and are confident will continue to deliver growth in this segment. With that, I'm pleased to announce and introduce you to Mike Keyes, President of the North American Group, to discuss how we have accelerated our growth in this market over the last 2 years and to explain how we have confidence we will continue to grow. Mike? Thanks, Jill. I guess I'd just start out by saying business is strong in the United States. So it is a great time to be with you to share our success over the last 2 years in both gaining market share and also in accelerating the growth rates across our portfolio of brands. Mark had talked about, he'd used some great words attractive, competitive, valuable. Another word I would use for the North America U. S. Spirits business is innovative. And if there are a few things that I'd like you to take away from the presentation today, they are these. 1, the spirits category has been improving in ways that Brown Forman is uniquely positioned to benefit from. Brown Forman used the challenges of the recession to ramp up innovation, to create opportunities to improve our overall business And with the success in our innovation and with the current environment that we're operating in, I'd like to leave you today with the confidence that we will continue our top tier performance and that we are gaining and winning in the marketplace. As we talk about the environment, there's one observation that is very, very important to Brown Forman. And that is that the growth trends for premium brands are outpacing both the total distilled spirits category and the value and popular price segments. This is particularly beneficial to Brown Forman where 87% of our portfolio in the United States sells for more than $15 a bottle. In fact, Brown Forman is the most premium of the top 5 spirit companies ranked by value in Nielsen. With the economy slowly continuing to improve, Spirit Brands are returning to taking more price than they have in recent years. And Brown Forman has been taking more price than the market in general, again, according to Nielsen. Jack Daniel's is supporting its price increases by building brand equity in a number of ways in the United States. This year, we have significantly increased our media expenditures and our presence by placing advertising on network television and by placing out of home spectaculars in key markets across the United States. This creative use of ad placement portrays the look of a leader and further helps us to premiumize the brand to our consumers. Jack Daniels is blessed with an ability balance its storytelling. I think John did a great job of taking you through how Brown Forman and Jack Daniels use authenticity, integrity, tradition, Americana and independence to bring our advertising alive. With the increasing importance of multicultural consumers, I'm also proud to say that for the first time in our Jack Daniel's is placing advertising on Spanish language television. Innovation has also been significantly increased across our portfolio and within the Jack Daniels family brands. This year, we're introducing a number of new super premium offerings that reinforce the small town handcrafted credentials of the Jack Daniel's distillery. Examples include Holiday Select, which is a brand that kind of fits into that holiday Christmas barrel tree program. And we make a large donation and the program revolves around Operation Ride Home, which provides our cash strapped soldiers with a chance to return home for the holidays. Another great product that we are introducing is unaged rye. It's currently being introduced in Lynchburg and throughout Tennessee for the holidays, and it will roll out in the rest of the United States in February. And John has already told you about the excitement behind the Sinatra bottle and I just reiterate what John has said. If you happen to find yourself in Las Vegas or down at the distillery, please pick up a bottle, you won't be disappointed. We have also increased the investment that we put behind our digital marketing initiatives. And as John pointed out, this is paying huge dividends. Jack Daniels now has over 3,500,000 friends on Facebook in the United States, and we have the highest engagement scores of any spirits brand in the world. We will continue to use our partnerships, including our sponsorship of Grammy Award winning Zac Brown, with messaging that reflects the values of Jack Daniels by creatively relaying the importance of responsible consumption of our products. We've also increased our presence in professional sports venues by partnering on advertising and responsibility initiatives with groups like Be My Designated Driver and these affiliations are very visible and important to our key legal drinking age to 35 year old male consumers. Jack continues to bring iconic and integrated marketing programs to the marketplace. Our summer independence program reminds consumers that Jack is the authentic American spirit. Our holiday programming emphasizes the fact that Jack has a tradition of bringing family and friends together and our music programs reflect the historical role that Jack has played in nurturing pop culture throughout the world. Bourbon and Tennessee Whiskey have significantly outperformed total distilled spirits over the last year. As you can see from the slide, this is particularly beneficial to Brown Forman, where over 60% of our company's retail value in the United States as measured by Nielsen resides within this category. We have a great portfolio of brands. And not only is Jack Daniels innovating, but many of the brands within this set are also innovating. Honey has been the most successful new product launch in our history. And I'd like just to take about a minute and a half to show you how we've supported the launch of this brand within the United States. Strategically started the campaign by building lore around the origin of the honey on Facebook. So news of Tennessee honey spread with the endorsement of Jack's loyal and passionate fans. Then we designed to be Jack Daniels in his DNA and made a national TV spot out of For the soundtrack to the campaign, we commissioned the Stone Foxes to cover Slim Harpo's I'm a King Bee. This innovative take on a classic blues track was perfect for the first flavored variation on Jack Daniel. Using Twitter's real time platform, we instilled a sense of urgency to get fans to find the product and be among the first to try it. Then we needed to reach a broader group with news of Tennessee Honey. So we mobilized our honeybees to tease our origin story on sites relevant to the newer non whiskey drinking target. Non Jack drinkers are now Jack drinkers. Jack drinkers, well, they're still Jack drinkers. Enough said. Early in its 1st year, Tennessee Honey became the number one brand in the growing flavored whiskey category and it outsells Red Stag and American Honey combined. As John mentioned, Honey was also chosen by Impact Magazine as the best new brand introduction of 2011 and it's already become a top 100 brand in the United States. The brand has accumulated nearly a 1000000 new friends on Facebook, of which half of these are incremental to our existing Jack Daniel's franchise. And as we approach 2,000,000,000 media impressions, we certainly have extended the reach of the Jack Daniel's family of brands by bringing new consumers who haven't used Jack Daniel's into the Jack Daniels franchise. Earlier this afternoon, Lawson showed you the new Southern Comfort Television spot, and we're very, very excited about the work that's going on to revitalize this brand in the United States. As with many of our brands, we began shifting resources to media over the last year and Southern Comfort is certainly maybe the biggest benefactor of that move. The new Southern Comfort Whatever is Comfortable campaign has both significant media and digital components and it's captured the attention of U. S. Spirit consumers. We believe that the consistent delivery of our message with 36 weeks of television advertising will drive unaided brand awareness and that this schedule coupled with the new creative and with exciting new line extensions like Bold Black Cherry we'll continue to grow the brand and the results have been dramatic improvements in our U. S. Sales and value trends. I'm proud to say that after several years of decline, the Southern Comfort family was up 3.2% in Nielsen value for the last 3 month reporting period. If I take you back to my opening comments, there are a few things I'd like you to walk away with. We're growing again, we're growing value share. The spirits category continues to improve in both the on and the off premise. The shift in consumer preference to both premium spirits and the Bourbon and Tennessee Whiskey is real. And if you combine that with our ability to take price, it's created a very positive and enviable position for Brown Forman in the United States. I'd like to thank you all for your attention. We're now scheduled for a break. I would ask if you could return to your seats by 320, that would be terrific. Thank you very much. Ron Berg, Brown Forman, Chief Financial Officer. Good afternoon, everyone. Let me add my thanks to you all for joining us this afternoon. Before the break, we covered quite a bit of material on the opportunities that we see for our brand portfolio globally and especially outside of the United States. I'll put a financial context around that. And I'm also planning on adding a little bit of color around the North American whiskey opportunity, some of the premiumization trends that we've been seeing, our international expansion. And then I'll talk a little bit about our capital deployment and then total shareholder return. So let me start with this slide. It's a slide that many of you have seen before. It basically summarizes the results of everything we've talked about so far. And I do think it's a great example of what we mean when we talk about how we think long term. This chart basically shows you net sales, gross profit and operating income going back over a 35 year, 25 year, 15 year and 10 year time horizon. And the one thing that, I'll point out is that you basically see very consistent performance in the high single digits across all of these time frames and across all three metrics. For the last 5 years, you'll see we have not quite performed up to these historical levels. But as you all know, during that time, we had one of the biggest recessions that we've seen in modern times. And with that recession we saw the move going from the on premise to the off premise. We saw trading down versus trading up. We saw competitors competing more on price than on brand building. And we saw the inability to raise prices to recoup costs. But in spite of all of this, we still grew. And I would say that one of the reasons for that growth is to a large extent a testament to much of what you've seen up here in the course of the day regarding our geographic distribution. And to the extent that we've diversified so much geographically, there were a number of markets that are able to buck those trends during that time. More recently, as I'm sure you all have heard in our recent conference calls, we are performing back to closer to those more historic levels. In fiscal 2012, we had underlying operating income and underlying sales growth at 9%. And then more recently year to date through October for fiscal 2013, our underlying sales grew at 8% and our operating income at 12%. Also as you've seen so far in fiscal 2013, we talked a lot about being focused on driving high single digit growth through better balance in pricing and volume growth. Prior to the downturn, we generally were experiencing price representing about 1 third of our revenue growth and volume remaining the remaining 2 thirds. And those are our goals now here as we've stated for fiscal 2013. When you look at the performance year to date, our price mix is up over 2 points on the underlying growth of 8. So we are definitely headed in that right direction. Let me talk for a minute about gross margins. This slide illustrates our gross margin over the last 10 years. As you can see, we're off a bit from the peak in 2,006. Although in recent years, gross margin basically hovered around 50%. Coming into this fiscal year, we've talked about our focus and how we are using pricing to support and elevate the premium position of our brands, but also importantly over time to recapture some of this lost margin. As we reported last week, year to date through October, our gross margins are up 260 basis points and out of that half 130 basis points are coming through the organic improvement that we're seeing through price mix and to reduce costs. In addition to pricing opportunities, let me also add some color on the resurgence that we've seen in the North American whiskey category. As you can see in this pie chart, our portfolio skews towards whiskey. And we believe it positions us well to outgrow the industry as we believe that the revival of the category particularly for bourbon and U. S. Whiskey is still in its early stages. And we believe that this is true both in the United States as well as globally. If we look at U. S. Whiskey and bourbon volumes on a totally global basis, we've seen growth since approximately the year 2000. And more recently according to IWSR, this most recent information in 2011, bourbon was the 2nd fastest growing category. So what do we think is driving this global growth? Well, we believe that one of the biggest reasons is the enormous global appetite that we see for Americana. And Jack Daniel's is the premium imported American spirit brand as I think John Hayes did such a great job highlighting earlier today. We look specifically at the U. S. Market. Mike shared some of this with you as well. On value terms, when you look at U. S. Whiskey and bourbon, it's basically been growing faster than the total distilled spirits for the last several months. We believe some of this renewed interest has to do with some of the interest that we've seen in craft distilleries. But really to a large extent the early stages that we believe that we're in, in terms of innovation. And as a great example of that, which you saw earlier with Tennessee Honey, which year to date has grown at a 50% rate and in the United States has continued to grow this year at 20%. Let me turn for a minute to premiumization. As you've seen, Brown Forman has one of the most premium portfolios in the industry with 90% of our total retail sales value at premium prices and above. So we believe with that we're also uniquely positioned to capitalize on the premiumization trends. We start in the developed world and you look at all the developed markets together. What we've seen is the further you move up the pricing ladder, the greater the growth. In this chart, we have brands priced premium and above growing in the aggregate at 7% compounded rate compared to those at standard and below growing at 4%. When you compare that to the emerging markets, the emerging markets are actually more striking and that the high end has been growing at double digits and at roughly twice the rate as the standard and below price points. And we really believe we're only beginning to tap into the enormous potential around the world that premiumization has to offer. Let me move to our international expansion. As Mark showed earlier, our mix of business has been undergoing its own United States. In the year ended with fiscal 2012 in April that number was 58% and was driven by a 19% CAGR over that time frame. And in fact, when you look at it over that last decade, 85% of our growth has come from markets outside of the United States. And again, we believe we're early in penetrating this global opportunity, particularly when you consider this in light of the fact we have some of the smallest shares of the total non U. S. Business when you consider the large spirit companies. Before leaving this slide, let me just make one quick comment on the U. S. Business. U. S. Sales have grown during this time frame. It's been albeit at a relatively slower pace. But when you look at the more recent results as Mike was talking about year to date through October, our underlying sales growth in the United States actually now approximates our global growth rate over the last 10 years. So let me talk for a second about this long runway for growth. Oftentimes, I'll get the question, how long do we believe we can continue to outperform the industry? How long is that runway? Mark shared a similar slide looking at specific individual countries. This wraps them all up together and actually looks at the global marketplace. And when you consider all of the volumes of Spirit Brands sold across the globe, Brown Forman today only represents about 1% share of that market. So when we think about that and the fact that this market continues to be relatively fragmented, we believe we continue to have substantial opportunities for growth as we increase our market share around the world. So with that, I'm going to segue and talk a little bit about Over these 10 years, we generated 4.6 Over these 10 years, we generated $4,600,000,000 mainly from cash from operations. Of this $4,600,000,000 we've reinvested $1,600,000,000 back into the business either in the form of capital reinvestment or in acquisitions. We also paid a steady and growing dividend, which was roughly another third of this $4,600,000,000 And finally, we were able to pay both special dividends as well as buyback some of our stock. So when you look at it in total, we basically reinvested 1 third and returned 2 thirds to the shareholders. Our priorities for deploying cash remains consistent with our philosophy to first, we reinvest in future organic growth. We look to grow the dividend as our earnings grow. We search for acquisitions that bring us new brands or new capabilities. And to the extent there is excess cash, return it to shareholders via share buybacks or through special dividends. After paying the special dividend that we recently announced, our debt to EBITDA will be roughly about 1.5 times, which we believe leaves us with very ample debt capacity without jeopardizing our investment grade rating. So what are our plans today and what we've been doing recently? Well, as I said, we start by looking for opportunities to invest behind our business, targeting long term returns that can be multiples of what is invested. Our business model really is quite efficient relative to the industry with about 2% to 3% of sales on average being reinvested in CapEx and usually generating very healthy ROICs. In fact, our industry leading ROIC has been in the high teens for years and was over 20% during the most recent 12 month period ended October 31. Next, we consider the dividend. We believe that dividends are important to our shareholder base. We've paid a dividend for 67 years and we've steadily increased it for the last 29. A few weeks back, our Board announced a 9% increase to an annualized payout of $1.02 per share. Then we look at other ways to invest behind the business. While we haven't made a large acquisition lately, we continue to look for ways strengthen our leading position in whiskey. We'll also look to ways to strengthen our vodka portfolio such as the addition of Maximus last year. And we're also very interested in any type of local brand opportunities that could play an important role in our future something similar to what you saw earlier when we talked about Mexico and the distribution business there that we acquired back in 2007. It's important to note, we continue to view acquisitions as an opportunity for Brown Forman rather than a necessity. So we'll continue to execute them only when we're confident that they really create long term value for all of our shareholders. Then finally turning for a minute to how we return excess cash to our shareholders. As you saw before over the last 10 years, we've returned it through a combination of buybacks and dividends. This chart shows you the dramatic reduction in our shares outstanding as a result of our history of share buybacks going back to 1987. More recently towards the end of November, given the strength of our balance sheet and our strong cash flows, we announced a special dividend of $4 per share that will be paid in late December. As in the case with many other family controlled public enterprises, we focus on delivering the greatest returns for our stakeholders while minimizing the risk profile. This chart illustrates one way to look at that. It shows the outperformance of our total shareholder return compared to the S and P 500 over 10 years against one measure of risk, a relatively lower average debt position over that time horizon. Here's another way to think about it. This slide looks at the highest returns with the lowest volatility or risk. In theory what's known as the Sharpe ratio. In reality, it means positioning the company to endure with a careful light on costs, a strong balance sheet and a long term view to building our brands measured in decades not in quarters. The first bar in this chart illustrates the number of companies that outperformed the S and P 500 over the last 10 years. There were 292 companies that accomplished that and Brown Forman was one of that 292. The second bar shows the number of companies in the S and P 500 that both outperformed the index, but also had a beta less than 1, an example of lower risk, but higher reward. There are 139 companies represented here and Brown Forman is one of these 139. Finally, the 3rd bar represents the number of companies in the S and P 500 over this period who had both higher returns than Brown Forman, but also a lower beta than Brown Forman. Only 6 companies were able to outperform Brown Forman on this metric. We're looking at it a different way. Brown Forman outperformed 4.94 94 of the 500 companies during this period in terms of delivering higher rewards for lower risk. One way that we like to think about this is that we believe it demonstrates our approach to the business, targeting higher risk adjusted returns through good times and bad and it's a strategy that we believe has allowed us to thrive and endure for 142 years. So let me summarize the reasons that we believe Brown Forman continues to be a great long term investment. It begins with one of the best portfolios of premium brands in the world, focused on categories that we believe are well positioned to outperform. 2nd, it's the unbelievable power of Jack Daniel's, the 4th largest global spirits brand growing in the high single digits and just hitting its stride in markets outside of the United States. We believe the runway for Jack Daniel's is long and we are focused on that prize. 3rd, while our U. S. Business is growing nicely, it's our growth outside of the U. S. That has been driving results and will continue to as we increase penetration in the emerging markets. 4th, it's our incredibly long term track record of being strong stewards of capital, investing in the future, acquiring opportunistically and returning cash to all of our stakeholders. And then 5th, the competitive advantage that we enjoy through our engaged and passionate long term shareholders, the Brown family. The family like most of you in this room want to see sustainable long term earnings growth, dividend growth and capital appreciation. And with approximately 59% of the voting stock, their support has allowed us to focus more on the long term and ensure that the company endures for future generations. And this we believe is one of the company's many competitive advantages and one that has driven some of the amazing numbers that I've been able to share with you today. So with that, I'm going to turn the stage over to our final speaker, Garvin Brown IV, our Chairman of our Board and a 5th generation Brown family member. And Garvin is going to share with us his perspective on the family as well as some of the evolutions that we've seen over the last few years as it relates to the company, its management and its Board. Garvin? Thanks, Paul. Thank you. Thanks. Good afternoon. Can you hear me? Good afternoon. It's a treat to be here today with all of you. I recognize voices from the earnings calls and of course many names and even some faces. So thank you for joining us this afternoon. As you can imagine, in the course of any year, I spend a lot of time talking about Brown Family Governance, our Board of Directors and even our company. I spend a lot of time talking also to investors. I live with some investors and I'm related to many, many more. But it's not always that we've actually taken the family governance topic and brought it out into the public sphere. And it's not often that I've had a chance to talk to our public investors and analysts about this subject. I think if you're in a family controlled public company and trying to judge what's family and private and what's appropriate to go in the public, it's a challenge. There's no textbook on our governance. I've looked for 1, I can assure you, but there is none. So, lately, with all the work that we've been doing, we thought maybe that it would be appropriate to come into the public and share some of this. Paul and I, the Board and I, my family and I think there's probably best practice for a family controlled public company to come share this sort of work. We think I think that you're owed the respect of an explanation as to how the Brown family organizes itself. And I even think that you'll enjoy seeing this work and that you'll see how it helps your investment. So for those of us who work on this topic, we always start with these three bubbles Board, family and company. And starting with the company, I'll say that in the old days, it was it seemed a lot easier. You could put board, family and company all on the same slide in one photo. We even had our an old approach to corporate governance. The 2 older gentlemen sitting in the middle were brothers and what they did actually was marry 2 sisters. So the other 3 were their sons and they were actually also double first cousins to each other. And so I think it probably made family politics a little bit easier to manage. The man on the far right is actually my grandfather, who died just before I was born. And on the far left, sitting up a little bit higher is Lyons Brown. Lyons brought his 3 sons into the company. And for those of you who have been around for a while, you'll recognize, I think at least 2 of them if not all 3. On the far left is Lee Brown, who is our Chairman and CEO, really as I grew up in the 70s 80s and into the early 90s, he went on to become the U. S. Ambassador to Austria and actually lives in New York now. On in the middle is Martin Brown Sr, who for 25 years ran the Jack Daniels business and really put it on its sure footing that you saw in John Hayes' slide from the early days up until 'eighty six. And on the far right is Owsley Brown. If you're about my age, Owsley is the one from that generation who probably represents the totality of that generation's leadership, just because you wouldn't have known the other 2 as well. A lot of what we saw here today is a realization of Owsley's vision and his goals, not just in the business, but in the quality of the people that have been standing on this stage. And I often think if there's one thing and he gave us many things, if there's one thing that Owsley gave us, it was actually an uncanny success at succession planning. Owsley reached into the organization, probably going back to the late 80s early 90s and could recognize a great talent he saw it. It was back in 2003 that Paul Varga took over our beverage company from Bill Street when he retired. And then it was in 2007 that Paul took over as our Corporate Chairman and CEO. And so actually some of the numbers that Don was showing today are 10 year CAGRs. Paul is just 1 year shy of those being his CAGRs, but he's really been running our beverage business now for 9 years. On the Board side, we've had some changes as well. Of course, I joined the Board 6 years ago along with 2 other cousins from my generation, the 5th generation. On the far left, can see one of them Sandra Fraser. Next to her is Jim Welch, who joined the Board around the same time, who's here today and you'll see him afterwards, the Vice Chairman of our company for cocktails. Next to Jim is Martin Brown Jr, the son of that earlier man in the black and white photo. But it's not just family members on our Board of course. Where I'm happy to say that we've got a lovely new set of independent On the prior Board, many of our independent directors coincidentally were born literally within 18 months of each other. So we had this amazing thing where 1938, I think, was the bumper year for Brown Forman, where they were all retiring at the same time. And so today, we've got a wonderful net new set of independent directors. They bring enthusiasm, excitement about the business, excitement to work with Paul and his team, but they also bring into the room their life experiences from places like McKinsey and P&G and GE and other companies. And so the richness of conversation in that boardroom reflects all the things that you would hope to find in the boardroom of such a public company. So, on the family side, I don't know how many of you have given PowerPoint presentations about your family, but I think we've figured out a way to describe this in a way that I hope is meaningful for you. Like a lot of families, of course, we have our matriarchs that are legends in our hallways. On the left is George Garvin Brown's wife, Amelia Owsley, from whom we have that name and she was from a wonderful family in Kentucky. And then we've also got Sally Brown there next to her who was Lyons' wife and recently passed away at the age of 100. Sally grew up with her father abroad. He was a military attache. She grew up in Vienna between the 2 world wars. And so moved to Kentucky, probably not a common Kentucky distiller's wife at that time. She was fluent in German, French and spoke Italian and Spanish pretty well and some servo Croat having summered in Sarajevo as you did in that day and age. And so I often think that the breakfast conversations were probably unique for a Kentucky home in the 1950s that she would have generated. Like a lot of families, we've grown over time. Here's one way of looking at the family tree. I'm in that bottom row. There are about 40 of us in the 5th generation, 17 of us are involved some way with Brown Forman. There's 3 of us on the board, another 9 inside the company. I straddle both those worlds. And then there's many others who are involved in this family committee that we have that I'll talk about in a second. Actually, I think even beyond formal family committee, we've got others that volunteer on its subcommittees. There might be 26 of us now between the 4th 5th generation who do stuff on Dixie Highway with Brown Forman in the course of a year. That's what we look like. That was a reunion a few years ago, some young kids from the 6th generation setting upfront there as well. You can see Aunt Sally in her trademark Austrian wool coat sitting there on the bottom left in her armchair. So, what interests us at Brown Forman? Obviously, look, we do follow the share price. We are interested in the financial success of the company. But we've had to live through things in the marketplace as you all have. None of us will forget, of course, the success at the turn of the century of companies like pets.com, when we as family shareholders were going to cocktail parties and feeling so unfashionable with our stake in this old industry. We made it through that period. And of course, don't have any regrets about not having diversified out of it in those days. But the point here is that, look, we all love following the share price, but you all know better than I do that it doesn't always reflect underlying value in a company. BF150, our long term strategy plan through the year 2020, which now of course is just an 8 year view, is something that probably appropriate value in a company. BF150, our long term strategy plan through the year 2020, which now of course is just an 8 year view, is something that probably approaches just approaches the timeline that we would like to assign to our investment. And so we warm easily to that sort of a long term strategy plan. In terms of brands, look, obviously, we understand Jack Daniels. Those of us in the company have worked on it. Martin Brown Sr. Lived in Lynchburg, Tennessee with his new bride in the 60s. We get Jack Daniels, we get Lynchburg, our roots are in Kentucky. We're originally from a small town called Mumfordville halfway between Louisville and Nashville from which we moved in the 1860s. So we understand places like Lynchburg. In the rest of the portfolio though, we stubbornly see a Jack Daniels waiting to break out. When we walk into an account, we do look for Chambord on the back shelf. We are interested in line extensions on Finlandia and in the wonderful new package change for Haro Dura. So, what do you do with all those people and all that enthusiasm? Do we all run into Paul's office and share with him our opinions on the Chambord package change? I mean, we honestly couldn't fit through the door these days. And I'm sure you would agree it's probably not the best use of Paul's time to meet with all of us about the Chambord package change. So I think of family governance as that intersection between enthusiasm and what's right for the business. Back in 2007, as Asli was retiring, we were all reading the papers and in every in any year, you'll the papers will be littered with stories of families that I think haven't gotten governance just right, let alone for a public company with non family shareholders. And so, we put a lot of time and energy into how to better organize ourselves for the future. We've got something called the family committee now that dates back to 2,007. It has on it a number of family members from all walks of the family. Paul and I co chair the committee. It has subcommittees that tackle governance, education, communications and actually as well a topic of interest for the family and the company, environmental sustainability, which is part of the inheritance we have from some of our work in the wine business. That's what we look like. Our photo is often in the annual reports. You can see in there of course the 2 co chairs, Paul and myself. Ernie Patterson is next to me. He's here today Director of Family Shareholder Relations. You'll see him afterwards who helps organize so much of this work and other members of the Brown Forman team here. On the far right actually is Lee Tatum, who's also around today and works for Paul. We divide our work into something called a curriculum map. We educate the family committee on the company and the industry, on governance, on ownership topics and also on family and community topics. We have a family constitution that we wrote and that 98% of those north of 2018 approved. The other 2% have since explained to me that they missed the deadline and other things. The family The family constitution has language in it that should look familiar to you. It looks and sounds like a lot of Brown Forman work. It's thoughtful. It talks about the long term and it about the company's commitment to a culture that prides itself on independence. This is what we look like at our summer meetings when the family comes into the annual meeting. In this shot are people who are on the board working at the company, people who don't work at the company, but whose father might have been on the Board or whose mother might have been there too. There's a woman whose dad was on the board for 40 years sharing a beverage with our CEO. There are multiple generations, including of course these young kids from the 6th generation, teenagers, here listening actually to John Hayes present on Jack Daniels along with their great aunt and their dad, and little kids for whom we design different things so that they can get their heads around this industry and what it means. Obviously, they're not quite into ROIC just yet, but we're working on that. They'll get there. I like this one of these little girls. Actually for me, it's a much better symbol of a family in the 21st century than that black and white that I started with. There were no girls in our old photos. These four actually live across 8 time zones. There are at least 2 passports amongst them, 3 different accents. They're Jewish, Catholic, Protestant and Greek Orthodox. None of them have the same last name, but all of them come to Brown Forman every summer. They've got their little Brown Forman lanyards, and this is what they associate with their company and their extended family. So back to that family tree, here it is as a blank slate. I like to look at it through the lens of engagement with Brown Forman. The traditional lens is to look through the generations at the people that have actually worked at the company or who have been on the Board or who have worked at the company and moved on to other things. We also had a Lennox Board when we had the Lennox Company, which was another way to engage family members who didn't work at the company who may not or who may not have been on the Brown Forman Board. And so the color coding here that's me with the dotted red over here and different colors as a Board Chairman. The Chairman and CEO are the solid red lines. And so this is one way of course looking at family engagement. Thanks to the work of the family committee and other committees like the major gifts committee of the company, we've been able to color in literally color in more people on this family tree to demonstrate their engagement and involvement with the business. If you add in internships, you get even more colors. So, we've been in the press also. I'm pleased to tell you not the sorts of stories that we're reading in 2007, but in the pleasant stories saying good things about how we've organized our family governance in a manner that benefits all shareholders. So, some people like to quote the Bible, others prefer Shakespeare. I like Jack Daniels. And I remember a great ad from when I was working on Jack with Mike Keyes actually and John Hayes. Mark McCallum was CMO at the time. Lawson actually, the whole old crews here was our financial analyst. And it tells a story of the growth of a brand from a small town. It's enjoyed in 135 countries at that time, made in a town with one stoplight. And so how does a business from a town with one stoplight grow into the numbers that you've seen today? Of course, a team, a commitment, a playbook, it's brand equity for Jack Daniels. And for me, that's a great metaphor. This brand has grown around the world and hasn't lost its way. And I think that for the Brown family as it grows over time across time zones and nationalities, gender, ethnicity that we've pulled together something here much like Jack Daniel's, a set of rules, a set of cultural practices that keep the family together in a way not just for itself, but in a way that benefits all shareholders, whether they're family or not family. And I think that this work today also will allow the company and the family to grow its way around the world without losing its way. So, you've seen a lot of the team today that have helped grow our business over the years. On the family governance side, I'd be remiss not to applaud the role that actually Paul has played informing all of this work. He sat a bunch of us down in the family in 2007 at Ozzie's retirement party in Los Angeles. And we all had a heart to heart about this. Look, what are we going to do? Are we going to be like those people in the newspaper? Or are we going to create something different? And with his partnership, we've created something different. And as you've seen so you've seen some of his CAGRs today almost to 10 years. But in this work you've also seen some of his leadership. So with that, please help me welcome back to the stage our company's Chairman and CEO, Paul Varga. Thank you. Very nice of you to say that. Thanks. Well done. Well, it's fun. Before we go off to Q and A, I can just reflect a little bit on this last couple of hours we've had here. And I just can't tell you how enjoyable it is for me personally to I don't like to hear such nice things, thank you, Garvin, but to see Brown Forman sort of flow over you for 2.5 hours. And I may just you saw all these half points and references. And I was thinking about a couple of things that hit me during it. It strikes me that you all know our numbers. I mean, we're a public company. We report them. We do our very, very best, you all, through Q and A and the formal reporting to give you a great transparency into how the company is performing and what we see ahead of us. We try our best to do that. You always are interested in more. What we wanted to do today that I hope you feel we accomplished was to give you a better understanding of why the company is performing as it is today. I mean, a little bit a deeper look than we can sometimes do around an earnings release or that kind of thing. And you get to see lots of charts and trends and graphs. But I mean, you also think about it, you get to see some people in Speedos, you get to see barrel trees, you get to see other kinds of things that actually do inform you as to how you might think about Brown Forman and what it's trying to do out in the world. So we basically wanted to improve your understanding as investors or potential investors in the company. But most importantly, we wanted you to share some of the enthusiasm we have for the opportunity ahead of us. Don had a slide there that talked about the company, and I had some of it at the beginning. You probably saw variations of this throughout the whole thing. We really, in terms of the we focused a lot today on the categories where we're present and how we're currently represented there and what opportunity we see for them and then the places where we do business. I want to thank those who gave just a short glimpse, Anjei, into Russia, Jill into Mexico and Mike into the U. S, I mean, we could have gone for hours, you all, on success stories in France and other places around the world that we think you'd enjoy. Maybe we'll do it another time. But more than the opportunity, we want you to share with us the feeling that we believe we're really well positioned to seize what's ahead of us, too. Just a quick listing of some of the things I heard were a premium portfolio, of course, led by Jack Daniels, and I am extremely biased in this point of believing it's the world's finest distilled spirits brand. I really do. I think there was this chart I love that John showed. There is no other brand that is above $20 a bottle that sells more than 10,000,000 cases in the world. There just isn't. We are fortunate enough to own it, and we believe it is just beginning to scratch the surface in terms of its geographical reach, but also some of the very appropriately done, I think, line extensions. And this Tennessee Honey story, I think, was a good example of that. We also believe we have the financial resources and flexibility to pursue this opportunity as well as a nice track record that Don took you through related to our history of financial stewardship that has been very shareholder friendly. I do think as well Garvin's piece here of having the family so well organized and so supportive of what we're trying to do. And then just by its own nature, exposing you to so many of our team here today, some are very familiar faces, as should be to you over the last decade. Others are some new faces that we hope you'll get a chance to talk to here when we break after the Q and A. We hope you share our belief that this is a great management team that is fortunate enough to lead another 4,000 or so people around the world to the sort of results that we've been able to share with you here today. For those of you who are currently Brown Forman shareholders, we hope you're even more committed after today. And those of you who are not but are considering, we hope you Garvin said, you can't join the Brown family, but maybe you can join the Brown Forman family, and we hope you're as enthusiastic about the future of the company as we are. With that, Don and I and some others are going to get organized here real quickly to answer your questions. And but just so you'll know, we will probably direct a number of them to and feel free to ask questions of individuals who you saw on stage here today. So thank you very much. And I think let me just see how this is organized. I think we have a handful of microphones that we're going to be probably spread throughout the room where you all will be able to use those to ask questions so the entire room can hear you. This is also being webcast, so it'll help with the technology we're using today. Hello. Yes. Judy Hong from Goldman Sachs. Hi, Judy. I wanted to just ask about the Jack Daniel's line extensions. It sounds like you're maybe accelerating sort of the pace of some of the innovations there. So if you can just talk about if you have certain targets in terms of what that mix looks like between the Tennessee Whiskey versus the line extensions? And how do you sort of balance your ability to maintain sort of the brand heritage and not get line extensions too different the core brand as you go forward. Okay. Just as a test, did everybody was everybody able to hear that question sufficiently in the back, particularly? Okay. So this is an often asked question about how we balance the extension of what we would consider to be the world's most valuable distilled spirit brain. So you do it with what we consider to be great thought and care. As a reference point to the flavored Jack Daniel's Tennessee Honey that you referenced, you should know that as an example for the United States, when that was introduced, just I mean, it'll be a little it'll be 2 years in the spring, I guess, since it was introduced. That was really the 1st full string Spirit line extension from Jack Daniels, I think, since the late 1990s. So it had been 15 years. So our track record of full strength extensions particularly, we've been pretty careful with it. And I think it showed, to be quite honest with you, and it came out in a couple of times during the presentations that not only have we been successful in introducing Jack Daniel's tenancy hunting into the United States, but if anything, we feel it has had a positive accelerating effect on the Jack Daniel's trademark. So the true test will be over time, and it's still only been a couple of years here, and we'll continue to watch it closely, but how does Jack Daniel's Tennessee Whiskey and how do people feel generally about the trademark? So you just you monitor it, you try to do the best job you can with it. And I don't I think we were asked this on our earnings call last week. We plan to take it quite cautiously so that we do exactly what I think you're encouraging us to do, which is to balance it well. Any others, Mike, you've been involved with it, John, you, yourself, any who might know things about the maybe the consumer data that we've seen since the introduction, that sort of thing. I'd like to start as well in saying we don't do a lot of it. We've been doing a bit more. But if you go back to Gentleman Jack's single barrel RTD has been over a frankly almost a 20 year period. So this is just another new one of frankly through a lot of consumer research that as I said there are we're trying to recognize, identify new consumer segments, new occasions for the trademark. And so this is just another example of, as I said as well, also we find that people actually they have a great respect for Jack Daniel's and like it, but just Jack Daniel's black label as a whiskey brand, some people just don't like whiskey. And we found Tennessee Honeybee an example, where our data is showing us that probably over 50% of people that are enjoying Tennessee Honey are not Jack Daniel's drinkers. And so this is a more of a within women for sure. The Latino community, we're seeing great success here, African American community. So again, in our quest to open up the brand to new consumer segments and occasions, again, very carefully studied and we're very, again, very optimistic for the continued success of this brand. Mike, do you want to add anything? Other than from my own personal experience, John will laugh, is I follow Jack Daniels on Twitter, right? So anybody around the world that talks about Jack Daniels, just pull it up and it pops up and you see who it is. There's a picture. And since we've introduced Tennessee Honey, the faces on Twitter are markedly different than they were for Jack Daniels. And so you'll have more as John said, more women, more Hispanic Americans. And the only thing I'd differ with John on a little bit is that they don't drink Jack Daniels. I'd like to say they don't drink Jack Daniels Tennessee Whiskey yet. Thank you. Go ahead. Brian Spillane from Bank of America Merrill Lynch. How are you doing, Paul? Good. Question about scale, international scale and I guess this goes back to one of the slides that Mark McCollum put up. I think maybe one of the ones that you add as well Don. You've done well over the last 10 years or so, regaining control of distribution in a lot of markets and also just expanding your footprint. And I think there was a slide there where we have 40 markets with 50,000 or more cases and 24 with more than 100,000 cases. Can you give us some idea where those markets stand relative to the corporate average in terms of your profitability, so maybe operating profit margin? And I guess what I'm trying to get at is, what's the level what's the case level or the revenue level in each market that where you actually see inflection in terms of profitability first? And then second, as we kind of look out over the next 5 years or so, should we expect to see the rate of profit growth and the rate of the contribution to the corporate total to increase from those markets as you've kind of moved past the investment phase? Mark would be have given some thought to your first question. Maybe I'll start with your second. And I think the answer to that one is yes. I mean, here are 40 key markets that have already reached a level of development, distribution velocity. Almost most of those, I'll say, are Jack Daniels markets where you could say that they're poised for very nice success going forward. So I think the answer to your second question is yes, those would be driving markets for Brown Forman Corporation going forward. On the other one, I don't know that my personal view, and we haven't studied it in the way that you asked the question to be able to give you the definitive answer, is that it is a mixed bag as to when it gets to that scale of profitability or gross profitability perhaps, depending upon how you might look at it on the P and L, where you get this inflection point and you're now sufficient to move it to a totally new level. One of the ways I think about what happened, I mean, if I think about my own philosophies about this 10 years ago, we would always talk about focus and focus and focus. And here we are 10 years later after having focused and focused and focused, and now we're one of those scale people. We are a bigger company that is more independent around the world because of largely the brand development work that has gone on, on the Jack Daniel's brand. But importantly, other important pockets in key markets from other brands in the portfolio as well that give us some excitement. But as a specific response to your question, I don't know that I could give you a ratio or a critical metric we look at that when it hits that, we say, now we go. And Mark, do you have anything that you would add on that sort of on the RTC front that could provide some insights of the way he had asked the question? I really don't from a metric point of view other than maybe to say that perhaps if you reprise that list of 12 markets that were on that priority set, they differ so much as examples of what you may have been asking us just now, some of those markets are investment phase markets. Brazil, I'll give as an example, is an investment phase market. But what we do know is what I would say, unusual in this industry, throws off that throws off the sort of margins that you would need to more quickly get to scale is amazing. And I guess I have a background in Campbell Soup, Cadbury Swipes, those companies. This is an amazing industry and to be able to say that we are premium, premium plus and get to a potential leverage point earlier than my experience in those other industries. And Brian, it's really only one of a handful of factors we will look at when we make that determination is to change a model. It could be for a strategic reason. Sometimes, we would do it simply because we will be more interested in building brands other than Jack Daniel's than any other partner we can envision. There's all kinds of criteria we look at when we make that determination, but scale is one of them. Scale is certainly one of them that we pay attention to, and we're in the fortunate position after these years of growth that in many more places today, we have more options available to us. Thank you for the question. Bill Chappell from SunTrust. Just going back to Tennessee Honey in the U. S, where it's been, as you said, for now 2 years, can you give us kind of more color on how you're managing the brand? Because obviously, it's exceeded expectations out of the box. But now as it's not mature, I mean, do you say, eventually, it can be this size compared to the core business, so we should manage to that? Are you stepping up advertising even more in year 3? Or would you start to scale back and get better profitability? How do you try to manage that growth as now you have a little more data to look at? I'll let Mike start it. And John, you chime in. Don, myself, I mean, a bunch of us can help with that answer. 2 years in, the first thing I'd say is we're still experiencing trends of plus 20%. And so we believe there's still a tremendous upside for Tennessee Honey in the United States. And you start out with a big brand with lots of advertising and the off premise fills pretty well with 750s. We've now introduced 175s. I don't think we've even scratched the surface on distribution opportunities even in the off premise and the on premise tends to come a little more slowly. So I don't think we scratched the surface. And I would also say to your question, we're certainly not in any kind of harvest mode. The brand is a great brand. It's very profitable and we will continue to invest behind the brand for the foreseeable future. I mean, it's still growing at just tremendous rates. The only thing I'd add on to that is that if you look at our you build a brand, first of all, through making people aware of it. We still have tremendous upside on awareness. There's still a lot of people out there who still haven't heard of the brand, leading to the trial of the brand. There's still a whole lot of people that haven't even tried it and that we're still converting when they do because a lot of it, you still get into that always Jack Daniels, I don't like whiskey or something. And so we spend a lot of time and investment on trialing and tremendous upside still here, of course, in the United States and then, tremendous upside still here, of course, in the United States and then huge upside outside of the United States. It's a pretty normal conversation for a brand at this stage to be having, which is right on where your question, Bill, was. And I'll just say, I mean, there are examples of flavored products from categories that started as expressions out in the marketplace that have become I mean, one of the foremost is Captain Morgan that over a period of time developed as that single expression into a very large brand, much larger than Tennessee Honey is today. So on one end, you can think of what would it require and what has to happen for an expression from Jack Daniels to have that kind of success. And then also, if it's not going to have that kind of success, where is it on some continuum and what is required? And they were really just touching on some of the basics that happened in the 1st couple of years about distribution awareness and trial, and we haven't even begun to think of mixability and extended use and all these other things that are very natural considerations. But we're going to be learning about it as we learn more in these next couple of years. I mean, we haven't even your question didn't even address the international expansion, which that's just the U. S. So we think there's still a lot of runway for Tennessee, honey. This is Krim Belt with Orange Capital Partners. I have a question concerning, if I look, let's say, 20 years into the future, I would assume that the U. S. Business as a percent of the business will keep shrinking. And I guess is my first question, is that correct? Or how do you think about that from a strategic point of view? And with that, I'm just thinking how maybe this is for Paul, how do you think about the skill set of the company and what is required for that switch? I mean, if you keep growing like you have been growing international, clearly your business is changing. And can you use the same skills from the U. S. And transfer them into markets outside the U. S. Or how is that how do you think about that as I'll handle the second question in a moment. But if you may want to comment on just that first one, Jim, you work on our strategy a lot as it relates to the position of the U. S. This question was how would we envision the U. S. Going forward as a percentage of brown form a? And it's been declining as a percentage as the international has grown. And I mean Yes. I mean, one factor to consider is the share the U. S. Represents of global value of total distilled spirits, which is something like 35%. And so we would certainly always want to be at least indexed to the percentage of the U. S. Representative of the global spirits market. Our aspiration is to actually to continue to grow share in the U. S. But certainly, there are tremendous opportunities. You've seen the really small market shares that we alluded to in the presentations, So lots of upsides. And yes, we spend a lot of time as a company evaluating how we want to grow as a global enterprise. We've gone through the standard evolution of a corporation from a domestic company to an export company to an international company to a multinational. And we grow I guess, we grow the organization and our capabilities in the same way that we grow our brands, which is very thoughtfully considered and done on a market by market basis. We are obviously then integrating all of these international businesses so that we're sharing best practices, understanding the learnings from all these route to market evolutions, sharing those across markets so that as we continue to expand in new countries, we can leverage the knowledge and learning that we've had from growing or controlling our route to market in other countries. And we're still a small company. We have 4,000 employees around the world. I like to say that we have more folks at a high school basketball game in Kentucky than that. And so what it does allow us, though, to stay very connected with each other. Leadership team knows most of our employees around the world. They're a highly, highly engaged workforce. And we continue to stay very connected in that way across cultures and languages. Yes. So I mean the only little spin I would add to what Jim said is that we would not have predicted 5 years ago that the environment in the United States would be so conducive as it is today to brown format. I mean, for many of us who've been at the company a long time, we were not a big what we used to refer to as a white goods company. We were squarely in the whiskey category, which had been declining in the United States for a long time. And lo and behold, I mean, it stabilized and started to grow. And now as sort of leading the growth of the U. S. Distilled spirits market in the more recent periods here. And who better to be positioned for that than a company like Brown Forman? So the U. S. Remains very exciting as a country to us on a multitude of levels, but there are only 300,000,000 people plus in the United States and there's another 7,000,000,000 out there who are growing with their personal income and disposable income that just like Tennessee Honey, we just mentioned, Jack Jones, Tennessee Honey, I mean, some people don't even really know us that well yet. So we've got a lot of work to do on both. And so the skill set question, what kind of skill sets? I mean, the ones we wrestle with the most, I mean, because we're known because of our U. S. Base, people think of U. S.-oriented capabilities and skill sets. I hope to some exposure to, for example, Anjay here today and others who you'll encounter in our conversations at Brown Forman. You'll see a broader group of capabilities and experiences at the company that reflect the global marketplace. I mean we don't pretend to know it all right here. That's why we want to give you access to people who I mean, this is probably one of the premier vodka brand builders in Brown Forman you've had a chance to look at today because our business, even though in the United States we all think about vodka being, man, what a great business, and it is in the United States, particularly the premium side of vodka. But I consuming parts of the world that we have aspirations as people's incomes rise and they spend more and this premiumization continues are very much in the world that Anjay was describing you today. So there are different capabilities that are required to win in these marketplaces. The ones that we as a group struggle with and have the most debate about and I suspect a lot of companies do deal with portfolio management and resource allocation. How do we know we're allocating our time and energy and creativity, the right things at the right time to do it well? I mean overall, I think we do it very, very well. We're always challenged at this company because we own Jack Daniel's and it's a captivating brand. And finding unique ways to organize your work, organize your resources so that all the brands can get appropriate attention is really important. That's an ongoing challenge when you own a trademark like Jack Daniel's. But I do think when you're in it for the long run, you'll find a way to develop those capabilities. You'll either hire them or you'll just get better. And so we're pretty committed to that. If I can add one other thing to that real quick. Just when I opened up my presentation, I was talking about how 10 years ago, when I was in Finance Director for Europe was based in Louisville. That was only 10 years ago. That has completely changed where it's not so much that we're exporting Louisville talent out into the rest of the world. We've made a big effort to bring people that we've found in the rest of the world and bring them into Louisville and bring them back and forth. And I think that's really exciting. The people having worked around that and having shipped some of my people into the United States in the last few years has really been a good experience for them and is helping us to build a management team that we think can be around for a long time. I'd make one other comment too. The and I've seen this even going back as far as 1994 when we really got started in the emerging markets. One of the things that I was really impressed by and continue to be is as popular as Jack Daniels is, it's also a very popular brand to want to be associated with. And the quality of the people that we are able to attract because of the business that we're in and the brands that we have has really been, in my mind, one of the reasons why we've been as successful as we have been. Today, when you look at our the total population working at Brown Forman, there's actually more people working outside the United States than inside the United States. And it's just been a real testament, I think, to the company and to the brand in terms of the quality of the people we've been able to attract. We get a you can imagine, I'm interested in this topic of capabilities. I just so just glancing at this group, and I'll just give you some quick examples. Jane Moreau, who's here with us, see a lot of you might know her voice from the earnings calls, is going to, in about a couple of weeks, start leading our production group. Garvin has worked as an and overseen our European business and our Jack and been a very important part of our Jack Daniels business. Mike Keyes has overseen both Jack Daniel's in the U. S. And worked in a variety of functions. John Hayes has worked both on Herradura and Jack Daniel's. Jim Welch has been throughout Brown Forman Corporation, I mean, has led our corporate affairs at least our corporate affairs and strategy today, but also has led human resources at the company. Mark's been both Chief Marketing and Brands Officer as well as Chief Operating Officer. Jill has just moved from Head of Production over to lead Latin America and North America. I'll give you those as examples. I talked about Lawson earlier. Don used to run our Advancing Markets Group and worked in the United States. He's our Chief Financial Officer. In some of this stuff, you all, it really helps to build a group of executives that know this business broadly and deeply. And if you can keep everybody together and work and create an environment where you can work well with one another, I think it's a real advantage for our company. And so I give you those as examples of ways you build capabilities as well by understanding the different disciplines and functions and areas of the company that over a longer period of time add up to a real asset. Great. Thanks. I have two questions, if I may. The first relates to the route to consumer and your international marketplace. And the slide you referenced showed Brown Forman owns 52% of that route to consumer. And I was curious, if you look out 10 years, how does that evolve? How do you see that going? Is it partnerships with Coca Cola Hellenic? Is it more ownership by Bauenformin? Do you have the capital? Are you willing to commit it to owning your own route to market? And then the second question, are there any brands in your portfolio that we should watch out for? I know in the past you've highlighted Towaka, so the comfort looks like it's turning around. Can you just comment on any kind of areas we should look for over the next several years of potential opportunities? You're going to get everybody answering that second one. But Mark, do you want to go ahead and tackle that first I would say that the last 6 years in particular has been reasonably frantic in terms of the degree of change to that 50 some percent of our international business that is now in owned distribution. I think we've said in a number of ways that the market situation will determine what the best route to consumer is for us. And so I it is definitely not the case that we are inexorably moving toward that pie chart being 100% owned distribution. We have route to consumer models in markets today that we would prefer to have versus owned distribution. So if I was to think forward, I think you put sort of a 10 year forward horizon on your question. I would say that it would be a very orderly and careful and perhaps not quite so frantic establishment of the route to consumer model that for that priority market makes sense for us. And Russia, the example that was given And it is a classic example as is the UK of where actually even though we have scale, the model that we are currently adopting suits us very well. That's the first part. The brands, I'm going to give to everybody else. Yes. And all of this, of course, assumes that the whole world cooperates with you. I mean, if some of these things, if the global economy went in the tank or something, you think differently about it. But I think that is generally the way we've been thinking about it. We'll continue to think about it. Anybody want I mean, just to open this to anybody, any brands that you all particularly feel that this group should pay more attention to or watch their development? I mean, I'll start with 1. I just think Woodford Reserve, Lawson was starting to talk about that today a bit about hitting sort of an inflection point, and we're just very excited about it. And that's a brand that's only I think it's in its maybe 16th or 17th year. So pretty patient approach from Brown Forman, renovating a distillery, introducing a brand. And we have very, very high hopes for that brand as we do for all of the premium and super premium line extensions. So I'll take that one as well. Coming from the Casa Herradura business, which I was fortunate enough to manage for about 5 years, Is the Herradura brand that you see here, I think, personally, it's just a jewel that had been one of the leading ultra premium brands in Mexico, but was losing share to Don Julio. And as we did research and things, you found that the packaging just wasn't delivering. And by simply making the package change down there, it's completely turned around the Mexican business where it's doing really, really well in Mexico. And as well as since that time as well in the United States, it's a brand that is it's beginning to catch on. And that's one I'm personally proud of and I think has huge potential in this country, the United States. Anything else, others? There's a couple of nice examples for you to keep an eye on. There's others, too. Vivien Azer, Citigroup. It struck me, it's interesting that China, while it has come up, wasn't a big focus. And of the markets that you presented for Jack Daniels, it's the only one that at least visually I could tell looks like you've seen depletion contraction over the last few years. As I understand it, you guys are stepping up your investment in China today. Can you speak to that and how your strategy has evolved over the last few years in China? Yes, I'll start. A lot of us could comment on it. I mean, we have we've been sort of struggling out there for a variety of reasons, I mean, some of which you all would be able to observe some of these reasons. And I mean, it's a really competitive market. We find that it's, I mean, a difficult trading environment there in turn particularly sort of penetrating this important on premise channel for the important Spirit Spirit business. We've had some stops and starts with partnerships there. I mean, some of these things, to be honest, are not unusual for emerging market world for a company that's going in and developing its business organically. There are a few other reasons. I mean, I think the really wonderful thing is that the Jack Daniel's trademark in that country remains with what we still refer to as one of the accepted brands in Chinese drinking culture even though it's had some tough depletion times in the last couple of years. And the thing that's giving us the greatest hope here in the last sort of half a year or so is we've retooled the leadership team there to get focused with some experienced people. The trademark is still the wonderful trademark, and we'll continue to look at ways that innovative ways to take Jack Daniels as the primary entrant from Brown Forman in that market. But I'm always encouraged that as much as we hear in the world, both in our industry and other industries about China, that this wonderful success story you've heard today has been unfolding really without much contribution from China. So when we get that right, we're really excited about it. Follow-up to that. How important is scale in China, I. E, does China need to look like a Mexico? Do you need to make an acquisition to get distribution scale there, at least in A Tier Cities? Well, actually, the way we build, I mean, Don, you can probably recall. You want to talk about how we got going there in a way that might give some color to that? Yes. So a lot of times when you look at these markets, one of the first questions that you ask yourself is where do you need to focus your brand building and what does that market structure look like? And in China, there are basically 2 different markets there. You've got your Western style drinking occasion and then you have kind of the business entertainment drinking occasion. And generally in the business entertainment environment, surprisingly maybe, it's really all about discounting. There's very basically you're talking about these karaoke bars. They have just a very small select brands they allow in and they allow in the one that's going to give them the greatest discount. It's in an environment where typically you don't get a lot of brand building. The host is looking to is looking for a face and generally will just look to the highest priced item on the menu and that's what gets drunk. But it doesn't necessarily translate to continued consumer behavior out of that occasion. And so we basically elected to focus most, if not all of our efforts in the Western bar drinking occasion and looking towards those young people that have the Western style lifestyle aspirations that are looking to those kinds of venues for their entertainment and are really looking to those types of brands to be their badges in terms of what they aspire to. And in the initial years, Jack Daniel's did extraordinarily well in that venue. There weren't many, but over time, the number of those types of bars grew throughout China. I think when we first started, we probably had about 20, 25 people running around trying to create do the brand promotions and create kind of the pull, if you will, and the loyalty behind the brand. I think today, we've got over 70 people if I'm not mistaken, continuing to do those types of activities and really kind of create the knowledge around the brand and what it's about. It's a little bit more difficult and complicated in China because you still aren't at a stage where people still fully understand or appreciate all the different nuances around Western style spirits. It's still very much about face and price. But those things will evolve and change over time. And we're we believe that the type of brand billing activities that we're doing today will pay off for us as the consumer just becomes that much more educated. Mark, anything? Just to say that we're I don't think it's ever been a distribution access question. It's actually China is a fascinating market, as Don said. I mean, 90 percent of the international spirits business is on premise. Flip that to Russia and it's the inverse, it's 90% off premise. And so that's a more organized and scaled play, hence Coca Cola partnership in Russia. But for China, access to distribution isn't a challenge. What we're doing is, as Paul said, we've refreshed the leadership team over the last 6 to 12 months and we're refreshing the 70 plus person sales team quite substantially retraining and also changing our sub distributor and distributor route to market. We're in the middle of all that right now. It's a don't come to China just yet. Back here, I think we got a question. Yes. Mark Swartzberg, Stifel, Nicholas. Question about the U. S. Pricing environment. Could you speak to the last kind of 4 or 5 years how it's evolved to this greater emphasis recently on price and what you think is really driving that. When you look at the consumer environment, it doesn't seem all that logical, but it might be that Diageo and you are saying we need to harvest this market to invest more in emerging markets. So could you just speak a little bit to what you think is really driving this, both from a macro perspective and then from kind of an industry thinking perspective? Mike, you want to take that? Yes. I can talk a little bit about our perspective and where we're looking. For the last 4 or 5 years ago as the recession hit the United States, the on premise really dried up. And we're really blessed with a brand like Jack Daniel's. We maybe see things a little more quickly than some other brands because our demographic is so broad. And So we saw that early on and we made a decision that because of the economic environment that we had to make our brands more accessible. And so we moved product or resources from more from what you saw today, although we continue to do those things, but less. And we actually had more gift pack. We had more couponing and discounting on a lot of our brands. And as a couple of things happened, as I said in my presentation is the environment started to change a little bit. The on premise started coming back. Even though the economic recovery is very slow, I think consumers just made a choice that these are affordable luxuries and that they're going to splurge a little bit and get out and socialize. And as that happened, we moved our resources over the last couple of years back predominantly to what we call digital, packaging, things that really premiumize our product. And so in the last couple of years for us, I mean, we're starting to see brands like Jack Daniel's Herradura, our premium brand, get to a place where we can actually sustain both we were at the volume stage 4 or 5 years ago, but both volume and value. And it just seems to be a perfect environment for us right now to do that. And to do that, like I said earlier, we've got to continue to make sure that consumers see our brands as very premium and willing to pay that incremental pricing. I think one of the only other thing I've at least read about and have observed, particularly with some of the smaller brands that you've seen more of this in the last year or so are people who are looking ahead. And if they're looking at explosive growth on their aged products, some of them are looking out into the world and saying, Hey, I want to fund and fuel the emerging markets, so I have to watch what I can allocate over to the United States. So I'll therefore take my prices up. So I think they're in the last year, you will have read some of the companies in the world talking about that, particularly in the scotch whiskey arena much more often, and that could be having an influence as well. As it relates to pricing, just to make sure people understand, as it relates to pricing, we look at pricing as part of the overall brand building exercise and the brand building model. We're not looking at pricing as a tactic to milk the United States, quite the opposite. We continue to see a lot of opportunity in this market. And we believe that consumers' perceptions over what is premium changes over time. And if you're not taking the price up with it, you risk having something done to you like years ago what happened to Smirnoff with Absolute coming in. And so we're definitely looking at pricing as part of our brand Shane Finhamore, Manicay Partners. Now you've had such wonderful success, which you've talked about today. But I was just wondering if you could talk about some of the challenges that you faced in maybe a few of the areas where you've had difficulty sort of meeting the ambitions that you've set out and maybe some areas where you think you might need to provide additional focus to get the success you desire? I mean, we've heard some of them. Southern Comfort, the last few years, so that hit it's our 2nd most important brand. So getting that on the right footing, we're starting to see signs out in the United States, got our fingers crossed for the international marketplace. So you've heard some on that. China, as a question was just asked, one of the few countries around the world where we've had our fits and starts and more fits lately than starts. And so we talked about that. I don't know that it's a challenge or a problem, but being able when you sit out and look at where you're doing where you want to do business, how you might improve your business and we oftentimes talk about really limited things for us on the acquisition front. It would be evident in our last half a dozen years or so that we just haven't gone out and bought much. Thankfully, we've been very dedicated to innovation, line extensions and things that have helped to drive the company. And frankly, I found those as more advantageous long term than the acquisitions even, but doesn't mean we're not interested in acquisitions. So we have a sort of a 4a scale we look at as we assess what we might be interested in. It's sort of first has to be attractive, has to be available, has to be affordable. And then in the end, the way the whole thing comes together, it has to be advisable. So we have pretty strict lenses we place on those things. And so the thing I always say, people are always interested in when are we going to acquire something or what's the next acquisition, and you'll know when we announce it. That's when you'll know because but know that we go through a rigorous process of trying to figure out the right things to bring into Brown Forman, just as we do when we have disposed of brands and businesses in past years. We really look at it and study it closely. Yes, Lauren? It's Lauren Torres from HSBC. Just curious, how can you or how have you been competing against the brewers? It seems like with deeper pockets these days and then focusing more on premium beers and craft beers, they're going head to head with spirits more so now than they ever have. Could you just talk about the dynamic in the U. S. And how you're competing? And outside of the U. S, in Mexico and Brazil, for example, there's a very big beer culture. So also there, how do you compete? How do you get people to switch over and keep them in the category? I mean, I'll give you a real honest answer on the U. S. Question. It's so competitive in the United States among spirit companies and the fact that so many entrepreneurial spirits companies exist and are being successful in the U. S, we probably don't have time to get over to the brewers. We like the success we've been having at the expense of some of the beer business, though. I would say your other question, I'll let maybe Mark talk about Australia and some of the Mexico, Brazil questions that you all Jill, others because we do think we compete because of the RTD format in those countries a little more directly. So we're probably more preoccupied in some of those places where we have good sized RTD businesses thinking about the beer occasion. Do you want to talk about maybe about New Mexico? Sure. A couple of things. 1, so when you think about the beer market, a lot of that is convenience in the can. And in both Brazil and Mexico, a lot of the RTD, same thing. Consumer looking for a convenient way to enjoy the beverage and also economical, not to go out and buy a whole bottle of whiskey, but to be able to economically enjoy something to drink other than beer. So I think that by itself helps. I would say though, when I think about craft brewers, I think about craft distillers. And craft distillers, you still have to make a fine product. And in the case of craft distillers, they have increased awareness around the product, but it's actually benefited Brown Forman in a number of ways like Woodford Reserve being the original craft distiller, people migrate that direction. So I'm not sure that craft brewers are impacting us. But when I look at the opportunity to come into other markets, be it RTDs or craft distillers to get emphasis on our things, It's really about finding some way to connect with the consumer in the occasion they want. And I think we have a number of ways that we're able to do that. Mark? Perhaps the only other thing to say internationally, we do know that the success that John described internationally for Jack Daniel's RTD and others of our trademarks in Australia, in Britain, in Germany touches on the beer occasion. And so it is true that through our ready to drink expressions of our trademarks, we are able to enter that occasion where we would not normally do that with full strength spirits. The other thing I would say, just I think the U. S. Craft brewing phenomena is a lens into the resurgence of bourbon and North interest in more flavor and taste, which is the phenomena driving consumers away from mainstream beer into different tasting, stronger tasting beer. I do believe that phenomena is also touching on why not so much vodka anymore, but more so bourbon and North American whiskey. It's interesting or not, but if you were to be able to get a telescope lens into Brown Forman and watch it over the course of any period of time and how we talk and what we look at, you'd probably be surprised how little we even talk about beer. It doesn't show up a lot in our presentations. There are a number of things that are going Spirit's way here in the United States as well as outside the United States to the extent that consumers continue to look for more flavor and more variety, you tend to have to come to spirits for that. And we stay pretty focused on that consumer. Whenever I come out into the investors' world, I probably don't go a day without getting a question about beer and beer share and what's happening there and all of that. And a little tongue in cheek, the only time I ever think about beer is the day before I come to a conference like this because I know I'm going to get the question and I probably need to go and take a look at what's been going on. So certainly when it comes to looking at beer occasions and the ways that we can be more competitive in that arena, we'll look at that from a consumer perspective. But you won't see beer names as competitive brands as we think about our business and how we're growing it. Yes, Ian Shen. Serena, we'll look at that from a consumer perspective, but you won't see beer names as competitive brands we think about our business and how we're growing it. Ian Shackleton from Nomura. I had a couple of questions on Don Slider and M and A. When we're looking at local acquisitions, what are really the criteria? It strikes me you did reference Cerro Dora. It was probably a bit exceptional in being quite a premium brand, whereas most of the local acquisitions will be low margin, less premium. And the other question was really around the categories then you're fishing in, which are obviously quite a small pond of Scotch and Irish. And really simple question, why aren't the more categories there, something like premium rum or is that an issue with the Bacardi distribution alliances? I'll take the last part first. One of the things that we believe that as we think out into the future and how the company needs to evolve, if we're going to be able to continue to compete in the top in a top tier level and outperform the industry overall, we got to be pretty selective that we're going into the kind of categories and the kind of brands that have the ability to do that. And so as we've of gone through the discipline of looking at the business and what we think those areas are, they can consistently and sustainably continue to outperform the 2 by far and away that we've got the most confidence in would be the scotch arena and the vodka arena. And so hence, those would be probably the 2 highest level of priorities that we have. Certainly, at premium levels and above, we like the premium positioning that we have. We think that's really where the long term future of this business resides from a profitability and a return standpoint. And given that we really don't have today the assets or the capabilities to do scotch, if we're going to go in there, it probably is going to necessitate some form of an acquisition in order to do it. On the vodka side, as you noticed up there, we've got both innovation as well as acquisition. And we're going to look at what are the different types of regional opportunities there that where a brand would do well in our hands. It doesn't mean that we won't look at other things. It's just as though if things were to come up for sale, we'll probably take a look at them, determine whether or not we think it could fit some of the criteria that we have. But when we think about proactively where the industry is going and where we want to go within it, we see those two areas as the ones that we are probably the most proactive about. Something for you, Jason. We use categories and sometimes countries to demonstrate prioritization and to actually to illustrate opportunity. But you should know that even within a particular category of interest, the vast majority of trademarks aren't of interest to us. We are, I mean, a much more focused brand building company by definition, and we just see those categories as offering superb opportunity for a company that wants to grow forever. And so you look for long running runways for growth is really the idea there. And but within it, you're going to really want to be really picky and choosy about the trademarks that you think will do very, very well in your hands. So I mean, while we talk a lot of times and use the category as a reference point, we in no way, shape or form are out trying to dominate categories and countries in some way. Our share of the global marketplace wouldn't I think it'd be unrealistic for us to think that way. So almost keeping to a narrow focus against great opportunities is really the way we think about And that's really resides in a brand trademark. One other short comment to make. I was talking about the rest of portfolio growth that we have. The one thing we do not have at Brown Forman, which is obviously a very good thing, is a long tail compared to most of the industry other participants out there. The last thing we want to do is make acquisitions whether local or international for scale sake that would eventually turn into a bigger tail. That is not something that we are interested in doing at all. And one of the strong or toughest criteria we put against any of the acquisitions is it's got to accelerate the company's growth rate, not decelerate it. And so the bar is pretty high. And then that's why we're pretty choosy on those. Thank you. Everybody is ready for a drink. You all thank you very, very much for what has been a long afternoon. Really appreciate you sticking with us to it this afternoon. Thank you all. Thank you.

• Slides