Did Jack Daniel sense a looming doom for the Kentucky whiskey market? Here's a blow-by-blow breakdown
Just this January, the Louisville-based spirits giant announced that it's cutting 12% of its global workforce and shutting down its very facility where it's been handcrafting barrels since 1945. The decision, expected to impact around 210 employees, is to save between $70 million and $80 million annually.
Following Jack Daniel's exit, the message is clear: the whiskey business isn't what it used to be.
ALSO READ| Kentucky whiskey bankruptcies: Which distilleries are broke, and why
The company explained that it will now source barrels from external suppliers, expecting to bring in over $30 million by selling off its cooperage assets. Brown-Forman also shuffled and appointed Jeremy Shepherd as its new chief marketing officer.
'These actions reflect the venerable company's 'relentless focus on evolving our strategy, our portfolio and our organization to grow and thrive,'' said CEO Lawson Whiting, per AP.
'Today's announcement will ensure we have the structure and teams in place to continue on this path, while also making investments that we believe will facilitate growth for generations to come.'
Kentucky whiskey market is going through bankruptcies
While Brown-Forman is trying to stay nimble, this week a string of bankruptcies has shaken the state's $9 billion whiskey industry, according to the Kentucky Distillers' Association.
LMD Holdings, the parent company of Luca Mariano Distillery in Danville, filed for Chapter 11, with court documents showing a jaw-dropping $25 million in liabilities.
Garrard County Distilling, a $250 million operation that only began production in 2024, was shut down in April due to mounting debts.
Even Stoli Group USA, along with its Kentucky Owl whiskey label, filed for bankruptcy after a double blow: declining spirits demand and a cyberattack that crippled operations.
ALSO READ| How much cheaper will whiskey be after India-UK FTA? What experts said
The problems are starting to mount industry-wide, whether it be inflation-strained consumers, Gen Zs' recent shift to not wanting whiskey, or renewed tsarphobia over tariffs on American liquor in the export markets.
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Hindustan Times
8 minutes ago
- Hindustan Times
Buy now, pay later is taking over the world. Good
BURRITOS ORDERED online, tickets to Coachella and Botox injections. These are not just must-haves for some American consumers—they can now all be bought using buy-now, pay-later financing. Such purchases are often the subject of derision. Paying for lunch in instalments is, to some, consumerism at its most ludicrous. Others see something darker: lending that skirts the edge of mainstream finance, preying on precarious borrowers. Neither mockery nor anxiety have dented the industry's growth, however. Worldpay, a payments firm, suggests that BNPL accounted for $342bn in spending around the world last year, up from just over $2bn a decade earlier. Older financial firms, such as JPMorgan Chase and PayPal, have entered the market, just as BNPL companies are taking on tasks that were previously left to banks. The opportunity for BNPL in business-to-business loans—a fragmented, old-school market—may be even larger than that for consumers. And a new market is emerging for portfolios of BNPL debt, which are securitised and bought up, often by asset managers. Chart The idea of a loan at the point of sale is an old one. In 1856 Isaac Singer and Edward Clark, an entrepreneurial duo, began selling sewing machines in instalments, with great success. The modern industry operates in a similar manner. When a customer buys a product for $100, they can pay in stages. The BNPL lender—perhaps Klarna, a Swedish company, or Affirm, a large American provider—pays the merchant upfront, in exchange for a cut of, say, $3. This works for retailers, since it boosts sales. Customers with access to loans spend at least 20% more relative to those without access, even as the sticker price stays the same. The customer pays back the sum over time, often six weeks, in four instalments and with zero interest. Despite the industry's recent success, there is reason to think it is still in the foothills. Fewer than 2% of Bank of America customers born before 1965 have an outstanding BNPL payment, compared with 10% of the bank's Millennial and Generation Z clients. As younger cohorts come to account for more consumer spending, the market should grow. In countries where BNPL has been around longer, it contributes to more sales: over one in five of those made online in Sweden, against less than one in sixteen in America. Local and regional firms are popping up to offer the service: Addi in Colombia, Atome in Singapore, Tamara in Saudi Arabia. As the industry grows, the borders between BNPL and mainstream finance are blurring. Klarna, an early mover, has been a bank in Europe since 2017. Sebastian Siemiatkowski, the company's co-founder and boss, says he wants it to become a digital financial assistant enabled by artificial intelligence. Affirm launched a debit card two years ago, and has seen uptake soar of late: the firm now reports almost 2m cardholders. Customers can use the cards in shops, either to pay in full or in instalments, bringing a financing method synonymous with e-commerce into the real world. In the past two years, both the BNPL giants have been integrated into Apple's and Google's digital wallets. Established financial firms are moving in the opposite direction. PayPal began offering BNPL services in 2020, capitalising on its strong relationships with merchants. Last year the payments giant processed $33bn in BNPL spending; an amount it says is growing at about 20% a year. Several banks now allow customers to split larger payments into smaller chunks after purchases. And Klarna's recent deals with payments firms such as Adyen, JPMorgan Payments and Stripe mean that its services are now provided to millions of merchants. Several fast-growing startups hope to disrupt trade credit, a vast market in which suppliers lend money to firms that buy their products. American companies alone report about $4.9trn in trade payables, money owed to other firms for supplies purchased on credit. The market is about four times the size of the $1.2trn in balances on American credit cards. It is also antiquated and ripe for innovation. Suppliers doing the lending are forced to manually assess whether each of their clients are creditworthy, with little information to go on, and chase buyers for payments. Matthias Knecht, co-founder of Billie, a firm specialising in business-to-business BNPL loans, suggests that such lending is roughly 15 years behind the consumer market. Richard Thornton, co-founder of Hokodo, another startup, believes that the potential impact on business spending is greater than with consumers owing to the limited alternatives available to young firms. He says that when small companies gain access to BNPL lending baskets grow by around 40% on average. For BNPL providers, expanding their lending operations as fast as possible means keeping a light balance-sheet. The idea of burrito-securitised bonds may be the subject of mockery, but the relatively opaque market for BNPL portfolios is booming. Asset managers and private investment firms that are snapping up the debt believe they have found an appetising asset class in which underlying assets mature quickly. In October, Elliott Advisors, a British affiliate of a mammoth hedge fund, purchased Klarna's $39bn British loan portfolio. In 2023 KKR, a private-markets giant, agreed to buy as much as $44bn in BNPL debt from PayPal in 2023. Affirm has issued around $12bn in asset-backed securities. One BNPL insider calls the market 'a feeding frenzy', where there is not enough debt to satisfy demand. Some difficult questions linger over the industry, which has ballooned over the past decade—a period without a prolonged downturn. Chief among them is whether it is facilitating risky borrowing by consumers living beyond their means. Customers undoubtedly have lower incomes than those using credit cards. And there have been worrying snippets of news. Klarna's consumer-credit losses rose by 17% year-on-year in the first quarter of this year. Research by the Federal Reserve suggests that the proportion of BNPL users who have made a late payment has climbed from 15% in 2021 to 24% in 2024. All the same, default rates remain markedly lower than other forms of consumer credit. The Consumer Financial Protection Bureau (CFPB), a regulator, notes that default rates for BNPL loans were about 2% between 2019 and 2022, compared with 10% for credit-card debt held by similar borrowers. Although Klarna's credit losses have grown in the past year, so have its balances. The company's overall default rate is lower than the industry norm. Could a growing pile of distressed consumer debt be hidden from view, beyond the sight of banks and policymakers? Some lenders worry about loan-stacking (borrowing from multiple sources at once). Such doubling up can cause a downwards spiral, with consumers taking on more and more loans in order to pay off earlier ones. Yet other research by the CFPB offers reassurance. It finds that measures of financial distress—such as revolving debt on credit cards or extra charges on credit-card loans—do not rise after BNPL use. Nor are BNPL users more likely to borrow from other sources in the 18 months after agreeing to pay for something in instalments. In June, FICO, America's main provider of consumer-credit scores, announced it would begin providing scores based on borrowers' BNPL histories. Julie May, an executive at FICO, notes a surprising finding from its year-long study with data from Affirm: for the most frequent borrowers, credit scores were improved or unchanged when BNPL loans are included. Research in Scandinavia finds similarly positive results. Christine Laudenbach of Goethe University Frankfurt and co-authors recently looked at 1m loan applications to an unnamed Nordic bank that makes use of BNPL data. Clients with a history of BNPL use, as well as a strong repayment history, were able to borrow at an average interest rate of 1.4 percentage points below the level suggested by their credit ratings. The final verdict on BNPL will come only in a severe downturn. But although its users are young, and many are new to borrowing, there are reasons for optimism. As the new form of finance becomes increasingly mainstream, it looks safer and more useful than its critics argue. Buy that burrito, and don't let anyone judge you.
The Hindu
8 minutes ago
- The Hindu
VOC Port handles 15 million tonnes of cargo this fiscal
The V.O. Chidambaranar Port crossed the 15-million tonne mark in cargo handling in this financial year on August 3. This milestone has been achieved 11 days ahead as compared to the previous financial year. An official statement said the port had handled 2,98,107 TEUs of containers up to August 3 this financial year, registering a growth of 9.75% compared to the 2,71,620 TEUs handled during the corresponding period of the previous financial year. The major commodities that contributed to this achievement include coal, limestone, salt, rock phosphate, edible oil, and construction material. The rapid growth in exports from Tiruppur, Coimbatore, and Karur has increased the container volumes. The operationalisation of North Cargo Berth-III for handling bulk cargo, which was recently dedicated to the nation by Prime Minister Narendra Modi on July 26, is another major contributor to the port's improved performance. The port's primary hinterland has been witnessing rapid industrialisation with the proposed man-made fiber factory by a Singapore-based firm, footwear manufacturing facility to be set up by a South Korean firm in Tirunelveli disrtict coupled with new investments in defence and space technology. Start-ups too augur well for VOC Port's cargo handling. 'Hence, the cargo handling of VOC Port in near future will scale greater heights,' said Port Chairman Susanta Kumar Purohit, who congratulated all stakeholders and trade partners for their continued support and contribution towards this significant achievement, the statement said.
Indian Express
8 minutes ago
- Indian Express
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