Brown-Forman's decision to cut 12% of its global workforce and close a US barrel-making facility reflects the significant headwinds faced by the company, as noted in a report by Needham analysts. The manufacturer of the iconic Jack Daniel's whiskey and a variety of other spirits anticipates a reduction of approximately 648 employees out of its total global workforce of 5,400.
Notably, around 210 of these job losses will be due to the closure of Brown-Forman's cooperage located in Louisville, Kentucky. In addition to workforce cuts, Brown-Forman has undertaken a restructuring of its executive leadership team, which involves consolidating and streamlining its commercial structure.
Analysts Gerald Pascarelli and Jack Siedow highlighted the company's long-standing practice of managing business with a long-term perspective and a commitment to its employees. They emphasized that such a decision is not taken lightly and reflects the numerous challenges currently affecting the spirits industry.
Among the critical issues impacting the industry are ongoing supply and demand imbalances, which are exacerbated by weak consumer takeaway trends in a tough macroeconomic landscape. In light of these issues, Needham has maintained a hold rating on Brown-Forman's stock. Brown-Forman's management expects that the restructuring will result in annual cost savings between $70 million and $80 million, funds that the company intends to reinvest to boost growth.
Approximately $30 million in proceeds are anticipated from the sale of the cooperage assets, although the workforce reduction and cooperage closure are projected to incur expenses between $60 million and $70 million. The company has also stated that the aim of this organizational evolution is to simplify and streamline its operations, enabling Brown-Forman to become a more agile and efficient organization.
This will allow for reinvestments in capabilities, technologies, brands, and personnel to stimulate future growth. In terms of leadership changes, Jeremy Shepherd will now assume the role of chief marketing officer, having previously overseen the company's USA and Canada commercial division. Meanwhile, Chris Graven, who has been with Brown-Forman for two decades, steps into the position of chief strategy officer.
Notably, the company's recent actions are not a preemptive strategy against potential tariffs on American whiskey, as clarified by analysts..