Jack Daniels Business History
Old No. 7 Nestled in a quiet mountain glen just outside of Lynchburg Tennessee you’ll find the Jack Daniel’s distillery. Started in 1866 by a man named Jasper Newton Daniel, he started distilling a sour mash whiskey now known as Jack Daniel’s. “Using spring water free of iron traces, he added the finest white corn, the best rye, and barley malt, both fresh and ripe yeast to make a “sour” mash, different from most bourbons. “(sippin’ whiskey) He let it ferment 24 hours longer than ordinary bourbons, then leached it through vats of sugar-maple charcoal to purify it, and finally aged it four to six years in new, charred white oak barrels.
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This process helps give Jack Daniels its unique smoky taste combined with a smooth richness that makes it, to such famed connoisseurs as Lucius Beebe, Novelist William Faulkner and onetime Vice President John Nance Garner, “the best sippin’ whisky of all. “(sippin’ whiskey) One morning in 1911, Jasper Newton Daniel showed up to work early. He tried to open the safe in his office but had forgotten the combination. Out of frustration he gave the safe a good solid kick. The blow broke his toe and would lead to a blood infection which took his life a couple of weeks later.
Jasper never married and had no children but had grown very close to his nephew Lem Motlow, whom he deeded the distillery to. One of Lem’s accomplishments was getting the company incorporated before his death in 1947. Jack Daniels Distillery has overcome several obstacles over the years. In the early 1900’s it was forced to shut down its distillery in Lynchburg and move to St. Louis due to the county becoming dry. Then when prohibition came, Jack Daniels was forced out of business for over 20 years.
Five years after prohibition was lifted Lem Motlow reopened the doors in Lynchburg after lobbying to pass a bill to allow the beverage to be produced in the dry county. Jack Daniels had never tried to crash “mass” markets, and never sold more than 300,000 cases a year. That was until the fall of 1956 when Kentucky based wine and spirits company, Brown-Forman Distillers, bought the Jack Daniels distillery for 20 million dollars cash. The name brand turned out to be well worth the price, as the distillery continues to thrive and posted 2,806,000,000 dollars in sales in ’07 along with 4,000,000 dollars net income. sippin whiskey) Jack Daniels is solely responsible for over 45% of sales for Brown-Foreman which also owns other popular products such as Southern Comfort, Korbel, Finlandia, and Canadian Mist just to name a few. The Brown-Forman distillery employs over 4,400 workers and sells products worldwide. The United States makes up only 53% of the company’s sales while the other 47% come from foreign markets. (10-k report) As seen in the graph overall sales in every market worldwide has steadily increased over the last three years.
This is due to the distillery’s superb management. Brown-Foreman develops it management staff through a committee system, causing senior managers to work outside their primary areas of responsibility quite often. This cross-pollination not only leads to better decisions, it also provides opportunities to learn from one another and to gain the benefit of colleagues’ opinions and experiences. Also by having long-tenured management and employees, colleagues can tap into each other’s knowledge. By creating an environment where people are encouraged to constructively disagree with others – including the CEO – co-workers improve their ability to harness the naturally diverse viewpoints of people in all levels of the company. “(Brown-Forman management notes) Both Jack Daniels and Brown-Foreman are dedicated to social responsibility. Jack Daniels has recently released a large ad campaign with the slogan “pace yourself, drink responsibly” in an effort to influence it’s consumers to be safe when drinking.
They have done this mostly through television commercials and magazine ads. Brown-Foreman encourages its employees to contribute time, energy, and resources to improve their community. Through contributions and volunteering efforts they have helped strengthen the educational system and supported diverse art and civic organizations within its community. Efforts are made to assess the environmental impact of operations and actions, and are committed to improving waste and materials usage, energy reduction, and water conservation.
While no financial predictions have been made, Brown-Forman states “we avoid the temptation to excessively discount a brand’s price in a futile search for unsustainable short-term results, preferring to focus instead on patiently forging the lifelong relationships and emotional connections with consumers that are the foundation of brand loyalty, sustainable brand equity, and superior profitability. ” This shows a strong desire to connect with its customers and build a loyal following by continuing to produce top uality products at competitive prices which, if successful, will ensure a long and profitable life for the distillery. The Jack Daniels brand is strongly linked to rock ‘n roll, bike culture, country music, and Nascar. These groups make up the target market or the company. (Wikipedia) It accomplishes this through television commercials, and magazines ad’s describing the whiskey smooth taste and rich heritage. In 2006, Jack Daniels began sponsoring the No. 7 car (after its bottle logo “old no. 7”) driven by Clint Bowyer.
After 130 years of production, and being placed in the National Register of Historic Places, Jack Daniels has proven it has staying power in the market. I think this firmly places the distillery in the “maturity phase” of its product life cycle. In the 60’s and 70’s the whiskey started tapping heavily into the foreign market and started to mass produce in the states which would have marked its growth period and has since sales with small yearly increases. Jack Daniels does a better job marketing its products than its competitors. This is very evident in its production of “ready to drink” beverages and barbeque sauces.
Though very popular, the product didn’t appeal to women until the introduction of fruity premixed drinks such as Lynchburg Lemonade, and Tennessee Apple. This helps the product reach a more diverse customer base and opens more marketing opportunities. Stock prices did drop over the year due to discontinued operations. Over the course of the last 52 weeks it has seen a high of $79. 88 and a low of $61. 35 and is currently being sold at $70. 38. (yahoo finance) Total shareholder return was down 9% in 2007 but long term returns have been very healthy.
In 2007 earnings from continuing operations were $3. 22 per diluted share according to the company’s financial reports. Brown- Forman currently expects 2008 earnings from continuing operations to be $3. 35 to $3. 55 per diluted share, which represents growth of 7% to 13% compared to 2007 earnings from continuing operations. Though buying stock in this company may not be a good idea for a short term investment right now, the data shows that a long term investment could turn out to be very profitable. Through its long and rich history the Jack Daniels distillery has become a staple in American Culture.
Surviving relocations and prohibition, the distillery still thrives on today as the world’s most popular whiskey. The nature of any business is to turn a profit and achieve sustainable growth. In this new era of world awareness businesses also have an obligation to make a positive contribution to the well-being of society and the planet. Jack Daniels and Brown-Forman distilleries strive to do just that. In writing this paper, and having a few Jack&Cokes along the way, it’s made me appreciate my favorite drink just a little more. Work Cited “A sippin’ whiskey” 1956 Time Magazine Sept. 0, 1956 http://www. time. com/time/magazine/article/0,9171,808612-1,00. html Brown-Forman website April 15, 2008 www. brown-forman. com “Jack Daniels” April 15, 2008 Wikipedia online encyclopedia http://en. wikipedia. org/wiki/Jack_Daniel%27s “BF-A technical analysis” April 15, 2008 Yahoo Finance http://finance. yahoo. com/q/ta? s=BF-A Jack Daniels website April 15, 2008 http://www. jackdaniels. com/ “form 10k” April 30, 2007 Security Exchange Commission Edgar Filings http://www. sec. gov/Archives/edgar/data/14693/000001469307000066/form10k2007. txt