Bank of America said late Wednesday it planned to return the entire $45 billion in bailout money it received from the government over the past year.
The move would allow Bank of America, the nation’s largest lender, to wriggle free from a variety of government restrictions it has had to abide by, including pay caps for its top executives.
It could also smooth what has been a difficult search for a new chief executive.
Outgoing CEO Ken Lewis is scheduled to depart by year end. Bank of America’s board of directors originally hoped to select a successor by Thanksgiving.
"We believe that this is good news, not only for the U.S. taxpayer and our company, but for the country as it is a milestone indicating that public policy has succeeded in helping our industry and the economy begin to recover," Lewis said in a statement.
The payback would be made largely through the sale of $18.8 billion of securities that would convert into common stock, according to the company. The stock sale will be put to a shareholder vote in coming months.
In addition, the bank said it would supplement the $18.8 billion with $26.2 billion in cash.
Last fall, as the government tried to stabilize the financial markets, Bank of America received $25 billion in aid under the Troubled Asset Relief Program, or TARP.
That number grew to $45 billion in the following months as the bank sought to cover losses it absorbed through its purchase of Merrill Lynch at the height of the crisis in September 2008 payday loan online.
There had been speculation earlier this fall that the company was exploring options to pay back part of the money it had received from the government.
But many believed that it would be at least several more months before the Charlotte, N.C.-based lender could get completely out from under the government’s thumb.
The move, of course, will save Bank of America from having to make any further dividend payments on aid it received from the government. So far this year, the company has paid out $2.54 billion to the Treasury Department.
But exiting TARP won’t come without a cost. The company said it would reduce its fourth-quarter results by $4.1 billion as a result. The company is expected to report a loss of $524 million in the current quarter.
Bank of America noted however, it did not plan to exercise its right to repurchase warrants, or rights to purchase company shares, owned by the government.
Bank of America (BAC, Fortune 500) shares finished more than 1% lower in regular trading Wednesday, but jumped more than 3% on the news after the bell.
The U.S. economic recovery will extend into next year as manufacturing expands and the pace of firings abates, reports today indicated.
The Conference Board’s index of leading indicators, a gauge of the outlook for the next three to six months, rose 0.3 percent in October, preserving a string of gains that began in April. Other reports showed claims for jobless benefits held at a 10-month low and Philadelphia-area manufacturing accelerated.
The rally in stock prices, low short-term interest rates and slowing job losses that propelled the leading index signal consumer confidence and spending are likely to stabilize, limiting the risk the economy will retrench. The data supported Treasury Secretary Timothy Geithner’s forecast today that the emerging expansion will be sustained into 2010.
“It’s very clear that the economy is now expanding, but I don’t see it being a vigorous expansion,” said Michael Moran, chief economist at Daiwa Securities America Inc. in New York, who correctly forecast the leading index. “We are seeing a gradual improvement, but the key word is ‘gradual.’”
Stocks extended a global drop as concern grew that the rally outpaced the prospects for economic growth and Bank of America Corp. downgraded chipmakers. The Standard & Poor’s 500 Index fell 1.3 percent to close at 1,094.9, with Intel Corp. and Texas Instruments Inc. losing ground.
Economists forecast the leading indicators index would increase 0.4 percent, according to the median of 58 estimates in a Bloomberg News survey.
Geithner Forecast
“We expect continued growth in the fourth quarter and ahead in 2010,” Geithner said today in testimony before the Joint Economic Committee of Congress.
He urged Congress to pass a financial regulation overhaul intended to strengthen the banking system and guard against “market-driven excess,” to avoid a repeat of the worst crisis since the Great Depression. Congress is considering a plan that includes changes to oversight of large banks, consumer protection and derivatives.
Federal Reserve Chairman Ben S. Bernanke last week said “significant economic challenges remain” due to a weak labor market and reduced bank lending.
The number of Americans filing claims for unemployment benefits held at 505,000 in the week ended Nov. 14, matching the prior week’s reading as the lowest since January. The number of people collecting unemployment insurance dropped in the prior week, while those getting extended payments jumped.
‘Glacial Pace’
“The labor market is improving, but at a glacial pace,” said Tom Porcelli, a senior economist at RBC Capital Markets in New York, who had forecast claims at 503,000 . “People are having a hard time finding a job as companies remain wary of the economic recovery.”
President Barack Obama on Nov. 6 signed into law a plan to extend jobless benefits, expand a tax credit for first-time homebuyers, and provide tax refunds to money-losing companies. The measure gives jobless people as many as 20 additional weeks of unemployment assistance.
The president has also announced plans to convene a jobs summit at the White House next month.
Manufacturing in the Philadelphia region expanded in November at the fastest pace in more than two years, reflecting gains in orders and sales, figures from the Fed Bank of Philadelphia also showed today.
Factory Rebound
The bank’s general economic index rose to 16.7 this month, exceeding the median forecast of economists surveyed and the highest level since June 2007, from 11.5 in October. Readings greater than zero signal growth.
Six of the 10 components in the leading index contributed to last month’s increase, led by the difference between short- and long-term borrowing costs, fewer jobless claims and higher equity prices. A longer factory workweek, a rise in money supply and an increase in factory orders for consumer goods also helped. Weaker consumer expectations, fewer building permits, shorter delivery times and a drop in orders for business equipment limited the advance.
Manufacturers that export to China and other emerging economies are among companies profiting from growth abroad. Caterpillar Inc., the world’s largest maker of bulldozers and excavators, posted third-quarter earnings that beat analysts’ estimates and issued a full-year forecast that exceeded the highest prediction.
“We are seeing encouraging signs that indicate a recovery may be under way,” Chief Executive Officer Jim Owens said in a statement Oct. 20. “When it comes, it can come quickly, and we, our dealers and our suppliers will be prepared.”
The world’s largest economy probably expanded at a 3 percent annual pace from October through December after growing at a 3.5 percent rate in the prior quarter, according to the median estimate of economists surveyed earlier this month. That followed a 3.8 percent contraction in the 12 months to June, the economy’s worst performance since the 1930s.
A spate of attacks in Pakistan’s Punjab as Islamic militants work more closely with the Taliban has raised business concern in the province that generates more than half of the country’s economic growth.
Forty-two people were killed last month in Punjab, home to Pakistan’s largest bank and companies producing clothing for retailers Levi Strauss & Co. and Gap Inc. Recent increases in surveillance and arrests are unlikely to reverse the violence that killed more than 220 people in the province in the first 10 months of this year, 20 percent more than 2008, said Ayesha Siddiqa, a Punjabi researcher on military and security issues.
The Karachi Stock Exchange 100 Index fell 2 percent last month, the most since January and only the third negative month this year, as bombings and militant assaults in major cities nationwide hurt investor confidence.
“The implications of this war spreading to Punjab are pretty severe,” said Standard Chartered Plc economist Sayem Ali in Karachi. Punjab represents 55 percent of Pakistan’s gross domestic product, he said. With foreign direct investment down by 60 percent in the three months to September, “our domestic security problems cloud companies’ strategies for coming back into Pakistan any time soon.”
Since the army began its biggest anti-Taliban offensive on Oct. 17 near the border with Afghanistan, bombings have killed about 350 people nationwide, mostly civilians.
Cricket Ambush
While Punjab has seen fewer terrorist attacks than Pakistan’s ethnic Pashtun northwest, guerrillas in Lahore attacked three police headquarters last month and ambushed the Sri Lankan national cricket team’s bus in March. Militants last month raided the army headquarters in Rawalpindi, also in Punjab. The province is home to about half of the country’s 180 million people.
The government must continue to stand up to the guerrillas or “the violence will continue to spread and investors will not feel safe anywhere” in Pakistan, said Habib-ur-Rehman, who manages $48 million of stocks and bonds at Karachi-based Atlas Asset Management Ltd.
Punjab is home to much of Pakistan’s textile sector and the nation’s largest bank by market value, MCB Bank Ltd. Textiles account for two-thirds of the country’s exports in a $165- billion economy.
Pakistan’s overseas direct investment fell 58 percent to $463 million in the three months ended Sept. 30, from $1.1 billion a year ago, according to data from the central bank.
Surveillance Cameras
“We have to keep so many security guards, set up surveillance cameras at the factories,” said Raza Mansha, chief executive of D.G. Khan Cement Ltd., Pakistan’s second-biggest cement maker, based in Lahore, Punjab’s capital and the country’s second-largest city. It “adds to our non-productive expenses and gives foreign visitors a bad impression guaranteed online payday loans.”
D.G. Khan Cement and MCB Bank are part of the Nishat Group, Pakistan’s largest industrial group. D.G. Khan shares fell 16 percent in October and have risen 4.3 percent this month. MCB was down 4 percent in October and is up 7 percent this month.
The benchmark share index has gained 56 percent this year after losing 59 percent in 2008. It rose 2.6 percent yesterday.
Interior Minister Rehman Malik told reporters last month that at least two Punjab-based groups — Jaish-e-Muhammad (Soldiers of Muhammad) and Lashkar-e-Jhangvi (the Army of Jhang, a southern Punjab city) — were operating jointly with the Taliban and al-Qaeda to attack the Pakistani state.
Limited Crackdown
Still, Pakistan’s crackdown on jihadist groups in the province has been limited, and won’t reverse the decades of growth that have made the militant groups a durable part of the political landscape, said Siddiqa.
“The state’s response really has been business-as-usual — selective pressure” rather than a systematic campaign against Islamic radicalism, Islamabad-based Siddiqa said in a phone interview.
For Umer Mansha, chief executive officer of Lahore-based Nishat Mills Ltd., that’s a worrying message. His company produces garments for San Francisco-based Levi-Strauss, the closely held maker of blue jeans and Dockers pants, and Gap, based in the same U.S. city and operator of the Old Navy and Banana Republic chains.
“Textile buyers like to come, see and feel the product,” Mansha, whose company is also part of the Nishat Group, said in an interview Nov. 12. “Buyers are simply not willing to come here. It’s very hard to get new clients.”
More Than Last Year
More than 10,000 Pakistanis — civilians, security forces and militants — have died in the country’s violence this year, a rate 75 percent higher than last year’s record, according to the New Delhi-based Institute for Conflict Management.
“The tactics used in recent attacks in Punjab, plus the literature recovered by police in making arrests, shows that there is more coordination and contact now between Punjab militants and the Arabs of al-Qaeda,” said Muhammad Amir Rana, director of the Islamabad-based Pak Institute for Peace Studies.
Punjab Home Ministry and police officials didn’t respond to phone calls and e-mail messages asking how many alleged perpetrators have been detained in the province.
The “poverty of southern Punjab in particular, and the covert support and funds that militants have had” from Arab donors and Pakistan’s military, “have let them build durable organizations,” said security researcher Siddiqa. “Militancy in Punjab is now a fixture.”
Hewlett-Packard Co is making a move into the network equipment market by striking a $3.1 billion deal for 3Com Corp, in a major challenge to Cisco Systems Inc.
The deal is the latest sign that technology giants from IBM to Oracle Corp are increasingly encroaching in each other’s markets as they seek to become one-stop shops for computing, networking and data storage. Cisco itself this year pushed into the server market, of which HP is a major player.
HP, which also reported higher-than-expected preliminary earnings on Wednesday, said it would pay $7.90 per share for 3Com, a 39 percent premium over its closing price. The deal values 3Com at $2.7 billion excluding its net cash.
“Cisco and HP are going to compete more and more,” said Jayson Noland, analyst at Robert W. Baird & Co. “We’re headed to a world where each of these large companies can give you everything you want.”
By buying 3Com, HP will be competing with Cisco on a wider range of network equipment, including routers and switches. 3Com also has a large presence in China and can help HP expand sales into one of the world’s fastest-growing markets.
HP is already a dominant force in personal computers, IT services, servers and printers, with recurring revenue streams that have helped it during the economic downturn.
3Com, for its part, has been pushing into the large enterprise market outside China with its H3C brand, trying to take on giants like Cisco.
“We wanted to create a powerhouse in the networking industry,” said Marius Haas, senior vice president of HP’s ProCurve networking division, adding that the 3Com deal puts HP in a good position to compete against Cisco payday cash advance.
When asked for comment, Cisco said: “While Cisco has a healthy respect for all of our competitors, acquisitions in our industry only validate the fact that networking is becoming the platform for all forms of communications and IT.”
3Com has been an acquisition target before. In 2008, Bain Capital Partners and China’s Huawei Technologies tried to buy 3Com for $2.2 billion but failed to win approval from a U.S. government security panel. Huawei is a privately held company set up by a former Chinese army officer.
3Com shares jumped 35 percent to $7.66 in after-hours trading. They climbed over 5 percent on Wednesday ahead of the announcement. HP shares edged 0.8 percent lower to $49.61.
A rise in 3Com shares and call options before the offer was announced sparked talk that the news had been leaked, option traders and analysts said.
3Com would be HP’s fourth biggest acquisition ever. The Marlborough, Massachusetts-based 3Com has 5,800 employees and posted fiscal 2009 revenue of $1.3 billion, more than half of which came from China.
TECH DEALS GALORE
Worldwide tech mergers and acquisitions have totaled $109.1 billion this year, down 20 percent from year-to-date 2008, according to Thomson Reuters data.
The Federal Reserve on Wednesday is expected to reaffirm its intention to keep U.S. interest rates at ultra-low levels for a long time to support the economy, even as signs of recovery accumulate.
The U.S. central bank cut overnight rates close to zero percent last December and it has vowed to keep them there for an “extended period.” While some analysts think the Fed could start to tip-toe away from that pledge, most say it is too soon.
“Once they start removing that, that’s a real sign that they intend, within six months, to start raising rates,” said Deutsche Bank economist Torsten Slok. “But it’s just premature, looking at the economic numbers, to arrive at that conclusion.”
The Fed will issue a statement around 2:15 p.m. EST at the conclusion of its two-day policy meeting on Wednesday. Analysts expect the Fed to nod to modestly encouraging signs suggesting the economy is gaining strength, but still expect a cautious tone on policy.
Policy makers will need to take into account the economy’s faster-than-expected 3.5 percent annualized growth rate in the third quarter, which effectively signaled the end of the most painful recession since the 1930s. Suggesting further momentum, data on Monday showed manufacturing activity hit its highest level in 3-1/2 years last month.
Improved third-quarter corporate earnings have also fed optimism that the upturn can be sustained next year even after government help has dried up.
In an act underlining rising confidence in the recovery, billionaire investor Warren Buffet on Tuesday said his company, Berkshire Hathaway Inc, agreed to purchase the nation’s largest rail company, saying it is poised to benefit from the recovery.
Fed officials in recent weeks, however, have sent the message that while the outlook has improved, the recovery is likely to be sluggish and needs continuing support.
Unemployment is expected to climb above 10 percent before the labor market improves, damping the consumer spending that accounts for around 70 percent of U.S. output. The banking system is still under pressure from loan losses, and credit remains tight.
“We have to think about our exit policy and are looking at it very carefully, but at the moment, that’s not our first order concern. At the moment, it’s policy accommodation,” Chicago Federal Reserve Bank President Charles Evans, a voter on the Fed’s policy-setting panel, said on October 22.
Other central banks are also wrestling with how best to spur growth and when to withdraw extraordinary measures to support their economies.
The European Central Bank is expected to keep rates on hold at a record-low 1 percent on Thursday, while there is a good chance the Bank of England will expand its large asset purchase program at a meeting the same day.
Most analysts at top U.S. banks expect the Fed to keep interest rates on hold until mid-2010 or later, although interest rate futures markets are pricing in an increase earlier in 2010.
(Editing by Leslie Adler)
U.S. factory workers at Ford Motor Co overwhelmingly rejected proposed concessions it has said it needs to stay competitive, while union workers in Canada on Sunday accepted cuts aimed at retaining jobs.
The Canadian Auto Workers union voted 83 percent in favor of an agreement that freezes wages for some 7,000 workers into September 2012 in exchange for protecting most factory jobs in Canada.
The CAW had announced the tentative pact with Ford on Friday and set a whirlwind weekend vote.
The win for Ford in Canada, which accounts for a little over 10 percent of its North American output, comes as its main union, the United Auto Workers, prepares to announce a stunning defeat for a similar proposal in the automaker’s home market.
A UAW vote in the United States has dragged on for two weeks to steadily building opposition from rank-and-file workers who have objected to giving Ford the same concessions already granted to rivals General Motors Co and Chrysler as part of their government-financed bankruptcies.
An official tally was not yet available on Sunday, but UAW members voted against the concessionary deal at most of Ford’s U.S. assembly plants leaving no doubt about the outcome.
The UAW represents about 41,000 U.S. factory workers at Ford and ratification of the proposed changes required the support of a majority of votes cast.
The UAW plans to release the results formally on Monday and President Ron Gettelfinger told reporters on Friday that he had no plans to seek a revote on the deal or more talks with Ford before 2011 payday advance loan. The current four-year deal expires in 2011.
The margin of defeat was substantial at some of Ford’s biggest assembly plants. Overall, seven of the 10 listed assembly plants voted down the contract, many overwhelmingly.
Workers in Kansas City, Missouri, where Ford builds the F-150 pickup truck and Escape SUV, voted 92 percent against the deal, while those at a truck plant near the automaker’s headquarters voted 93 percent to reject it.
At a local that represents two Kentucky assembly plants the vote was 84 percent against approving the tentative agreement that Ford and the UAW announced in mid October.
The tentative UAW agreement included a “no-strike” provision on wages and benefits for the next negotiations in 2011 that became a lightning rod for opposition.
Workers also objected to a blurring of job classifications for skilled workers that would increase Ford’s flexibility and reduce its costs, and to allowing Ford to increase hiring of entry level workers at $14 per hour for a period.
The UAW and Ford agreed on other cuts earlier in 2009 that the automaker believes will save it $500 million per year.
Ford’s deal with the Canadian union is the second cost-cutting agreement between the two sides in 18 months and includes cuts in benefits, a reduction in vacation and breaktimes and higher healthcare costs for workers.
Germany’s Lufthansa and the airline industry’s representative body provided a gloomy outlook for the sector as carriers around the world struggled to make a profit amid a fierce battle for business.
“Initial signs of a stabilization in volumes are far away from making up for the enormous and unrelenting pressure stemming from the massive fall in price levels,” the German flagship carrier said on Thursday.
Industry body IATA echoed Lufthansa’s warning, saying it was still too early to talk about a recovery. IATA has said it sees the world’s airlines losing $11 billion this year as consumers tightened their purse strings and companies cut travel budgets.
“The worst may be over in terms of the fall in demand, but yields continue to be a disaster and costs are rising,” IATA said.
Airlines around the world have been crippled by a toxic mixture of reduced spending on travel, a drop in global trade and rising oil prices. To cut their bloated cost bases, many have grounded planes and canceled or deferred plane orders.
Lufthansa has rescheduled some aircraft deliveries to save 1 billion euros ($1.5 billion) over the next three years. Plane makers Boeing and Airbus are headed for their worst annual order tally in at least 15 years.
Demand has suffered especially this year in the highly profitable business class segment as companies ask staff to book cheaper seats.
Finnish national carrier Finnair said earlier that it saw third-quarter sales fall sharply due to declining demand for business travel, adding it would continue to make losses during the rest of the year cash till payday advance.
Russian flagship carrier Aeroflot said its first-half net profit fell five-fold to $14.4 million as lower passenger numbers hit revenue, which fell 30 percent to $1.46 billion. The airline said lower jet fuel prices pushed up its margins on pretax earnings to 12 percent from 10 percent.
Aeroflot gave no outlook for the second half but analysts said they expected performance to improve only slightly as better sales from renewed passenger growth at the airline is offset by rising fuel costs.
Air cargo is in even worse shape than passenger demand as global trade remains at low levels, IATA said. Lufthansa, which operates Europe’s biggest air cargo fleet, said revenue in the sector was still falling steeply due to declining prices.
Lufthansa ended the session up 2.6 percent, while Finnair was down 1.3 percent and Aeroflot was up 0.26 percent.
CASH IS KING
“What we have seen so far does not indicate at all that the tough times for the airline industry will be over soon. The environment will remain challenging for some time and we still do not expect significant positive newsflow in the short term,” said MM Warburg analyst Michael Bahlmann.
Japan Airlines, Asia’s largest airline by revenue, is asking the government for a “huge” bailout as it heads for its fourth annual loss in five years, weighed down by $15 billion in debt and crippling pension costs.
OPEC Secretary-General Abdullah al-Badri said on Monday he knew of no plans to shift international oil trade away from its dollar denomination.
When asked if he was aware of any such moves, Badri said: “No, no, this is a 100 percent member country policy.”
Reiterating that oil trade denomination issues were the concerns of individual OPEC members rather than group policy, Badri also said dollar weakness was a concern for exporters.
“This is a member country policy but it is a concern for us,” Badri said.
American International Group is to sell its Taiwan life insurance unit for $2.15 billion, marking the largest disposal since a U.S. government bailout saved the insurer from collapse last year.
The sale of Nan Shan Life on Tuesday was another step in AIG’s effort to repay U.S. taxpayers after the government injected $80 billion into the company, but the insurer faces two more sales processes in Asia and others across the globe.
The sale is to two little-known buyers — a start-up financial group run by a former Citigroup banker and an obscure, publicly traded Hong Kong holding company with a market value of $111 million.
“It (deal) has to be approved by Taiwan’s investment commission first,” said Lee Chi-Chu, vice chairperson of the Financial Supervisory Commission, adding the regulator has not received an application from AIG. “We have told AIG that we do not welcome investors backed by China fund,” she said.
Taiwan’s business ties with China have picked up since President Ma Ying-jeou took office last year.
The agreement will likely to bring a sigh of relief to the AIG camp as, at one point, it looked liked the process would not succeed.
Primus Financial, the firm founded by Citi’s former Asia investment banking head, together with China Strategic Holdings, are to buy Nan Shan Life, ending a five-month auction that involved private equity firms and local financial groups.
Nan Shan, a top three Taiwan insurer, has assets of $46 savings account payday loans.4 billion and employs 36,000 sales agents in Taiwan and has a market share of 10 percent with its 4 million customers.
Primus will own around 20 percent of the business and China Strategic 80 percent, according to the companies.
The sale allows AIG to check one business off its list of units to sell in fund-raising efforts.
Hong Kong-based life insurer AIA is seeking a more-than $2 billion initial public offering and sources said American Life Insurance Co, which generates half its revenue in Japan, could fetch $5 billion in an IPO. [ID:nN08285471]
Both companies have also attracted acquisition interest, though nothing has materialized yet.
China Strategic, whose businesses include battery production and securities investments, had said it planned to raise about HK$7.8 billion ($1.0 billion) to fund a possible joint acquisition.
“The deal priced Nan Shan at about 1 time price to book, which is fair when you compare 1.9 times for Cathay Financial and Fubon Financial, and 1 time for smaller rival Shin Kong Financial,” said Dexter Hsu, an analyst at JP Morgan in Taiwan.
An executive from Deutsche Bank, which is Primus’s financial advisor, told Reuters that Primus would be using bank loans to pay up to 35 percent of the $2.15 billion.
The American whiskey market may be back on a roll. The industry which produces Jack Daniel’s and Jim Beam is seeing sales flatten in its domestic market but overseas business is booming and driving overall growth.
These two top brands already have half or more of their sales overseas and are dragging the rest toward export markets such as Western Europe and Australia where annual sales volume growth has averaged nearly 6 percent over the last 10 years.
Both compete head on with other Scotch, Irish and Canadian whiskies, but have done well as Brown-Forman Corp’s Jack Daniel’s became the world’s largest selling single whisky brand four years ago overtaking Diageo’s Johnnie Walker Red.
“Worldwide American whiskey has the opportunity to be the fastest growing in overseas markets. One of its advantages is its mixability compared to scotch whisky,” said Brown-Forman’s Chief Executive Officer Paul Varga.
In the economic downturn, Varga has seen some downtrading to cheaper brands, but whisky’s heritage and taste protects it from the worst of the downtrading seen in the vodka sector.
“The summer months have seen some easing of industry destocking while there is still some trading down,” he said.
The current downturn comes after a decade of growth which followed sliding volumes in the 1990s, and the domestic market has gained nearly 2 million 12-bottle cases since 2000 as whiskey like other spirits gained at the expense of beer.
The U.S. whiskey market was worth 28.3 million cases in 2008, over twice the size of the French cognac market at 12.4 million, but well below the scotch industry at around 100 million. This U.S. industry takes in two Tennessee whiskey distilleries and around 10 bourbon distilleries in Kentucky.
The market is dominated by Jack Daniel’s at 9.5 million cases and Jim Beam at 6 million, which make up 55 percent of U faxless pay day loans.S. industry volumes, and on the export front the former started selling more overseas two years ago and now sells 4.8 million cases outside the U.S. as it pushes into the big export markets of Britain, France, Japan and Australia.
“We are a near-10 million case brand, but could be a 17 million brand with more warehousing,” said master distiller Jeff Arnett at the Jack Daniel’s Lynchburg distillery in Tennessee.
North of Tennessee, Jim Beam is the world’s No 1 Kentucky bourbon, owned by Fortune Brands Inc, selling its 6 million case sales split equally between the U.S. and its big export markets especially Australia and Canada.
Around 12 years ago Jack Daniel’s first moved ahead of Jim Beam in volume terms, but Beam is fighting back as it is the first to move into flavored whiskeys, so popular in the vodka market, with its new Red Stag bourbon infused with black cherry.
This new product has sold 90,000 cases since its launch in June and is attracting new drinkers not seen as typical bourbon consumers. It is Fortune’s first major launch since Jim Beam Black Label over 10 years ago, and executives say if U.S. sales continue strong, it will look at the overseas market.
At Brown-Forman, Varga says Jack Daniel’s has not launched a new pure whiskey product for 12 years, and its flagship No 7 brand accounts for 97 percent of Jack Daniel’s volume.
In its last quarter, (May-July) the Jack Daniel’s family of brands, which includes strongly-growing ready to drink products, saw sales up 8 percent at constant currencies, and Varga says the sales mainly came from volume rather than higher prices.
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