The company attributed the 6.4% drop in net sales, to $22.5 million from $24.1 million a year earlier primarily to decreases in sales of Clontarf, vodka and certain liqueur brands and Jefferson’s bourbon case mix skewing “toward our lower price and lower margin expression, Jefferson’s Small Batch,” said Richard J. Lampen, President/CEO. The year-earlier third quarter included $2.5 million in sales of Castle’s limited-release, high-margin Jefferson’s Presidential Select.
“We expect this situation to reverse in the fourth quarter as several Jefferson’s expressions with significantly higher prices and margins, such as Jefferson’s Pichon Baron and Jefferson’s Ocean Cask Strength, become available,” he said.
Another factor: “Our third quarter results were also negatively impacted by a one-time $1 million increase in professional fees,” Lampen said.
On the bright side, U.S. sales of Castle’s lead brands, Jefferson’s bourbons and Goslings rums, were up.
Setting aside the case mix in the third quarter, we expect the strong growth in Jefferson’s to continue to drive our long-term trends of increasing sales and improving financial performance,” Mr. Lampen continued.
“Jefferson’s is a key brand for us and we are very excited about our current bourbon inventories. The combination of our new fill programs and opportunistic purchases of aged whiskey resulted in our having just over 30,000 barrels at the end of the third quarter,” said John Glover, EVP/COO. “At approximately 25 cases (9L) per barrel, this would equate to approximately 750,000 cases of finished products. as our new fill continues to age and begins to be included in our finished goods, we will see significant reductions in COGS, which will result in substantial bottom-line improvements,”.
“Also, expected rebates on excise taxes as a result of the Craft Beverage Modernization and Tax Reform Act of 2017 should further improve financial results,” Glover continued.
“The growing popularity of ginger beer cocktails, including Goslings’ trademarked “Dark ‘n Stormy” cocktail, has been an important growth driver of both Goslings Stormy Ginger Beer and Goslings Black Seal Rum,” Glover said.
Ginger beer sales for calendar 2018 exceeded 1.8 million cases, making “Stormy Ginger Beer” the best-selling premium ginger beer in America. GSGB is now sold in the mixer section of all of the approximately 4,500 Walmart stores in the United States and has become a leader in that section. We expect the success in Walmart to lead to new placements in other chains,” Glover added.