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Implementing an FX Hedging Strategy to Facilitate International Growth

Brown-Forman has experienced dramatic expansion in recent years, fuelled by the growing domestic and international popularity of brands such as Jack Daniel’s, Southern Comfort, and Finlandia Vodka, to name a few. For example, in 2002, around 23% of our revenues were generated outside of the United States. Today, this figure is around 58%, with growing market share in both Europe and other parts of the world, particularly Mexico, Australia and Turkey. We have embarked on an ambitious strategy to continue expanding both the Jack Daniel’s family of brands and the rest of our portfolio internationally, as well as consolidating our market leadership position in the United States.

To successfully achieve these objectives, we have identified a number of both developed markets, such as the United Kingdom, Australia, Germany, France and Spain, and emerging economies such as Poland, Mexico, Russia, China, Brazil and India as target growth regions for the future. To facilitate this continued expansion, and avoid the negative impact of increased exposure to foreign currency volatility, we needed to put in place an efficient and robust forecasting and FX hedging process.

Key Points

  • Brown-Forman’s continuing global expansion meant that the company required an efficient and robust forecasting and hedging process
  • The final component of SAP’s Corporate Finance Module was implemented in 2004
  • The authors describe the firm’s approach to hedging, which has extended the tenor of its transactions whilst reducing the percentage of the total exposure hedged
  • Brown-Forman’s risk management is constantly reviewed and refined, with careful attention to euro risk

 

Written by

Robert Waddell
Global Treasury Manager
Brown-Forman Corporation

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