Good day, and thank you for standing by. Welcome to the Brown-Forman Third Quarter and Year-to-Date Fiscal 2024 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers presentation there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Sue Perram, Vice President, Director, Investor Relations.

Thank you, and good morning, everyone. I would like to thank each of you for joining us today for Brown-Forman third quarter and year-to-date fiscal 2024 earnings call. Joining me today are Lawson Whiting, President and Chief Executive Officer; and Leanne Cunningham, Executive Vice President and Chief Financial Officer. This morning's conference call contains forward-looking statements based on our current expectations. Numerous risks and uncertainties may cause actual results to differ materially from those anticipated or projected in these statements. Many of the factors that will determine future results are beyond the company's ability to control or predict. You should not place undue reliance on any forward-looking statements, and except as required by law, the company undertakes no obligation to update any of these statements, whether due to new information, future events or otherwise. This morning, we issued a press release containing our results for the third quarter and nine months ended January 31, 2024, in addition to posting presentation materials that Lawson and Leanne will walk through momentarily. Both the release and the presentation can be found on our website under the section titled Investors, Events and Presentations. In the press release, we have listed a number of the risk factors you should consider in conjunction with our forward-looking statements. Other significant risk factors are described in our Form 10-K and Form 10-Q reports filed with the Securities and Exchange Commission. During this call, we will be discussing certain non-GAAP financial measures. These measures, a reconciliation to the most directly comparable GAAP financial measures and the reasons management believes they provide useful information to investors regarding the company's financial condition and results of operations are contained in the press release and investor presentation. With that, I would like to turn the call over to Lawson.

Thank you, Sue. And good morning, everyone. Thank you for joining us today as we share our third quarter and year-to-date results for fiscal 2024. Before we get into the specifics of Brown-Forman's performance, I wanted to take a moment to offer a few comments about the dynamics and trends within the broader spirits industry. The last few years have been some of the most volatile and complex in my 26 years in the spirits industry with a variety of factors creating noise within the system. This can make it hard at times to distinguish between short-term headwinds and long-term trends. The last few months have been particularly noisy as demand for Spirits has been normalizing after more than two years of outstanding growth. To truly understand the current environment, however, it's important to reflect back on the beginning of the pandemic when the closure of the on-premise, limitations on travel and remote work prompted many consumers to shift their spirits consumption from bars and restaurants and invested at home bars for entertaining. Once restrictions eased and bars, pubs and restaurants reopened, consumers began spending heavily on vacations and other experiences they missed during the lockdowns. In addition, many consumers continue to entertain at home. Many in our industry call this the COVID super cycle. In calendar 2023, after two-plus years of above average spending, consumers were getting back to more normal consumption patterns, but were soon faced with high inflation and increased interest rates that made them reconsider when and how they purchase spirits. By the late summer of 2023, the spirits industry across much of the developed world, including the U.S., saw the impact of these changing consumer behaviors in the form of weakening takeaway trends. However, we continue to believe, as we mentioned last quarter, that these…

Thank you, Lawson, and good morning, everyone. From a geographic perspective, our emerging international markets collectively delivered 11% organic net sales growth and continue to lead the company's growth in the year-to-date period. Jack Daniel's Tennessee Apple, particularly in Brazil and Chile, once again led the growth due to our ability to meet strong consumer demand with the return of normal levels of supply. Jack Daniel's Tennessee Whiskey growth was led by Turkey as momentum in the premium whiskey category continued. In Mexico, New Mix continued to deliver strong double-digit growth as the brand continued to benefit from our pricing strategy and gained share of the RTD category. In the travel retail channel, organic net sales grew 1% in the nine months of the fiscal year, which is impressive as it lapped 52% growth in the year ago period when international airline travel and the cruise industry rebounded and nearly returned to pre-COVID levels. Strong double-digit growth of our super premium American whiskeys such as Woodford Reserve, Jack Daniel's American Single Malt, our exclusive global travel retail offering and Jack Daniel's Single Barrel was partially offset by declines in Jack Daniel's Tennessee Whiskey and Jack Daniel's Tennessee Honey. Turning to the United States. Organic net sales decreased 2%, driven by lower volumes, partially reflecting an estimated net decrease in distributor inventories of 2%. The impact of our year-to-date results due to the comparison against the significant inventory rebuilding during the first half of fiscal 2023 moderated as we believe distributor inventories normalized in the third quarter of fiscal 2023 and have remained at normal levels. Our pricing strategy, which led to higher prices across much of our portfolio, led by Jack Daniel's Tennessee Whiskey and el Jimador helped to limit the decline. Consumer demand for U.S. whiskey, particularly super premium…

Thank you. [Operator Instructions] And our first question comes from Lauren Lieberman with Barclays. You may proceed.

Great. Thanks so much. So I'm still honestly after all the prepared remarks, a bit confused around where the shortfall really stemmed from both in the quarter and stemming going into Q4 because you talked about sequential improvement in the second half with what was expected. Third quarter looks like it decelerated sequentially despite the easier comp. I know you mentioned softer holiday demand globally, but again that doesn't really help me with the 4Q. So just if you could maybe rank order what sort of where the areas were of short term negative surprise, I think that'd be really helpful. Thanks.

Thanks, Lauren and I'll go ahead and I'll step back a little bit broader first and then I'll narrow in specifically to your question. So first, let me say, we think about our business in decades and generations and I'd like to point you to slide five, which when we think about the 2020 decade that we're in and the kind of the first three full fiscal years, you can see that our compounded annual growth rate for that period of time on an organic net sales basis is at a 9%, which is definitely above our long-term growth algorithm. And then kind of moving closer into the periods that we're in now, we have now lapped the first half of F 2023, which was our strongest first half growth rate in the last decade, we talked about that in our last call and that was all about rebuilding our inventories. And then if you kind of look at last year, kind of nine months year-to-date and this year that CAGR is 6%, which is in line with our longer-term growth algorithm. So when we step back and look at it at the broadest perspective so far for this decade, we believe we're off to a good start and we have confidence that our business is sound with a strong gross margin expansion and strong cash flow. So just to set the stage and then I'll dial in even closer to your question is, you're right and that's what we said is during the important holiday selling season, we did not expect the softness of consumer trends that we did see during that important holiday selling season and that has now limited our top line acceleration. When we think about it from a markets perspective, for us, it was US…

Let me give you a shorter version of that, Lauren. Christmas stunk around the world for a month, I mean, we had a lot of markets that disappointed during Christmas this year, which we did not expect when we were thinking about our year to go period three months ago. So it was surprisingly weak.

Okay. Now, just one quick follow-up, because that was a very fulsome answer, so thank you, both versions, both short and long. But what does that mean for inventory levels in Q4? Because I know, Leanne, you called it the ships versus depletes and that like the big picture lapse are getting to a better, we're moving along. But shipments, look shipments were also weak for Christmas, right? I'm just trying to put the two pieces together, because if you expected Christmas to be better usually the shipments have kind of happened, right and it's the depletions that are the problem. So that's also a little bit surprising to me if I'm making sense, I would expect it to be shipments might have been okay, but depletions would have been the problem and that would leave a hangover for Q4.

Yes, I think what we saw was, we didn't see those orders come in for the important holiday selling season like we -- at the level that we traditionally do and being able to comp above where we were. So that didn't come in the way that we expected again in that late November, December time frame that we were expecting. And so when we think about again and we continue to be in a bit of a different position, which we've talked about this many times as we rebuilt our inventory. We continue to believe that our inventories, through the supplier to the distributor, to retailers, to consumer are in line and really this is about consumer takeaway at this point for us. And so, again, that fluctuation in consumer takeaway being lower than what we expected really drove that for us. We do continue to see when we'll go to the US specifically, you continue to see that net change in distributor inventory kind of come back in line. If you look from the first half to the third to the nine months ended, that is coming much more back in line, which we said we expected it to moderate.

Okay. All right, great. Thank you. I'll pass it on.

Thank you. One moment for questions. Our next question comes from Bonnie Herzog with Goldman Sachs. You may proceed.

All right, thank you. Good morning. I actually just maybe have a bit of a follow-on, on the conversation you guys were just having regarding inventory levels, but more at the consumer, I guess level. Do you have a sense of where these are and really how much you think consumer pantry destocking is impacting the category? And then your thoughts on when that might reverse? And, Lawson, do you still believe the category growth will get back to the mid-single digit range and then if so, how quickly could this occur? Thank you.

Yeah. Okay, Bonnie. That's a good question, because we have talked a lot about that internally over the last few weeks around, I'm talking about the consumer inventory thing. And I do think and I believe, although, it is -- that's a hard number to get to, there's really no way to study consumer inventories necessarily of what's still in the pantry. But my theory, if you look at the last three, four, five years, you can see the elevated growth rates, Leanne was just quoting a few of them. But let's just focus on the three year, because it's on that page five of our. You're looking at a 9% organic growth rate over three years, including this year. That is way several points above any sort of normal run rate for the most part in our industry. Some of that has to be sitting in a consumer's pantry at home. Now, people think of spirits as often referred to as a fast moving consumer good and it's really not. This is not like food or some other categories that move much faster. Spirits, I call it kind of in the middle. When I think about different consumer categories, I think about food being the fastest, I think about an exercise bike is the slowest, because once you pull that demand forward, you're not going to go buy another bike. Spirits is in the middle and so it is taking some time to clear those consumer cabinets. We've said before that we look at like 80% of our consumer base only buys two bottles a year. So they have a bottle sitting in their cabinet at home that's probably half full and it's just the deferred cost. The good thing is, we think that if you do the math around that, that should largely be over and that's why Leanne just said here, we expect going forward, particularly in the US I think we're talking, but our sales rates to be much closer to what consumer takeaway is right now. So, that's question. What was the other? [Multiple Speakers] Yes, TDS getting back to norm of 4% to 5% which is what it has been for like decades, short of the last couple of years on all the volatility. I know I've seen some of our competitors that have said anywhere from six to 18 months and that's a pretty big range. I think for us is what we're saying, we do believe next year will start to return to those normal levels as this inventory conversation largely, we think will largely be over.

All right, thank you.

Thank you. One moment for questions. Our next question comes from Andrea Teixeira with JP Morgan. You may proceed.

Hey, good morning. This is Drew on for Andrea. Thank you for taking our question. So just following-up on the US, you talked about some changes in consumer behavior internationally, in France, I think you're seeing some trade down. Can you talk about what you're seeing in the US, any evidence of perhaps more value seeking challenges or trade down? And then also what you're seeing from an on-premise perspective, if there's been any incremental softness there? Thank you.

Yes. So look, I mean, on the trade down, converse, now this is US and I think this is good news, I think relative to probably what people are expecting. But if you look at the data, particularly, I'm looking at Nielsen data over the last three months, you're not seeing trade down and we've still got that same dynamic where -- I'll simplify a little bit here, but $30 and above is growing much and take RTDs aside, pull that out of that when I say this, but 30 and above is growing at a materially better number than 30 and below. And so that's -- we're not seeing the trade down in our old portfolio and we're not really seeing it across the industry yet. So I think that just hasn't happened. And that I think we were expecting to see maybe a little bit more of that. So I generally consider that good news. On the pricing environment, which you didn't specifically ask about that, but I think it's worth talking about that for a second because pricing really has not -- we've been worried, as you've seen, consumer weakness, that somehow that would result in more aggressive pricing, deeper pricing to Christmas, all those kind of things and it didn't really happen and we're not really seeing that coming through the data right now. You look at TDS across spirits, it's still positive, like plus one or 1.5 something right in there. And interestingly, this is where we were narrowing down even quicker as Tequila in the US and then US Whiskey across the US and both are also positive. So there's been a lot of speculation that Tequila pricing would start to fall apart as the costs have come down. It's just not showing. And if you look at the last 13 weeks and you go, which would cover the Christmas time period, both of those categories saw improved pricing, not lower. And so while I do hear a lot of these anecdotal stories of X, Y, Z brand went deep or whatever it might have been and there are examples out there like that. But for the most part, pricing is holding up so far and I consider that to be a pretty big positive too. Did I answer...

On-premise.

On-premise, do you have -- I don't have the on-premise numbers in front of me. Sorry, we -- I don't have the on-premise numbers right in front of me, so I haven't seen a material change in those necessarily, but I'm trying to find the data point. Let's get back to you on the on-premise.

This is where we talked about that there's two points of acceleration compared to the October 23rd. So we continue to see acceleration there with TDS and Brown-Forman now growing low single digit.

All right, I'll pass it on. Thank you so much.

Thank you. One moment for questions. Our next question comes from Chris Pitcher with Redburn Atlantic. You may proceed.

Thank you very much. Just a question in terms of buying patterns, you've sort of alluded to it, but in the current environment, have you seen any structural changes in how retailers or wholesalers are buying and given the sort of the interest rate environment and the uncertainty, is that creating, making it harder for you guys to plan? And then if I could have a follow-up just on Japan, you flagged that as being one of the areas that got hit by hard by destocking, with sales down 100%, it's quite hard to gauge what the real underlying revenue is with your new route to market there. Could you give us an idea of what sort of scale the Japanese business is still running at, despite all these massive distortions? Thanks very much.

Yes. So I'll go back to your -- the first part of your question, which is, as far as buying patterns, we shared with you I think in our last call that as -- how we prioritize rebuilding the markets that we have with and replenishing their distributor and retailer inventory, that kind of has changed in the short-term our traditional consistent seasonality of the shipments that we pattern buying that we have seen, we're still lapping some of that, especially as you get into our emerging international markets and we're lapping the way that we rebuilt that and the timing and the cadence is a little bit different. It makes -- it does make it a little bit harder, but I think for us the biggest piece again was back to that important holiday selling season and consumers being stretching their discretionary spend because of how they've been impacted with interest rates and inflation. And for Japan, when we look at that business, again, this has been a year of kind of two pieces. One was how we rebuilt our inventory in the prior year. And I think we said in our prepared remarks, we had a backlog of orders waiting for supply to be able to fill those. We were able to do that in the second half of last year. So coupling that with our route to consumer change, it has just basically -- we haven't needed to make any shipments to Japan this year. To your point, what's the business look like more on a depletion base and we would say, we have been in frequent connection with the team there as they continue to progress to this own distribution model on April 1st and from a depletion base, we're still excited about the health of our brands in that market. So again, I would say from an organic perspective, we just have -- we're investing in the long-term value creation opportunity in Japan and it's set to be a growth driver as we're moving forward.

Just quick -- normally a company, a country, a market would drop out if it's not in the top ten in a period, can we assume the fact you've still put Japan in there that it would be a top ten market for you on a normalized basis?

Yes. How we set our top ten and I think we have it in our queue, it's basically set on April 30 of our prior year. So it's in there for that reason.

Thank you.

Thank you. One moment for questions. Our next question comes from Nadine Sarwat with Bernstein. You may proceed.

Hi. Thank you for taking my question. Two for me. First, just a clarifying question. You had mentioned your view that perhaps the market in the US could get back to that historical 4% to 5% value growth in the next year, could I just clarify with that fiscal next year or calendar next year? And then my second question, something I think a lot of people are bringing up amongst investors the topic of moderation, perhaps younger consumers drinking less, adding some GLP-1s in there. I mean, all of this has been thrown around as potential reasons for the weakness that we're seeing in US spirits, but to be honest, in US alcohol more broadly with the implication that, that could be a permanent change. I would be curious to get your views on that, all those factors I listed and where do you think it goes from here? Thank you.

Yes. Good. So, Nadine, a few things on this, because this is obviously a topic that we have spent a lot of time trying to understand a little bit better too. Over the last, I'll make it up five years, we had seen TDS go from 5% to 4% to 3% to 2% to 1%, something like that. I would be concerned that some of those things you just talked about, wellness trends, cannabis trends, GLP-1s, all those types of things, that would be an indicator that something is happening structurally in the business that's going to -- that could be permanent, but that's not what we saw. We as -- I think everyone on this call knows. I mean, that 4% to 5% range, COVID moved it around volatility wise, but it has been in that range for decades. And then all of a sudden, if you look at TDS the same, you look at July of last summer and you see a very sharp deceleration in the market, like GLP-1s or cannabis isn't not going to take a market and move at 4 or 5 points seemingly overnight. And so I just don't think that's what is -- I don't those big macro concerns that are out there are what is impacting the market today. Now over the next decade or two, do I want to look at that and understand that better? It is -- it could be a headwind, yes, but particularly on a healthier Gen Z kind of conversation. Cannabis, that's been around now for, I don't even know, ten plus years, whatever it is. We've studied that 18 ways till Sunday and have never been able to find a state where we saw reduced alcohol consumption based on it going legal and it's tough to do now because so many places are legal, but -- so, yeah. So I do think in general these are shorter-term challenges, particularly the US, but it's also true in Europe too. Europe is dealing a lot of the same macro factors the US is. And I do think it's the combination of what we've already talked about, but the very difficult comps, I think the consumer is weakened than it was, say, this time last year. But now predicting is the turnaround going to be six months or twelve months, I don't know. I don't have a crystal ball on that. But I am a believer that the macro factors impacting our business are more short-term in nature than these big macro headwinds.

Got it. And just to confirm that getting back to 4% to 5% next year comment with that next year fiscal calendar.

I don't know, if I was kind of -- I'm not making it up, but I mean, it's more of a return to normal over the next, call it 12 to 24 months in our world, something like that.

Yes, and then the one thing that we looked at is, history is not always a predictor of the future for many reasons. We know when we went and looked back at the last time, the consumer was really stretched with macroeconomic factors. We looked at 2000, 2001, 2008, 2009, they were followed by really strong years of growth and those trends were, when they were negatively impacted were much shorter and like Lawson just said, it's kind of that 12 to 18 month window by which we're already in it, so none of us know, but that's what history has said to us.

Got it very clear. Thank you very much.

Thank you. One moment for questions. Our next question comes from Eric Serotta with Morgan Stanley. You may proceed.

Good morning. Thanks for taking the question. First, Lawson, hoping you could expand upon your comments earlier on pricing and promotion. First, I guess as a housekeeping item, when did your pricing in the US, particularly on Jack Daniel's go in? And then I know you said that thus far not seeing much pricing in the data, but it does seem like it's more been kind of one off anecdotal or the anecdotal reports about discounting seem to be more than one off. I know Diageo mentioned some increased promotions in the US. Just wondering if you have any broader perspective between what seems to be a broader theme of increased promotions and what you guys are seeing in the data?

Yeah, well, on the pricing history, I guess, when did it kick in? It was -- if we're talking about the US, it was about three years ago now. So we have chosen, I think, a slightly different path than some of our competitors. We've talked about this numerous times, but it's kind of that low and slow and it's what I want to see continuing going forward and is what we're trying to strive again even over the next twelve or 24 months. And that's a US comment for the most part, but it actually does apply to much of the rest of the world too. Europe had pretty healthy price increases the last couple of years too, which is collectively why we, one of the main reasons why we've been able to improve our gross margin. And so I have very little interest in giving that back and so we're going to continue to be pretty strong with that. As I mentioned earlier, I mean, I know anecdotally it feels that way and I've heard the same things and I saw what some of our competitors have said, but the reality is it's not coming through the data. So, I don't know -- I'm not sure how else to answer that. I mean, we talked about trade down earlier a couple of questions ago or the lack of, I should say. So it's not coming through in trade down here and we're not seeing it in terms of really individual brands that have all of a sudden gone deep and by the way, I think it's worth probably commenting too and this is at a very high level, so I personally -- we're not deep studying this quite yet. But the competitive, some of the brands that have gone lower haven't seen much in the way of a decent rebound in their volume. I'm just not sure these, not sure that's the core consumer problem right now is higher pricing. Pricing elasticity, as I said, low and slow, but if you compare pricing changes over the last two, three years to what grocery has done to what other consumer categories have done, where it was much more, you saw much higher inflation in the food channel, let's say, than you did in spirits. And so I just not -- I don't think -- I'm not that worried that our pricing actions have chased consumers away from our products. I just don't -- I think that would be sort of missing what the actual problem is.

Great. And then just one other question, hoping to get your perspective on either Brown-Forman or industry, Barreled whiskey inventories obviously been a massive investment cycle over the past decade, making up for the previous three or four decades. But maybe, hopefully you could give some comments as to where you think inventories are today relative to future demand, realizing you've got a plan for multi-decade cycles here.

Yes. So I'll talk about our barrel whiskey inventory and I think for anybody who's followed us for a while, you've probably heard us say that we have a very robust, semi-annual process where we're always adjusting to future consumer demand outlooks. And with doing that, we capture the change in trends, if there are any. So when you look at our that our barrel whiskey, we're constantly adjusting it. When you look at our balance sheet, when you see increases for us there, it is about looking out over the long term and that represents our future growth expectations. And with work in process, also in some brands, you would find our aging inventories there and with the acquisition of Diplomatico, you would have seen that increase as well. So for many in the industry, I don't want to speak on anybody's behalf, but many in the industry use not the same proprietary way of doing the work, but I know that they often look at their long-term demand over that cycle as well. So I think people are always adjusting.

Great. I'll pass it on. Thank you.

Thank you. One moment for questions. Our next question comes from Peter Grom with UBS. You may proceed.

Thanks, operator and good morning, everyone. Hope you're doing well? So I guess I'm a bit confused by the commentary on the top line trajectory. So on one hand, you're talking about a normalization of category growth and you'd expect that to get back to that mid-single digit growth at some point over the next 12 to 18 months and that would kind of seem to imply that 2025 could be another challenging year. But on the other hand, if you back out the distributor inventory headwind, which sounds like you expect to be largely complete after 4Q, you're kind of already at this mid single digit growth rate. So I know we'll get to fiscal 2025 in June, but how should we think about the building blocks for your organic growth outlook over the next 12 to 18 months? Should we focus more on that category growth rate or should we be kind of focusing on kind of mapping this distributor inventory headwind? Thanks.

Yes. So as excited as we are to begin to talk about our next fiscal year, we'll have that in full detail for you in our next call.

But I do think you picked up on an important point. If you look at that depletion schedule or Schedule D, if you assume that we're there from an inventory perspective, certainly depletions are better than, certainly a lot better than shipments over this year. So we're getting there. We're getting past these comps. I mean, there's like light at the end of the tunnel. We can't get there fast enough, but we're almost there.

Okay, that's helpful. And then maybe just a quick follow up on gross margin. I know a lot of moving pieces here and Lawson, I appreciate the commentary on the year-to-date progress, but from a quarterly perspective, you would have to really go back to kind of the tariff days to see a sequential step down of this magnitude in the third quarter relative to the second quarter. Was that simply a function of weaker volume performance or was there something else that drove that kind of sequential step down?

Yes. So when we think about our gross margin and the outlook that we have driven by a couple of thing. So, one, we lapped supply chain disruption in, largely speaking, we had the majority of the cost in our second quarter of last year. So that benefit continues to moderate as we move through the rest of the year. And then just as we do kind of estimates from an inventory costing perspective, we would have had a benefit in our fourth quarter of last year that we will have to comp this year. But all of that has been built into our full year guidance for the entire year where you've been able to see kind of the difference between our top line growth estimates and our operating income and the leverage that we've expected through there. But we have been very happy to return to gross margin expansion and have the strong expansion that we've had through the nine months to date. But again, talking about in that last quarter, it will go more towards the guidance that we have provided.

Thank you. One moment for questions. Our next question comes from Filippo Falorni with Citi. You may proceed.

Hi. Good morning, guys. I have a question on the ready-to-drink spirits part of the category, particularly in the US. If you look at total spirits categories stripping out ready-to-drink, actually the trends have been a lot more negative than it looks on the surface. So do you think this growth in the ready-to-drink spirits is more structural and have you done any work of calculating any impact on your volumes given, obviously, you sell less liquid in ready-to-drink compared to like a full bottle if that were to continue to grow at this rate. And following-up on the margin part, you talked in the past about ready-to-drink spirits being more of gross margin dilutive, although more similar at the operating margin level. So any thought on the margin implications will be helpful as well. Thank you.

Yes, so your first part of that was the TDS and yes, you're right, RTDs are boosting TDS for sure. You take those out and it's closer to flat, which, honestly, close to flat. It's been 30 plus years since TDS has gone negative in the United States, not since the early 1990s when they had the excise tax changes. So from a pure TDS takeaway US figure it's about as bad as it's been, well, it is as bad as it's been in my career. So there are certainly challenges there. Now, do I think there's this big structural move in the world of RTDs? One, I mean, they meet a lot of consumer trends and needs right now. So I do believe it's a very powerful category. But if you go back over the last 20 or 30 years and you look through our industry, there have been so many booms and busts of different brands that we always start out by talking about California cooler 30 years of brown form 30 years ago when it went from 12 million cases to zero in about two years. So, I mean, there are booms and busts in that space. Jack and Coke is a bit different in that it's such an established drink already, it's the largest bar call in the world. That is not a fact in my mind. There are other brands we'll see. We've seen what happened to the malt based RTDs over the last few years and that category got blown up largely by these spirit based RTDs. So it's a volatile space for sure.

And then to your -- the liquid part and the margin part of your question from liquid, yes, there is less liquid in a case of RTDs, of course, than the full strength. But we will be planning to supply liquid to significantly broader geographic reach with this product. Again and we just talked about the process that we use and looking for the demand needed for our liquid, so that would be built into there. And then from a margin perspective, though, gross margins for RTDs are lower than our company average, Jack and Coke should be higher than the rest of our RTD portfolio because we will have advertising support jointly funded between Brown-Forman and the Coca-Cola company. And also we have to look at it in totality of when we are increasing our RTD business that we're also adding in the two super and ultra premium brands of Gin Mare and Diplomatico, which have higher gross margins than the company. So you'll have to take all of those factors into account.

Got it. Thank you. I'll pass it on.

Thank you. I would now like to turn the call back over to Sue Perram for any closing remarks.

Thank you. And thank you Lawson and Leanne and thank you to everyone for joining us today for Brown-Forman's third quarter and year-to-date fiscal 2024 earnings call. If you have any additional questions, please contact us. We look forward to seeing many of you in Louisville on Wednesday, March 20th for our 2024 Investor Day. Presentations by the company's executive leaders will focus on Brown-Forman's strategic priorities and long-term ambitions. Details regarding the live webcast of the presentations, along with a question-and-answer session can be found in the March 4 press release about the event. And with that, this concludes today's call.

Thank you for your participation. You may now disconnect.