What Is Going On With The Brown Family?

By Richard Thomas

Late last week it was revealed that two prominent members of the Brown family had sent a letter to Wolf Pen Branch, the entity that holds most of the Brown family stock in Brown-Forman, harshly condemning leadership of the company. This letter was sent in July, when Sazerac had renewed its push for a $15 billion buy-out of Brown-Forman.

What the seven-page letter underlines for observers who were not already aware is that the Brown family is not as unified and monolithic as it seems many assumed.

The Dissidents
The letter was signed by W.L. Lyons Brown III and his brother Stuart Brown, a pair who own their share of Brown-Forman outside of Wolf Pen Branch. In discussing Brown-Forman’s corporate politics, I have often described it as a de facto family-owned company. This is because although Brown-Forman is publicly traded, the overwhelming majority of voting stock is owned by members of the Brown family. Descendents of George Garvin Brown (who died in 1917) number at well over 100, and most of them have combined their ownership stakes into Wolf Pen Branch, which controls approximately 60% of the voting shares.

The ownership stakes of Lyons Brown and his brother exist outside of Wolf Pen Branch and constitute roughly a further 10% of the company’s voting shares. Lyons Brown, a fifth-generation heir and now 66, was forced to leave his executive role at Brown-Forman in 2002, after 15 years with the company, following strained relations with his uncle and then-CEO Owsley Brown II. After departing, he started Altamar Brands.

The intra-family politics of the Brown clan are notoriously opaque, but the known facts of their history, status as shareholders outside Wolf Pen Branch, and lack of any real say in Brown-Forman’s governance all point out Lyons and Stuart Brown as the black sheep of the family business.

The Letter Voiced Support For A Sazerac Takeover
At its heart, the letter questioned why Brown-Forman’s board rejected Sazerac’s offer out of hand, not even trying to negotiate a better deal. Yet the Sazerac offer was unsolicited by Brown-Forman’s board and came at a time when they were exploring a merger with Pernod-Ricard.

A merger with Pernod-Ricard, the world’s second largest drinks conglomerate, was a very different proposition from being bought out by a smaller rival, Sazerac. As has been discussed in The Whiskey Reviewer previously, merging with Ricard would have brought complimentary strengths to the new company while making Wolf Pen Branch (i.e. most of the Browns) co-equals with the Ricards in a company that would have rivaled Diageo (the world’s largest drinks company) for size and status. Being bought out by Sazerac, by contrast, would have meant the Browns effectively exiting the whiskey business while the larger company would essentially double down into a business both Sazerac and Brown-Forman are already strong in. This is one point I think the letter misrepresents, because it describes the Sazerac buy-out as coming from “an American company headquartered in Louisville, Kentucky — a natural cultural and operational fit,” while neglecting a real discussion of the pros and cons of the two very distinct deals.

Another point the two Browns get wrong in their letter is in mocking the current leadership for turning Jack Daniel’s into “Baskin Robbins” by introducing so many new expressions. Most whiskey industry observers think, to the contrary, that Brown-Forman waited too long to take this step. A brief look at Jack Daniel’s history is necessary to explain why.

As outlined in my book, Jack Daniel’s: Behind The Bottle, Jack Daniel’s was not just a whiskey brand but a cultural force in mid-20th Century America, which helped it to avoid the Great Whiskey Crash of the 1970s and 1980s. Where every other whiskey company in America saw sales shrink for two decades, Jack Daniel’s grew at home and abroad. When the Small Batch era began in the early 1990s, Brown-Forman responded with the creation of Woodford Reserve, so they did not ignore wider trends entirely. However, Jack Daniel’s did not follow the model of introducing new brands, expressions and especially age stated whiskeys that drove the revival of the industry as a whole in the 1990s and 2000s. Even Wild Turkey was busier with new, premium products than Jack Daniel’s in this era.

Hence, most whiskey enthusiasts turned their noses up at Jack Daniel’s until the last several years, when they began to do what the rest of the industry had been doing for a decade and a half. Without all those “flavors” the Brown brothers criticize, the company’s sales picture might be even worse now.

It also painted the leadership of Brown-Forman as doing little or nothing while their share price dropped by $50 a share over three years. Although technically true, framing it that way uses the heavily inflated share price of the post-Pandemic, peak Bourbon Boom years of heavy drinking and speculative frenzy. Stocks rise and fall, and a fairer and more accurate price for comparison might be the $47 the stock commanded at the beginning of 2019 (about $60 today, after the Trump inflationary cycle). The price has still fallen, but from that baseline it has fallen a third less than purported.

I think the two Brown brothers posed a rhetorical question as to why the Board would reject Sazerac’s offer out of hand: while they might like to receive a fat check for their shares and exit the whiskey business, at least most of the rest of the Brown family apparently does not. As for the notion that Brown-Forman’s leadership is fiddling while the company falls apart, they’ve shed 12% of their workforce, shuttered their Irish and Scottish distilleries and sold the vertically integrated cooperage that the company was once so proud of. After 13 years in the top office, CEO Lawson Whiting has been shown the door. It’s hardly the picture of complacency.

If anyone in the Brown family was going to make such criticisms and advocate for a buy-out, it was probably going to be Lyons and Stuart Brown. The real question is not why they would send a letter to the rest of the extended family in the way that they have, but how many of the extended family shares their outlook.