With distilling giant Diageo (DEO -0.07%) planning to come after Brown-Forman (BF.B) (BF.A) on its home turf, the Kentucky-based company best known for its Jack Daniel's brand is betting that interest outside the U.S. will keep it growing faster than its competition.

Brown-Forman reported quarterly and full-year results for 2014 last week. The numbers came in close to expectations, with a beat on EPS and a miss on revenue. Wall Street was unimpressed by the results, and the stock didn't move much over the following few trading days.

But the long-term picture looks bright for Brown-Forman. Bourbon and American whiskey continue to gain popularity in the U.S. and worldwide. And Brown-Forman happens to own the world's most recognizable name in American Whiskey: Jack Daniel's.

Source: Foodbeast.com.

Capitalizing on a trend
Jack has been driving growth for the company that has been outpacing that of its rivals Diageo and the now privately owned Beam. Company executives see that trend continuing, and there are a few good reasons to believe that they will be right.

First, let's take a quick look at how Jack Daniel's and Brown-Forman's other brands have been faring outside the U.S. Sales in emerging markets were up 9% in the company's fiscal 2014. Sales were up more than 20% in markets such as Brazil, China, Turkey, emerging Africa, southeast Asia, and Russia. The company's spirits are also selling well in developed markets outside the U.S. Underlying sales in France climbed 18%, while sales in Germany and the U.K. were up 8%.

The sales spike in France was a particularly good sign for Brown-Forman, since the company just made a major investment in taking control of its own distribution in the country, the world's third-largest spirits market. This should not only help fuel sales, but also cut costs, since Brown-Forman will no longer have to pay a middleman to get its spirits to market.

It's the Coca-Cola of whiskey
Brown-Forman CEO Paul Varga sees the company as particularly well positioned to outpace its rivals. As American whiskeys continue to grow in popularity around the world -- sales worldwide have doubled since 2004 -- Brown-Forman has two big advantages:

  • It has an iconic America brand -- whiskey's closest thing to Coca-Cola -- as the centerpiece of its spirits portfolio. This gives it a leg up over competitors like Diageo in many international markets as it looks to expand.
  • It generates a comparatively smaller percentage of its sales from outside the U.S. than its competitors. Even though Jack's total addressable market extends to some 160 countries, 40% of Brown-Forman's sales still come from the U.S.

What's more, Brown-Forman believes American whiskey still has just a small share of the global spirits market and is a long way from reaching its potential on a global scale. Here's what Varga had to say on the subject: "Global demand for whiskey, and Jack Daniel's in particular, is strong and growing, and we believe the long-term opportunities for Brown-Forman are enormous."

Brown-Forman believes it has more pricing power with Jack than it is now taking, both in the U.S. and worldwide. But it's looking to seize an opportunity to grow the brand at a time when American whiskey is a hot product. This is a long-term approach to growing the centerpiece brand and introducing spirits drinkers to Brown-Forman's other products, including the Jack Daniel's flavored whiskeys and higher-end whiskeys Gentleman Jack and Woodford Reserve bourbon.

That's a sensible approach that should pay dividends for years to come.

The Foolish bottom line
As the bourbon and whiskey markets heat up in the U.S., Brown-Forman is facing increased competition from both smaller players like Buffalo Trace and Heaven Hill and from distilling behemoth Diageo, which recently announced plans for a new $115 million distillery in Kentucky. But with a truly iconic brand like Jack Daniel's, Brown-Forman is uniquely positioned to maintain sales here and expand sales globally, where it has a long runway for growth ahead.