Leanne Cunningham
Senior Vice President and Chief Financial Officer at Brown-Forman
Thank you Lawson and good morning everyone. As Lawson reviewed our headlines for the quarter, I will provide additional details on our business results and our outlook for fiscal 2023. First, I will share our top line results by geographic clusters. Developed international markets collectively delivered strong organic net sales growth, up double digits for the quarter, an increase in tourism and a return to the on-premise channel, fueled broad-based growth across the markets despite continued supply chain challenges.
Jack Daniel's Tennessee Whiskey was the largest contributor to growth, driven by Germany, Spain, and Austria. Belgium also contributed to the growth as it has seen solid momentum since transitioning to own distribution in January of 2022. Jack Daniel's ready-to-drink momentum continued with double-digit growth led by Germany and Australia. Consumers' desire for convenience and interest in the ready-to-drink category remains high in these markets and we are gaining share. Aligned with our strategic priority of increasing focus on our premium and super premium portfolio, our emerging brands model that we recently began extending to some international markets delivered very strong double-digit organic net sales growth driven by GlenDronach, el Jimador, and Woodford Reserve.
Collectively, our emerging international markets continued to rebound with very strong double-digit organic net sales growth, driven by strong organic growth from Jack Daniel's Tennessee Whiskey, particularly in Turkey, Sub-Saharan Africa, Brazil, and Chile. Jack Daniel's Tennessee Honey grew organic net sales double digits led by Chile where the brand has more than doubled and New Mix growing strong double digits in Mexico. Growth was partially offset by lower volumes of Herradura in Mexico, as the brand faced supply chain constraints. And year-over-year declines in Russia due to the suspension of our commercial operations beginning in March of 2022.
The US business remained strong growing organic net sales 7%. This growth builds upon the 19% organic net sales growth delivered in the first quarter of fiscal 2022, which was fueled by the initial reopening of the on-premise channel. Woodford Reserve led the growth for the first quarter with a positive impact from higher pricing and higher volumes as supply and capacity constraints eased. Also benefiting from an improved supply chain environment, Jack Daniel's Tennessee Honey and Jack Daniel's Tennessee Fire, experience volumetric gain.
Growth was partially offset by lower volumes of Korbel and Jack Daniel's Tennessee Whiskey which both lapped double-digit comparison in the same prior year period. Despite the supply chain challenges, we estimate a net increase in distributor inventories positively impacted net sales, although even with the increase in the quarter, we believe distributor inventory levels remain below their pre-pandemic levels. This is due in large part to transportation and logistics constraints as well as increased consumer demand. We continue to monitor consumer mobility trend and based on data from OpenTable and Google mobility the on-premise trends have continued to harbor around pre-pandemic levels.
This shift to the on-premise is continuing to impact off-premise takeaway trends as consumers have made the gradual return to restaurants and bars. Our year-over-year takeaway trends have also been adversely impacted by supply chain constraints for brands such as Gentleman Jack and Jack Daniel's Tennessee Honey, Jack Daniel's Tennessee Fire, and Jack Daniel's Tennessee Apple, Finally, the travel retail channel continued its strong rebound growing organic net sales, 85% led by increased Jack Daniel's Tennessee Whiskey volume as international airline travel and the cruise business accelerated in the May through July period.
Our business in this channel has not yet fully recovered to pre-COVID levels but continues to close the gap. As Lawson will share the details of our gross margin expansion for the quarter I will now turn to our operating expenses. Organic advertising expenses in this quarter compared to the same prior year period grew at a higher rate than our topline growth, largely due to the timing of our increased investments in the United States to support Jack Daniel's Tennessee Whiskey, Herradura, the launch of Jack Daniel's Bonded and Triple Mash and Woodford Reserve. Our organic SG&A investment increased high single digits, driven primarily by higher compensation-related expenses and the investment behind our people to support our business needs in a post-pandemic environment while continuing to leverage new ways of working.
In total reported and organic operating income grew 19% and 32% respectively in the first quarter of fiscal 2023. These results combined with a decrease in our effective tax rate resulted in a 30% diluted earnings per share increase to $0.52 per share. And finally to our fiscal 2023 outlook, we continue to be optimistic as we look ahead, even in this, the current volatility and uncertainty of the global macroeconomic and geopolitical environment. We believe our headwinds and tailwinds will remain largely the same through the remainder of our fiscal year and the strength of our portfolio of brands, supported by strong consumer demand, and our strategic investments will enable continued growth and therefore, we are reiterating our full year fiscal 2023 guidance.
With the start of a new fiscal year, we have now cycled against the more volatile months of the pandemic and believe we are seeing trends begin to stabilize. We remain confident in the collective strength of our US, developed and emerging international markets along with the travel retail channel. We anticipate our results should continue to benefit from the continued return of tourism and the gradual reopening of the international on-premise channel along with stronger pricing and innovation. We do remain cautious given the potential impact of inflation and rising energy prices on consumer spending. I also want to reiterate that the seasonality of our fiscal 2023 results will be impacted by the abnormal seasonality of our fiscal 2022 shipments due to supply chain disruptions.
As you will recall in the first half of fiscal 2022, distributor inventories did not increase ahead of the important holiday season as is typical, and we experienced stronger shipments in the second half of fiscal 2022 as glass supply challenges began to ease. In the first half of fiscal 2023, we expect distributor inventories to continue to return to more normalized levels. Therefore, we expect our growth rate in the first half to benefit from the net change in distributor inventory. Our second half results will lap to increase in the net change in distributor inventory related to the rebuilding of our inventory position in the prior year period.
As it relates to our fiscal 2023 cost, the removal of the EU and UK tariffs on American whiskey remains a significant tailwind, while we continue to expect input cost inflation to remain a headwind. Also cost related, our glass supply position has improved. There are some challenges that remain for some of our brands, particularly Herradura. We are continuing to partner with our current glass suppliers, as well as add new suppliers to address these constraints and similar to many other CPG companies the overall supply chain particularly transportation, logistics, and freight continue to be challenging.
While we are actively working to navigate these challenges and their impact, we do believe supply chain disruption will remain a headwind for the remainder of the fiscal year. Based on these headwinds and tailwinds, we are reiterating our reported gross margin guidance for it to expand slightly for the full year as our trajectory of expansion continue. Also related to our supply chain, we constantly search to identify continuous improvement opportunities to optimize both our supply chain and its related costs.
As we have shared with you during many calls, we had been progressing various initiatives to address the challenges related to the cost of wood. One such initiative has led us to the recent announcement regarding the decision to sell our Stevenson mill in Alabama and Jackson mill in Ohio to Independent stave Company. This sale is a part of a long-term agreement between Brown Forman and Independent Stave to allow for the expansion and diversification of our supply chain network. Independent Stave is a dynamic family-owned cooperage company and is committed to environmental sustainability and its operations.
All of these existing mills are sustainable, forestry initiative certified and independent stave like Brown Forman is a founding member of the White Oak initiative to support the long-term sustainability of White Oak for us. Although divesting part of our business is never an easy decision. There are significant advantages to this partnership including broader-based sourcing continuous improvement initiatives and cost savings from economies of scale. We are also pleased that all employees impacted by the agreement will be offered positions with independent staves. It is important to note, we will continue to own and operate our Clifton mill and Clifton Tennessee and both are Brown Forman and Jack Daniel's cooperages.
For the last component of our outlook, the outlook for operating expenses remains the same. In addition to our philosophy of growing the investment behind our brands at a rate similar to our top line growth, as we have stated, many times that when the EU and UK tariffs on American whiskey were removed, we would reinvest a portion of the relief back behind our brands. We are very pleased that in fiscal 2023, we are now executing against this additional investment behind our brands. And as we shared last quarter, we will also invest behind our people and expect a continued rebound of discretionary spend to support our business needs in a post-pandemic environment.
Based on these expectations, we currently expect our organic net sales and organic operating income to grow in the mid single digits range for the full fiscal year and we still expect our fiscal 2023 effective tax rate to be in the range of about 22% to 23%. Lastly, we have noted, the impact of foreign exchange on our reported results. The dollar continues to strengthen against many major currencies. Most notably, we are seeing the negative effect of the appreciation of the dollar against the euro and the Turkish lira.
The guidance we provide is on an organic basis, which excludes the impact of foreign exchange. If we were to take the rates where they are today against the dollar for the remainder of this fiscal year, foreign exchange would be a headwind for us in fiscal 2023 on a reported basis. In summary and as Lawson stated, we have had a strong start to fiscal 2023, delivering double-digit top and bottom line growth on both a reported and organic basis.
We remain optimistic as we look ahead and are confident in our ability to build upon this momentum and deliver consistent long-term growth despite near-term challenges and uncertainties. We believe our brands and our people are resilient. As our results continue to reflect, as we often say, there is nothing better in the market than Brown Forman. This concludes our prepared remarks, please open the line for questions.
