Oligarch Swoops For Vodka Giant
A Russian billionaire-backed fund is in exclusive talks to buy Poland’s top spirits firm for nearly £600m, Sky News understands.
Source: SKY News
By Mark Kleinman, City Editor
21 January 2013
A fund backed by one of the Russian businessmen who netted billions of dollars from the sale of a joint venture with BP is in talks to buy the biggest spirits producer in Central and Eastern Europe.
I have learnt that Pamplona Capital Management is close to a 700m euro (£587m) takeover of Stock Spirits Group, which owns some of the most popular vodka and other spirits brands in the world.
Pamplona is backed by Alfa Group, a company headed by Mikhail Fridman and one of the members of the AAR alliance which last year agreed to end its conflict-plagued joint venture with BP in Russia by selling out to Rosneft, the Kremlin-controlled energy giant. The deal netted Mr Fridman and his partners at least $7bn each, cementing their status among the world’s wealthiest individuals.
People close to the talks said Pamplona had secured a period of exclusivity to finalise a deal with Oaktree, and that an agreement could be reached within weeks.
Goldman Sachs, the Wall Street bank, is among the lenders understood to be financing the deal for Pamplona, with a number of other banks lining up for a role.
Stock, which is based in Britain, has been owned by Oaktree Capital Management, another investment firm, since 2007.
The company traces its roots back to the Austro-Hungarian empire of the late nineteenth century, and now claims to be the biggest spirits producer by volume in the Czech Republic and Poland. It is also a major player in markets such as Croatia, Italy, Slovakia and Slovenia.
Among its major brands are Stock 84 brandy, Fernet Stock bitter as well as vodkas such as Wodka Zoladkowa and Orzel. Some of the products are distributed in the UK through big supermarkets although Britain accounts for a tiny proportion of the company’s sales.
Stock is chaired by Jack Keenan, a former executive at Diageo, and run by Chris Heath, the former chief financial officer of Gondola Holdings, the parent company of restaurant chains including Pizza Express, ASK and Zizzi.
People close to the situation said it was likely that Stock’s management team would continue to run the business under Pamplona’s ownership if the takeover is completed.
The talks with Pamplona represent at least the second attempt by Oaktree to sell Stock. In 2011, it examined a stock market listing of the company, following which Diageo expressed an interest in buying it.
Those talks came to nothing, although it is conceivable that Diageo or another of the major spirits producers will return in future with an offer to buy Stock as they attempt to broaden their exposure to major spirits markets in the region.
Pamplona invests funds across Europe and has tried to buy a string of assets in the UK, including an aborted attempt to acquire the snacks arm of United Biscuits late last year.
It owns Oakwood Global Finance, which comprises two portfolios of residential mortgages, and KCA Deutag, a provider of drilling and engineering services to the oil and gas industry.
Oaktree and Pamplona both declined to comment on Monday.
Thai Tycoon Wins Battle for Fraser & Neave
By P.R. VENKAT and CHUN HAN WONG
Thai tycoon Charoen Sirivadhanabhakdi is poised to win control of Singaporean conglomerate Fraser & Neave Ltd. F99.SG -1.95% after rival bidders led by Indonesia’s Riady family backed down on Monday, ending a monthslong stalemate in one of Southeast Asia’s largest-ever takeover battles.
Mr. Charoen, a Thai billionaire who controls 40.6% of Fraser & Neave, is now the sole bidder for control of the 130-year-old company, which has interests in property, publishing and food and beverages. He would pay 8.2 billion Singapore dollars (US$6.68 billion) for the remainder of the company, based on his latest offer and stake.
Mr. Charoen’s offer of S$9.55 a share-made through his unlisted vehicle TCC Assets-values Fraser & Neave at US$11.2 billion. It is conditional upon acquiring more than 50% of the company by Feb 4. He made his current offer Friday, raising an earlier bid of S$8.88 a share.
Fraser & Neave’s independent directors will “evaluate TCC’s revised offer and make their recommendations to shareholders in due course,” a company spokeswoman said Monday.
In a filing to the Singapore Exchange Monday, the Riady-controlled Overseas Union Enterprise Ltd. LJ3.SG +4.38% said it and its partners had decided not to raise their US$10.6 billion offer because a successful takeover would have come with an “unattractive” price tag. The Overseas Union-led consortium’s offer of S$9.08 a share lapsed Monday.
The battle for Fraser & Neave began in July last year, a big year for mergers and acquisitions in Southeast Asia, where deal-making reached its highest level since the global financial crisis. The takeover bids also illustrated two important trends-the impact and allure of Southeast Asia’s booming economies and the move beyond their home markets of some of the region’s largest, most powerful companies-and the billionaire families behind them.
Mr. Charoen’s companies make Chang beer and have interests in property and soft drinks. The Riady family controls the Lippo Group, one of Indonesia’s most powerful conglomerates, with interests in real estate, publishing and banking.
Fraser & Neave develops residential and commercial properties in Singapore and other Asian markets, and produces dairy products and sports drinks such as 100Plus.
The company has been in play since Mr. Charoen first began buying into it in July. This prompted Dutch brewer Heineken to buy out its 81-year-old beer-brewing joint venture with Fraser & Neave for US$4.6 billion in September and put the rest of the conglomerate’s remaining assets in play.
Mr. Charoen made his first bid for the whole of Fraser & Neave in September, offering US$7.2 billion to buy the shares he didn’t own.
The Overseas Union consortium followed with a US$10.6 billion offer in November. Overseas Union was backed by Japanese brewer Kirin Holdings Co. 2503.TO +3.15% -Fraser & Neave’s second-largest shareholder with a 14.8% stake.
Kirin planned to acquire Fraser & Neave’s food-and-beverage business if the takeover succeeded.
It wasn’t clear on Monday how Kirin would respond to Overseas Union’s failed bid. A Singapore-based public relations executive representing Kirin declined to comment.
The prospect of a bidding war had propelled Fraser & Neave’s share price to record highs above existing bids, but both bidders spent months extending offers the company described as fair but not “compelling.” Mr. Charoen had extended his original S$8.88-a-share offer seven times since September, while Overseas Union extended its initial S$9.08-a-share bid twice since November.
Fraser & Neave’s board noted that both offers were at the lower end of a valuation of between S$8.58 and S$11.56 a share made by its independent financial adviser, J.P. Morgan Chase JPM +0.04% & Co.
Last week, Singapore’s Securities Industry Council stepped in. Citing shareholders’ need for certainty, the SIC set a deadline of last Sunday for the bidders to table their final offers or submit to an auction. Mr. Charoen responded Friday with the revised offer, and bought about 93.03 million shares-or 6.46% of the company-on Friday and Saturday at S$9.55 apiece.
Mr. Charoen’s new offer marked a 7.5% increase from his earlier bid, but is nearly 2% lower than Fraser & Neave’s last closing price Monday of S$9.74 a share.
This forced Overseas Union to submit a better bid by Monday or withdraw from the battle.
In its statement Monday, Overseas Union cited the Singapore government’s latest aggressive property market curbs, introduced this month, as a factor in its decision not to raise its bid. Those measures were aimed at reining in soaring housing costs by discouraging investment demand. Analysts described them as the city-state’s toughest in over three years.
SABMiller Flags Weak Chinese Demand
By SIMON ZEKARIA
SABMiller SAB.LN +0.62% PLC on Tuesday said it was hit by a drop in Chinese demand in the third quarter, as the brewing giant recorded a slowdown in global volume growth.
The London-listed company, whose lager brands include Peroni Nastro Azzuro and Castle, said beer volumes for the third quarter rose 2% before acquisitions and disposals, representing a slowdown from the 3% growth rate recorded a year earlier and 4% posted in the first half. Soft drinks volumes increased 3%.
But volumes in Asia-Pacific, excluding Australia, fell 1%, weighed down by subdued demand in China, where volumes fell 3%, “due mainly to an exceptionally cold and wet winter across the country.” This compares with 7% volume growth in Asia-Pacific a year earlier.
Still, the Australian business, which had been under scrutiny following the company’s $10 billion acquisition of Foster’s in 2011, started to improve, with sales for the quarter down 4% on a comparative basis, compared with a 8% decline in the previous six months. Flagship brand Victoria Bitter grew 2%-its first quarter of growth for more than 10 years-and SABMiller said the integration program in Australia is ahead of schedule.
The world’s No. 2 brewer, behind Anheuser-Busch InBev NV, ABI.BT +0.18% pushed through price increases in some regions, which boosted revenue per hectoliter 5%. Revenue rose 8% in the quarter, before acquisitions and disposals and at constant currencies.
Latin America, the brewing group’s biggest region, saw beer volume growth recover to 6%, up from 4% in the first-half, but down from 8% in the same period last year. Volumes in Africa grew 4%, with South African volumes up 3%.
European volumes rose only 1%, with some beer markets hit by “depressed consumer confidence”, the company said.
In North America, MillerCoors LLC-the joint venture between SABMiller and Molson Coors Brewing Co. TAP +1.43% -said domestic sales to retailers were down 1.1%. Domestic sales to wholesalers fell 1.4%. Still, analysts say U.S. beer demand is showing signs of improvement, supported by rising employment.
Global I/O: US Spirits Wholesaler Survey
Input: 13th UBS proprietary wholesaler survey
Given that the US is the biggest profit pool for international spirits companies (36% of EBIT), but has low visibility due to the Three Tier System, we publish our 13th US spirits wholesaler survey to provide an independent industry health check.
Output: optimism remains, though meaningfully less so than prior quarter
53% of wholesalers surveyed are more optimistic on their business now than three months ago (this marks the lowest level since June 2011), with 24% less optimistic than three months ago (significantly up from 9% in Sept 2012). While there is still a clear expectation for volume growth y/y in the next quarter, conviction levels have moderated. In the on-trade especially, less than half (42%) now see better trends than in the prior quarter. Promotional activity appears to be stable rather than lower y/y, but encouragingly the proportion expecting actual price increases y/y in the next quarter is 58% which is in line with our September 2012 survey.
Less certainty for short-term trading
There are signs suggesting that the end of Dec saw weaker trading for US spirits, particularly in the on-trade as fiscal cliff concerns weighed on consumer confidence, and a tough weather comp. There is risk that fiscal cliff concerns continue to weigh until the “sequestration” deadline of 1 March. We nudge down 2012E vol growth from 3.5% to 3.0% to reflect a weaker Dec, and hold price/mix growth at 2.0%. We leave unchanged 2013E at +2% vol and +4.5% value growth.
Diageo rating cut from Buy to Neutral; BFB and STZ Buy
We downgrade our Diageo rating in today’s report “Less wind in Diageo’s sails”.
Less wind in Diageo’s sails
How much better can it get? We move to Neutral
Since mid 2011 Diageo has been re-energised with increased focus on organic top line and operational leverage, as well as using its balance sheet for EM acquisitions. EM exposure is now c40% of EBIT. Diageo’s major market, the US (38% of EBIT) has seen strong spirits vol growth, with a return to headline pricing.
We see limited scope for organic upgrades in 2013-14E
We lower FY organic sales and EBIT growth by 30-40bps, forecasting +6.1% and 9.4% respectively. This captures slightly reduced US spirits growth to reflect a short-term weakening in current trading (see lower optimism score in UBS proprietary US Spirits Wholesaler Survey published today). For H1 13FY UBSe organic sales +5.5% and EBIT growth +9.2%. Mid-term, given increased EM weighting, we remain confident that Diageo can deliver close to +7.5% organic sales and over +10% EBIT growth from 2015E onwards (above consensus),
M&A options more limited for now
After an intense 2 years of activity, we see less M&A likely in 2013CY, particularly post Cuervo. We are bullish about the USL deal, but it is a slow burn turnaround. We see a low probability of Diageo acquiring Beam, or Moët Hennessy becoming available, short-term. We assume dividend growth picks up modestly to 10% pa.
Valuation: Neutral from Buy, new price target 2000p (from 2050p)
We cut 14E px EPS by -3% for (1) the loss of Cuervo distribution, (2) FX. Our new DCF-derived PT implies 13CY P/E of 18x (currently trading on 16.8x), therefore we see some potential for further re-rating, but no longer sufficient upside to justify a Buy.
Brown-Forman Cleaning Up Numbers
Lowering Numbers to Reflect Change in Capital Structure
After raising $750m of debt at a blended 2.3% to pay their special dividend, Brown-Forman’s is more levered and has increased repayment responsibilities. We are adjusting our numbers to capture the interest expense obligation beginning January 1st (1 month of BFB’s FY3Q13 and full 4Q13). The new debt adds $17.5m to annual interest expense. Our FY13 EPSe is now $2.70 (from $2.72) and FY14 $3.10 from $3.16. We are lowering our PT to $71 from $73, while applying the same 23x P/E multiple. We reiterate our Buy rating.
Operational Estimates in the Right Place – No Changes
In our 13th Quarterly US Spirits Wholesaler Survey published today, we highlight decreasing optimism amongst distributors. We are becoming less optimistic on the category, but expect brown spirits to hold up well in the face of the category growth rates slowing — flavored whiskies, in particular, continue to outperform.
Investment Thesis – Just the Beginning
We believe that Brown-Forman is in the early innings of a prolonged trend toward brown spirits. With balanced growth in the US and abroad, we see Brown-Forman continue to leverage the Jack Daniel’s trademark in a very profitable way. The Company is experiencing volume growth, positive pricing, and alleviating input costs, as it enters this secular trend. We expect Brown-Forman to enter a period of multi-year earnings surprises.
Valuation: Reiterate Buy; Price Target $71
Our $71 target is based on 23-times our new FY14e EPS of $3.10.
Majors tighten grip on global spirits sector – research
By Ben Cooper
21 January 2013
The world’s largest spirits groups are continuing to increase their share of the global spirits market, a new report from Euromonitor International has found.
According to Euromonitor International’s Passport report, Growth for International Spirits Companies in Difficult Times, the top ten spirits producers increased their share of the global spirits market in 2011 to 26%, driven both by organic growth and acquisition.
However, the report states that, while international spirits companies have greater potential to expand, they were seeing “mixed results” in growth terms. Companies performing strongest were those with the broadest geographic and category spread, it says. Moreover, strength in emerging markets was not necessarily key.
“Geographic breadth is more important than whether the market is a mature or emerging one,” the report says. “The key element is the remaining potential for growth in a particular market. There are still significant opportunities to grow organically in mature and emerging markets.”
While the top ten have been pulling away from the pack, the report notes that the gap between the two largest players – Diageo and Pernod Ricard – and the others has also increased. It also notes that a new period of consolidation is beginning in the spirits sector.
In particular, Beam Inc is “vulnerable to takeover”, with Pernod Ricard having most to gain from a move for the company, due to its relative weakness in North America and the fact that it would have fewer competition issues than Diageo in making such a move.
“Beam is likely to be the next big company that loses its independence,” the report notes. “The company is publicly listed and, more importantly, is weakly positioned both in terms of geographic spread, as 86% of its volumes are sold in mature markets, and brand portfolio.”
Beam to sell several cheaper brands for $65M
Source: Chicago Tribune
By Samantha Bomkamp
January 21, 2013
Beam Inc., which makes Jim Beam and Maker’s Mark bourbon, said Monday it has agreed to sell several of its lesser-known brands to Luxco Inc. for a combined $65 million.
The brands include Calvert, Bellows, Wolfschmidt vodka, Dark Eyes vodka, Canada House Canadian, and Tempo Triple Sec. The Calvert brand includes Lord Calvert Canadian, Calvert Extra and gin, while Bellows’ line incorporates blended whiskey, Bourbon, gin, rum, Scotch and vodka.
They are all distributed in the U.S. and posted revenue last year of about $30 million on sales of 1.8 million cases.
Deerfield-based Beam said the sale of these cheaper brands will allow it to streamline its offerings and focus on the brands it has acquired over the last two years, including Pinnacle Vodka, Calico Jack rum and Skinnygirl Cocktails.
The deal is expected to close by the end of the month, but Beam will continue to make and bottle the brands through at least next year.
Luxco is based in St. Louis.
GuestMetrics Releases Data on 2012 On-Premise Wine Trends: Consumers trade down from bottles to glasses
On-premise wine consumers traded down from bottles to glasses in 2012, with Sauvignon Blanc and Pinot Noir gaining share at the expense of Chardonnay and Cabernet Sauvignon.
According to GuestMetrics, based on its proprietary database of POS transactions of over $8 billion dollars in transactions and over 250 million checks from restaurants and bars across the United States over the past two years, there was a dramatic change in consumption of wine in on-premise during 2012, with a large shift in consumption from bottles to glasses.
“Comparing 2012 against 2011, we see that the number of wine bottles ordered in restaurants and bars declined 13%, while the number of wine glasses increased by 4%.” said Bill Pecoriello, CEO of GuestMetrics LLC. “Given the large difference between the price, with the average bottle costing over $43 and the average glass costing $9.60, we believe this shift was driven by a consumer base that is still feeling pressure from a sluggish economic recovery, not to mention the unusually high level of uncertainty towards the end of the year with specter of the fiscal cliff.” In total for 2012, wine by the bottle represented 13% of wine items ordered (vs. wine by the glass which represented 87% of wine orders), but given the significant difference in pricing, wine by the bottle accounted for 41% of total wine sales (vs. 59% for wine by the glass).
“Based on this large difference in performance between wine by the glass versus wine by the bottle, wine by the glass gained 220 basis of share of the wine category in 2012,” said Peter Reidhead, VP of Strategy and Insights at GuestMetrics. “Furthermore, looking at the drivers of sales in more detail, we see that the price of the average bottle of wine sold increased by 9% versus the more modest price increase of 3% for wine by the glass, which may have been part of the exodus from wine by the bottle during 2012.”
“In terms of varietals, there were also some noteworthy shifts in the wine category in 2012,” said Brian Barrett, President of GuestMetrics. “The varietals that gained the most share of the wine category were Sauvignon Blanc, Pinot Noir, and Malbec, while at the other end of the spectrum, the varietals that lost the greatest share of the category relative to 2011 were Chardonnay, Cabernet Sauvignon, Merlot, and Pinot Grigio. Despite the loss in share for those varietals they still held the top spots for 2012. The top 5 varietals for 2012 were Cabernet Sauvignon, Chardonnay, Pinot Grigio, Merlot and Sauvignon Blanc. In our minds, this underscores the importance of restaurateurs as well as suppliers having an up-to-date understanding of the constantly shifting tastes of the consumer, in order to make sure their menus and brand portfolios best meet those changing demands.”
About GuestMetrics LLC
GuestMetrics, LLC is revolutionizing how the hospitality industry operates. Despite the dawn of the Digital Age having begun more than three decades ago, the hospitality industry essentially functions the same way it did centuries before. GuestMetrics has cracked the code by collecting data from tens of thousands of restaurants and turning billions of raw transactions into intelligible data that is fundamentally transforming the business operations of everyone from the independently-owned bar/restaurant on the corner, to multi-national chains, to the food & beverage companies that supply them. Please visit www.GuestMetrics.com for more information and to arrange for a free demonstration.
Ardagh thinks it has the bottle for IPO
By Jamie Smyth in Dublin
Irish glass bottle maker Ardagh was a habitually underperforming minnow on the Irish Stock Exchange with just I£40m annual revenues when Paul Coulson became chairman in 1998.
Fifteen years later, the former accountant nicknamed “The Cooler” is on the brink of transforming it into the world’s second-biggest glass bottle company with ambitious plans for an initial public offering in the US.
Last week Mr Coulson, who owns 36 per cent of the company, announced Ardagh’s third year of billion-dollar acquisitions in the past four years, agreeing a $1.7bn deal with Compagnie de Saint-Gobain to buy its Verallia North America unit.
If the acquisition clears regulatory approval, Ardagh’s sales would expand to ?5.3bn, up from annualised sales of ?4.1bn to the end of September 2012. Ardagh had annualised earnings worth ?682m to end-September 2012, according to the company.
“It is a transformational deal because it will make Ardagh the largest glassmaker in the US as long as it gets antitrust approval from the US authorities,” says Chip Dillon, a partner at Vertical Research Partners, an independent equity research firm in the US.
“Ardagh has done an incredible job of growing during a tough time for the glass sector,” says Mr Dillon.
Ardagh was originally a glass bottle maker with operations limited to Ireland and the UK. Mr Coulson has broadened the company’s geographical reach by making a string of acquisitions in the UK, northern Europe and the US. He has also diversified the company’s product line by purchasing Impress Group for ?1.7bn in 2010, which specialises in metal container products. Its $880m takeover of Anchor Glass in July 2012 boosted its workforce to 18,000 across 100 facilities. Sales are now evenly split between its glass and metal divisions.
The company operates mainly in the relatively stable food and drink sectors, supplying bottles, drink cans, food tins and a range of other container products. It counts Coca-Cola, Jim Beam, Heineken, John West, AB InBev and Procter & Gamble among its clients.
Buying Verallia North America would give it a presence in the US wine market for the first time and enable it to leapfrog its rival, Owens-Illinois, as the largest producer of glass bottles in the US.
Ardagh’s rapid growth owes a lot to Mr Coulson’s success at raising money even when debt markets are tough. The company had financed 10 acquisitions by raising ?3.5bn debt even before last week’s proposed takeover of Verallia North America. Investor demand remains strong and last week Ardagh raised a further $1.52bn from international bond markets to fund its latest deal.
Credit rating agency Moody’s maintained its B2 rating on Ardagh’s debt following the Verallia North America acquisition. It said the deal had “compelling strategic rationale”, though it valued Verallia at 6.3 times earnings, which was “somewhat above recent transactions in the sector”. It also cautioned about potential integration risks as the company pursues $70m annual savings from synergies by 2016.
“Coulson is not afraid of leverage and has used the company’s balance sheet well to scale up quickly,” says one Dublin-based financier, who did not want to be named. “He is clearly now in the big league,” he said.
Some in Dublin draw comparisons with that other Irish packaging mogul Michael Smurfit, who grew the Jefferson Smurfit Group into Ireland’s first genuine multinational. But Mr Coulson has adopted a significantly lower public profile than the cardboard box tycoon.
People who know him say he is hugely tenacious and has great foresight. Mr Coulson is credited with pulling off what many consider to be the “deal of the Celtic Tiger” when he organised the controversial sale of Ardagh’s former glass bottle site in Dublin for ?412m close to the peak of the property market. The site is now worth a fraction of the price paid by a consortium of property developers.
At investor road shows last week Ardagh management said they plan to float the company in the US, possibly as early as the fourth quarter if market conditions stabilise. If Mr Coulson manages to pull it off he will be one of the few Irish success stories to emerge from the country’s traumatic economic crash.
Craft beer keeps growing, led by Boston Beer, Sierra Nevada
Source: LA Times
By Tiffany Hsu
January 21, 2013
The craft beer revolution kept charging ahead in 2012, when 12% more barrels were shipped than the year before, the sixth straight year of growth.
Of 27 major craft brewers – all of which saw some gain – 16 had double digit increases, according to industry research group Beer Marketer’s Insights’ Craft Brew News publication.
In all, the craft beer industry enjoyed a 1.5 million barrel boost to 13.7 million barrels total.
Samuel Adams Boston Lager maker Boston Beer led the segment, with craft beer shipments rising as much as 3% to nearly 2.2 million barrels. But the company’s share of the industry has slid to 15.7% from 21% in 2008, according to the report.
Sierra Nevada, a brewer based in Chico, is the second largest in the sector. It’s 12.6% shipping gain to 966,000 barrels was its best advancement in more than a decade.
Petaluma brewer Lagunitas Brewing had a blockbuster year, with shipments booming 46% to 235,000 barrels. The company – which makes labels such as Hop Stoopid Ale and Little Sumpin’ Sumpin’ Ale, has more than quintupled its shipments in five years.
Unlike the general beer industry, where Anheuser-Busch and MillerCoors control some 80% of business, craft beer operators exist in more of a diaspora. More than three-quarters of the craft beer segment is split among 2,000 smaller rivals.
Serbian brandy distillery closes operation
22 January 2013
Navip, the oldest Serbian plum brandy producer, has closed production at its distillery after 84 years.
Built in 1929, the distillery produced Serbian Slivovitz plum brandy such as Navip Slivovitz, Navip Slivovitz 8yo, Navip Slivovitz 5yo, Bardaklija, Beogradska Slivovitz and others, reported b92.net.
The distillery manager Miroljub Spasojevic was quoted by the website as saying that the distillery had to stop production of brandy even though it had contracts to export around 80,000 to 100,000 bottles.
In the last forty years, the distillery exported brandy to the rest of Europe, the US and Canada. The Zemun-based Navip’s distillery exported 1.6 million bottles in the decade before economic sanctions were imposed against Serbia.
However, as the bankruptcy procedure was launched last year, it meant end to the production at the distillery.
Spasojevic stated that despite sufffering the latest setbacks, the distillery has plans, buyers and technology to overcome problems in order to start production again.
Deep discounts drive Champagne sales
Source: the drinks business
by Patrick Schmitt
21st January, 2013
Deep discounting over the Christmas period in the UK and France has led to Champagne volume growth in the major multiples but also one bankrupt supplier.
Asda sold almost 250,000 bottles of £10 Champagne in the last week of December
Retailers in Champagne’s two largest markets employed aggressive price cutting tactics to entice shoppers during December, while suppliers of inexpensive supermarket labels struggled to make money as they attempted to absorb the increasing cost of grapes.
The latest figures to be released in the UK show that supermarket chain Asda achieved a 25% increase in Champagne sales over December from an aggressive deal on its exclusive label Pierre Darcys.
Having slashed its price from £23.98 to just below £10 a bottle, the supermarket reported sales of almost 250,000 bottles in a single week in the run up to New Year’s Eve.
Overall Champagne sales at Asda were up 17% in 2012 compared to the previous year, increasing the retailer’s share of the Champagne market by 1.7%.
Certainly the supermarket’s Christmas Champagne deal was the most aggressive year-end offer in the UK market, with the next cheapest bottle available at Tesco, where De Vallois had its price cut from £28.99 to £14.49.
Nevertheless, Morrisons had previously offered the deepest discount, having cut the price of its Hubert Marie Champagne from £28.99 to £10 for one week only until Sunday 2 December 2012.
For suppliers however, rising grape costs in Champagne are making it increasingly difficult to provide Champagne at such low prices.
Indeed, as previously reported by the drinks business, one supplier of several exclusive Champagne labels, Pressoirs de France, has gone into administration, unable to make a profit on bottles sold for as little as ?8 a bottle.
Although UK retailers were certainly aggressive in their Christmas Champagne deals, the discounts were deepest across the Channel in the French supermarkets.
Leclerc sold Champagne in a half price loyalty card deal which allowed shoppers to effectively buy a bottle for ?5.45
Retailer Leclerc was even selling Champagne in a half price loyalty card deal which allowed shoppers to effectively buy a bottle for ?5.45 (?10.90 would buy them a bottle of Champagne and a ?5.45 voucher to spend on food in-store the following day).
The Champagne for this offer, the Laurence D label, was supplied by Nicolas Dubois of the now bankrupt Pressoirs de France.
However, Asda’s Pierre Darcys label was supplied by cooperative Union Vinicole des Coteaux de Bethon (UVCB), which is also producer of the Paul Laurent brand.
Despite the depth of the Champagne discount at Asda, sparkling wines outsold Champagne at the retailer, with Cava and Prosecco spearheading volume growth.
Together, Champagne and sparkling wine enjoyed 28% year on year sales increase at the supermarket in 2012.
Putting some fizz into the wine market
Source: Industry Updates
When talking about Bordeaux, many Chinese people know it is the most famous luxury wine production and trading base in France. However, when talking about the Champagne region in France, many are unaware that it is the only production region for champagne in the world and its name has been legally protected to prevent other producers of fizzy wine from trading on it.
In China, the red wine market is booming and owning expensive wine is becoming a symbol of good fortune and social status. However, champagne – a unique sparkling wine associated with luxury and power over the centuries – has yet to receive widespread recognition and acceptance by the Chinese.
“Compared with red wine, the acceptance of champagne is still limited,” said Wang Wei , director of the Comit Interprofessionnel du Vin de Champagne (CIVC) in China. CIVC is the trade organization of champagne in France that oversees the global champagne market. One of CIVC’s missions in China is to promote champagne and tell the story behind it to the Chinese.
Currently, the annual output of champagne is about 300 million bottles, of which 150 million bottles are sold globally. Only 1.3 million bottles of champagne were sold in China in 2011, an increase from the 300,000 sold in 2006. Wang said about half the demand for the drink came from Shanghai.
Officially introduced to the Chinese market in 2006, the demand for champagne is increasing gradually. However, market awareness is far below red wine. Most Chinese know Lafite is one of the most expensive red wines in the world but not many people can name the best champagne in the world.
Figures from consulting firm Euromonitor show that a total of 1.3 billion liters of red wine were consumed in China in 2011. In comparison, champagne consumption was only 900,000 liters in 2011.
In recent years, champagne has been increasingly seen at weddings and celebration parties in China. However, in many cases, newlywed couples only pour champagne down an ornate arrangement of glasses for a photo but do not drink it.
“The taste is light and a little bit strange. I think many guests, especially elderly people do not like that cold wine with bubbles,” said Liu Hui, a white-collar worker in Shanghai whose wedding ceremony was in September 2012.
“In Western countries, champagne is consumed before meals. However, in China, on the rare occasions champagne is needed, most is drunk in bars and clubs,” said Wang.
Many Chinese people believe champagne was developed for ladies and is not suitable for business banquets, he added.
Wang said the different qualities of different types of champagne mean traders can take different approaches to explore the market.
“Compared with the massive trading model employed by red wine traders, champagne producers and traders want to maintain the premium nature of the wine,” said Wang. “The price of red wine can fall extremely low. However, the price of champagne will have a bottom line.”
In an ordinary store in China, the cheapest champagne is around 500 yuan ($80.26) per bottle. The price will be much higher in bars and clubs.
Wine market experts said the special taste of champagne is a factor that makes it less popular in China than red wine.
“Chinese people do not like the acidic taste of champagne. They also do not like wine with bubbles in it,” said Vance Yang, champagne master with Le Sun Chine in Shanghai.
Federico Tabja, Chile’s trade commissioner, who saw red wine exports from Chile increase 19.6 percent to 1.38 million cases (9 liters per case) in the first eight months of 2012, said Chinese people do not like drinking cold beverages. And the strong, fruity taste of champagne is relatively strange for Chinese customers.
Meanwhile, the relatively mature red wine market encourages Chinese people to choose something they are more familiar with.
“Red wine entered the Chinese market early and people are more familiar with it. Drinking red wine is trendy nowadays,” Tabja said.
A market insider said one way to make the taste more acceptable is to add syrup to champagne to lower the acidity, which is providing big business opportunities to syrup providers including France-based premium syrup maker Monin.
Despite the champagne business currently being small compared with other imported alcoholic drink businesses, insiders believe the market will get mature.
“We have seen significant growth in the champagne market in the past six years and we have high expectations for the market. We want demand in the Chinese market to be as high as it is in Japan,” said Wang. Japan is the largest champagne market in Asia.
Sydney launches first ‘natural’ wine fair
by Christina Pickard in Perth
Monday 21 January 2013
Sydney’s inaugural ‘natural’ wine fair is already attracting controversy, with one wine writer saying quality winemakers are annoyed by the ‘natural’ label.
Rootstock Sydney will offer over 100 wines from more than 30 producers who ‘share common philosophies on viticulture, winemaking and sustainability’, the festival’s website says.
The majority of exhibitors are Australian, with a handful from Italy, France, Greece, Slovenia, the US, New Zealand and Spain.
Australian wineries include Jauma, Shobbrook, Lucy Margaux and Paxton; Radikon and Giuseppe Rinaldiare coming from Italy, and Milton Vineyards, Pyramid Valley and Rippon from New Zealand. All are available in the UK.
Set up by Giorgio De Maria, owner of Sydney wine bar 121 BC, wine writer Mike Bennie, and James Hird, owner of the Wine Library bar, the festival is subtitled the Sustainable and Artisan Wine and Food Festival.
‘We don’t feel the need to use the term “natural”‘, Bennie told Decanter.com. ‘We don’t want to be dogmatic. Artisan and sustainable are as indefinable as the term natural, and are certainly bandied about as often, but unfortunately we have no other way of telling the consumer these wines are slightly different, as in handmade with more pastoral origins as opposed to more mechanized industrial farming.’
Bennie believes there has been a significant increase in interest in Australia for wines of a more ‘lo-fi’ nature, ‘as consumers move towards more understanding of provenance. A lot of the wines that fall under the “natural” umbrella are celebrated here and seen to be successful.’
Bennie also referred to the success of overseas natural wine festivals as a model for Sydney’s. However, while fairs like London’s Real Wine Fair and RAW drew thousands of visitors, they also proved divisive.
According to Australian wine journalist Max Allen, this discord exists in Australia too: with the dominance of large-scale producers, smaller independent winemakers already consider themselves ‘natural’ or ‘artisan’.
‘In many cases they’re not working that far off “natural” anyway. There is a lot of industrial wine made here, but at the smaller level, most Aussie winemakers are already pretty much doing the right thing. So with “natural” wines coming up as a rebellion, some winemakers feel that perception is unwarranted.
‘There are a lot of cranky Aussie winemakers out there who have let “natural” winemakers get under their skin and it’s really annoying them.’
Bennie, however, reckons that most consumers are not aware of the conflict, and that even in the trade it is far less pronounced than it is elsewhere in the wine world.
‘It’s an in-trade conversation. Certainly there are people who are rightly challenging “natural” wine and what it means. But most Aussies just care if the wine’s good.
‘In Australia to draw lines in the sand, as in “us versus them” isn’t our thing. We want an inclusive fair, and the wines are a great talking point in helping communication between producers and the consumer.’
Rootstock Sydney takes place on 17 February 2013.
Wine pairing pioneer Shirley Sarvis dies
January 21, 2013
Shirley Sarvis, a San Francisco food writer, cookbook author and pioneer in the art of wine and food matching, died in her sleep at her Russian Hill home Wednesday. She was 77 and had been in poor health for several years.
When Ms. Sarvis authored “American Wines and Wine Cooking” with St. Helena wine writer Bob Thompson in 1973, little had been written about how to pair food with wine. Her timing was impeccable – the California wine scene was emerging and few people ventured beyond the standard “white wine with fish, red wine with meat” approach.
“She had a really rare palate – out there in the stratosphere – in terms of her ability to taste,” said Annie Somerville, longtime chef of Greens Restaurant in San Francisco. Ms. Sarvis and Chalone Vineyard founder Richard Graff helped pick the wines for the restaurant at a time when “no one knew much about wine with vegetables,” Somerville said.
Ms. Sarvis began her food career at Sunset magazine in 1957, moving to the Bay Area after graduating from Kansas State University with a degree in home economics.
From Sunset she went on to a long freelance career, writing for magazines including Woman’s Day, Better Homes and Gardens, and Gourmet, and writing several cookbooks, including “Woman’s Day Home Cooking Around the World,” “Best of Scandinavian Cooking” (with Barbara Scott O’Neil) and “Trader Vic’s Helluva Man’s Cookbook” (with Vic Bergeron).
“She was very good at interviewing and pulling recipes out of people,” said former Sunset food editor Jerry DiVecchio. “She fell in love with flavors and would pursue them to the nth degree.”
Ms. Sarvis took that ability on the road, staging food and wine pairing meals and seminars at Bay Area hotels, restaurants and wineries. “She would serve food with three or four wines and discuss the qualities that made them enhance each other, then let the audience come to their own conclusions,” DiVecchio said.
In her later years, she remained an avid supporter of the Bay Area food scene, frequenting restaurants and farmers’ markets as often as possible.
Ms. Sarvis was born Feb. 21, 1935, in Norton, Kan., and is survived by three nieces – Joye Lynne Mock, Jeannie Ownes-Arnold and Janet Laird, all of Kansas. Her only sibling, Phyllis Sarvis Smith, died several years ago.
A public memorial service is planned for 2 p.m. Feb. 16 at St. Luke’s Episcopal Church, 1755 Clay St. in San Francisco. Donations in her memory can be made to St. Luke’s, Philharmonia Baroque Orchestra ( www.philharmonia.org) or Food Runners ( www.foodrunners.org).
German retailers call on EU to protect ‘Rotspon’
by Patrick Matthews
Monday 21 January 2013
North German bottlers of one of Europe’s oldest – and oddest – wine names are calling on the appellation authorities to beef up its legal protection.
There is a mini-boom in so called ‘Rotspon’, a Medieval term describing a French red wine imported in bulk and bottled and aged within the city limits of Hamburg, Lüneberg or Lübeck.
The fact that the wine is aged in the damp and cool climate of northern Germany is supposed to give it special qualities and longevity. Napoleon is said to have been impressed with the quality of the wines he found in the region when he marched through in 1806.
Now bottlers are at war over who should have the right to put Rotspon on their labels.
The Lübecker Rotspon appellation is legally protected, but outside Lübeck the term Rotspon is used on the whim of wine merchants. It is possible to find Austrian Pinot Noir – neither aged in North Germany nor produced in France – on sale as Rotspon.
The confusion can even extend to Lübecker Rotspon itself. The appellation is being misused to describe wine that has not been aged within the city limits.
Emmanuel Mack of leading Lübecker Rotspon bottler HF von Melle, whose sales of around 200,000 bottles are growing by up to 5% year on year, says some bottlers are ‘jumping on a bandwagon’.
Hamburg-based Johannes Kemnitz started bottling Rotspon in 2005 ‘because we liked the history and tradition of Rotspon and thought that this is really a privilege for a city in a region without viticulture’ is calling for EU intervention to protect the wine’s good name.
Kemnitz charges the biggest Lübecker Rotspon bottler, Carl Tesdorpf, with bottling French barrel-aged wine on arrival in Germany rather than cellaring it themselves.
As part of the Hawesko group, one of Germany’s bigger players in the wine market, says Kemnitz, ‘they seem to have good lawyers who were able to make a case because of vagueness over the legal definition of Rotspon.’
Rotspon (which means ‘red wooden stave’), in Mack’s view, should showcase the skill of barrel ageing and bottling wine, and is gratified to find his own sales of around 200,000 bottles growing by up to 5% year on year.
For both Mack and Kemnitz the art of Rotspon is to select a French red wine, age it in barrel, and release it at the optimum moment for immediate drinking.
Rotspons retail at ?7 to ?20, and are are taken seriously: wines such as HF von Melle’s Lalande-de-Pomerol 2009 beat all French-bottled rivals in a Bordeaux-organised competition. They are popular in Scandinavia and sold all over Germany, but rarely exported to the UK or the US.
No one from Tesdorpf was available to comment at the time of going to press.
GLAZER’S, INC. APPOINTS NATIONAL ACCOUNTS DIRECTOR FOR MIDWEST AND SOUTHEAST MARKETS
January 21, 2013
Glazer’s today announces that Mitch Rick has been hired as National Accounts Director, managing strategic accounts from Indianapolis to Florida. The On Premise National Accounts Department at Glazer’s continues to expand its coverage by adding this position to the team. Mitch will office in Indianapolis, IN and have responsibilities for regional and national accounts headquartered in OH, IN, KY, TN. In addition, he will cover accounts headquartered in the Southeast U.S. as Glazer’s continues to enhance its presence in this area.
In addition to his core responsibilities encompassing all aspects of regional and national account sales, Mitch will also act as a marketing, training and event resource for Glazer’s Midwest states. As such, Mitch will report to Randy Porter, Senior Vice President On Premise National Accounts but will also have cross-functional reporting to Keith Petrauskas, Regional President of Indiana and Ohio.
Mitch has been a long time Glazer employee with over 14 years at Union Beverage and Glazer’s in Chicago, and he previously spent 6 years in Glazer’s National Accounts Department.
Randy Porter commented, “We are excited to expand the National Account footprint of Glazer’s to effectively cover all of the states in which we operate. Glazer’s has one of the top on premise national account teams in the country and this move helps strengthen our presence by enabling us to call on over 250 chains within and outside of our states.”
Amber Taverns cheers festive tipples
By Christopher Thompson
Brisk drinking in the run-up to Christmas lifted sales at Amber Taverns. The privately owned company, which prides itself on running drink-led pubs, said like-for-like sales for December rose 4.4 per cent over the same period in 2011. Total December sales rose by 23 per cent to £3.6m, net of costs, helped by 11 new pub openings during the calendar year.
“Once again we have shown the viability and popularity of well-run wet-led pubs,” said Clive Preston, 76, Amber’s chairman and founder. “We will add even more of the same to our existing estate over the year ahead as we continue to progress our strategy of building a quality pub portfolio.”
Last October, Amber agreed a £24m loan facility with Lloyds Bank. The company said it planned to spend £6m this year opening 10-12 pubs.
Amber, based in Preston, has bought and turned round 82 pubs in northern England and the Midlands since 2005, most of which were boarded up. While listed pub companies such as Greene King and Spirit Pub Co increasingly concentrate on food, Amber’s pubs often offer nothing more to eat than crisps and pork scratchings.
In doing so Amber has exploited a market niche that bigger pub companies no longer cater to – the old-fashioned boozer.
“Some people say wet-led pubs are a niche market – but it’s a big one,” said Mr Preston. “There’s still a lot of people who want to go into a pub and drink and not necessarily be around people who are eating . the majority are men but we get a lot of women coming in with their husbands.”
Instead of using a traditional “tied” tenanted model – where tenants buy their beer and pay rent to a pub company – Amber manages the drinks’ offering in its pubs and then pays the landlord a percentage of the pub’s takings. All Amber’s pubs are freehold.
“It encourages the entrepreneurial spirit – the more they take, the more they earn,” said Mr Preston. “The only costs they have to pay are themselves and the staff who they employ.”
Amber outperformed the wider pub industry, which registered a 2.1 per cent increase in like-for-like sales for the six weeks to January 6, according to the Coffer Peach Business Tracker, representing a slightly better festive period than the year before.
Much of the industry growth came from new openings and pub chains taking market share from independents.
Georgia: Atlanta’s legislative wish list includes higher alcohol taxes (Excerpt)
Source: The Atlanta Journal-Constitution
By Jeremiah McWilliams
The city of Atlanta’s legislative wish-list for the 2013 General Assembly includes changes in state law that would allow the city to increase taxes on alcohol, sell condemned and blighted property to private parties, designate sales tax revenue disbursements by tenths of a cent rather than a full penny, and charge the public school system for the cost of running school board elections.
A document obtained by The Atlanta Journal-Constitution shows a wide range of requests, some of which – like the ability to raises taxes on beer, wine and liquor – have been requested before, only to fall short under the Gold Dome.
“A lot of this comes down to local control,” said Megan Middleton, Atlanta’s intergovernmental affairs manager. “We’re asking for the authority to make changes. You still would have the local input.”
One proposal – such as slicing penny sales taxes into smaller increments of one-tenth of a percent, which could go to different purposes – is similar to those pushed this year by Cobb County.
A sales tax levied in Atlanta at a tenth of a percentage point could generate about $11 million or $12 million in revenue per year.
After the 2010 legislative session, Atlanta Mayor Kasim Reed met with arts backers, including the Woodruff Arts Center and the Annie E. Casey Foundation, to discuss the merits of a partial penny tax. He now cites Denver’s fractional tax for the arts as a model for Atlanta.
“It is getting some momentum,” Middleton said of the fractional sales tax proposal.
Yolanda Adrean, who represents northwest Atlanta on the City Council, said the proposal would provide municipalities with much-needed flexibility.
“If a penny of tax could be split between more than one priority, it could allow the city to move on some very crucial needs,” Adrean said. “I’m not suggesting that we add a penny of sales tax. In a time where there’s a great deal of sensitivity to how much you’re taxed and where that money goes, this gets everyone focused. There are lots of pressing needs that are not getting funded.”
The city plans to ask for a number of other changes to state law, which could give the city flexibility and cash on a number of fronts.
The city wants citizen review boards – including the Atlanta Citizen Review Board, which has oversight over the city’s police department – to be exempted from the requirement to release documents under an open records request until all the entities involved have finished their respective investigations.
Some of Atlanta’s requests are sure to attract opposition. Proposals to increase alcohol taxes were criticized last year by restaurants and their representatives at the Gold Dome. And this week, open-government advocates criticized the city’s request to create more exemptions to the state’s open records law.
“The general rule of the open records law is transparency, and the law discourages any additions like this proposal which would provide further impediments to public access,” said Hollie Manheimer, executive director of the Georgia first Amendment Foundation
Atlanta again seeks several tax increases on alcohol. One proposal, a 5 percent excise tax by-the-drink on beer and wine, would raise an estimated $4.5 million every year. The proposal is similar to others that have failed to make headway under the Gold Dome in years past.
“What we run into is a lack of action,” said City Councilman Howard Shook of Buckhead. Previous requests for heftier alcohol taxes have generally “arrived dead and stayed that way.”
Texas: Liquor store blues
It’s time for the Texas Legislature to allow liquor stores to operate on Sundays.
Source: Houston Chronicle
January 18, 2013
If you have ever been in the middle of making the perfect Bloody Mary for Sunday brunch only to find that you’re out of vodka, then Texas state Rep. Senfronia Thompson has filed a bill for you – a proposal to let liquor stores operate on Sundays from noon to 10 p.m. The bill, H.B. 421, also expands the legal operating hours on other days so that liquor stores can be open from 9 a.m. to 10 p.m.
Beyond making life easier for procrastinating party planners rushing to Spec’s at 8:59 p.m. or teary-eyed Texans fans the past several Sunday afternoons, there is a point at which reasonable regulation of alcohol becomes an unnecessary government intrusion into private business. It makes sense to limit bulk alcohol sales during those late-night hours when drunk drivers pose a serious threat. Banning alcohol sales on Sundays, however, is an outdated remnant of pre-Prohibition blue laws and has little purpose in contemporary pluralistic society.
And Texas wouldn’t be the first state to walk back blue laws, with 14 states repealing Sunday liquor bans since 2002. People are coming to the realization that we have liquor laws on the books that just don’t make sense, and it is about time we took them out.
As another incentive to change the law, Thompson says that increasing hours should bring in more tax revenue on liquor sales, estimating a $8 to $13 million growth for the state. During tight budgets, anything helps.
Not everyone is a fan of the bill, with some surprising opponents. Of all folks, liquor store owners and operators have expressed concern about the additional overhead and cost of staying open for the added time. But this isn’t communist Russia and nobody will force the local vodka depot to adhere to mandatory operating hours or face the gulag. Without compelling arguments otherwise, the key justification behind a store’s hours should be the market. If liquor stores want to stay closed on Sundays then they have that right – Chick-fil-A has operated like that for years.
And if there is consumer demand for Sunday liquor stores, we are sure that some enterprising upstart will provide. The Texas Legislature just has to get out of the way and let our liquor flow freely.