SABMiller CEO Says Beer Deals Slowing Amid High Multiples
By Duane D. Stanford
Jan 29, 2013
Global beer acquisitions by big brewers have slowed because the prices paid have skyrocketed, SABMiller (SAB) Plc Chief Executive Officer Graham Mackay said.
“The last few have been at unthinkable levels,” Mackay said at a conference in San Antonio hosted by Beer Business Daily. “It’s hard to see how most of the potential deals can be worth it.”
He didn’t specify what potential deals he was referring to.
Global brewers have used acquisitions to expand into new markets in recent years. Including net debt, Anheuser-Busch InBev NV (ABI) last year agreed to buy the remainder of Mexico’s Grupo Modelo SAB for $17.1 billion while Heineken NV (HEIA) last year bought Fraser & Neave Ltd.’s stake in their Asia Pacific Breweries Ltd. (APB) joint venture for about $4.36 billion, according to data compiled by Bloomberg.
Those deals followed London-based SABMiller’s 2011 purchase Foster’s Group Ltd. in Australia for about $13 billion, including net debt.
AB InBev is valuing Modelo’s enterprise value at 13 times earnings before interest, taxes, depreciation and amortization, while Heineken is paying 17 times F&N’s Ebitda, according to data compiled by Bloomberg.
Mackay also said he believes Anheuser-Busch’s purchase of the rest of Modelo will be approved by U.S. regulators. Any concessions won’t derail the deal, he also said.
Mackay declined to say whether he expected a deal between Anheuser-Busch InBev and SABMiller.
“Our job is to make our business as expensive as possible to buy,” he said.
SABMiller shares rose 27 percent in the 12 months through yesterday, boosting the company’s market value to 49.3 billion pounds ($77.7 billion).
Last week, the world’s second-biggest brewer reported organic revenue that beat estimates for the third quarter as consumers opted for pricier beers.
Revenue at the maker of Grolsch and Peroni rose 8 percent on an organic basis, which excludes the effects of acquisitions and disposals, the London-based company said in a statement. That was ahead of the 6.5 percent median estimate of 11 analysts surveyed by Bloomberg News.
COTTAGE GROVE MAN SENTENCED TO FEDERAL PRISON FOR $879,000 TAX FRAUD
Defendant filed more than 70 false federal excise tax returns on behalf of his business, Side Pocket Food Company, and owes more than $879,000 in federal excise taxes
Today, Chief U.S. District Court Judge Ann Aiken sentenced William Myers, 66, of Cottage Grove, Oregon, to serve one year and one day in prison for failing to pay $879,000 in federal excise taxes and for filing more than 70 false federal excise tax returns on behalf of his company, the Side Pocket Food Company. Upon release from prison, the defendant must serve three years of supervised release, including 100 hours of community service each of the three years and pay restitution in the amount of $873,186.88. Pursuant to a plea agreement, defendant admitted that he owes more than $879,000 in federal excise taxes and filed more than 70 false excise tax returns. Additionally, defendant was operating an illegal still inside the company warehouse.
According to court records, the Side Pocket Food Company is a distilled spirits plant, primarily in the business of blending and bottling distilled spirits, in Cottage Grove, Oregon. It purchases bulk alcohol and bulk distilled spirits from manufacturers or bulk distillers, and the Alcohol and Tobacco Tax and Trade Bureau (TTB) issued the company an operating permit to operate as a rectifier (processor), warehouseman, and bottler. As a licensed distilled spirits plant, the company was required to file federal excise tax returns with the TTB and to pay federal excise taxes to the TTB.
Despite collecting federal excise taxes from the company’s clients, Meyers failed to pay the federal excises taxes to the TTB. Instead, Meyers and others used this money to pay for personal expenses, including car, house, and credit card payments, and business expenses. When approached by TTB about the excise taxes, defendant engaged in a repeated pattern of evasion, intentionally avoiding TTB’s efforts to audit his company and to rectify his federal excise tax situation. Defendant operated the illegal still in the middle of the company warehouse, distilling wine for local wineries. When tested, the distilled alcohol had dangerous levels of lead and copper, creating a public health risk to unknowing members of the community.
U.S. Attorney S. Amanda Marshall noted, “Defendant cheated his clients, the taxpayers, and the regulatory system, acting as if the rules did not apply to him or his business. Business owners need to understand that this type of conduct will not be tolerated. There are legitimate ways, like bankruptcy, to work through difficult financial times. Theft and tax fraud puts individuals and communities at risk, it is illegal, and will land you in jail.”
Timothy Marsh, Deputy Director for Criminal Enforcement, Alcohol and Tobacco Tax and Trade Bureau, (TTB) said, “Failure to pay taxes is not a victimless crime. It robs the community of revenue and hurts law-abiding businesses. TTB is committed to ensuring a level playing field where businesses can compete on an equal and lawful basis.”
This case was investigated by the Alcohol and Tobacco Tax and Trade Bureau and is being prosecuted by Assistant U.S. Attorney Scott E. Bradford.
RABOBANK REPORT: OUTLOOK FOR GLOBAL BEVERAGE INDUSTRY IN 2013
SUPPLY SECURITY A TOP PRIORITY IN FACE OF ECONOMIC HEADWINDS, COMMODITY VOLATILITY
January 29, 2013
Rabobank has published a new research report on the outlook for the global beverage industry in 2013, forecasting the impact of weaker demand in developed markets, slower growth in emerging markets, and price and supply volatility for beverage-related commodities. As a result, the bank says, 2013 will see beverage companies focusing on new sourcing strategies to increase security of supply.
In the report “Thirsting for Growth,” the bank’s Food & Agribusiness Research and Advisory team says a major concern for all beverage companies in 2013 is the outlook for key commodities. Exerting greater control over procurement, including achieving increased transparency with upstream suppliers, will be a critically important initiative for many beverage companies in 2013.
Rabobank says that in the past, beverage manufacturers were more concerned with buying their inputs at the lowest price, but in today’s world of tightening supply and price volatility, security of supply has emerged as a key concern for many manufacturers. Increasing complexity within the supply chain requires greater dependency and alignment between key stakeholders. As a result, supply chain management and strategic development experts have initiated “strategic sourcing” of agricommodities.
Ross Colbert, global beverage strategist for Rabobank and lead author of the report, said, “Strategic sourcing requires beverage companies to re-evaluate their procurement processes through the lens of global supply and demand, to better understand the impact of price volatility, security of supply and related risks. This approach has led global brand owners to develop dedicated supply chains, where suppliers, processors, distributors and even retailers are more aligned and operate in a more integrated system.”
In the report, Rabobank’s analysts forecast the outlook for three primary beverage sectors – soft drinks, coffee and tea, and alcoholic beverages.
Rabobank Outlook for Soft Drinks
. The global soft drinks industry will continue to straddle two different worlds: the mature developed markets where growth has stagnated and developing markets where previously high growth rates have slowed, but still offer the greatest upside
. Bottled water will continue to lead in volume with a projected growth rate of 5.4% in the coming year.
. Ready-to-drink tea and Asian specialty drinks will be the fastest growing soft drink segments with projected growth rates in 2013 of 9% and 14%, respectively.
. Coca-Cola and PepsiCo are set to undergo a new wave of refranchising as they look to shift bottling assets to strong franchise partners, allowing each giant to focus their efforts on brand building and marketing.
Supply and demand issues are leading to strategic sourcing for fruit juice companies. These sourcing strategies include juice suppliers increasing physical control (investing in growers), focusing on market power, and following adaptive strategies such as ingredient substitution or reformulation.
Rabobank Outlook for Coffee and Tea
. Continued growth in global coffee will be driven by three key drivers: innovation in single cup brewing (e.g. K-Cups, pods, etc.); “premiumization,” with consumers choosing to drink higher quality coffee; and increased consumption in the away-from-home channel in developed markets, led by Starbucks and McDonald’s.
. The global tea industry is forecast to face short supply in 2013. Key tea producing countries are expected to have a production drop in the range of 1 to 5% in 2013, while demand is set to grow by 3%. With consumption in India and China outpacing domestic production, reduced exports and rising prices are expected for both markets
Rabobank Outlook for Alcoholic Beverages
. Beer is forecast to be one of the slowest growing beverages this year. In mature markets, decline is driven by saturation, health trends and increases in excise duty
. Spirit consumption in Western Europe is also expected to wane. Regional players and local spirits are likely to be the worst hit with larger, international spirits companies, with broader product portfolios better positioned to weather the storm
. The wine industry will face tighter availability of global wine inventories, a soft consumer environment, and the need to continue developing many emerging markets. Suppliers will have to develop sourcing strategies that secure sufficient supply at the right cost and in the right place, and that are flexible enough to be relevant when global inventories become more readily available.
In light of the current global economic uncertainty, slower growth from BRIC markets, and cautious consumer spending, the beverage industry will remain thirsting for growth in 2013. Rising commodity costs will impact all drink segments and likely force beverage companies to raise prices at a time when consumers are already under economic pressure. Faced with narrowing margins, those beverage companies that have a vision and commitment to engage in strategic sourcing will have a competitive advantage in 2013 and beyond.
Diageo Shifting to Upscale Tequila After Adios to Cuervo
By Clementine Fletcher
Jan 29, 2013
Echo Hopkins’ love of tequila began with a happy hour margarita at the Blue Moon Mexican Café in Bronxville, New York. Four years later, her tastes have matured, and she now eschews cheap margaritas in favor of tequilas costing $10-plus a shot meant to be sipped and savored.
“As you move on from college you begin to realize you can enjoy tequila slowly,” said the 25-year-old art researcher.
Hopkins is the kind of consumer that spirits giant Diageo Plc (DGE) is counting on as it revamps its tequila business. With U.S. consumption of the fiery Mexican tipple climbing and more drinkers shifting upmarket, the London-based distiller last month said it would terminate a distribution deal with Jose Cuervo after 16 years.
As Diageo prepares to release results tomorrow, analysts say abandoning the deal with Cuervo, the world’s top-selling tequila, was a smart move — even if it meant losing $470 million in annual sales.
“It probably makes sense that Diageo walked away,” said Trevor Stirling, an analyst at Sanford C. Bernstein. “Diageo perceives that all the growth in tequila has been in premium brands. Cuervo isn’t premium.”
Larry Schwartz, Diageo’s North America president, in December said any replacement for Cuervo would have to be premium. Without naming any brands, Schwartz said the company was mulling whether to develop a high-end tequila, acquire a small brand pricier than Cuervo, or find a partner.
Diageo, which posted $16.8 billion in sales last year of brands ranging from Smirnoff vodka to Guinness beer, had been in talks to buy the Cuervo brand, which analysts say would have fetched some $3 billion. In December, Diageo said those negotiations had failed, and that by June Diageo would no longer distribute Cuervo. Diageo stock has since declined 1.2 percent.
Tequila, distilled from the roasted hearts, or pinas, of the spiky blue agave plant in Mexico, is gaining in popularity, especially in the U.S., its biggest market. American consumption rose at an average annual rate of 4.1 percent from 2006 to 2011, according to researcher International Wine & Spirit Research, almost double the growth of the total U.S. liquor market.
More important for Diageo, pricier varieties are expanding the fastest. The market for tequilas that sell for more than $20 a bottle has increased more than 10 percent over the last five years, IWSR reports, attracting global distilling companies.
In 2007, Davide Campari-Milano SpA (CPR) bought 80 percent of Cabo Wabo, a premium tequila, and it acquired San Nicolas, another upscale brand, the following year. In 2011, Pernod Ricard SA (RI) signed a joint venture with upmarket Tequila Avion.
Tequilas priced under $20, which make up over half of the U.S. market by volume and the bulk of Cuervo’s sales, have slid 1.1 percent over the past 5 years. Cuervo’s market share in the U.S. has fallen to 34 percent from 45 percent over the same period, Liberum Research estimates. The majority of tequila drunk is in cocktails like margaritas, according to Kevin Vanegas, Master of Tequila at Wirtz Beverage Nevada, a Las Vegas liquor distributor.
After Diageo announced it would no longer sell Cuervo, speculation mounted that it was eyeing Beam Inc. (BEAM), which makes Sauza, the third-biggest tequila brand in the U.S. The buyout speculation has sent Beam’s shares up 5 percent since then.
Sauza, which retails for about the same price as Cuervo, would do little to help Diageo meet its target of 6 percent annual sales growth, according to Liberum analyst Pablo Zuanic.
“There’s no point for Diageo to spend money and effort trying to get the non-premium market,” Zuanic said. “Their focus should be on premium tequila.”
Diageo may report a first-half sales increase of 5.6 percent tomorrow, excluding acquisitions and the impact of currency fluctuations, according to the median estimate of 11 analysts surveyed by Bloomberg. That would represent a slowdown from the 7 percent gain in the same period last year. Diageo has forecast a one percentage-point widening of its operating margin in North America to 39.1 percent this year, aided by pricier new products.
The high end of the tequila market is dominated by Patron, part-owned by Bacardi Ltd. Patron sold 1.66 million cases in the U.S. in 2011, double that of its next competitor, Grupo Cuervo’s 1800 brand, IWSR estimates. Potential targets abound: there are over 150 tequila distilleries in Mexico producing more than 1,500 brands, according to Vanegas.
All tequila is made from agave, but Jose Cuervo and Sauza are “mixtos,” containing as much as 49 percent alcohol made from non-agave sugars.
Like Cognac, Bourbon, or single malt scotch, tequilas vary by how long they’re aged. So-called anejo varieties sold by most brands at a premium, must spend at least a year in wooden barrels. High-end tequila should be sipped “like a fine whiskey,” said Vanegas — not downed in shot glasses alongside a lime wedge and a lick of salt, as is often the case in U.S. bars.
Diageo does own half of an upmarket tequila called Don Julio, alongside the Beckmann family, Cuervo’s owners. The brand saw sales growth of 26 percent last year versus a 5 percent decline for Jose Cuervo.
Diageo might lean on other spirits to get by without Cuervo. Over the past two years it has bought brands such as Brazil’s Ypioca cachaca and Turkey’s Yeni Raki to complement its dominant position in whisky and vodka. It was the first big European distiller to invest in a Chinese maker of its popular national spirit, baijiu.
With tequila drinkers, Diageo’s challenge is to get Americans to pay up for pricier brands like Don Julio now that it no longer distributes Cuervo. That may take some doing, according to enthusiasts such as Hopkins.
“There’s still a stigma attached to the frat boy culture of taking shots of tequila,” she said. “I’ve been out with people and ordered amazing aged tequila meant for sipping, and had them down it in one go.”
EARNINGS PREVIEW: Diageo 1H Pre-Ex Operating Profit Seen Up 8%
Diageo (DGE.LN): 1H 2013
Due: Jan. 31 at 0700 GMT
Company Survey of 4 Analysts
Average Operating Profit Before Exceptional Items: GBP2.02B, up 8% (GBP1.87B 1H 2012)
Average Net Sales: GBP6.02B, up 4.5% (GBP5.76B 1H 2012)
Note: Diageo is expected to post a rise in first-half operating profit before exceptional items on higher sales, driven by the company’s operations in Latin America, Asia Pacific and Africa. Analysts expect good numbers amid robust industry conditions. They also see the group delivering a consistent performance and mark it out as a “top pick” in the beverage sector. U.S. revenue growth is expected to be strong, though it could be slower from the first quarter due to the timing of price increases. Analysts will be focused on regional performance as well as progress on the acquisition of a majority stake in India’s United Spirits.
Pennsylvania: Corbett plan said to include wine, liquor and beer
By MARC LEVY
January 29, 2013
Gov. Tom Corbett is expected to call for auctioning off wine and liquor store licenses and opening beer sales to a broad array of retailers including supermarkets and convenience stores, according to information from people briefed by the governor’s office Tuesday.
The plan would dramatically liberalize the sale of alcoholic beverages in Pennsylvania and throw out Prohibition-era limitations that have thus far withstood the efforts of three straight Republican governors.
Corbett’s office said the Republican governor will announce his plan Wednesday afternoon in a Pittsburgh state office building. His spokesman, Kevin Harley, declined to comment on the details ahead of the governor’s announcement, but he said it would be a “bold” plan.
“He believes Pennsylvanians should have choice and convenience in purchasing beer, wine and liquor, the same convenience that is afforded to residents of 48 other states,” Harley said.
According to information from people briefed by the governor’s office, the plan involves shutting down the more than 600 state-owned wine and liquor stores as a prelude to auctioning 1,200 wine and liquor store licenses. The information was provided by people on condition of anonymity because they did not want to be named providing details before the governor announces them.
Owners of supermarkets, drugstores, restaurants and big-box stores would be able to buy separate licenses to sell beer and wine. Convenience store owners would be eligible to sell beer while the state’s approximately 1,200 licensed beer distributorships would be able to bid for licenses to sell wine and liquor.
Harley said a bill reflecting Corbett’s plan will be introduced in the near future.
Wendell W. Young IV, the president of the union that represents about 3,000 unionized state store clerks, said Tuesday that privatization of wine and liquor sales would diminish consumer choice and state tax revenue while raising liquor consumption rates and the crime and health problems that follow.
“Why would we want to be like the 48 other states when we’re already so much better than them?” Young questioned.
Corbett had said during his 2010 campaign that he supported the privatization of the state-owned wine and liquor stores. However, he never had his own plan introduced in the Legislature, as governors often do on key policy initiatives, and he did not actively campaign for legislation that was championed by House Majority Leader Mike Turzai, R-Allegheny.
Regardless, Corbett’s forthcoming legislation will face headwinds, even in a Republican-controlled state Legislature.
Democrats are largely hostile to efforts that will put unionized liquor store clerks out of work, and leaders of the Republican-controlled Senate are cool to the idea. Meanwhile, Sen. Charles McIlhinney, the Bucks County Republican who chairs the committee that handles liquor control legislation, on Tuesday said he would introduce a bill to allow beer distributors to buy licenses to sell wines and liquor while keeping the state’s wine and liquor stores open.
In December 2011, Turzai’s plan to shut down the state-owned wine and liquor stores and auction off retail liquor-store licenses to supermarkets and other private operators collapsed in a House committee.
The committee instead approved legislation that resembled McIlhinney’s bill, but it never received a vote on the House floor.
Do TV liquor ads drive kids to drink?
Source: Denver Post
By Steven Reinberg, HealthDay Reporter
Seeing beer and liquor ads on TV may promote drinking as early as seventh grade and lead to alcohol-related problems just a few years later, a new study suggests.
The more ad exposure the teens reported – and the more they enjoyed the commercials – the more they drank by 10th grade, the researchers found.
“This study provides evidence that exposure to alcohol advertising in seventh grade and liking those alcohol advertisements on television is associated with higher levels of drinking in the eighth and ninth grades,” said lead researcher Jerry Grenard, an associate professor in the School of Community and Global Health at Claremont Graduate University in California.
This early drinking is in turn associated with the development of alcohol-related problems, such as fighting or academic decline, by 10th grade, he said.
“Examples of problems include failing to do homework, attending school drunk, passing out and getting into fights,” Grenard said.
While the research doesn’t prove that liquor advertising caused the drinking, Grenard said drinking by young teens was less prevalent before the heyday of TV liquor advertisements.
Policy makers should work with the alcohol industry to limit adolescents’ exposure to alcohol advertising, Grenard added.
“Parents and schools should teach children about the design of persuasive messages in the media to help them avoid undue influence by the media on their behaviors,” he said.
For the report, published online Jan. 28 in the journal Pediatrics, Grenard’s team recruited nearly 4,000 seventh graders and questioned them about use of beer, wine or liquor and exposure to liquor advertising. They kept tabs on many of the students through 10th grade.
Overall, the more ads seventh graders watched and the more they liked them, the more they drank from seventh to 10th grade, they found.
Seventh graders who watched these ads, especially girls, were more likely to start drinking.
And boys who liked the advertisements were more likely to develop alcohol-related problems, Grenard’s group found.
Grenard believes the ads influence seventh graders to drink as they move on in school. Of the seventh graders recruited for the study, 57 percent had never tried alcohol or only a little, he noted.
“Therefore, we were able to assess exposure to advertising before many students began to drink alcohol regularly,” Grenard said.
Other experts agreed that schools, parents and doctors should help children understand that what they see on TV or on the Internet isn’t always true.
“This study contributes to existing research on advertising and alcohol use among youth by showing an association with exposure to alcohol ads on TV and later alcohol use as well as problem behavior due to drinking,” said Jennifer Manganello, an associate professor at the University at Albany School of Public Health.
Based on these findings and earlier research, “media literacy programs” are needed to educate youth about advertising claims, she said.
“Also, parents should be familiar with where their children may be exposed to alcohol ads, including places like social media sites and mobile phones,” Manganello said. They should also discuss alcohol advertising with them, she added.
But Dr. Metee Comkornruecha, who practices adolescent medicine at Miami Children’s Hospital in Florida, doesn’t believe liquor ads play an overwhelming role in getting kids to drink.
“I think it’s a minor role,” he said. Total media exposure, however, does have a significant role, and this includes what children see in movies, TV programs and online, he added.
Comkornruecha doesn’t think liquor ads should be banned from TV as tobacco ads are. “A lot of responsibility is to teach kids about media literacy,” he said.
“While we can’t shelter all our kids from everything, the important thing is teaching them how to react and how to interpret the messages they are seeing,” Comkornruecha said.
Another paper in the same journal issue found that too few doctors counsel adolescents about the dangers of drinking.
That 2010 study of 10th graders – led by Ralph Hingson from the Eunice Kennedy Shriver National Institute of Child Health and Human Development – found that 36 percent drink, 28 percent binge-drink and 23 percent were drunk in the past month.
Although 82 percent had seen a doctor and 54 percent were asked about drinking, only 17 percent were counseled to reduce or stop drinking, the researchers found.
The researchers concluded that “efforts are warranted to increase the proportion of physicians who follow professional guidelines to screen and counsel adolescents about unhealthy alcohol use and other behaviors that pose health risks.”
United Kingdom: Is this Britain’s most irresponsible parent? Mother-of-four, 35, has been giving her daughter alcohol since the age of THREE ‘so she would grow to be a good drinking partner’
Source: Daily Mail
By Steve Nolan
29 January 2013
A party-loving mother has admitted giving her daughter alcohol from the age of three so that she would be able to ‘drink properly’ as a teenager.
Doctors have condemned 35-year-old Shannon Burrows after her startling confession that she gave daughter Jamie Lee, now 20, her first taste of alcohol as a small child.
The youngster was drinking cans of Fosters every weekend and had a bottle of vodka to share with a friend to mark her 15th birthday.
By the time she hit the legal drinking age of 18, she was able to hit the town and match her mother drink for drink until 4am.
Mother Shannon said: ‘We love getting drunk together, if she loses control, I look after her and vice versa.
‘We are like best mates. We have a great time’
But GP Dr Sarah Jarvis warned children should not drink alcohol and warned that drinking from an early age may have damaged Jamie Lee’s health.
She warned that drinking alcohol may have damaged her daughter’s brain development, long-term memory and liver.
According to the doctor, she may have developed a psychological addiction to alcohol.
Shannon, from Doncaster, south Yorkshire, pays for her heavy drinking partly with money earned by her landscape gardener husband John, 50, and her £180 per month child benefit.
Husband John looks after their other children – two sons aged 12 and a daughter of nine – while she goes out drinking with unemployed Jamie Lee once a week.
Shannon told Closer magazine she wanted her daughter to drink ‘properly’ so that she would have a ‘party buddy’ when her daughter reached legal drinking age.
She said that she knew Jamie Lee would go out and get wasted on her 18th birthday if she had no experience of drinking alcohol before hand.
She revealed that, after getting drunk together, the pair nurse their hangovers together and share a fry-up.
Shannon said that although she knows that some people will disapprove of her attitude towards alcohol, she says that her parenting skills have never been criticised by friends and that she knows what is best for her children.
Shannon started drinking herself at 14 and would often get so drunk that she collapsed in the street.
On some occasions she had to be taken home by police.
The mother said that she does not worry about her daughter’s health because teenagers are ‘resilient’.
Jamie Lee has been unemployed since leaving her job at a clothes shop six months ago.
She says that she is grateful that her mother built up her resistance to alcohol.
But Dr Jarvis, a clinical consultant with the website patient.co.uk, said that drinking at a young age did not build up a person’s tolerance to alcohol.
She told Closer magazine that early drinking just allows the body to take in more alcohol.
According to Dr Jarvis, Jamie Lee will now have to drink more in order to feel the same effects.
She recommended that women drink no more than three units of alcohol in one sitting.
United Kingdom: Middle-class drinkers ‘will bear brunt of alcohol policy’
Older, middle-class drinkers will bear the brunt of David Cameron’s minimum alcohol price plan, according to researchers who predict one of its main effect will be to end today’s multi-buy deals.
Middle class drinkers will be among the most affected by a 45p minimum unit price for alcohol, because they tend to drink a lot, say academics.
Source: Daily Telegraph
By Stephen Adams, Medical Correspondent
29 Jan 2013
If implemented, the Prime Minister’s proposal for a 45p minimum price per unit will have the “biggest impact” on those who drink at home, according to academics.
It will end supermarket offers – such as three bottles of wine for £10, or multi-buy deals on crates of beer – that are very popular with middle-class drinkers, they say.
However, according to the researchers, who have modelled the likely effects on consumption and health, a 45p minimum unit price will save 10,000 lives over a decade.
A Home Office consultation on the proposals ends next Wednesday (Feb 6).
Professor Anne Ludbrook, a health economist at Aberdeen University, said it was a “misconception” that middle class drinkers would not be affected by minimum pricing, based on the false assumption that “they don’t buy cheap alcohol”.
Studies showed more than half of the alcoholic drinks well-off people bought cost less than 50p per unit, she said.
Rather than buying strong, cheap drinks most often associated with problem drinking, she said the middle classes took advantage of discounts on regular or premium brands.
“Buying these offers, that are usually multi-buys, you have to have quite a lot of disposable income,” she said.
Dr John Holmes, a public health expert at Sheffield University, said: “Perhaps the biggest impact will be on older groups who are more likely to drink at hazardous levels.”
Such people “tend to drink at home” rather than in pubs or bars, which will be largely unaffected by minimum pricing because drinking on licensed premises is already expensive.
He continued: “As a result it’s their alcohol that’s going to be most affected.”
Exactly what multi-buys and discounts were affected would depend to a degree on how the market reacted, he forecast.
But he said: “It may limit some of them. Asda has a ‘three for £10’ deal on wine. They would not be able to do that anymore, unless the wine was incredibly weak.”
Such deals are very popular in other supermarkets and off-licences.
He went on: “You wouldn’t be able to have the big slabs of beer being sold for 35p a unit, but you might be able to have slightly smaller slabs being sold at slightly higher prices.”
The academics were speaking in London to outline results of their project to model the likely effects of minumum pricing on consumption and health.
They looked at more than 100 studies, including evidence from Canada, which is the only country to have brought in minimum pricing.
Dr Holmes concluded: “When you change the price of alcohol, consumption falls”.
Sheffield University’s Alcohol Research Group calculated that a 45p minimum price will save the NHS £600 million over 10 years, due in part to 300,000 fewer hospital admissions, and £100 million in savings from lower crime.
He said a 45p minimum price “isn’t really a policy that will penalise moderate drinkers” because it would only end up costing them an extra £7.80 a year.
By comparison, it would cost those who continued to drink “harmful” amounts, £130 more a year.
But contrary to popular wisdom, better off people tend to consume the most alcohol. The fifth richest in society buy twice as much per head as the fifth poorest, said Prof Ludbrook.
However, the poorest tend to suffer disproportionately from the harms of alcohol overconsumption, such as liver disease. In part, this is because disadvantaged Britain contains large numbers of extremely heavy drinkers.
Average alcohol consumption among the poorest appears low because there are large numbers of abstainers in this part of society too.
The academics highlighted their research as the Wine and Spirit Trade Association launched a campaign called ‘Why should responsible drinkers pay more?’
Only a fifth of adults supported minimum unit pricing, according to a ComRes poll commissioned by the trade group.
Miles Beale, its chief executive, said: “We do not believe that increasing the price of alcohol will effectively tackle problem drinking.”
But Dr Nick Sheron, of the Alcohol Health Alliance UK, said: “The international evidence from Canada shows that it works.”
*Men are twice as likely to die from alcohol-related causes as women are, according to the Office for National Statistics (ONS).
In 2011 there were 17.2 alcohol-related deaths per 100,000 men, compared to a figure of 8.3 for women. Alcohol caused 4,503 men to die in England that year and 2,272 women. Compared to 2010, those figures represented increases of 1.4 and 1.8 per cent respectively
Death rates from alcohol were highest in north west England and lowest in East Anglia and London.
AB InBev acquires Chinese brewery to break into middle and low-end beer market
Source: Morning Whistle
Anheuser-Busch InBev (AB InBev) is reported to be acquiring Chinese Nanchang Asia Brewery Co., Ltd, a leading brewery in Jiangxi province, to break into China’s middle and low-end beer market according to National Business Daily.
At present, the middle and low-end beer markets are mostly divided between Tsingtao, Sedrin and Nanchang Asia. “This acquisition can help AB InBev to seize the leading position in the middle and low-end beer market with local sales channels owned by Nanchang Asia,” the secretary of Nanchang Wine and Spirits Industry Association told National Business Daily.
Data from the Nanchang Wine and Spirits Industry Association reveals that sales of beer in Nanchang can reach billions of yuan, of which middle and low-end products contribute over 80 percent.
Belgium Interbrew Group, predecessor of AB InBev, first entered the Chinese market by acquiring Nanjing JinLing Brewery in 1997.
Then AB InBev rapidly expanded in the Chinese market by a series of mergers and acquisitions, becoming a successful example for international companies expanding in China.
It acquired Harbin Brewery in 2004 with 5.5 billion yuan, then bought Fujian Sedrin Brewery with 5.88 billion yuan in 2006, setting a record amount of acquisition in the Chinese beer industry.
In December last year, AB InBev announced an investment of 1.6 billion yuan, building a production base in Hunan with an annual productivity of 1 million tons to fight for market share in Central China.
With the premise of a guaranteed high-end market, AB InBev digs deeper in mass market to localize its business, which is believed to be the main reason for the success of AB InBev in China.
Data from National Business Daily shows that 70 percent of the Chinese beer market is made up by the middle and low-end, and that room for development in high-end market is limited. “So it’s a smart business direction for AB InBev to acquire local brewery companies and to explore the middle and low-end market,” Nanchang’s secretary said.
Scientists figure out what makes beer good for you
Source: Seattle PI
By JAKE ELLISON
January 29, 2013
Our understanding of how hops becomes the molecules that give beer its flavor and the shape those molecules take has been wrong for 40 years, say scientists from the University of Washington.
Using a century-old technique, they’ve nailed down the precise structure of those molecules for the first time, overturning the long-standing assumptions. And, while beer brewers the world over are unlikely to change their recipes, the scientists hope to use the discovery to create new medicines.
“Now that we have the right results, what happens to the bitter hops in the beer-brewing process makes a lot more sense,” Werner Kaminsky, a UW research associate professor of chemistry, said in a press release.
And, because beer and its bittering acids – in moderation (the school emphasizes) – have beneficial effects on diabetes, some forms of cancer, inflammation and perhaps even weight loss, knowing exactly what they become in beer means they can be used to make new pharmaceuticals.
Diageo’s Johnnie Walker shake-up is too radical
Source: Market Intelligence Center
By: Julian Close
Tuesday, January 29, 2013
Johnnie Walker is the world’s best selling line of Scotch and Diageo’s number one brand by value, with annual sales in excess of $1.5 billion dollars. It has also been one of the company’s major growth engines, a trend Diageo has been able to perpetuate with successful tweaks to the line, such as the 2011 introduction of Johnnie Walker Double-Black. But the change currently underway goes beyond mere tweak. Red and Black, the line’s lower-end offerings, and Blue, its high end, have been left alone, but everything in the middle is changing. Diageo’s strategy is to focus on blended Scotch (where they see the potential for the most growth) and to encourage buyers to move up the product chain, but each change carries risks.
Elimination of Green Label: Introduced in 2004, Johnnie Walker Green Label has never been one of its best performers, and with sales falling, the decision to scrap the expression seems straightforward, even obvious, if one goes entirely by the numbers. Numbers, in this case, don’t tell the entire story. Green label is one of the line’s most highly rated products, and the line’s only blended malt (malt whisky from multiple distilleries) as opposed to blended Scotch (malt and grain whisky from multiple distilleries). The packaging proudly names and promotes four of the malts that make up the blend, including Talisker and Cragganmore, both of which are part of Diageo’s highly successful Classic Malts series. The decision to scrap the Green Label could alienate malt whisky fans, to some of whom, a fine malt whisky is always superior to a blended whisky. These malt lovers may constitute a relatively small segment of the Scotch market, but it is an influential segment, and they are the very consumers Diageo targets with Classic Malts series.
The Introduction of Platinum Label 18 year old: The new Johnnie Walker Platinum 18-year-old will sell for about $110 dollars. This is a price point that the line has not included before, and one which may cannibalize sales of the super-premium Johnnie Walker Blue. This cannibalization could come from high-end Scotch drinkers who are merely curious, well-intentioned gift-givers who assume (understandably) that nothing is higher-end than “platinum,” or from members of either group who find the product a better value than Blue label.
The Replacing of Gold Label 18 year old with Gold Label Reserve: Gold Label 18 year old has also received critical accolades, but it is being replaced with a new product, Gold Label Reserve, which carries no age statement. The new expression will contain whisky from many of the same distilleries, but it will be younger. Younger whisky is generally, though not always, inferior to older whisky. Critical response seems to bear out that this is the case with Gold Label Reserve. Some of the risk here is obvious, particularly to anyone old enough to remember New Coke. In addition, fans of Gold Label 18 year old may feel that they have been tricked into purchasing an inferior product released under a very similar name. This could turn into a PR debacle for Diageo, of a sort they know all too well. In 2004, the company created a problem for itself by releasing Cardhu Pure Malt (a mix of malt whiskies from multiple distilleries) in packaging nearly identical to the popular Cardhu Single Malt. This was widely viewed as an intentional deception and led to a confrontation with the Scotch Whisky Association, or SWA. Though the SWA decided in Diageo’s favor, the company was stung enough by the criticism that it withdrew Cardhu Pure Malt after only a few months. That Diageo would invite a recurrence of this debacle seems not only risky, but also somewhat bizarre.
Johnnie Walker whisky represents a significant portion of Diageo’s business, comprising 19 million of 157 million total units sold in 2012. According to Diageo, the transition tested well in Asia, but that does not mean it won’t cause problems elsewhere. Until the transition is complete (some time in 2013) and sales for the new products have stabilized, Diageo will remain a risky long-term play.
200 jobs to be created by new beverage distribution venture (Excerpt)
Source: Jamaica Gleaner
January 29, 2013
Two hundred Jamaicans should benefit from additional jobs that will be created through a joint venture between Red Stripe, a Diageo Company, and Pepsi-Cola (owned by Cabcorp) following the signing of a deal to form a 50-50 sales and distribution company.
The new company, Celebration Brands Limited, will be equally owned by the two entities and will sell and distribute all Red Stripe-Diageo and Pepsi brands in Jamaica. The effort makes this venture the single largest beverage distribution company in Jamaica with a portfolio of world-renowned brands.
According to Cedric Blair, managing director of Red Stripe, the joint-venture company comes as part of an accelerated growth strategy and is expected to create economies of scale resulting in efficiencies and safeguarding the sustained growth of both businesses.
“The formation of this new local company is a clear sign of our commitment to the Jamaica economy and to improving our distribution infrastructure by offering enhanced frequency and quality of service to our customers,” Blair said.
Wineries quick to defuse NRA links
By James Atkinson
Several Australian wineries received a rude shock last week when they discovered their wines were being sold by the NRA Wine Club, a fundraising vehicle for America’s controversial gun lobby group, the National Rifle Association.
As many as 20 Australian wineries, including household names like Yalumba, Tahbilk, St Hallett, d’Arenberg and Jim Barry Wines, were among those with products listed for sale on the NRA Wine Club website, which has since hidden its wine range from the view of non-members.
Also removed from the website was the club’s promise to gun-loving wine drinkers: “Now you can support the Second Amendment with every wine you buy.”
There’s no suggestion that any of the wineries knowingly had their wines listed on the site.
St Hallett Wines marketing manager Matthew Roberts told TheShout the winery was looking into the incident.
“It is certainly not a purposeful support of a political cause. As far as we are aware at this stage the Club is being managed by a third party wine club management company that purchases wine from one of our wholesalers,” he said.
“Therefore, due to the three-tier (in this instance four-tier) system in the US, we have had no visibility into these sales. While we would like to ensure St Hallett wines are represented in channels that align to our values we need to investigate and understand the American legal system as it relates to this matter,” said Roberts.
Yalumba managing director Robert Hill-Smith said he did not want Yalumba associated with the gun lobby and would act to withdraw its stock, according to News Limited reports.
NEW PORTFOLIO OF MONGOLIAN VODKAS TO BE LAUNCHED IN THE USA IN 2013
The APU Company, the leading beverage company in Mongolia, will introduce a range of vodka expressions and appoints three industry veterans to lead the effort.
Source: Savona Communications
January 29, 2013
Mongolia’s First National Brand, will launch a portfolio of premium Mongolian vodkas including the ultra premium Chinggis Khan Original Mongolian Vodka, into the United States In 2013 as part of a wider Global launch. Other brands will include Soyombo (super premium) and Arkhi (premium) vodkas. A standard vodka and a beer brand are planned for future release. Three seasoned industry executives with brand building successes will lead the global effort: Jett Yang, James Espey and Arthur Shapiro.
For further information contact Arthur Shapiro, firstname.lastname@example.org, 917-855-7726.
Southern Wine & Spirits of America Strengthens Operations in Pacific Northwest Markets
Gregg Risley Named Vice President, Operations – Pacific Northwest
Shawn Youmans Appointed Vice President, Operations – Oregon
Source: Business Wire
Southern Wine & Spirits of America, Inc.
John Klein, Executive Vice President, General Manager of Southern Wine & Spirits of America’s seven Pacific Northwest markets (SWS-PNW)- divisions of Southern Wine & Spirits of America, Inc., (Southern), the country’s leading wine and spirits distributor – announced today the appointment of Gregg Risley as Vice President, Operations – SWS-PNW. Regarding the Company’s operations in Oregon, Klein also announced that Shawn Youmans has accepted the role of Vice President, Operations – Southern Wine & Spirits of Oregon. The appointments of both Risley and Youmans were effective January 20, 2013. Risley will report to Klein, and Youmans will report to Risley.
Commenting on these two important SWS-PNW appointments, Klein said, “As we continue to strengthen our operational reach and capabilities throughout the Pacific Northwest, Gregg will directly oversee all of our operations – including customer service, purchasing and facilities management. He will work closely with Southern’s Business Solutions Group and Supply Chain Management organizations, ensuring that the Pacific Northwest capitalizes on these important resources for efficiency and effectiveness across our company.” Risley previously served as Southern’s Vice President, Operations in Metro New York.
Klein continued, “We also look forward to Shawn raising the level of service excellence for all our customer and supplier partners in Oregon. Shawn oversaw the operations for the joint venture between Southern Wine & Spirits and the Odom Corporation in the Northwest – and will apply his vast knowledge to Oregon as we drive increasingly strong levels of service across the state.”
In related appointments concerning New York State, Southern’s Senior Vice-President, Supply Chain Officer Bobby Burg announced that Kevin Randall, currently serving as Vice President, Operations for the Upstate division of Southern Wine & Spirits of New York (SWS-NY), will assume Risley’s former position for the Metro New York market. Burg also noted that Amos Heaton has been named Vice President, Operations in SWS-NY Upstate to assume Randall’s former role. Both Randall and Heaton’s appointments are effective January 20, 2013 as well.
Australia: Coles pleased with liquor’s progress
Source: The Shout
By James Atkinson
The underlying performance of Coles’ liquor operations improved in the first half of the 2013 financial year, parent company Wesfarmers revealed this morning.
Releasing Wesfarmers’ second quarter retail sales results for the period ending December 31, finance director Terry Bowen said liquor continued to negatively impact on Coles’ overall sales figures, this time holding the rest of the division back by about 1.2 per cent.
But Bowen said the company was pleased with liquor’s sales performance in the context of the repositioning of the division that is currently in progress.
Coles managing director Ian McLeod said: “The underlying performance of liquor improved in the first half as a result of encouraging wine category performance and more effective promotions in the run up to Christmas.”
Coles’ headline food and liquor sales for the second quarter were $7.7 billion, up five per cent on the previous corresponding period. Headline sales in the first half of the 2013 financial year increased by 5 per cent to $14.3 billion.
Comparable food and liquor store sales increased by 3.9 per cent in the second quarter and 3.8 per cent in the first half.
Coles opened 20 new liquor stores and one hotel and closed five liquor stores during the quarter, taking the total number of liquor stores and hotels to 895.
Buffalo Wild Wings, Inc. (BWLD): Hyper-growth waning, we’re not playing chicken; initiate at Neutral
Source: Goldman Sachs
INVESTMENT LIST MEMBERSHIP: Neutral
COVERAGE VIEW: NEUTRAL
We initiate coverage of BWLD shares with a Neutral rating and 10% upside to our $82, 12-month price target. We see risk in the medium term as (1) we believe BWLD is towards the latter stages of its “Hyper-growth” phase,
(2) wing cost inflation is pressuring its price value perception, yet it continues to take more pricing, and (3) consensus estimates for 110bp of food cost relief by the end of 2013 seem aggressive as a base case in light of uncertainty around wing costs (partially driven by a potential MCD wing launch.) This said, we see the potential for near-term EPS upside from higher margins, which keeps us from getting more negative at this time.
Core drivers of growth
We forecast 16-18% revenue growth in out-years for BWLD driven by roughly 10% annual unit growth and 3-5% SSS growth, with the balance largely from new unit productivity. Our base case forecast is for this to translate to similar 16-18% annual operating profit growth, as low- to mid-single digit SSS are likely not enough to drive fixed cost leverage.
Risks to the investment case
The primary upside risks are better SSS growth than anticipated or a reversion to more modest wing cost inflation. Downside risks are more elasticity than anticipated or continued increases in the cost of wings.
We introduce a P/E and DCF-based 12-month price target of $82. This is 21x our 2H13/1H14 EPS estimate, a 1.2x PEG, which is in line with the broader Restaurant group average.
We are Neutral rated on the Restaurant sector. While there are some solid growth stories, industry trends remain choppy. We are particularly concerned around Casual Dining, where traffic has been in decline.
Custom Designed iPad Webpages for B-21 Fine Wines & Spirits Enables Remote Retail & Enhances Product Interaction
Web development firm, Bayshore Solutions announces the launch of custom iPad-focused webpages for B-21 Fine Wines & Spirits company (B-21). The iPad webpages were created to feature promotions, and allow prospects and customers to sign-up for email and purchase wine at events and other venues outside of a retail location.
B-21 Fine Wines & Spirits is in its family’s fourth generation dedicated to quality wines, competitive prices and exceptional customer service. B-21 offers wines, spirits and specialty beers online at www.b-21.com and at their retail locations in Florida and now, with this iPad functionality, at any event location they staff.
Bayshore Solutions has partnered with B-21 for more than a year focusing on strategic paid search and social media. The fine wines & spirits company came to Bayshore Solutions with an idea of enhancing their in-store experience with technology using iPads. Bayshore Solutions created two iPad-specific marketing solutions for B-21 to use in store and at events and tastings.
The in-store iPad interface features a slideshow that announces B-21’s promotions. The website is easy to update, has calls-to-actions for email communications and also serves as a way for B-21 to collect customer’s names, birthdates and phone number for personalized and exclusive SMS messaged promotions. B-21 deployed these iPads at stationary locations around the store for customers to view and interact with while shopping.
A retail-remote iPad interface presents an eCommerce portal for B-21 to use at events and tastings. Customers can purchase directly from the iPad for an easy, quick checkout and to take advantage of promotions exclusive to specific events. The iPad website is linked to B-21’s database of inventory and ensures immediate verification of stock for remote wine sales and promotions.
“Bayshore Solutions is pleased to partner with B-21 Fine Wines & Spirits to integrate this innovative technology with strategic marketing that enhances the in store customer experience and expands the flexibility of sales.” said Kevin Hourigan, President and CEO of Bayshore Solutions. “This solution is measurably driving growth and helping differentiate B-21 as a Leader in their industry.”
To find out more about B-21 Fine Wines & Spirits, please visit: http://www.b-21.com.
NRF forecasts tepid sales on slow economic growth
By Katherine Field Boccaccio
January 28, 2013
Retail industry sales (which exclude automobiles, gas stations, and restaurants) will increase 3.4%, down slightly from 4.2% in 2012 and 5.8% in 2011, according to the National Retail Federation’s 2013 economic forecast.
The lukewarm forecast, released Monday, comes on the heels of a holiday season that went head-to-head with Washington’s political wrangling over fiscal concerns, shifting consumers’ spending plans downward. In the end, holiday sales in 2012 grew 3.0%.
In its Monday press briefing, NRF attributed the lukewarm forecast to political wrangling in Washington over fiscal concerns, and NRF president and CEO Matthew Shay said that while it’s too early to precisely predict how recent tax hikes will impact spending, “We can safely predict that consumers will be shopping for price more often [in 2013] and there will be more ‘trading down’ occurring.”
Shop.org, NRF’s digital division, expects online sales in 2013 to grow between 9.0% and 12.0%. Online sales in 2012 during the months of November and December last year grew 11.1%.
“What we witnessed during the holiday season is an indication of what we are likely to see in 2013,” said Shay. “Pushing fiscal policy decisions down the road will lead to even greater uncertainty, and will continue to impact consumers’ desire and ability to spend on discretionary items. The administration and congress need to pursue and enact policies that lead to growth and economic expansion, or it could be another challenging year for retailers and consumers alike.”
A number of factors contributed to NRF’s 2013 economic forecast, including:
Employment: The labor market continues its modest recovery but 2013 is not expected to result in meaningful acceleration in growth. As of December 2012, the unemployment rate has held steady for the last two months at 7.9%. Retailers on average employed 150,000 more workers in 2012, and the industry remains one of the biggest employers in the world.
Income growth: Consumers are constrained by modest growth in income, and recent legislation passed in January increased payroll taxes for millions of workers, further limiting Americans’ spending decisions.
Housing: NRF expects the housing sector to continue to improve and the fundamentals for growth to see continued gains in 2013.
Inflation: Price pressures continue to be contained. NRF expects the Consumer Price Index to increase 1.9% in 2013, below the 2.1% increase in 2012.
Consumer confidence: Current consumer attitudes are likely weighed down because of the handling of the fiscal cliff and the increase in payroll taxes. NRF said it expects confidence to improve as the pace of the recovery accelerates in the second half of 2013.
“While it’s too early to know the full effect of higher payroll taxes, there’s no question that many consumers will feel some kind of impact from the change in their paychecks,” said NRF chief economist Jack Kleinhenz. “But consumers have been a key driver of the economy and I expect their spending to grow modestly in 2013.”
New Hampshire: NH House panel rejects beer tax increase
Source: Union Leader
By BILL SMITH
A proposed 33 percent increase in the state beer tax was left at death’s door Tuesday, as the House Ways and Means Committee voted to recommend killing the bill.
By a vote of 14-2, the influential tax-writing panel declared the proposed increase to be “inexpedient to legislate.”
Chairman Barbara Almy, D-Lebanon, said members were concerned about the financial impact of a beer tax that is “considerably higher” than most nearby states.
Supporters of the tax now face a tough task. Passing a beer tax requires rounding up enough votes to overturn the Ways and Means Committee recommendation, and a promised veto by Gov. Maggie Hassan means a two-thirds majority would ultimately be required in each branch for the beer tax hike to make it into law.
The proposed increase of 10 cents per gallon, from 30 to 40 cents, would be paid at the wholesale level. Industry representatives argued at a hearing earlier this month that the increase would trickle down to the consumer level, damaging the state’s strong beer sales record.
The tax bill was filed by Rep. Charles Weed, D-Keene, who wanted to use proceeds of the tax increase to fund substance abuse prevention efforts.
During hearings on the bill, opponents argued it would weaken the state’s competitive standing in the region on beer sales.
“It would have put us as the highest beer tax in New England,” said Ways and Means Vice Chair Patricia Lovejoy, D-Stratham.
The beer tax in neighboring Massachusetts, set at $3.30 per barrel, is about 11 cents per gallon and has been unchanged for 33 years. In Vermont, the 26.5 cents per gallon tax has not been changed since 1981. Only Maine among nearby states has a higher beer tax, at 35 cents per gallon; an effort to raise the Maine tax was was rejected by voters in 2008.
A short-lived extension of the 6.25 percent Massachusetts sales tax to alcoholic beverages was rolled back in a 2010 referendum.
Competitive pricing for beer in New Hampshire is credited with spurring strong sales in the state compared to stagnant performance nationwide.
Weed and other supporters said that alcoholic beverage sales are a logical source of funds for substance abuse programs, which have suffered in recent years as lawmakers divert liquor store profits from a substance abuse fund to other state purposes.
The two first-year lawmakers who voted to support the beer tax increase in committee, Democrats Harry Young and Richard Ames, represent different Jaffrey districts and each spent long careers working in human services. Young spent decades as a hospital administrator, while Ames was general counsel to several human service agencies in Massachusetts.
New Hampshire retailers sell more beer per capita than any other state in the country.
According to the Beer Institute, about 43 gallons per person of legal drinking age is sold in the state compared to a national figure of about 28 gallons.
New Hampshire: Second firm protests warehouse decision by NH Liquor Commission
Source: New Hampshire Union Leader
By DAVE SOLOMON
The second-place bidder for a $200 million warehouse contract with the New Hampshire Liquor Commission has filed a formal protest with the commission over the bidding process, while third-place bidder Law Warehouses of Nashua appears headed for court.
XTL-NH on Monday filed a formal protest with the Liquor Commission over the award of the contract to Exel of Westerville, Ohio, a subsidiary of the German company Deutsche Post DHL. The deadline for protests was Monday.
XTL-NH maintains that Exel should have been disqualified from the bidding process during the initial stages of the Request for Proposals (RFP) evaluation period.
“Exel intentionally did not submit a proposal as per the RFP’s rules, and therefore, failed to comply with the requirements of the RFP,” said James Bianco, a Concord attorney representing XTL-NH, in a statement released late Monday afternoon. “Their proposal differed greatly from those bidders, like XTL-NH, who followed the RFP’s rules and met the requirements included in the RFP. This created an unequal comparison among bidders, and destroyed the purpose of competitive bidding.”
The company’s protest also questions the cost-efficiency of the Exel contract.
“During the bidding process, XTL-NH submitted the lowest price out of the five bidders,” said Louis Cerone, president of XTL-NH. “It is our understanding that traditionally, New Hampshire has always awarded contracts to the lowest qualified bidder. Our price for the contract that was awarded was at least $5.3 million less than Exel’s. Over the life of the contract, these savings add up to a total of over $42 million. Why did the State of New Hampshire walk away from over $42 million in savings? It doesn’t make sense.”
The state Attorney General’s office has defended the Liquor Commission in court as Law Warehouses pursued a Right-to-Know petition for more information on how the contract was awarded, but the Attorney General’s office has not commented on the contract itself. Manchester attorney Stephen Judge, serving as liquor commission counsel in regard to the warehouse and transportation contract, said the commission needs time to review the XTL-NH protest.
“The Liquor Commission will review the statements that are made by anyone who files a protest,” he said. “XTL is the only bidder that filed a protest, and under the RFP, there are five business days to respond. It would be premature for me to comment on the substance of what they have filed at this time.”
Bianco, whose Concord law firm specializes in government relations, said the contract with Exel is not in the best interest of New Hampshire. “The NHLC improperly entered into an open-ended contract with Exel that allows the company ample opportunities to significantly raise prices in the future,” he said. “This puts the state at risk of adding costs to and losing revenues for the majority of this contract.”
Law Warehouses has been active in challenging the contract for several months, but XTL-NH, the second-place bidder, had been largely silent until Monday.
“We are very concerned about the process the NHSLC followed to award this contract,” Cerone said. “We know that our company had the lowest price and most responsive bid for this contract. We are concerned that the NHSLC acted inappropriately by changing the RFP process to favor Exel.”
XTL-NH’s parent corporation, XTL Inc., currently provides warehouse services for the Pennsylvania State Liquor Control Board and maintains corporate headquarters in Philadelphia.
A spokesperson for Exel said earlier this month that the company is moving forward with plans to start business in New Hampshire and has identified a site along Route 3A in Bow for construction of a 240,000-square-foot warehouse. Payment for the warehousing operations does not come from the state, but from the distributors and distillers, who in effect pay the warehouse operators rent to store their product until it is sold.
The Liquor Commission posted its scoring sheet for the five warehouse bidders on its website recently, as part of a 44-page history of how the bid was awarded. On that scoring, XTL-NH had a lowest-cost bid, but scored lower than Exel in “overall solution” and “IT” categories.
The Exel proposal scored 93 points, compared to 91 for XTL-NH and 82 for Law Warehouses, which has done the warehouse and trucking work for the commission since the 1970s.
Attorneys for Law Warehouses on Monday sent a letter to the Attorney General’s office raising many of the same issues contained in the XTL-NH complaint, but said the protest process was vaguely defined with no specific remedy.
“It is quite clear that under these circumstances, the New Hampshire Superior Court is the proper forum to determine whether the NHLC acted unlawfully in awarding a contract to Exel,” wrote attorney Christopher Carter on behalf of Law Warehouses. “Law Warehouses is prepared to immediately pursue all available remedies, including litigation, to vindicate its rights and enjoin the NHLC from proceeding with the Exel contract.”
Indiana: Indiana lawmakers push for Sunday alcohol sales
By PAMELA ENGEL
January 29, 2013
The last state in the nation to bar retail alcohol sales on Sundays is making a push to lift the restriction, but strong opposition from liquor stores could leave Indiana’s effort as flat as an open bottle of champagne.
Two bills introduced early in this legislative session aim to broaden a state law that currently restricts Sunday alcohol sales to restaurants, bars, breweries and wineries.
Indiana’s ban on retail alcohol sales dates back to Prohibition. The sponsor of one bill said allowing Sunday carryout alcohol sales would bring in more tax revenue for the state, but liquor store owners contend their overhead costs would increase in order to staff their stores an extra day.
Liquor store owners also argue that allowing Sunday sales would essentially spread out six days’ worth of sales over seven days and worry that more people would buy alcohol while shopping at grocery stores instead of making a trip to a liquor store.
“This state not allowing Sunday sales has kept us in business,” said Jon Sinder, co-owner of Crown Liquors, a chain of Indianapolis-area stores. “In other states, you can’t buy spirits at big-box retailers.”
But Republican Sen. Phil Boots of Crawfordsville, who authored the Senate bill, said it’s time for Indiana to adopt a free-enterprise mind-set. He also said the bill could be a money maker, bringing in $10 million annually if it passes.
“The state of Indiana has said it’s OK to consume alcohol on Sunday but they’ve picked who the winners are and who the losers are,” he said. “I think that it’s time we become more competitive. Competition is not a bad thing. The liquor stores don’t want to compete.”
Liquor store owners say competition isn’t their only concern. They contend their stores are more heavily regulated than big-box retailers and argue that the package liquor industry helps keep alcohol out of the hands of minors.
“All of our clerks are licensed and trained,” Sinder said. “If we go, then the state becomes less safe.”
Rep. Sean Eberhart, R-Shelbyville, who authored the House bill, argues that Indiana’s current law might be less responsible because it allows for Sunday carryout sales at restaurants.
“How silly is that that we allow somebody to drink and drive home but we don’t allow somebody responsible to buy that alcohol on Sunday to take it home and enjoy it?” he said.
Indiana has loosened its alcohol laws to promote tourism and economic development, Boots said. In 2010, lawmakers approved a bill that allows microbreweries to sell beer for carryout on Sundays.
But the effort to lift the Sunday sales ban has failed in recent years. Grocery stores hope 2013 is different, as Sundays are typically the second-biggest shopping day of the week.
John Elliott, a spokesman for grocery chain Kroger, said the ban is “a customer service problem.”
“Every single Sunday, we’ve got customers who are disappointed that they cannot purchase this product. This is particularly a challenge in communities that have a heavy concentration of factory or shift workers,” he said. “There are households that can only shop on Sunday.”
Ray Cox, president of liquor store chain Elite Beverages, said Sunday retail alcohol sales are probably “not a big deal either way” to most consumers.
Jerry Owens, 44, of Indianapolis, said it’s an inconvenience to not be able to buy alcohol on Sundays, but that people are familiar with the law and have to work around it.
“I don’t see anything wrong with (the bills),” he said. “I’d buy beer on Sunday.”
Eberhart is hopeful that the legislation will get enough support to make it out of committee. No date has been set for either bill.
“I think public opinion has changed over the years and we’re a society now that we want convenience and speed,” he said.
Eberhart noted that liquor stores wouldn’t be required to open on Sundays, but said he thinks the decision should be left to the stores, not the state.
“I don’t think it’s the government’s position to tell you when you can and can’t sell your product,” he said.