U.S. Fights AB InBev With Tested Game Plan
By BRENT KENDALL
The Justice Department in 2011 sank would-be deals involving H&R Block Inc. HRB +0.40% and AT&T Inc., T +2.07% after years with little merger litigation.
Now the department is fighting Anheuser-Busch InBev NV’s ABI.BT +0.03% acquisition proposal with a game plan developed in the earlier cases, casting the Budweiser brewer as a dominant player that wants to eliminate a scrappy rival and its disruptive pricing.
Whether the department can score is a question worth billions of dollars to the world’s largest beer company. AB InBev’s market value briefly dropped as much as $10 billion last week after the government sued to block the company’s planned $20 billion deal for Mexico’s Grupo Modelo GMODELO.MX -0.17% SAB.
The Belgium-based brewer plans to argue that the Justice Department fundamentally misunderstands how Modelo’s beers are sold and is cherry-picking misleading passages from company documents to make a case. How the court defines what market is at stake could be key to who wins.
The Justice Department says Modelo, similar to the companies that AT&T and H&R Block had sought to buy, plays an important role in keeping the market competitive. Modelo, with its popular Corona Extra brand, is thwarting AB InBev’s desire for higher prices industrywide, the department says.
As in the earlier lawsuits, the department is attempting to use internal corporate communications to make its case. The Justice Department in its 27-page complaint quotes company documents more than 30 times to argue that the merger will force Americans to pay more for beer.
“The Justice Department has learned very well what works in court,” says University of Florida law professor D. Daniel Sokol. “If you can tell a story about a firm constraining prices, that’s a good story to tell a judge. And nothing tells a better story than documents.”
U.S. District Judge Beryl Howell thought so in October 2011 when she barred H&R Block from acquiring TaxAct, a low-cost digital tax preparer. She found that the companies’ internal documents bolstered the government’s view of the case and that TaxAct was a crucial competitor because it bucked industry pricing norms.
That victory provided momentum for the government in its case against AT&T’s planned purchase of T-Mobile USA Inc. The government cited company documents that depicted T-Mobile, the smallest of the top four national wireless carriers, as disruptive to pricing. AT&T dropped the deal in December 2011.
In the beer case, the Justice Department says Modelo has increased its market share by keeping the prices of its beers only slightly higher than those of Bud Light and Millercoors LLC’s Coors Light, the two top-selling beers in the U.S. Unlike craft beers, which can cost twice as much as Bud, Modelo’s Corona is only about $2 more for a six-pack of bottles.
When AB InBev raises the price of Budweiser and Bud Light, some drinkers “trade up” to Modelo beers, the government says. Such competition is especially heated in Latino communities, it says.
“The lack of price increase in Corona is increasing pressure,” says an AB InBev document cited by the Justice Department. The government says elsewhere that an AB InBev executive said California was “a burning platform” because of “price compression” between Corona and AB InBev products.
AB InBev likely will argue that the Justice Department quoted portions of internal documents out of context, people familiar with the company’s thinking say. At trial, the company could present the full passages coupled with testimony by executives, the people say.
Steven J. Cernak, an antitrust lawyer with Schiff Hardin LLP who isn’t involved in the case, says the documents cited by the Justice Department may not be as definitive as the government would like. And some, he says, appear to show that AB InBev was worried about all higher-end beers, not just Modelo.
“There are always documents that say, ‘This competitor is driving us nuts,’ ” Mr. Cernak says. “I’ve got to believe the defense is going to be able to throw other exculpatory documents back at DOJ.”
A central part of the company’s defense will be arguing that Modelo isn’t actually a competitor of AB InBev in the U.S., the people familiar with the company’s strategy say.
Crown Imports LLC, a joint venture of Modelo and U.S.-based Constellation Brands Inc., STZ +0.99% currently distributes Modelo’s brands in the U.S. and sets prices, AB InBev says. And the proposed merger involves a side deal in which Constellation would take full control of Crown and keep distributing the Modelo brands. AB InBev and Modelo say that ensures that the prices of Modelo’s brands would be set independently from Bud’s.
The case could well turn on what market U.S. District Judge Richard W. Roberts decides is most relevant for reviewing the proposed merger.
The Justice Department wants the deal evaluated for its effect on the entire beer market.
But the companies could argue that Corona and other imported Modelo labels, such as Pacifico and Modelo Especial, have a higher status and don’t compete with mass-market domestic brands like Budweiser and Bud Light.
Or AB InBev and Modelo could argue that the relevant market is alcoholic beverages generally-meaning wine and other beverages also help keep prices in check.
“Defining the market is 90% of the game,” says the University of Florida’s Prof. Sokol. “If you win that battle, the rest is easy.”
AB InBev has tapped former government antitrust lawyer Steven Sunshine of Skadden, Arps, Slate, Meagher & Flom LLP for its legal team.
The Justice Department lawyer who litigated the H&R Block and AT&T cases, Joseph Wayland, recently returned to private practice and the department has yet to fill his slot.
Justice Department antitrust chief Bill Baer doesn’t say whether the government will hire outside counsel and says the government lawyers who developed the beer case “are going to be involved in litigating it.”
For AB InBev, Prize Is the Mexican Market
By BETSY MORRIS
Anheuser-Busch InBev ABI.BT +4.18% is expected to work every angle to salvage its $20 billion acquisition of Grupo Modelo GMODELO.MX -0.17% SAB of Mexico-not because of what it could squeeze out of its U.S. business, but largely to gain a clear path to the beer market in Mexico-a potential bonanza.
But in what is becoming an increasingly common problem for large international corporations, even the loftiest and best-laid global strategies can run into brick walls when they encounter more nationally-minded antitrust regulators.
In a move that surprised both the company and many of its followers, the U.S. government sued Thursday to block the merger on the grounds that the deal would “substantially lessen competition in the market for beer” in the U.S. as a whole and particularly in 26 metropolitan areas, causing both higher prices and fewer choices for American consumers.
AB InBev, the world’s largest brewer, denied the charge, arguing that the U.S. market has plenty of choices when it comes to beer, and noting that it has taken steps to distance itself from the new business.
“Now it’s either litigate, negotiate or walk away,” said Trevor Stirling, an analyst with Sanford C. Bernstein. AB InBev’s “initial response was quite aggressive-you’re stupid and we’ll see you in court,” he said.
However, he and others believe that AB InBev is secretly following a two-pronged approach-simultaneously negotiating and litigating. “My expectation is there will be a negotiated settlement that will satisfy the Department of Justice,” he said.
AB InBev declined to comment.
Grupo Modelo may be too valuable for AB InBev to let go. Its strategy is to be a global brewer; the deal announced last June to acquire the 50% of Modelo it didn’t already own would give it additional brand and distribution power, it said at the time. The acquisition would also add a fourth big name-Corona-to AB InBev’s portfolio of global brands (the other three are Budweiser, Stella Artois and Beck’s). AB InBev currently has nearly 20% of the global market by volume.
More significantly though, said Mr. Stirling, the deal would give AB InBev a clear path to the promising Mexican market, which AB has coveted due to its favorable demographics and one of the highest per capita gross domestic products of all developing markets.
Now, Mr. Stirling said, AB InBev must figure out what it has to give up in the U.S. to get access to the Mexican market.
Beer has a 70% share of the alcoholic beverage market by dollar value in Mexico and is expected to grow, the company said at the time it announced the deal. Moreover, Grupo Modelo is both well-situated and well-seasoned.
Not only has it successfully imported and distributed Bud and Bud Light in Mexico for more than two decades, it has also made its own Corona brand the leading imported beer in 38 countries around the world.
For its part, AB InBev already commands a roughly 48% share of the U.S. market by volume. Bud Light is the No. 1 selling brand in the country and Budweiser is No. 3. No. 2 is Coors Light, which is sold by MillerCoors. Grupo Modelo also owns the No. 1 and No. 3 imported brands in the U.S.-Corona Extra and Modelo Especial.
Constellation Brands Provides Additional Comment Regarding U.S. Department of Justice Action
Source: Thomson Reuters
Feb. 1, 2013
Constellation Brands, Inc. issued the following statement today in further response to the U.S. Department of Justice’s (DOJ) action yesterday concerning the proposed Anheuser-Busch InBev (AB InBev) and Grupo Modelo (Modelo) transaction.
Constellation Brands believes the DOJ’s action demonstrates its incomplete understanding of the proposed transaction for at least three primary reasons:
1. Crown Imports, not Modelo, is AB InBev’s competitor in the U.S. Corona and the other Modelo brands are sold in the U.S. by Crown Imports LLC (Crown), a joint venture currently owned 50/50 by Constellation Brands and Modelo. An independent company and one of the industry’s most successful competitors, Crown imports, warehouses, markets, prices and distributes the Modelo portfolio and other products on an exclusive basis across the U.S.
“The Crown team has built its business into the third largest beer company in the U.S., and it is surprising that the DOJ has overlooked the existence and commercial activities of this highly successful and autonomous business,” said Rob Sands, president and chief executive officer of Constellation Brands. “Crown’s President Bill Hackett, a 29-year steward of the Modelo brands, and his team of established beer industry veterans have an outstanding track record of brand building and sales execution in the marketplace.”
“Our Crown team independently develops implements and refines pricing, promotional and sales strategies for each of our brands in the U.S.,” said Bill Hackett, president of Crown, “and we execute strategies and set distributor tactical priorities based on our objective analysis of the competitive dynamics in each local market. Further, our Crown team is responsible for all marketing decisions, including developing the very successful ‘Find Your Beach’ campaigns that support Corona and other Modelo brands in the U.S. Equally important to consider are the formidable challenges we face to ensure that roughly 170 million cases of beer annually make it safely from multiple foreign breweries to hundreds of distributors and ultimately many thousands of retailers throughout the country.”
2. Constellation Brands’ acquisition of Modelo’s interest in Crown will improve competition. The proposed transaction will enhance Crown’s status as an independent and competitive entity and will strengthen Crown’s position as a growing competitor to AB InBev in the U.S. beer market. Crown will have complete, autonomous control as the brand owner in the U.S. with respect to its distribution, marketing, promotion and pricing of Corona and the other Modelo brands. Critical to Crown’s success is its independent judgment in selecting and collaborating with the best distributor option available in each of Crown’s markets. Underscoring Crown’s successes in this regard, Hackett added, “I am extremely proud of Crown’s track record of working through our industry-leading distributor network to grow share in the highly competitive U.S. beer market, even during challenging economic times.”
3. Crown will have even greater flexibility in responding to competitive factors in each of its markets. The new contract ensures that Crown will benefit from both long-term stability in costs of goods provided by AB InBev and from the operational excellence and global scale of the world’s leading beer producer. As a result, Crown and consumers can benefit from the considerable efficiencies that are expected to be achieved by the AB InBev/Modelo transaction. Additionally, Crown will immediately have access to several more Mexican beer brands to sell in the U.S., and is guaranteed supply of a certain number of new products each year upon request. In terms of shipment priority, Crown will be on parity with the Mexican domestic market. Finally, Crown is empowered to freely innovate and supplement its offerings in the U.S. beyond the Modelo portfolio at Crown’s sole discretion.
Sands reiterated his support for Crown’s role in the transaction by stating: “Constellation Brands has stood behind Crown’s highly admired portfolio of brands not only for the past six years through the Crown joint venture, but also for the preceding fifteen years when Constellation’s subsidiary Barton Beers imported and sold these beers in the western half of the U.S. Constellation is thrilled by the opportunity to redouble its support for Bill Hackett and the entire Crown team in driving Crown’s business to even greater successes in the U.S. in the coming years.”
Constellation Brands (STZ): Downgrading to Neutral on increased deal risk in the near term
Source: Goldman Sachs
INVESTMENT LIST MEMBERSHIP: Neutral
COVERAGE VIEW: NEUTRAL
We remove STZ from the America’s Buy List and downgrade to Neutral. Prompting this move is today’s announcement that the DOJ has filed a civil antitrust lawsuit in an attempt to block ABI’s proposed acquisition of Grupo Modelo. STZ’s plan to acquire Crown Imports was dependent on the ABI-Modelo acquisition closing. We believe it is prudent to now place a lower probability of the deal closing given increased uncertainty. We lower our 12-month, SOTP price target $4, to $36, on this lower probability. Since added to the Buy List on April 3, 2012, STZ is +32.1% vs. the S&P 500 +6%. Over the past 12 months STZ is +54.8% vs. S&P 500 +14.1%. Our EPS is unchanged.
We have lowered our probability of the deal closing to 50% from 75% in our sum-of-the-parts valuation, as the DOJ lawsuit is likely to cause increased deal/litigation risk for the stock in the near term.
The deal could still get done with “good enough” remedies – The DOJ is not indicating no remedy is acceptable so there is still potential for DOJ and ABI to agree to settle the lawsuit with ABI agreeing to make some concessions. At this point, the DOJ’s complaint seems to suggest that the remedies need to be more significant than getting rid of 10-year call option in the supply agreement with Crown or selling a value brand in certain markets.
Key question is whether ABI is willing to propose significant remedies such as divesting a brewery asset. Downside case for STZ if no deal reverts back to pre-deal scenario – STZ’s 50% of ownership is set to expire at the end of 2016 under the old agreement with Modelo, with Modelo having option to import alone and pay a nominal book value to STZ, switch to a third-party and pay 8X EBIT to STZ or re-up the contract.
This process could take 6-12 months to be resolved if litigation is fully pursued. While settlement is possible, we have no clarity on timing and believe it is prudent to move to Neutral. Upside risk include a quick resolution of the deal while downside risk is the deal is blocked.
Kirin To Sell F&N Stake For $1.6B In Bidding War Fallout
Source: Law 360
By Karlee Weinmann
February 01, 2013
Japanese brewer Kirin Holdings Co. Ltd. said Friday that it would sell its 15 percent stake in Fraser & Neave Ltd. for SG$2 billion ($1.6 billion) after a Thai billionaire inked a deal for the Singaporean conglomerate earlier this month, besting a rival offer Kirin had supported.
By tendering its shares in favor of the SG$13.2 billion offer made by Charoen Sirivadhanabhakdi’s TCC Assets Ltd., Kirin – best known for its namesake beer – will rake in a profit of 47 billion yen ($510 million). It did not sketch out plans for the proceeds.
The move comes after a monthslong bid war between Charoen and hedge fund-backed developer Overseas Union Enterprise Ltd. over F&N, coveted for its food and beverage holdings in high-growth Asian markets and its multibillion-dollar real estate portfolio. Kirin had originally pledged its support for the offer from OUE, which last month bowed out of the chase.
Since OUE abandoned its bid, Charoen’s F&N stake has climbed to more than 50 percent, ramping up pressure on Kirin, a major shareholder, to either hand over its stake or mount an effort to thwart the sale.
Under an earlier agreement, Kirin would have paid SG$2.7 billion to take over F&N’s global food and beverage business – worth an estimated SG$8 billion – had the company sold itself to OUE, a group controlled by Indonesia’s Riady family.
Collaboration with F&N to grow both companies’ beverage segments was the cornerstone of Kirin’s July 2010 buy-in to the company. In making the deal, Kirin said it hoped for a partnership that would integrate both beverage lines, giving both of them greater prominence in high-growth Asian markets.
But with Charoen, the owner of Thai Beverage PCL, at the center of F&N’s takeover, Kirin said it will instead begin a search for new Southeast Asian partners.
“With the recent major change in F&N’s ownership structure, weighted heavily toward TCC, Kirin has determined that it would be difficult to implement its integrated beverages strategy in Southeast Asia with F&N as Kirin’s core partner,” it said.
Despite backing away from F&N as a partner, Kirin said it would continue with plans to beef up its business in the region, particularly in fast-emerging Singapore. The company said it is on the hunt for new partners, and for now will work closely with its sister companies in Thailand and Vietnam.
F&N’s food and beverage branch, which makes and sells soft drinks, beer, dairy beverages and snacks, emerged last summer as a sought-after piece of the conglomerate’s business.
Charoen’s ThaiBev for several months last year found itself locked in a separate bidding war with Dutch beer giant Heineken NV for F&N’s beermaking unit. Heineken, a longtime joint venture partner of F&N, ultimately beat its Thai rival with a SG$5.5 billion bid but Charoen kept his sights on the conglomerate, which would provide a strong foothold outside ThaiBev’s home market.
TCC’s tender offer for F&N closes Feb. 18.
Counsel information for the latest deal was not immediately available.
BEAM REPORTS 2012 FOURTH QUARTER AND FULL YEAR RESULTS
Beam Inc. (NYSE: BEAM), a leading global premium spirits company, today reported results for the fourth quarter and full year 2012.
For the full year 2012, reported net sales increased 7% to a record $2.5 billion.
Sales for the year were up 6% on a comparable basis, significantly outperforming the company’s global market.
Growth of the company’s premium global Power Brands and broad-based growth across geographies fueled the full-year comparable sales performance. New product innovations, higher pricing in select categories, and trading up by consumers contributed to favorable price/mix and margin enhancement.
On a reported basis (GAAP), full-year diluted earnings per share from continuing operations were $2.48 versus $0.85 in 2011. Full-year diluted EPS before charges/gains was $2.40, up 13%, exceeding the company’s 2012 target for low-double-digit growth and ahead of the company’s long-term target of high-single-digit growth. Reported earnings comparisons largely reflect the impact of costs in 2011 associated with the separation of Fortune Brands’ businesses.
For the fourth quarter, reported net sales increased 11% and net sales were up 5% on a comparable basis. Comparable sales growth reflected strong results in the core markets of the United States, Australia and Germany. Diluted EPS before charges/gains for the quarter was $0.67, down 3%, reflecting the company’s previously projected 20% increase in brand-building investment. Diluted EPS from continuing operations for the quarter was up 36% on a reported basis.
Bourbon, Premium Innovations and Pricing Benefit Q4 Results
“We closed the year with another strong sales quarter as we continued to outperform our market,” said Matt Shattock, president and chief executive officer of Beam. “We exceeded our expectations with better-than-anticipated global sales of Bourbon and higher-than-expected accretion from the Pinnacle acquisition. We also benefited from premium innovations across categories that improved product mix, as well as higher pricing in select categories. As we called out three months ago, Q4 EPS before charges/gains was modestly lower due to our substantial increase in brand investment in the quarter to support long-term growth.”
Excellent Results in First Full Year as Beam
“Beam continued to deliver excellent results in its first full year as a focused pure-play spirits company,” Shattock continued. “We created value through the long-term growth algorithm we outlined a year ago: growing sales faster than our market, operating income faster than sales, and EPS faster still. In 2012, we exceeded our expectations at both the top and bottom lines as we increased comparable sales at roughly twice the rate of our global market, and grew EPS before charges/gains ahead of our target for the year. Full-year sales growth was balanced across our three regional segments, fueled by double-digit global growth for our Power Brands and Rising Stars, and we improved margins with premium innovations and higher pricing.
“We are particularly pleased that we outperformed in 2012 even as we increased investment in the competitive position and long-term growth of our business. These investments included a double-digit increase in brand-building investment, as well as higher capital expenditures to produce more aged spirits to meet future demand. In 2012, we further strengthened our core equities with impactful brand communication on television and in digital media; we accelerated our growth with innovative new products while also opening our new Global Innovation Center; we continued to strengthen our premium portfolio by adding a Power Brand in vodka and entering Irish Whiskey; and we enhanced our routes to market across fast-growing economies like China as well as in developed markets such as Japan.
“Beam generated higher-than-expected free cash flow of $337 million, and we ended the year with a net-debt-to-EBITDA ratio of 2.8 times, better than we had targeted. We’re also pleased that our 2012 acquisitions were five cents per share accretive to our full year results,” Shattock said. “We believe our investments and stronger balance sheet enhance Beam’s prospects to deliver sustainable, profitable long-term growth.”
Financial Highlights for the Full Year 2012:
Income from continuing operations was $398.2 million, or $2.48 per diluted share, versus $0.85 per diluted share in 2011.
Excluding charges and gains, diluted EPS from continuing operations was $2.40, up 13% from $2.12 in 2011.
Reported net sales were a record $2.5 billion (excluding excise taxes), up 7%.
On a comparable basis, which adjusts for foreign exchange and acquisitions/divestitures, net sales were up 6%.
Comparable net sales by segment: North America +7%; Europe/Middle East/Africa (EMEA) +5%; Asia Pacific/South America (APSA) +5%.
Operating income was $575.9 million, up 46%.
Operating income before charges/gains was $631.9 million, up 10%.
The company generated free cash flow of $336.8 million and an earnings-to-free-cash conversion rate of 87%.
Return on invested capital before charges/gains (rolling 12 months) was 7% and was 23% excluding intangibles.
The company’s net-debt-to-EBITDA ratio was 2.8 times at year end.
Establishing 2013 Earnings Growth Target
The company announced that it is targeting to deliver high-single-digit growth in diluted earnings per share before charges/gains for 2013 against its 2012 base of $2.40 per share.
“We enter 2013 with an assumption that our global spirits market will grow value approximately 3%, consistent with what we saw in 2012,” Shattock said. “We’ll face headwinds including higher raw materials costs and challenging comparisons in India as we reposition our business there, and we’re not currently assuming material new pricing in 2013. At the same time, we anticipate benefiting from several favorable dynamics: the strength of the bourbon category, our innovations and brand-building initiatives, strong growth in emerging markets, our efficiency and effectiveness agenda, and an additional five cents per share of accretion from our 2012 acquisitions. Incorporating these factors, we’re targeting for 2013 to outperform our market at the top line and deliver growth in diluted EPS before charges/gains at a high-single-digit rate. With regard to phasing, we will face our most challenging comparison of the year in the first quarter as we cycle against new-product launches and route-to-market changes that helped drive comparable sales up 13% in Q1 of 2012.
“We believe that Beam is well positioned to deliver sustainable, profitable long-term growth as we continue to invest in fast-growing categories, fast-growing new products, and fast-growing markets. We feel good about our prospects for continued outperformance in 2013.”
The company expects to generate free cash flow for 2013 in the range of $300-350 million, which incorporates continued investment to increase distillation capacity and produce more aged spirits to support long-term growth.
“While we have sustained investments in long-term value creation, we’ve also continued our track record of delivering immediate value to shareholders with the 10% increase in our dividend we announced recently,” Shattock concluded.
Beam Inc(BEAM.N): Subpar (but In-line) 4Q EPS, FY13 Guidance Below Consensus
Source: Morgan Stanley
In-line 4Q EPS, But Lower Quality: Q4 EPS of $0.67 were a penny above consensus, but quality was subpar, with in-line sales growth (+5% organic), but a 150 bp miss in gross margins vs. consensus, driving 2% gross profit downside. By region, NA revenue upside was offset by international downside, and we worry that 8% core sales growth, which did benefit from timing of sales in Mexico, is ahead of underlying demand. Despite topline upside, NA profit was worse than we expected, likely due to higher spending, offset by international profit upside. See page 2 for 4Q results vs. MS.
FY13 Guidance Below Consensus: Beam guided to HSD (%) EPS growth in 2013, which is a disappointment given it is below consensus expectations for +10-11%, and it includes 5 cents of EPS accretion from acquisitions (so really mid to high single digit organic), although the FY12 base is also a penny higher. While we had expected BEAM to guide to +HSD-low DD (%) EPS growth given they tend to be conservative, the lack of a low DD (%) high-end of the range will likely be viewed as a disappointment. In the release, BEAM cited higher raw materials and India FCPA pressures as headwinds, and guidance assumes no “material new pricing” which we think will end up being conservative given a rapidly improving industry pricing environment. Net, given a run-up and disappointing guidance, we expect a negative stock reaction.
BEAM: After a Solid Finish to 2012, Both Challenges and Opportunities Lie Ahead in 2013
The Outlook for 2013 – After a strong 2012, BEAM appears well-positioned for continued growth in 2013. That said, there are a number of key challenges and opportunities that was plan to keep an eye on:
Geographic Perspective: BEAM expects to continue to outperform the ~3% growth of the North American spirits market, primarily driven by innovation. In EMEA, the company is looking for outperformance in Germany, the U.K. as well as growth in Russia and Eastern Europe, which is to offset weakness in Spain. Finally in APSA, BEAM expects that the adverse impact of the ongoing internal investigation in India will be offset by continued momentum in Australia and the emerging markets of Brazil, China and those in Southeast Asia.
Key Spirits Categories: BEAM expects that bourbon will continue to outperform the overall spirits category both in North America and in international markets with BEAM’s 2012 price increases and flavor innovation to drive further growth for its Jim Beam and Maker’s Mark brands. And in vodka, BEAM is looking for double-digit top-line growth for Pinnacle via further brand-building investments.
Timing Issues To Impact Results – Notably, there are a number of timing issues in 2013, including: (i) a tough comp in 1Q13 as new innovations drove 12% sales growth in 1Q12, (ii) $35 million in cost increases to be primarily seen in 2Q13-4Q13, (iii) the aforementioned India investigation, which is to adversely affect the company through 3Q13, and (iv) the lapping of the Pinnacle acquisition in 2H13.
Adjusting Our Estimates and Target Price – Taking into account the guidance noted above, we are adjusting our estimates as follows: FY13 to $2.63 (from $2.69) and FY14 to $2.92 (from $3.00). Our FY15 EPS is $3.24. We assert that BEAM should trade at a 22x target multiple (in line with its average since becoming a pure-play spirits company) and given our FY14 EPS estimate, we derive a $64 target price target price on the stock (down from $65). As this represents 7% ETR from current levels, we maintain our Neutral rating on BEAM.
BEAM: Global Spirits Outlook Remains Healthy
EPS Ahead of Consensus. This morning, BEAM reported 4Q12 pro forma EPS of $0.67 (-3%), which was one penny ahead of consensus but three cents below our forecast.
N. America Sales Benefited From Investment Spending. Organic net sales in North America grew +8%, which was ahead of our +1.5% forecast, helped by higher ad spending (which resulted in 680 bps of operating margin contraction, to 21.4%), as well as an easy comparison in Mexico which likely added a couple of points to organic sales growth. On a reported basis, N. America sales grew 20.2%, helped by a 12-pt benefit from acquisitions.
Healthy Brand-Level Sales Growth. Across BEAM’s largest brands, net sales growth remained relatively healthy, with the Jim Beam brand posting an acceleration relative to the 9-month trend (of +10% vs. +8%), while Sauza accelerated to +10% from +6%. Conversely, Pinnacle Vodka decelerated somewhat to +19% from +22%, while supply constraints weighed on Maker’s Mark’s growth which decelerated to +15% from +23%.
EMEA Remains Solid. Organic sales growth in EMEA was +4.0%, and +3.6% on a reported basis. Meanwhile, operating income grew a faster 8.7% on a reported basis, which resulted in 150 bps of operating margin expansion, to 31.0%.
APSA Impacted by India. Sales growth in APSA was impacted by changes to BEAM’s India business operations, such that organic sales were down 2%, while reported sales were down 0.2%. Meanwhile, expense timing associated with the India change benefited operating income, which grew 28% on a reported basis, and drove 600 bps of margin expansion to 27.5%.
Guidance Below Consensus Estimates. For 2013, BEAM expects the global spirits market to grow 3%, in line with 2012. The company expects to deliver EPS growth of high single digits. We note that 9% EPS growth would imply 2013 EPS of $2.62, which compares to the Street’s $2.65 forecast and our $2.69 estimate. Embedded in this assumption is an expectation for pressure from higher raw material costs, challenging comparisons in India, as well as no new pricing. Given that 1Q12 benefited significantly from new product introductions (roughly ~50% of sales growth), 1Q13 will face an exceedingly tough comparison. Free cash flow is expected in the range of $300-$350 million.
Beam Management Discusses Q4 2012 Results – Earnings Call Transcript (Excerpt / Link)
Source: Seeking Alpha
February 1, 2013
Good morning. My name is Andrea, and I will be your conference operator today. At this time, I would like to welcome everyone to Beam’s Fourth Quarter and Full Year Earnings Conference Call. [Operator Instructions] Thank you. Now I would like to turn the call over to Matt Shattock, President and CEO of Beam. Sir, you may begin your conference.
Matthew John Shattock – Chief Executive Officer, President, Director, Member of Executive Committee and Member of Corporate Responsibility Committee
Thank you, Andrea. Good morning. Bob Probst and I would like to welcome you to our discussion of Beam’s 2012 fourth quarter and full year results. Before we begin, please note that our presentation includes forward-looking statements. These statements are subject to risks and uncertainties, including those listed in the cautionary language at the end of our news release and in our SEC filings, and our actual results could differ materially from those currently anticipated. This presentation also includes certain non-GAAP measures that are reconciled to the most closely comparable GAAP measures in our news release or in the supplemental information linked to the Webcast and Presentations page on our website.
LVMH: all that glitters
Scale has advantages for luxury group but, like its products, there is a hefty price tag
Champagne. Watches. Handbags. Perfume. What else is there, really? LVMH sells them all, giving investors access to the whole spread of the emerging markets/luxury goods growth story in one glittering package.
Results this week showed how well the company is doing. Operating profits rose 11 per cent, pushing the shares up despite lower margins in clothing, which accounts for half of profits.
The shares have risen 10 per cent in the past year. But imagine that instead of buying the LVMH package, you had built a portfolio of companies that between them offer similar goods and services. It might include Diageo for wines and spirits, Prada for clothes and handbags, Richemont for watches and jewellery, L’Oréal for cosmetics, and Dufry for travel retail business. Such a portfolio, with its constituents roughly weighted to reflect the relative size of each segment at LVMH, would have risen 60 per cent during the year.
Much of that outperformance is down to Prada, but even replacing that with a more modest performer (say, Salvatore Ferragamo) would still have produced a superior result. Part of the reason is size – LVMH is one of the largest companies in the sector by revenues and so growth is a bigger challenge. And although it is growing faster than the competition in many areas of its business, that is not the case in clothing and leather goods. Its revenues from that area were up 14 per cent in 2012. Prada’s are expected to have risen almost a third; Ferragamo’s 17 per cent.
Of course, scale has its advantages. LVMH’s spread of businesses provides some protection against peaks and troughs in any particular market, and it has the resources to invest in growing markets. But such relative safety and convenience, like much of what LVMH sells, has a hefty price tag attached.
Pennsylvania: PSEA President responds to Governor Corbett’s liquor privatization scheme
Mike Crossey, president of the Pennsylvania State Education Association, today released the following statement on Gov. Tom Corbett’s liquor privatization scheme:
“Linking liquor store privatization to school funding is just another way of holding students hostage to the governor’s political agenda.
“It’s nice that the governor has acknowledged that he created a school funding crisis, but our students shouldn’t have to count on liquor being available on every corner in order to have properly funded schools.
“We need to restore the nearly $1 billion in education cuts made by Gov. Corbett with an adequate and sustainable funding plan, not with money that doesn’t exist.
“Plans to privatize the liquor stores have failed in the Legislature every time they have been attempted in the last three decades and rightly so.
“PSEA is willing to work with legislators of both parties in the General Assembly to craft a long-term funding plan that is fair to taxpayers and provides students with the kind of quality education they deserve.”
Pennsylvania: Privatizing state’s alcohol distribution risks lost revenue and higher social risks
Source: The Express
February 1, 2013
The Keystone Research Center calls on the General Assembly and public to encourage Gov. Tom Corbett to abandon a new proposal to dramatically increase the number of retail outlets for beer, wine and spirits in the state.
“The proposal could cost the Commonwealth revenue that won’t be invested in education, health services and a stronger economy,” said Stephen Herzenberg, Ph.D., an economist and executive director of KRC. “It will also radically increase alcohol accessibility and the resulting social costs.”
KRC economist Mark Price, Ph. D., estimated last year that, controlling for other variables including the strength of state alcohol regulations, privatizing alcohol distribution in Pennsylvania would lead to 58 more traffic fatalities annually.
Professor Karen Glanz, who heads Penn’s Center for Health Behavior Research, also observed that “retail alcohol privatization increases the risk of excess consumption of alcohol and its associated consequences. A large body of research has also found negative social impacts from privatization of alcohol distribution.”
Dr. Glanz is the George A. Weiss University Professor at the University of Pennsylvania and a member of the Community Preventive Services Task Force, a national task force of public health experts. The Task Force recommended in April 2011 against further privatization by states of retail alcohol distribution. A peer-reviewed article summarizing the research that led the Task Force to its conclusion was published in the American Journal of Preventive Medicine in April 2012.
“The governor’s proposal seems out of step with voters,” Herzenberg said. “While elected officials elsewhere are recognizing that voters want real solutions on jobs and other priorities of middle-class families, the governor is trying to fix a system that isn’t broken.”
Herzenberg said that the revenue implications of the governor’s proposal will deserve careful study. “The state wine and spirits system transfers about half a billion dollars to the General Fund annually, including taxes and profits. How much will be collected from the industry after privatization?”
The governor’s proposal was released in conjunction with an analysis of its financial implications that builds on a 2011 study of privatization options by the consulting firm Public Finance Management (PFM).
University of Michigan research scientist Roland Zullo found that the 2011 PFM study used internally inconsistent assumptions to arrive at over-optimistic conclusions about the impact of privatization on revenue and consumer prices.
For links to the studies by Dr. Price, the Community Preventive Services Task Force, and Dr. Zullo, and for other information, go to Keystone’s Alcohol Privatization Page at www.keystoneresearch.org.
Pennsylvania: The other side to liquor privitization
Gov. Corbett’s plan isn’t all good news
Source: The Daily Pennsylvanian
By ellen slack
February 1, 2013
A few thoughts about what was left out of the Jan. 28 article, “Gov. Corbett to push privatization of liquor sales”:
First, there was no mention of the loss of revenue averaging over $100 million a year in exchange for a one-time cash windfall, the size of which pro-privatization interests have every reason in inflate.
True, tax revenue would continue, but there’s another consideration. It’s often argued that with higher prices in Pennsylvania than in surrounding states, privatization would bring lower prices. But according to the independent PLCB Users Group, Pennsylvania taxes alcohol more heavily than surrounding states do. Privatization alone would do nothing to change that, so lower prices are not a given.
The rather-extensively quoted Charlie Gerow, described by the Daily Pennsylvanian as “a spokesperson for the newly formed grassroots Coalition to End the Liquor Monopoly, is called “a prominent Harrisburg Republican consultant” by The Patriot-News of central Pennsylvania. The same article identifies other organizers of the Coalition as “a chairman of the state’s largest taxpayer organization,” the “retired president of the Columbia-Montour Chamber of Commerce” and the Cumberland County treasurer. Grassroots?
The DP article sandwiched a statement about the wine and spirits store on 41st and Market Streets closing with Gerow’s comments about more stores opening and the “added convenience” to be brought by privatization. This juxtaposition seems to imply that the lack of a place to buy alcohol conveniently located near Penn is somehow the fault of the state store system. The store at 41st and Market closed, as the DP reported at the time, because of building issues. There would have been a new state wine and spirits store in the area around 43rd and Walnut streets, but it was strenuously opposed by the Muslim community associated with a nearby mosque.
Last June, again as reported by the DP, the zoning board approved a proposal for a store at 43rd and Chestnut streets. Don’t think Penn, with its huge real estate empire and political clout, is going to allow a liquor store any closer than that!
Religious opposition to increased availability of alcohol is obviously a factor, as mentioned above. Many conservative Christian leaders oppose privatization, and in some parts of Pennsylvania this can be very important politically. Another anti-privatization force is Mothers Against Drunk Driving, for obvious reasons.
What about the loss of some 5,000 jobs? It would be incredibly naive to think that huge numbers of present PLCB employees would magically pick up jobs in privatized retail situations. And even if they did it would probably mean the abysmal pay and working conditions of most retail employment. Think “race to the bottom” here. Does Pennsylvania need to shed any more decently paying jobs?
As far as health issues, in 2011 the United States Center for Disease Control’s Task Force on Community Preventive Services recommended “against further privatization of alcohol sales,” based on a review by specialists of the available research.
Finally, there is a widespread belief that privatization will inevitably lead to lots of incredibly stocked stores in great locations. The reality could be quite a bit different. Other states don’t have alcohol superstores in every neighborhood. Is your supermarket going to stock everything that an average state store has? Want to shop for wine at Wal-Mart? If small operators could afford to buy licenses in Pennsylvania, no doubt the majority would only offer selections as limited as those in small liquor stores everywhere else.
Washington: A battle over liquor sales to restaurants and bars
Source: Seattle Times
by Bruce Ramsey
A fight about liquor sales to restaurants and bars erupted last week at the House Government Accountability and Oversight Committee in Olympia. It’s a fight about how Washington’s new privatized liquor system works, who is allowed to do make money doing what. It is between the same sides as fought over Initiative 1183.
Opinion Northwest is a blog for writers who take sides, so I’ll put my cards on the table. I supported 1183 and the privatization of liquor, taking the side of Costco, the restaurants and grocery chains against the liquor distributors and the grocery independents. My sympathies have not changed. But the fight I describe here has reasonable arguments on both sides. It’s complicated, and explaining it takes a lot of words. This time I’m not worrying about my own opinion.
The two sides define the issue differently. The Costco and restaurants’ side says the issue is the freedom to compete, to serve the consumer and not have restaurants and bars subjected to a wholesale duopoly. The distributors’ side says the issue is Costco creating an unfair advantage for itself under the law it wrote and put up the money to pass. (Costco wrote Initiative 1183 and spent nearly $20 million on the campaign to pass it.)
The hearing at which the battle broke out was held Jan. 24. It was about House Bill 1161, offered by Rep. Ross Hunter, D-Medina. Hunter’s bill would change two of the rules, one about liquor taxes and one limiting the size of certain purchases.
First, liquor taxes. In addition to the state sales tax on liquor (20.5 percent) and the bottle tax ($3.77 per liter) , Initiative 1183 imposes a 10 percent tax (falling to 5 percent after two years) on the gross liquor revenue of wholesalers and another 17 percent tax on the gross liquor revenue of retailers. (These two are officially “fees” but really they are taxes.)
When Initiative 1183 opened up liquor wholesaling to private enterprise, it was clear that wine and beer wholesalers were going to get a big new piece of business: the right to be in a wholesale business of selling liquor to private stores. The initiative charges the wholesalers $150 million, one time, to enter this market. The proceeds of the 10 percent tax on their gross revenues go toward the $150 million until March 31, 2013. After that they owe the difference. John Guadnola, executive director of the Association of Washington Spirits and Wine Distributors, says this means that the two big distributors, Youngs Market and Southern, will together be writing a check for at least $100 million on top of all the money they invested to get into this market.
You can see why liquor is expensive in Washington.
About a quarter of the market is restaurants and bars. If restaurants and bars buy from distributors, the price they pay doesn’t include the 17 percent retail tax. If they buy from a retailer the price does include the 17 percent.
The restaurants say this drives them into the arms of the distributors, of which there are two large ones, Youngs Market and Southern. But in towns farther from Seattle-Aberdeen, for example- Bruce Beckett of the Washington Restaurant Association says it’s difficult to get timely deliveries from these distributors, and that even in Seattle, the distributors sometimes don’t have certain products on hand. Travis Rosenthal, owner of the Tango Restaurant in Seattle, testified at the hearing in Olympia that his distributor has run out of Benedictine, and won’t have any until Feb. 22. He’ll have to go to a retailer, he said, and will get hit with the 17 percent tax.
Said Monique Trudnowski, owner of the Adriatic Grill in Tacoma, “I can buy tomatoes from whomever gives me the best price and the best tomatoes.” She said she should have the same freedom to buy sprits.
Now the second issue. Initiative 1183 says a restaurant or bar buying liquor from a retailer (except a former contract liquor store) can buy only 24 liters per sale. I’m told this was put into 1183 to entice the distributors to stay neutral on 1183. In the event, they opposed it with several million dollars, they lost, and the “24 liters per sale” is now in state law.
What does it mean? Costco said it meant a cashier could ring up no more than 24 liters at a time. If a bar owner had 48 liters on his cart, the cashier had to ring up a 24-liter sale twice.
The Washington State Liquor Control Board decided it meant 24 liters per store per day. I asked the Liquor Board’s chairman, Sharon Foster, about the 24-liter issue. “We wrote these rules with strong legal advice,” she said.
Costco and the grocers have sued the Board in Thurston County Superior Court. The lawsuit, which comes up for hearing March 15, asks for some of the same things they would get in Rep. Hunter’s bill.
The bill would write Costco’s interpretation of the 24-liter rule into the law. At the hearing Hunter said, “If you’re a small restaurant, and you run out of vodka at 7:15 in the evening, you need to be able to get more vodka. And if at 9:15 you run out of rye, you ought to be able to go to the same retailer.”
The distributors have a different view. They argue that on top of all the costs of employees, warehouses and trucks, they have to pay the state $150 million to have privileges and tax rates of wholesalers. The retailers don’t pay any of that, so they should stay out of that market. To the wholesalers, this fight is about Costco (whose full name is Costco Wholesale Corporation) horning in on their wholesale business without having to pay the costs the law- the law Costco wrote – imposes on other wholesalers.
Michael Gonzales, business agent for Teamsters 174, which represents workers at the distributors, argued that point at the hearing: that Costco wants to be a distributor without paying the money.
Arguing the other side, Joel Benoliel, chief legal officer of Costco, recalls that the Legislature passed a law in 2011 to lease out the state’s wholesale liquor monopoly for 10 years to one company-and that the state rejected a bid of $300 million as too low. Under 1183, which repealed that law, the new wholesalers pay half as much to take over the state’s market for an indefinite period.
Speaking of the distributors, Benoliel said, “These guys have been in a protected business in partnership with the state for 75 years. They can’t understand the idea of free competition.”
“The benefit of this bill attaches principally to Costco and Safeway,” says Guadnola of the Association of Washington Spritis and Wine Distributors.
That’s the main fight. Another part of it involves the people who bought state liquor stores that supplied restaurants and bars. They thought they were getting that business without the burden of the 17 percent tax, but the tax has been imposed on them and they have lost much of the business to wholesalers. The buyer of the state liquor store in Leavenworth testified that the store had 18 restaurant and bar accounts that totaled 30 percent of its business, and that with the 17 percent tax only two of those accounts are left.
Still another player in this is the small groceries, which opposed 1183 because it denied liquor licenses to retailers under 10,000 square feet of floor space, and for other reasons. The organization of small grocers supports removal of the 17 percent tax on retail-to-restaurant sales but opposes any change in the 24-liter-per-day limit.
United Kingdom: Ministers consider ‘calorie labels’ for wine, beer and spirits
Bottles of wine and beer could display how many calories they contain to discourage people from drinking too much, under new Government plans.
Anna Soubry said she and the Government are ‘committed to improving the labelling of alcoholic drinks’
Source: Daily Telegraph
By Rowena Mason, Political Correspondent
01 Feb 2013
Anna Soubry, a health minister, said officials have been in talks about “the possible inclusion of calorie content on labels” with the alcoholic drinks industry.
Ministers are concerned about the issue as an official study has linked the high calories of alcoholic drinks to people being overweight and obese.
They are separately looking at how to reduce deaths caused by alcohol and tackle anti-social behaviour fuelled by drink.
It is thought displaying calorie content could encourage those who watch their weight to moderate consumption.
Lager can be as fattening as a slice of pizza at around 250 calories per pint, according to the Drink Aware Trust.
The alcohol education charity also says two large glasses of wine have about the same amount as a beefburger at 400 calories.
Mrs Soubry revealed the talks about calorie labels in a parliamentary question by Andrew Rosindell, the Conservative MP for Romford.
The minister said she and the Government are “committed to improving the labelling of alcoholic drinks”.
“The Department has discussed the possible inclusion of calorie content on labels with representatives of the alcohol industry on a number of occasions,” she said.
She added there is a chance the European Commission could suggest mandatory calorie information on alcoholic drinks when it reviews the issue within two years.
The Government’s preferred method of getting companies to provide more health information is through “responsibility deals”. These voluntary agreements have successfully got fast food companies, including McDonalds, KFC and Pret a Manger, to provide calorie information on their menus.
Mrs Soubry recently caused controversy when she said it is easy to spot poor people because many are obese.
Her new comments on calorie content come as the Home Office prepares to make a decision on whether to bring in minimum pricing of around 45p per unit of alcohol.
The plans, championed by the Prime Minister, are aimed at stopping people from drinking cheap alcohol to excessive.
However, there are fears it could raise the price of alcohol for moderate middle-class drinkers and fail to tackle the drinking habits of people with alcohol problems.
On Friday night, a Department of Health spokesperson said officials are “continuing to work with industry” on the “labelling of alcoholic drinks”.
“By the end of this year, 80 per cent of all alcoholic drinks on shop shelves will include clear labelling on units and health messages,” he said. “Through the Responsibility Deal we will continue to discuss how to give consumers more information on alcoholic drinks, including calorie labelling.”
United Kingdom: Big brother to log your drinking habits and waist size as GPs are forced to hand over confidential records
Source: Daily Mail
By Jack Doyle
1 February 2013
GPs are to be forced to hand over confidential records on all their patients’ drinking habits, waist sizes and illnesses.
The files will be stored in a giant information bank that privacy campaigners say represents the ‘biggest data grab in NHS history’.
They warned the move would end patient confidentiality and hand personal information to third parties.
The data includes weight, cholesterol levels, body mass index, pulse rate, family health history, alcohol consumption and smoking status.
Diagnosis of everything from cancer to heart disease to mental illness would be covered. Family doctors will have to pass on dates of birth, postcodes and NHS numbers.
Officials insisted the personal information would be made anonymous and deleted after analysis.
But Ross Anderson, professor of security engineering at Cambridge University, said: ‘Under these proposals, medical confidentiality is, in effect, dead and there is currently nobody standing in the way.’ Nick Pickles, of the privacy group Big Brother Watch, said NHS managers would now be in charge of our most confidential information.
He added: ‘It is unbelievable how little the public is being told about what is going on, while GPs are being strong-armed into handing over details about their patients and to not make a fuss.
‘Not only have the public not been told what is going on, none of us has been asked to give our permission for this to happen.’
The data grab is part of Everyone Counts, a programme to extend the availability of patient data across the Health Service.
GPs will be required to send monthly updates on their patients to a central database run by the NHS’s Health and Social Care Information Centre.
Health chiefs will be able to demand information on every patient, such as why they have been referred to a consultant. Another arm of the NHS will supply data on patient prescriptions.
In a briefing for GPs, health chiefs admit that ‘patient identifiable components’ will be demanded, including post code and date of birth.
NHS officials insist the information centre will be a ‘safe haven’ for personal data, which will be deleted soon after it is received.
The information will be used to analyse demand for services and improve treatment.
But a document outlining the scheme even raises the prospect of clinical data being passed on or sold to third parties.
It states: ‘The patient identifiable components will not be released outside the safe haven except as permitted by the Data Protection Act.
‘HSCIC … will store the data and link it only where approved and necessary, ensuring that patient confidentiality is protected.’
Patients will not be able to opt out of the system.
Before the election the Tories condemned the creation of huge databases – including the controversial NHS IT project – and insisted it would roll back ‘Labour’s database state’.
But last month, in the first sign of a dramatic shift away from this position, Health Secretary Jeremy Hunt said he wanted millions of private medical records to be stored and shared between hospitals, GPs, care homes and even local councils. He sold the programme as part of plans for a ‘paperless NHS’ by 2018 and claimed ‘thousands of lives’ would be saved.
But details of the changes have raised serious concerns among civil liberties and privacy campaigners, as well as health professionals
Last night GPs’ leaders said the latest proposals were too broad.
‘Patients must be given the option to opt out of any scheme that seeks to transfer identifiable information about them from their records to another source,’ said a BMA spokesman.
‘This opt-out should be widely advertised and explained in order that patients are reassured and understand the process being carried out.’
Phil Booth of the campaign group NO2ID said an unprecedented volume of data would be ‘sucked up’.
‘People have to trust in the notion of medical confidentiality. They expect to be able to talk in confidence to their GP,’ he said.
‘They don’t expect their private conversations to be uploaded on to a national database where they will be made available for any number of purposes for the benefit of persons unknown.’
A spokesman for the NHS said last night: ‘The NHS constitution makes clear what information can be used for by the NHS and this proposal complies exactly with that.’
Experts: Energy drinks, alcohol and teens shouldn’t mix
The caffeinated contents of energy drinks like Red Bull and Monster can be dangerous for teens, especially when combined with alcohol, new research confirms.
A report, published on Feb. 1 on Pediatrics in Review, reiterated that energy drinks can cause insomnia, rapid heartbeat, high blood pressure, anxiety and obesity among other issues which can be exasperated by alcohol.
Other side effects include concerning behaviors, which can include drunk driving and risky sexual behavior.
“I don’t think there is any sensationalism going on here. These drinks can be dangerous for teens,” review lead author Dr. Kwabena Blankson, a U.S. Air Force major and an adolescent medicine specialist at the Naval Medical Center in Portsmouth, Va., told HealthDay. “They contain too much caffeine and other additives that we don’t know enough about. Healthy eating, exercise and adequate sleep are better ways to get energy.”
Making things worse, study authors said, that energy drink makers constantly market to young people, leading them to think it’s okay to mix their drinks. These adolescents and young adults aren’t always aware that mixing alcohol and energy drinks can make them feel less drunk than they really are, they said.
Drinking just one caffeinated beverage mixed with alcohol can be the same as drinking a bottle of wine and several cups of coffee, according to the study. Sixteen-ounce energy drinks have about 160 mg of caffeine, compared to one average cup of coffee which only contains 100 mg. More than 100 mg a day of caffeine is unhealthy for teens, Blankson told HealthDay. Other additives like sugar, ginseng and guarana boost the caffeinated effects in the energy drinks.
“We don’t know what these additives do to the body after periods of extended use,” Blankson said.
About 25 percent of students in North Carolina universities said they had drank an energy drink and alcohol mixture in the month prior to taking the survey, the report said.
Another study on the subject published in CMJA Open on Jan. 16 showed that when researchers surveyed 36,155 students in seventh through 12th grade about their alcohol and energy drink consumptions levels, about 20 percent said they mixed the two beverages. The 2010 to 2011 statistics matched previous studies on the subject matter conducted in Canada, the U.S. and Europe.
Jennifer Hartstein, a child and adolescent psychologist in New York City, told Forbes that the caffeine addiction may start at home. Parents often tell their children that caffeine is a natural way to “get energy or feel good.” Hartstein said children shouldn’t feel pressured to do more than they are capable of.
“It’s okay not to do everything,” Hartstein explains. “The belief is the more that you do, the more desirable you are. Unfortunately, you are then spread way too thin.”
Clean and Sober: A Tour of Pernod Ricard’s New 250 Park Avenue Offices
Source: Commercial Observer
By Billy Gray
It’s Thursday morning, 9:15, and the immaculate bar at Pernod Ricard’s new Midtown headquarters is empty. Company representatives half-jokingly offer Bloody Marys. But despite scores of bottles of Absolut, Jameson, Glenlivet, Beefeater and Malibu that tauntingly-and in some cases perilously-line the conference room tables and cubicle dividers of the three-floor space, the office is all business.
Pernod Ricard, the French beverage conglomerate with 36 wine and spirits brands under its umbrella, settled into its 82,000-square-foot office at 250 Park Avenue last October, leaving behind 40,000 square feet at 401 Park Avenue South, which it subleased. About 200 employees- including 80 who moved here from the Purchase, N.Y., office-occupy the full 16th, 17th and 18th floors (158 employees remain in Westchester).
A big draw of 250 Park Avenue was the wraparound corner terraces on the 17th floor, which offer gobsmacking views up Park Avenue and to the East and Hudson Rivers on either end of 47th Street. They’ve been put to little use over the past four months, and are to be avoided on this arctic day. Luckily, the foosball and pool tables are indoors.
Scott Spector, a principal in the New York office of Spector Group Architects, which dramatically renovated the space “from almost white box conditions,” mentions that the paramount goal of the design was to foster collaboration. And the office tour reveals the sort of open workspaces normally associated with web upstarts toiling and tweeting away below 23rd Street. Spector Group re-exposed the brick walls and pipes running below the 14-foot ceilings, bringing a sleekly industrial vibe to starchy Midtown. (The white-shoe law firm Sullivan & Cromwell preceded Pernod Ricard at the address.)
Still, the bright and assiduously funky elements of the office enhance the corporate message. Branded conference rooms include a Kahlua suite awash in Alhambra tiles, a clubby Glenlivet nook where you can smell the leather and oak, and a preppy Perrier Jouet-themed redoubt where Lilly Pulitzer would feel at home on a Skype teleconference, surrounded by pastel floral prints.
And wherever you are on the floor plan, you really cannot help but stare at all those (seemingly unopened) bottles.
“The word ‘distillery’ was embedded in our brains early in the design phase and needed to be echoed throughout” Mr. Spector says. The firm succeeded. Anheuser Busch-another alcohol giant ensconced in 250 Park Avenu-would need a live Clydesdale trotting around the reception desk to distill its corporate essence so successfully into the workplace.
“Our bar’s bigger than theirs,” said Jack Shea, the company’s senior vice president of communications. Pernod Ricard’s employees spread their brand’s identity and somewhat soberly revel in it, in and out of the office. Happy hours on the 17th floor occur only on Thursday evenings.
“Our employees like to work hard and play hard,” Mr. Shea said. “But we’re about moderate consumption of our products, in terms of how we promote them to the outside and our own employees. We’re ambassadors of responsibility.”
HEAVEN HILL DISTILLERIES AND ALS ASSOCIATION JOIN FORCES TO HONOR MASTER DISTILLER PARKER BEAM
6th Generation Bourbon Legend to Spearhead Fundraising Efforts Through Promise Fund and Fall 2013 Edition of Parker’s Heritage Collection
Source: Heaven Hill
Heaven Hill Distilleries, Inc. will be working with the ALS Association to promote awareness and fundraising for efforts to battle the disease, in the early stages of which legendary 6th Generation Master Distiller Parker Beam has been recently diagnosed.
Heaven Hill and Parker Beam plan to dedicate this upcoming Fall 2013 edition of Parker’s Heritage Collection, the highly anticipated and highly regarded limited annual release of rare American Whiskeys, to raising funds for the ALS Association. Heaven Hill plans to earmark $20 from the sale of every bottle of the next Parker’s Heritage Collection release for donation to the ALS Association, and projects that a minimum of a quarter of a million dollars will be raised.
Beam, who is a charter member of the Bourbon Hall of Fame and a grand-nephew of James Beauregard “Jim” Beam, has been crafting some of the world’s most critically acclaimed whiskeys-first with his father, Earl, and now with his son, Craig-at Heaven Hill for over 50 years. Diagnosed with ALS in the past year, Parker Beam is continuing to work and contribute to Heaven Hill’s and the Bourbon industry’s rising profile. He will continue to personally select the barrels used for his namesake Parker’s Heritage Collection bottlings.
The ALS Association has established a special fund, known as the Parker Beam’s Promise of Hope Fund, into which $20 for each bottle of next fall’s Parker’s Heritage Collection sold will be donated (www.alsa.org/ParkerBeamPromiseofHope) . Although the details and quantities of the next Parker’s Heritage Collection release will not be made public for some time, Heaven Hill expects to produce sufficient quantities to generate in excess of $250,000 to aid in research to combat a disease which affects over 30,000 Americans at any given time.
“Both my wife Linda and myself have become very involved in the ALS Association and in raising awareness of the disease since I was diagnosed with it,” noted Parker Beam. “We are pleased to be helping in any way we can and are most appreciative to Heaven Hill and the Shapira family for helping with such a generous financial contribution from the sale of the upcoming edition of Parker’s Heritage Collection. We hope that others will become more aware of ALS and will find additional ways to help us in our fight.”
BREW: Preliminary 2012 Results and Initial 2013 Guidance Released (Craft Brewers Alliance)
Preliminary 2012 Results. BREW released preliminary results for 2012 yesterday after the market’s close. For the year, the company reported depletion growth of 6% (at the low end of their downwardly-revised range of +6 to +8%), though sales came in at the high end of the range at +13%. Gross margin missed management’s expectations slightly, coming in at 29.6% (down 70 bps YoY), vs. guidance of 29.8%-30.3%. And, with SG&A spending coming in at the high end of the range, the company delivered full year EPS of $0.13 (vs. guidance of $0.12-$0.17), and our estimate of $0.15.
Initial 2013 Guidance. For FY13, BREW expects to deliver depletion growth of 7% to 11%, with average pricing up 1% to 2% (though sales will be depressed some by the termination of contract brewing for Goose Island). Gross margin should be roughly unchanged YoY (at the midpoint of the guidance range), while SG&A should be up again (though spending growth should decelerate given the significant investments BREW has made over the last few years).
Revising Our Estimates and Target Price. Taking into account the aforementioned guidance, we have updated our EPS estimates as follows: FY13 to $0.14 (from $0.18) and FY14 to $0.16 (from $0.21). We assert that BREW should trade at 0.75x price/sales (in line with its historical average) and given our FY14 sales estimate, we derive a $7.50 price target on the stock. As this represents approximately 9% ETR from current levels, we maintain our Neutral rating on BREW.
NABCA Legislative Update: January 26, 2013-February 1, 2013
Wells Fargo’s Weekly Economic and Financial Commentary
Source: Wells Fargo
. Despite the 0.1% contraction in GDP in 4Q12, underlying economic fundamentals have improved.
. Overall GDP was driven down by a 22.2% decline in government defense spending, while consumer and business spending were stronger than expected, growing 2.2% and 8.4%, respectively.
. Nonfarm payrolls increased 157,000 in January with strong results from the retail, construction, and health sectors.
. Consumer confidence suffered in January as the payroll tax increase impacted paychecks.
. The ISM Manufacturing Index surged in January to its highest level since April 2012, breaking back above its 12-month moving average.
. The worldwide financial crisis of 2008 and 2009 has forced Brazilian policy makers to focus more on domestic consumption and less on the external market.
. Consumption habits of middle and upper income families in Brazil are making the transition more difficult.
. To help spur growth, the Brazilian central bank has committed to keeping interest rates low.
. Politicians must refrain from restricting imports to encourage domestic consumption, as such a policy would cause higher inflation and less monetary easing from the central bank, thus, constraining the economic recovery.
News From TTB
GAIL HOSEY DAVIS NAMED DEPUTY ASSISTANT ADMINISTRATOR, HEADQUARTERS OPERATIONS
We are pleased to announce that Gail Hosey Davis has been selected as Deputy Assistant Administrator, Headquarters Operations, beginning January 27, 2013.
Davis has served as the director of TTB’s International Trade Division since 2003. In that position, she led the division in initiating several critical collaborations with many of our foreign counterparts. Her prior work experience includes 15 years with the Bureau of Alcohol, Tobacco, and Firearms, in a variety of roles including chief of staff of its Office of Science and Technology. Davis has a master’s degree in public health.
TTB GUIDANCE ON FLOOD DAMAGED PRODUCTS
In the aftermath of recent natural disasters, we have received questions about the safety of alcohol beverage products exposed to flood waters.
The U.S. Food and Drug Administration (FDA) offers guidance on its website about the safety of foods, including alcohol beverage products, adversely affected by hurricanes, flooding, and power outages. The FDA notice states that food products submerged in flood waters may pose a health hazard because of possible exposure to sewage, chemicals, heavy metals, pathogenic microorganisms, or other contaminants. The notice advises that certain food products that have been exposed to flood waters are adulterated and should not enter the human food supply.
It is TTB’s position that adulterated distilled spirits, wines, and malt beverages are mislabeled within the meaning of the Federal Alcohol Administration Act (FAA Act). Subject to the jurisdictional requirements of the FAA Act, mislabeled distilled spirits, wines, and malt beverages, including adulterated products, may not be sold or shipped, delivered for sale or shipment, or otherwise introduced or received in interstate or foreign commerce, or remove from customs custody for consumption, by a producer, importer, or wholesaler, or other industry member subject to 27 U.S.C. 205(e).
If you have any questions about whether an adulterated alcohol beverage product can be reconditioned or whether it should be destroyed, please call TTB’s Market Compliance Office at 202-453-2250, or toll free at 866-927-2533, and select option 5.
TTB SEEKS COMMENTS ON SEVEN INFORMATION COLLECTIONS
We are currently inviting comments on a number of TTB forms and recordkeeping requirements. These include the Drawback on Wines Exported form (TTB F 5120.24), which we are revising for clarity, as well as five other information collections related to alcohol and one related to large cigars. For more details about these information collections and instructions for commenting on them, see our Federal Register notice of January 22, 2013. Comments are due by March 25, 2013.
FDA ISSUES PROPOSED RULES TO IMPLEMENT THE FOOD SAFETY MODERNIZATION ACT
On January 16, 2013, the Food and Drug Administration (FDA) issued two proposed rules implementing the Food Safety Modernization Act passed in early 2011. In general, the first proposed rule concerns food processers and manufacturers, while the second concerns growers of certain fruits and vegetables. Currently, TTB is evaluating the possible impact of these proposed FDA regulations on TTB-regulated industry members.
View the two proposed rules at Regulations.gov under Docket ID: FDA-2011-N-0920 (food processers and manufacturers) and Docket ID: FDA-2011-N-0921 (certain fruits and vegetables growers). Both proposals are open for public comment through May 16, 2013
Buying Wine on the Web
Source: The New York Times
By ERIC PFANNER
February 1, 2013
In an ever more digital world, there are a few things that remain reassuringly analog. Wine, for example. The mysteries of a Montrachet or the magic of a Margaux remain too complex and too nuanced to reduce to the zeros and ones of digital DNA, though I imagine someone must be trying. Although technology has its limitations in the making of wine, it is increasingly useful in the buying and selling of it.
The Internet accounts for only a tiny fraction of worldwide wine sales. Most people buy their wine at local shops or supermarkets. But online sales have been growing strongly for a few years in Britain, Germany and some other European markets, as well as China and Japan. There are signs of progress in the United States, where regulatory hurdles have been a problem.
At the end of last year, Amazon opened an online wine shop in the United States. Presumably the e-commerce giant hopes to do for Bordeaux or Barolo what it has done for books: Make a previously unimaginable selection available to anyone, anywhere, at any time and at a bargain price.
But Internet wine sales in the United States have been complicated by Byzantine rules. Some states forbid online sales, others restrict cross-border shipments. Others maintain monopolies over distribution. So Amazon is starting with only a handful of states and the District of Columbia.
Europe, so fragmented and divided in other ways, is more coherent and unified in this niche of the economy. From my home in France I can order wine online from almost any other European Union country and expect it to show up at my door in a few days.
The only variable is cost. For some reason, Italian parcel services tend to charge more than ?50 to ship a 12-bottle case of wine to France, about $70. German delivery companies often do the job, faster, for less than ?20. There you have the euro crisis in a nutshell – or a case of wine. Still, my cellar would be a lot poorer without those occasional deliveries from the sunny south.
The most advanced online wine market is probably Britain. Wine Intelligence, a research firm in London, estimates that up to 15 percent of all retail wine sales in Britain take place online – perhaps five times the U.S. percentage.
Growth in Britain has been led by supermarket chains like Tesco, which have been using wine as a way to promote Internet grocery shopping services. But specialist British wine merchants like Berry Brothers & Rudd were also early online innovators, opening e-commerce sites well over a decade ago.
“Not only do we like wine, but we also like the Internet,” said Antonia Branston, an analyst at the research firm Euromonitor in London. More and more British online wine specialists, like Laithwaites, Slurp and Naked Wines, are expanding to other countries in Europe, the United States or Asia. Slurp, for example, opened sites in Germany and France last year. While the prospect of a British Web site trying to sell wine to the French might sound a bit like carrying coals to Newcastle, Slurp insists there is a place for it.
“Basically, France is very focused on French wine,” said Audrey Bouttier, who oversees Slurp’s Continental European sites. “We are trying to do something a little bit different. Especially among young people, it’s becoming very hip to bring something other than the traditional bottle of Bordeaux to a dinner party.”
So Slurp offers a vast selection of what the French call “vins du monde” (wines of the world), or imported wines.
Greater choice is one of the biggest benefits of Internet wine shopping, but beware of exaggerated claims. While I often buy wine via the Internet, I rarely use generalist sites that promise a bit of everything – some Burgundy, some Bordeaux, some Australian shiraz and maybe a bit of Napa Valley cabernet, too.
Why? Isn’t the promise of anything, anywhere the raison d’être of the Web? Perhaps, but wine continues to confound the algorithm-writers’ efforts to commoditize it. Many of the best wines are made in quantities too small to suit the national or global scale of the Internet.
Many big wine Web sites simply offer the same bottles you see on the supermarket shelves, at the same prices. To get the best wines, retailers need local knowledge and connections. Many of the best online wine sellers are offshoots of local shops, located in wine regions.
While small shops struggled initially with the challenge of the Internet, many of them now sell wine online. That means even more consumer choice, though you’ll need help navigating the maze. This is where perhaps the most useful Internet wine site of all, Wine-Searcher, comes in.
Wine-Searcher, based in Auckland doesn’t actually sell wine but helps you find it. It lists the offerings of tens of thousands of merchants around the world and links to their Web sites. Whether you’re looking for something as ubiquitous as Mouton Cadet Bordeaux or something as rare as a Riesling Trockenbeerenauslese from Egon Müller in Germany, Wine-Searcher will point you to the right place, and show you the prices.
There is something reassuring about buying wine from retailers with a track record. In France, some online-only retailers have employed questionable business models. Several customers of 1855.com, a French site that is named after the year of the first classification of Bordeaux chateaus, have filed lawsuits and won court judgments against the company over delayed or unfilled orders.
The problem appears to have been that 1855 offered for sale wines that it did not actually own. When a customer bought one, the company tried to acquire it elsewhere, at a lower price. But certain wines, like prized vintages of Bordeaux, instead surged ahead. Like a hedge fund caught in a “short squeeze,” 1855 found itself having to pay more to buy wine than it had made selling it.
1855 said it was dealing with the problems. “The peak of complaints is now behind us, and all should be cleared within six months,” the company said in a statement.
But some investors seem to have doubts. A leading shareholder in 1855, Jean-Pierre Meyers, son-in-law to the L’Oréal heiress Liliane Bettencourt, sold his stake and severed his ties to the company.
Elsewhere, however, online shops are sometimes seen as more reliable than the bricks and mortar kind. Yes My Wine, a Chinese Web site that has been growing rapidly, is an example. Consumers apparently trust the site more than their local shops in China, where fake wines abound – the transport and storage of real ones is shoddy as well.
As a result, online wine sales are starting to take off in China, a potentially enormous market, given the enthusiasm for the Internet and, as of the past few years, for fine wine. Wine Intelligence estimates that about five million Chinese shop for wine online – about a quarter of those who say they are regular buyers of imported wine.
So, while big players like Amazon dominate many areas of the digital economy, there doesn’t appear to be a universally successful approach to online wine selling.
“It’s not like insurance or flights,” said Richard Halstead, chief operating officer of Wine Intelligence. “There’s a lot of local variation.”
As there is with what’s in the bottle.
Too Bordelais to fail?
By Jancis Robinson
The best 2009s were beautifully balanced it was one of the most enjoyable Suffolk bordeaux tastings I can remember
Look at any guide to investing in wine and it will tell you that you can’t go wrong if you buy the best, in particular the first growths of bordeaux. But that advice is now thoroughly out of date. The most recent heavily hyped vintage was 2009, an especially ripe year that required remarkably little effort on the part of the grower and winemaker, resulting in unusually concentrated, alcoholic wines. Encouraged by the high scores meted out by American guru Robert Parker, the Bordelais asked for record prices for their 2009s, with first growths released at five-digit prices in pounds per dozen bottles. The Chinese, many of them with zero experience of the wine market, bought heavily, as did some investment funds.
The theory is that once the prices (but not wines) are released, after the famous en primeur tastings, then they steadily rise, providing a nice return for investors. But for the first time since the overpriced 1997 vintage was released, prices for 2009s have actually fallen since release. This is not meant to happen for vintages of this calibre. Prices for 1997 fell because it was a very ordinary vintage but, bolstered by unprecedented demand for the much better 1995s and 1996s, the Bordelais thought (wrongly) they could introduce another price hike. But 2009 is unequivocally a good quality vintage. The problem was, again, overpricing. Demand from Asia gave the Bordelais the confidence to ask for steep prices for the top 2009s (and 2010s) but investors have been left with a nasty taste as they have watched prices soften.
Of course, the economic climate hasn’t helped but the real problem has been with the first growths. The London-based fine wine trading platform Liv-ex prepared a graph that tracked the average price of 45 top red 2009s since release. It showed that, even having rallied since hitting bottom last September, the average price is still about 3.5 per cent below release price. Separating out the different categories, however, the top wines have fallen in value more dramatically than the rest. The left bank (Médoc and Graves) first growths – Châteaux Lafite, Mouton, Latour, Margaux and Haut-Brion – have fallen by 17 per cent on average and the top wines of the right bank (St-Emilion and Pomerol) by 3 per cent, while over the same period since early summer 2010 the other smarter wines have on average risen by about 7 per cent on the left bank and almost 10 per cent on the right. That’s more like it!
Part of the problem was that the Chinese in particular wildly overvalued Château Lafite, which achieved near-mythical status in China for a while, inflating the average first-growth price. Another contributory factor is that, especially on retasting the wines once bottled, Robert Parker appeared to scatter 100-point scores like confetti. Score-conscious investors realised they didn’t have to spend first-growth sums in order to secure a 100-point wine. Since even the best wines in the next rank down, the so-called super seconds, cost less than half as much as the first growths, this helped to soften first-growth prices.
How do the 2009s taste today? A group of three wine writers and up to 16 wine merchants meet every January in the Suffolk seaside town of Southwold for a three-day immersion in the vintage that went into bottle 18 months before. Recently retired bordeaux négociant Bill Blatch somehow manages to source examples of every single significant wine and several other associated ones that are less important – well over 250 in all, including the top whites, both sweet and dry. Most importantly, we all taste blind, comparing like with like – usually calling on a second bottle if we think there may be a problem.
Ch Duhart Milon, from the same stable as Ch Lafite, costs about £90 but it did very well in our Southwold tasting, better than stablemate Carruades at three times the price
Ch Duhart Milon, from the same stable as Ch Lafite, costs about £90 but it did very well in our Southwold tasting, better than stablemate Carruades at three times the price
With all this ripeness, and alcohol levels stated on the label (which were probably a little less than actual strengths) from 13 per cent up to 15.5 per cent for some right bank wines, these 2009s could have been very tiring to taste. But the best were beautifully balanced and, notably from Pomerol, Pauillac and Sauternes, provided some of the greatest pleasure I can remember at a Southwold bordeaux tasting.
Early showings elsewhere of the 2009 crus bourgeois, the less starry wines of the Médoc, were impressive. I suspected this would be an early drinking vintage that would exhibit much more consistency than many and, unlike most bordeaux vintages, might not retreat into a shell as it evolves in bottle. But few of the “lesser” Médocs we tasted (which, admittedly, were weighted heavily in favour of properties there owned by highly ranked châteaux to the south) were thrilling, although the best offer good value. And some wines, notably the consistent and impressive reds of St-Julien, seem more marked by their structure than their fruit – more concentration than just ripeness – whereas the Pauillacs were in general much sweeter.
As usual, St-Emilions and Margaux varied enormously but the excesses of over-oaking and overripeness are less evident than in the early years of this century. The Pessac-Léognan reds, which usually score highly for their extra freshness, didn’t this year. And the dry whites, which came mainly from the same appellation (although more and more fancy bordeaux châteaux have planted white wine grapes on their less satisfactory land and are trying to sell expensive whites too), in general lacked a bit of fruit in the middle – perhaps because they had to be picked so early as acidity levels plummeted.
There were one or two wines, of both colours, that tasted as though they had been acidified, as is routine in so many wine regions outside Europe. (It is perfectly legal in France so long as the same lot of wine is not chaptalised – or, has sugar added to bolster alcohol. No one would have dreamt of chaptalising in 2009.)
At the very end, when we were reviewing all three days’ tastings, one senior wine merchant fixed the younger ones with a beady eye and dared to ask, “Are you proud to have sold these wines which proved overpriced?” No substantive answer was forthcoming. We moved swiftly on to how much we are looking forward to retasting the lovely and less flamboyant 2010s in a year’s time.
GLAZER’S, INC. APPOINTS HEATHER ALPER VICE PRESIDENT SALES
February 1, 2013
Glazer’s today announces that Heather Alper is appointed as Vice President Sales, reporting to Executive Vice President Sales and Marketing, Shawn Thurman. Alper will be responsible for the corporate performance of a portfolio of Glazer’s strategic suppliers. The appointment is effective February 18, 2013.
Shawn Thurman said, “We are pleased to be promoting Heather to a Vice President role within our corporate team. Heather will be managing and driving a portfolio of important suppliers with whom we want to grow our performance and our overall relationships.”
Heather Alper joined Glazer’s two years ago after achieving success working in sales and marketing management roles with many suppliers and consumer facing companies, including Moet Hennessy, Neiman Marcus, Hillwood Development, and William Grant, where she was Division Marketing Director. Currently Vice President On-Premise for the DMH Division in Texas, she was previously Director of Business Strategy for Glazer’s MHUSA business. Heather earned her MBA in Marketing/Finance, a BBA in General Business, and a BA in Psychology from Southern Methodist University.
Australia: Woolies liquor sales up 4.8 per cent
By James Atkinson
Woolworths’ underlying liquor sales growth was in line with the 4.8 per cent overall growth achieved by its food and liquor business last quarter, the retailer reported.
Woolworths Australian Food and Liquor sales for the second quarter ended December 30, 2012 were $10.3 billion, an increase of 4.8 per cent on the previous year. The division’s sales for the half year were $20.5 billion, an increase of $0.9 billion or 4.7 per cent on the previous year.
While liquor continues to drag on rival Coles’ results, it’s a different story at Woolworths, according to CEO Grant O’Brien.
“The effect that liquor had on the overall result [sales growth] was negligible; if it was significant I’d call it out,” O’Brien told analysts yesterday.
Woolworths opened 11 Dan Murphy’s stores during the half year, taking the total to 170. The retailer expects to open a further five Dan Murphy’s in the 2013 financial year.
Woolworths director of liquor, Brad Banducci said: “Our Liquor business continues to generate strong positive growth momentum with sales growth experienced across all three formats – Dan Murphy’s, Convenience (BWS and Woolworths Liquor) and Direct (Cellarmasters and Langton’s).”
“Growth has been assisted by store openings and our continued investment in multi-option.”
Comparable store sales in Australian Food and Liquor for the half year increased 2.4 per cent and for the second quarter increased 2.5 per cent.
Former Outback exec returns to restaurant industry
Paul Avery, who was COO at OSI Restaurant Partners Inc., has joined World of Beer as president and chief executive
Feb. 1, 2013
Paul Avery is returning to the restaurant industry more than three years after leaving his position as chief operating officer at OSI Restaurant Partners Inc.
Avery has assumed the president and chief executive roles at World of Beer, a craft beer tavern concept based in Tampa, Fla. Avery said he originally looked into the brand as a potential franchisee. But he decided to purchase a controlling interest in the company after he discovered the growth potential of the craft beer segment.
“I’m at a point where I want to reengage with the business,” he said. “This is an opportunity to get involved with a brand that has exceptional potential and a talented, progressive team.”
Avery left Outback Steakhouse parent OSI Restaurant Partners (now Bloomin’ Brands Inc.) in 2009 to prioritize his work as a board member for the Friedreich’s Ataxia Research Alliance, or FARA. Now that FARA is running smoothly, he said, it’s time for him to step back into the restaurant industry.
“I’m having a great time,” Avery said. “To be back in the saddle is really a great thrill for me. It’s in my DNA.”
The focus of World of Beer is to serve craft beers in a laid-back tavern setting. Avery first became interested in the concept because two of his former OSI Restaurant Partners colleagues, Ben Novello and Jim Pollard, were working there in executive roles.
“Joining forces with Paul once more, after decades of working together at Outback Steakhouse, is like a dream come true,” said Novello, who previously served as chief executive at World of Beer, in a statement. “Jim and I have a long, storied history of success with Paul, and the addition of a close friend and industry legend means a great deal to us both.”
Both Novello and co-owner Pollard will remain with World of Beer in executive roles and will serve as principals and board members for the company.
Founded in 2007, World of Beer currently has 36 locations in 11 states. During the next year, the company plans to open 40 more units. In 2014 and beyond, Avery said World of Beer hopes to open 50 more locations each year. The company is also looking to expand beyond the Southeast, he said. Las Vegas, Seattle and Portland are all target markets. “It’s nationwide in scope,” he said of the concept.
World of Beer differentiates itself by allowing nearby restaurants to deliver food to guests. “So customers can come in one night and have craft beer and enjoy a delicious pizza,” Avery said. “The next night, they can come in and enjoy a craft beer and have sushi or Chinese food.”
Although some World of Beer franchisees serve food at their locations, there is no company-wide food menu available yet. However, the company plans to roll one out in 2013, Avery said.
“It’s not a fad,” Avery said of craft beer. “It’s a trend that over the last decade has showed double-digit growth. It’s where the consumer is today, and it’s only going to continue to grow.”
Kansas: Bill to change Kansas liquor laws introduced
A bill that would allow the sale of adult beverages in grocery and convenience stores was introduced into the Kansas legislature.
Current Kansas law only allows these businesses to sell 3.2% beer, while liquor stores are allowed to beverages with stronger alcohol content.
The proposed new law will allow grocery and convenience stores to sell adult beverages, and will lift restrictions on liquor stores allowing them to sell items such as ice, mixers and snacks and further expand their locations in the state. The bill would also require sales clerks to check I.D. for anyone who appears under the age of 27 in all liquor, grocery and convenience stores. Just as with current liquor laws, the proposed legislation would not allow any retailer to sell adult beverages below cost.
North Carolina: McCrory appointed ex-Lt. Gov. Gardner to ABC chair
Former North Carolina Lt. Gov. Jim Gardner has returned to a state government post, this time as the state ABC board chief.
Gov. Pat McCrory announced Thursday he’s appointed Gardner as chairman of the North Carolina Alcoholic Beverage Control Commission.
The Rocky Mount native is a longtime restaurant executive who once served in Congress and was elected North Carolina’s first and only Republican lieutenant governor of the 20th century in 1988. He lost to Democrat Jim Hunt for governor in 1992. Gardner supported McCrory in his 2012 gubernatorial campaign and served on his transition team. Gardner turns 80 in April and succeeds Zander Guy of Surf City as chairman.
The governor picks the commission’s three members, but only the chairman serves full-time.
State law sets the chairman’s salary around $111,000.
Kentucky: Two-thirds of Kentuckians favor allowing liquor sales in groceries
Source: Courier Journal
Feb 1, 2013
David Sattich says it makes no sense that a drugstore in Kentucky can sell wine and liquor, but a grocery store cannot.
“I don’t see any difference between ‘you sell it in a grocery store’ and ‘you sell it in a drugstore,’ ” said Sattich, 69, of eastern Jefferson County.
That’s a view apparently shared by many in Kentucky, according to the latest Courier-Journal Bluegrass Poll, which found that 62 percent of respondents favor letting groceries sell wine and liquor where packaged alcohol sales are allowed already.
The poll, conducted by SurveyUSA, found 27 percent opposed the idea while 11 percent weren’t sure.
It’s an issue unlikely to come up during the legislative session that resumes on Tuesday – in part because of a battle being waged in the courts.
U.S. District Judge John Heyburn II ruled last summer that a Kentucky law allowing liquor and wine sales at drugstores but not groceries is unconstitutional. Enforcement of the ruling is on hold, however, while it is appealed by both the state and a Northern Kentucky liquor store.
The ruling addressed a lawsuit filed in 2011 by the Food with Wine Coalition, a group of grocery and convenience stores, and Maxwell’s Pic-Pac, a Louisville grocery store. The Party Source, a Northern Kentucky liquor outlet, joined the state as a defendant.
Rep. Dennis Keene, D-Wilder, who says he expects to file a bill addressing less controversial liquor issues next week, said the grocery question won’t be a part of that.
“Everybody’s kind of waiting to see what the courts decide,” he said.
Tim McGurk, a regional spokesman for Kroger, said the grocery chain is satisfied to let the issue play out in the courts.
“Our own polling had almost identical numbers to that,” he said of the Bluegrass Poll, “and our customers tell us that the polling is right in our stores every day when they’re asking us why don’t we sell wine.”
Keene’s bill, which is being pushed by Gov. Steve Beshear, relies on recommendations of a task force the governor appointed to tidy up Kentucky’s alcoholic beverage laws and regulations – including some in effect virtually since Prohibition.
Nebraska: Alcohol ID Card Bill Advances
Source: News 6
A bill that would allow Nebraska bars and liquor stores to accept out-of-state identification cards when selling alcohol won first-round approval in the Legislature Friday.
Lawmakers voted 30-0 to advance LB 173. The bill was introduced by Sen. Colby Coash of Lincoln.
Current law allows sellers to accept a valid driver’s or operator’s license, a Nebraska state identification card, a military identification card, an alien registration card or a passport when confirming that a buyer is legally permitted to purchase alcohol. The current wording doesn’t allow for out-of-state identification cards.
The bill requires two more votes before it goes to the governor.
Maine: Lawmakers OK with rejection of Maine liquor offer
Source: Pharmacy Choice
Maine Top legislators signaled Thursday they support Gov. Paul LePage’s rejection of an offer from Maine’s wholesale liquor distributor to guarantee the state $320 million over 10 years if the state extends its contract without opening the bidding to other offers.
One of the lawmakers, Democratic Sen. Emily Ann Cain of Orono, said she was glad Maine Beverage Co. made the offer to the state, saying it provides the Legislature with a lot of valuable information about the potential of the state’s liquor business.
Maine Beverage President and CEO Dean Williams told the state he could guarantee annual state liquor revenues of $32 million, with the potential for an additional $4 to $6 million annually. Maine Beverage has held the wholesale liquor contract for the past decade but the deal is set to expire next year.
In declining the offer Wednesday, LePage said he believes there’s more value for the state in the wholesale liquor operation than Maine Beverage’s proposal offered but invited the company to participate in a competitive bidding process.
Cain, a member of the Appropriations Committee, said the whole liquor contract matter faces a long and thorough review.
With the state looking for immediate revenues in 2004, Maine Beverage was awarded a 10-year contract for warehousing and distribution. In exchange, the state received $125 million up front, plus profit sharing.
Some Republican lawmakers say the state could have gotten a better deal.
“In 2004, we had a fire sale on our wholesale liquor contract that didn’t result in the best deal for our state,” said Senate GOP Leader Michael Thibodeau of Winterport. “Maine cannot afford to repeat this mistake. We need to make sure we maximize the revenue stream created by the next liquor contract.”
House Republican Leader Rep. Ken Fredette of Newport agreed, saying it’s important to maximize the value of the liquor contract.
“Maine Beverage Company has proven that the contract’s value is substantially higher than what they paid for it in 2004. We must ensure that our return on this state asset is put to good use in our overall budget strategy,” Fredette said.
Maine Beverage held out its offer as a possible alternative to LePage’s plan to raise $186 million the state owes to hospitals for Medicaid services dating to 2009, which would trigger $298 million in federal funding to complete the repayment.
LePage has suggested the state take over liquor sales and issue bonds to pay the Medicaid debt, paying the bonds with future liquor sales. Maine Beverage said the revenue from the new contract could pay the debt without a bond issue.