Tuesday March 12th 2013
Today Is A Biodynamic LEAF Day.
Diageo overhauls its supply chain (Additional Information)
By Louise Lucas, Consumer Industries Correspondent
Diageo, the world’s biggest distiller, is devolving supply chain operations to country level as emerging markets account for an ever bigger slice of sales.
The move will shrink regional operations, making annual savings of £60m after three years, and enable the maker of Johnnie Walker whisky and Smirnoff vodka to respond to the needs of its 21 key markets.
As emerging markets account for an ever bigger slice of sales – Diageo is targeting 50 per cent by February 2016 and is already at 43 per cent – multinationals are adapting their global footprints in areas including procurement and marketing.
Diageo said that recent acquisitions of local liquors in China, Turkey and Brazil changed the way the supply dynamics worked.
“A couple of years ago one big supply chain worked because we were selling mainly our premium brands and had a straightforward portfolio,” said a spokesman for the company.
“With the emerging markets getting bigger and acquiring companies with big local footprints, including their own supply basis, it makes more sense to be operated where the demand side is.”
Emerging markets sales grew 14 per cent year-on-year in the first half, compared with 5 per cent for the overall group, helping to increase operating profit 21 per cent.
Some of the strongest growth came from Latin America and the Caribbean, where sales were up 18 per cent. However, the fast growing Scotch category, in Latin America, Asia and Africa, offers less flexibility on supply – Scotch whisky has to be distilled in Scotland.
The shake-up of the supply chain follows a similar refocus of the group’s sales and marketing operations, which resulted in the global operation being broken up into five regional divisions and then into local markets.
The annual savings will kick in from financial year 2016 and there will be a £100m restructuring charge. Diageo said it was too early to say how many jobs would be affected.
As emerging markets grow in scale more companies are mulling how best to handle corporate services which have in the past decade or so been handled at regional level, with, for example, each country in a region possibly requiring only a couple of marketing executives.
Sukand Ramachandran, London head of operations practice at Boston Consulting Group, said: “Now companies are actively growing these markets and volumes have changed, so the question is asked: is my region adding value?”
Procurement, logistics and distribution is paramount in the drinks industry – brewers joke that they are in the business of logistics rather than beer.
Regulation, geography and infrastructure also play a part. Mr Ramachandran said that in the service sector, where regulations drive the need for controls on local countries, the regional role remains important.
In large countries with remote regions companies are being more creative in terms of distribution. In Brazil, both Diageo and AB InBev, the world’s biggest brewer, sell through branded bars. In the US, alcohol has to be sold via third-party distributors.
Scots jobs at risk as Diageo unveil restructure plans
Source: The Scotsman
By GARETH MACKIE
11 March 2013
DRINKS giant Diageo has unveiled plans to restructure its global supply operations in a shake-up that is expected to lead to job losses among its 4,000 employees in Scotland.
The maker of Johnnie Walker whisky and Smirnoff vodka said the overhaul, which is aimed at giving local management more responsibility in balancing supply and demand, is designed to save £60 million a year.
Diageo, headed by chief executive Paul Walsh, said the move will lead to one-off costs of about £100m as responsibility for local operations transfers to the group’s 21 “key” markets, and regional supply structures are reduced.
While a spokesman acknowledged that some jobs could be at risk as a result of the review, he said it was too early to tell what the impact will be.
He added: “Further work will be required to establish the exact nature of the reorganisation but there is likely to be some impact on employees.
“Therefore, as decisions are made, these will be shared with our employees and their representatives first and foremost.”
Unite’s national officer for the drinks industry, Jennie Formby, said the union noted yesterday’s announcement with “some trepidation” as it follows Diageo’s decision in 2009 to close its Johnnie Walker bottling works in Kilmarnock and the Port Dundas distillery in Glasgow with the loss of about 850 jobs.
She said: “Workers and communities are still smarting from the brutal decision to close those sites to cut costs. We will be looking for early assurances from management that our members won’t pay the price for this restructuring.”
Diageo said the shake-up of its supply operation, which spans the purchasing of raw materials and services through to production and distribution, follows a review of its entire operating model two years ago and is a result of its “increasing presence” in fast-growing markets across Africa, Asia, eastern Europe and Latin America.
These regions accounted for some 42 per cent of Diageo’s net sales during the first half of its financial year, pushing up demand for Scotch brands such as Buchanan’s. However, sales of J&B fell by almost a third as demand eased in France and Spain. To overcome falling sales across western Europe, the group is looking to tap into growing demand from the burgeoning middle classes in emerging economies such as India, where the alcohol sector is predicted to expand by 15 per cent annually over the next five years.
Last year, Diageo agreed to pay £1.3 billion for a majority stake in Vijay Mallya’s United Spirits, which owns Whyte & Mackay and has a 41 per cent share of the Indian market. It is also spending £23m to form a joint venture with Mallya to run United National Breweries’ traditional sorghum beer business in South Africa.
But the group surprised the market in December by pulling the plug on long-running talks to acquire Jose Cuervo, the world’s best-selling tequila, worth an estimated $3bn (£2bn).
It has since unveiled plans to develop its own tequila brand using a similar strategy to Ciroc, the premium vodka launched by the company in 2003 that enjoyed growth of 62 per cent last year.
The group did not give any timescales for the completion of its supply chain overhaul, which is expected to see some layers of management removed across its global operations.
It said: “An initial review has already established that efficiency-driven cost savings can be delivered which, together with savings from footprint changes and cost reductions in respect of the regional supply organisations, are expected to amount to approximately £60m per annum.”
Diageo PLC: Cost savings in greater supply
Stock Rating/Industry View: Overweight/Neutral
Price Target: GBP 21.50 (from GBP 20.40)
Price (08-Mar-2013): GBP 19.94
Potential Upside/Downside: +8%
Tickers: DGE LN / DGE.L
Self-help underpins a robust top-line: The announcement of an incremental £60m cost savings initiative – worth 30p per share – follows a review of Diageo’s Global Supply and Procurement operations and comes on the heels of the 2011 Operating Model Review. The latter itself underpinned the group’s medium-term growth targets of c.6% sales growth and 200bps of margin expansion by F14e. With the price/mix story in spirits and Diageo’s core markets like the US gathering momentum, top-line enhancement to come from the USL deal, positive FX tailwinds and after underperforming SABMiller and Pernod by 9% and 8% respectively YTD (GBP adj.), there is greater scope for relative upside in Diageo in the near term, in our view. Following the earnings adjustments outlined below, we increase our price target to 2150p.
Aligning Global Supply and Key Markets: Diageo is enhancing the alignment between its Global Supply and Procurement operations and its Key 21 operating markets. As a result, local operations will be transferred to in-market subsidiaries and overall regional operating structures will be reduced in scale and reach. The company expects this programme to result in £60m of annualised cost savings by year three (F16e). Diageo expects to incur £100m of exceptional restructuring costs as a result. With the group aiming to continuously offset half of its COGS inflation via savings/efficiencies, and with work on identifying cost saving opportunities ongoing, there is still scope for the £60m savings target to rise further, in our view.
Benefits back-end loaded: Given that production savings often take longer to deliver than straightforward headcount reductions, we expect the benefits to be back-end loaded. We estimate incremental savings of £5m in F13e, a cumulative £20m in F14e, £40m in F15e and £60m in F16e. We expect the bulk of these savings to come in Europe and North America. The programme should drive 1.5% earnings enhancement over time – equivalent to a present value per share of c.30p. We expect the associated P&L exceptional costs to be phased £25m in F13e, £45m in F14e and £30m in F15e.
Earnings upgraded by 4-5% for saving and FX: We raise our estimates to reflect both the additional cost savings and recent sterling weakness. We increase our F14e group EPS forecast by 4.4%, (0.5% to reflect the new cost savings and 3.9% for FX – USD/GBP 1.49). Our F13e estimates are up by 0.8% to 103.3p.
Great Britain has a drinking problem; U.S. shouldn’t import it
Source: Daily Freeman
By Glenn Gilbert / The Oakland Press
March 10, 2013
The movie “Field of Dreams” produced a notion that has embedded itself firmly in the American psyche:
“If you build it, they will come.”
Research has consistently shown that is the case with facilities that sell alcoholic beverages. The more stores there are, the more alcohol that is sold – with its attendant increase in drunken driving, underage consumption, addiction and crime.
But a national deregulation movement that some say has been promulgated by the alcohol industry has taken hold in some states and is being pushed in others.
Deregulation may make sense in fields like energy, because the resulting competition leads to lower prices. But lower alcohol prices will spawn more alcohol consumption. Is that really what we want?
Good grief, we could end up like Britain, according to Pamela S. Erickson, a national leader in the fight against excess access to alcohol.
The United Kingdom is an example of what can happen in a totally deregulated environment, she said.
“Today alcohol is available in bars, clubs and grocery stores 24 hours a day, seven days a week,” Erickson said. “They have little regulation, poor enforcement and lots of cheap alcohol. The also have an alcohol epidemic on their hands.”
Four large grocery chains control 75 percent of the market, Erickson said. Most use alcohol as a loss leader, as they engage in price wars.
“Drinking at home has increased,” she said.
And there has been a large increase in public disorder crimes around bars – vomiting, urination, fights and vandalism.
“England has a drinking problem,” wrote Tim Heffernan in the November-December issue of Washington Monthly.
“Since 1990, teenage alcohol consumption has doubled. Since World War II, alcohol intake for the population as a whole has doubled, with a third of that increase occurring since just 1995. The United Kingdom has very high rates of binge and heavy drinking, with the average Brit consuming the equivalent of nearly 10 liters of pure ethanol per year,” Heffernan wrote.
The United States is in comparatively better shape.
“A third of the country does not drink, and teenage drinking is at a historic low,” Heffernan wrote. “The rate of alcohol use among seniors in high school has fallen 25 percentage points since 1980. Glassing is something that happens in movies, not at the corner bar.
“Why has the United States, so similar to Great Britain in everything from language to pop culture trends, managed to avoid the huge spike of alcohol abuse that has gripped the UK? The reasons are many, but one stands out above all: the market in Great Britain is rigged to foster excessive alcohol consumption in ways it is not in the United States – at least not yet.”
One state currently considering deregulation, Michigan, has good control of the industry, said Mike Tobias, executive director of Michigan Alcohol Policy Promoting Health and Safety. Michigan’s system of regulations has succeeded in helping reduce problems related to alcohol use.
Since 1997, underage drinking has declined significantly as measured by the Michigan Youth Risk Behavior Survey.
The number of Michigan teens who had used alcohol was 68.8 percent in 2009, down from 81.9 percent in 1997 and below the national average of 72.5 percent.
Alcohol use before the age of 13 was 18.8 percent in 2009, down from 34.9 percent in 1997, and lower than the national average of 21.1 percent.
Binge drinking among teens affected 23.2 percent of them in 2009, down from 32.4 percent in 1997 and below the national average of 24.2 percent.
With statistics like these, why would Michigan want to change its approach with legislation that would diminish verification requirements for alcohol license applicants, increase the number of resort liquor licenses and allow beer to be shipped directly to consumers? Why would any state?
51 Die in Libya From Homemade Alcohol
Source: ABC News
By ESAM MOHAMED
March 11, 2013
Libya’s Health Minister says 51 people have died over the past three days from drinking homemade alcohol that contained poisonous methanol.
Minister Nouri Doghman says another 330 people were injured from the alcohol since Saturday.
He said Monday that some were blinded, while others went into comas or suffered kidney failure.
He says the dead range in age from 19 to 50 years old, and that Algerians and Tunisians are among the dead.
The sale and consumption of alcohol is banned in the conservative North African country. Like illegal drugs elsewhere, some Libyans turn to black market dealers to buy alcohol, which is often cooked in people’s homes or deserted farms.
The ministry says it is investigating the case.
Two years too long? Pernod Ricard’s lengthy CEO succession is a long wait between drinks
12 March 2013
Two years too long? Pernod Ricard’s lengthy CEO succession is a long wait between drinks
Succession planning is a good thing, but sometimes you wonder if it’s overdone. Just ask Alexandre Ricard. Ricard was 40 last year when he was named chief executive-designate of Pernod Ricard, France’s biggest distiller. It was a great gig to land, but he won’t take the job for another two years.
It makes things awkward because way in advance of taking the job, people wonder what you’ll do differently when you’re in charge. It’s a question journalists like to ask. It can be more awkward when they ask and you’re sitting next to the current CEO – to whom you report and will do so for the next couple of years.
Of course, you don’t become CEO-designate of a company like Pernod Ricard if you’re not someone who can parry a journalist’s questions with ease.
“It’s probably a question for another couple of years’ time,” Ricard said without missing a beat. “But in the meantime, and I think the best way of saying it is that the current strategy of Pernod Ricard under Pierre’s leadership is delivering, clearly.”
Sitting right next to incumbent CEO Pierre Pringuet in a joint interview last week, Ricard then proceeded to go through the details of that strategy.
“I don’t see why this would change,” he said. “These have been the clear drivers of our value creation and our success, our collective success.”
Ok, so he’s a team player, and a smooth one at that, speaking American-accented English that he no doubt perfected while earning his MBA at the University of Pennsylvania’s Wharton business school.
But you do get a hint that the next man at the top, who will only ascend in June 2015 when Pringuet retires, will be more toned-down in style. If you ask his boss Pringuet how the company’s flagship wine Jacob’s Creek – traditionally seen as a middle-ground drop – can compete in the race to China’s fast-growing premium wine market with rival Penfolds’ wide suite of top-label wines, he gives a blunt response.
Pringuet, a former French civil servant, is disdainful of comparisons of his company with Penfolds owner Treasury Wine Estates.
“The answer is very simple,” he says. “Look at the P&L and look at the company which is profitable and I think you have the answer to your question.”
Hubris is a great tool, but can leave you open to attack. Pernod Ricard last month reported a 5.8 per cent increase in its half-year operating profit to ?1.46 billion ($1.85 billion), while over the same period, TWE’s earnings before interest and tax fell 20 per cent from a year earlier to $73.4 million. Of course, over the past year, the French company’s 26 per cent share-price rise is nearly doubled by TWE’s 48 per cent gain.
At this point, Ricard steps into the conversation, dispensing diplomacy
“Just to add – one of the key strategic pillars to our strategy is premiumisation,” he says. “We have embarked on a premiumisation strategy a few years ago which is clearly delivering results – if you look at our P&L indeed. Both in terms of driving price by investing behind the brands, Jacob’s Creek being the key one, by driving trade-up into our reserves portfolio – Jacob’s Creek Reserves – by driving up as well into our higher marques such as St Hugo. And this is something that we’re doing across all markets.”
Pringuet sees less need to be diplomatic. He goes back to his point.
“And making profits.”
Ricard’s anointing last year happened a bit hurriedly. He had long been seen as the heir-apparent, but the company behind Absolut Vodka was plunged into crisis in August with the sudden death of chairman Patrick Ricard, Alexandre’s 67-year-old uncle. Patrick Ricard, the chief executive for 30 years until he handed over to Pringuet in 2008, mattered. He was the man who had built up the business started on the kitchen table of his father’s house, into a global giant. In 2006, Fortune magazine named him European businessman of the year. In 2007 he received France’s highest honour, the Legion of Honour.
Less than two weeks after his death on August 17 – reportedly from a heart attack – the company stated that Alexandre Ricard would step up from his role of managing director for distribution to that of chief operating officer and deputy CEO. The decision, Pringuet says, had already been made “a couple of years ago” and all that happened after Patrick Ricard’s death was that the announcement was brought forward from the November annual general meeting.
Ricard now has a couple of years to polish his style further before restoring family leadership to the company founded by his great uncle in 1932 (Pernod, with which it combined in 1975, was established in 1805).
But perhaps he won’t be so different to Pringuet after all, if family history is any guide. In 2002, the New York Times reported that after the company had bought Glasgow’s Chivas Regal, the UK’s Guardian newspaper stated: “The one challenge which Pernod is yet to overcome is to teach the British to enjoy a shot of Ricard (pastis) each evening”. Patrick Ricard’s response was suitably glib: “If one day we find a way to convince you, we will do so. You could always improve your taste.”
Maybe Alexandre Ricard is just biding his time – and his tongue. It would certainly make the next two years easier.
Disclosure: The writer holds TWE shares.
Strength in craft beers being helped by their higher average on-premise checks
March 12, 2013
According to GuestMetrics, based on its POS database of over $8 billion in sales, the strong performance in craft beers is likely being at least partially driven by the higher average check by patrons who purchase craft beers, making the craft segment more attractive to restaurant operators.
“In analyzing the average check amount across the two billion checks in our system for table service restaurants and bars, the average check for craft beers is significantly higher than most of the mainstream beer brands,” said Bill Pecoriello, CEO of GuestMetrics LLC. “Based on our data, when a patron orders a craft beer, the average check is around $80, which is well above that of the largest beer brands. In contrast, the average check is $63 when a Budweiser is ordered, $62 for Coors Light, $60 for Miller Lite, and $52 for Bud Light. Perhaps surprisingly, the average check when a Yuengling is ordered is only $55, so while we believe there is still plenty of room left for Yuengling to grow as it expands its distribution footprint, there is risk that restaurant operators don’t push as hard on selling the brand given its lower average check size.”
“At the other end of the spectrum, there are several large brands that actually have average check amounts above that of craft beers. Heineken came in at the top at $89, followed by Stella Artois at $84, Guinness at $83, and Sam Adams at $81,” said Peter Reidhead, VP of Strategy and Insights at GuestMetrics. “And to round out the picture of the top dozen brands, Corona Extra, Blue Moon, and Dos Equis all had average check amounts below the average for craft beers at $72, $67, and $65, respectively.”
“When we factor in the average time spent at the restaurant or bar for each transaction in minutes, the story does not change materially. The average check amount per minute spent in the restaurant/bar for craft beers is around $1.00, while that of Heineken remains at the top of the group at $1.25, and Miller Lite, Bud Light, and Yuengling have the lowest average check per minute at $0.76, $0.71, and $0.65, respectively,” said Brian Barrett, President of GuestMetrics. “As restaurant operators become increasingly sophisticated in the age of big data, we believe viewing the total amount of money spent on each check depending on which beer brand is ordered will ultimately help the operators optimize their overall sales and profits.”
About GuestMetrics LLC
GuestMetrics, LLC is revolutionizing how the hospitality industry operates. Despite the dawn of the Digital Age having begun more than three decades ago, the hospitality industry essentially functions the same way it did centuries before. GuestMetrics has cracked the code by collecting $8 billion dollars in sales from over 250 million checks from tens of thousands of restaurants, and turning billions of raw transactions into intelligible data that is fundamentally transforming the business operations of everyone from the independently-owned bar/restaurant on the corner, to multi-national chains, to the food & beverage companies that supply them. Please visit www.GuestMetrics.com for more information and to arrange for a free demonstration.
CEDC Jumps in New York on Debt Swap as Kaufman Cuts Stake
By Halia Pavliva
Mar 11, 2013
Central European Distribution Corp. (CEDC), Poland’s second-biggest vodka maker, rose the most since the end of January in New York after a shareholder reduced his stake and the company announced a new debt swap offer.
CEDC, as the maker of the Bols, Zubrowka and Zelyonaya Marka brands is known, surged 13 percent to 45 U.S. cents by the close of trading in New York, trimming this year’s tumble to 79 percent. Trading volume was almost four times the average of the past tree months, according to data compiled by Bloomberg.
The new offer reflects terms agreed by CEDC’s biggest shareholder Roust Trading Ltd. and a steering committee of holders of 30 percent of the company’s 2016 notes, according to a statement dated March 8. The plan would give Roust 85 percent of CEDC equity and require other holdings to be reduced to 5 percent. Investor Mark Kaufman, who backed another restructuring plan and has criticized CEDC management, sold about 3.5 million shares last week, cutting his stake to below 5 percent, according to data compiled by Bloomberg and a filing.
“The company will now have a better chance to survive as Mr. Kaufman is selling shares,” Krzysztof Kuper, an analyst at Ipopema Securities SA (IPE) who rates CEDC’s U.S. stock hold, said by phone from Warsaw. “Chances for a successful debt restructuring are now higher.”
CEDC, based in Warsaw, erased about 50 percent of its market value in 2012 amid slumping sales, rising liabilities and management transitions. Revenue fell 8.7 percent in the third quarter to $191.3 million, after shrinking in the previous two quarters, data collated by Bloomberg show. Chief Executive Officer William Carey stepped down in July.
The restructuring aims to reduce CEDC’s debt by as much as $635 million. The company’s shares in Warsaw ended the day 5.8 percent higher at 1.65 zloty, or 52 cents.
Bidders circle £1bn bid for Lucozade and Ribena
A £1bn bidding war for Lucozade and Ribena is bubbling up with a raft of private equity firms from Blackstone to Permira considering potential offers for the brands.
Source: Daily Telegraph
By Helia Ebrahimi, Senior City Correspondent
11 Mar 2013
GlaxoSmithKline chief executive Andrew Witty signalled last month that he wanted to offload the brands, which he described as two of Britain’s most iconic home-grown drinks.
An auction is not likely to be launched for some months, but buy-out firms have begun running a rule over the division.
Sources suggest that one potential scenario could see Blackstone team up with Lion Capital, the firm behind GHD and All Saints, with ex-Barcadi boss Javier Ferrán taking the role of chairman. The two firms worked together on the buy-out of Orangina before selling the company to Japan’s Suntory in a ?2.6bn (£2.3bn) deal. However, Lion is currently restricted in the amount of money it can invest because of the limited amount of capital left in its fund.
Permira, KKR, Bain and CVC are also expected to have an interest. However, drinks-maker Britvic, which had been tipped as the most likely bidder, is thought to be constrained by the likely price tag – as well as potential competition issues.
Other potential suitors include corporate buyers like Suntory and Nestle, which would be able to leverage significant synergies from their global infrastructure network.
GSK has not yet appointed a bank to run the auction but insiders suggest consumer rainmaker Blair Effron at boutique bank Centreview is the most likely choice.
In February, Mr Witty said the brands’ combined sales were £750m but that they remained “poles apart” from the core strategy of GSK’s £26bn pharmaceuticals empire.
According to research from Nielsen, Lucozade was the second-biggest soft drinks brand in the UK last year, with two thirds of its sales home grown and the rest coming from Nigeria, Singapore and a fledgling business in China.
Kirin Brewery Co ramps up frozen beer launch (Excerpt)
By Andy Morton
11 March 2013
Kirin Brewery Co is to bring its frozen beer innovation, Ichiban Shibori Frozen Nama, to the world.
The Japanese brewer said the brand, which uses a machine to cover the beer with an ice-cold foam head, has been well received in tests in Hawaii, Shanghai and Singapore, and a global launch is lined up for this year. Markets will include New York, Los Angeles, Haiwaii, Florida, Shanghai, Hong Kong, Taiwan, South Korea, the UK and France, a Kirin spokesperson told just-drinks today (11 March).
C&C Group completes acquisition of Gleeson Group
11 March 2013
Ireland-based C&C Group said that it has completed the acquisition of M & J Gleeson and its subsidiaries.
C&C Group is a manufacturer, marketer and distributor of branded cider and beer.
The Group manufactures Bulmers, the leading Irish cider brand, Magners, the premium international cider brand, the Gaymer Cider Company range of branded and private label ciders and the Tennent’s beer brand.
C&C Group also owns Woodchuck and Hornsby’s, two of the leading craft cider brands in the US.
The Group also distributes a number of beer brands in the Scottish, Irish and Northern Irish markets, primarily for Anheuser-Busch InBev.
NABCA 20th Annual Legal Symposium – March 11, 2013 to March 13, 2013
NABCA’s 20th Annual Legal Symposium begins this evening with registration and networking.
On Tuesday, March 12, sessions begin at 8:30 AM with topics that include: The Three-Tier System: It Survive? Should it Survive?; 21st Amendment Litigation 2013: Commerce Clause, Antitrust and More; and Can the First Amendment Save Controversial Packaging. Concurrent sessions will be held in the afternoon. Topics to be discussed are: Alcohol Regulation by Demographics; Using Social Media to “Sell” Regulation; Responsibility Success Stories; Revising State Regulation; Ethics: Cowboy Ethics (for Regulators) and Ethics: The Organization as Client (for Lawyers).
On Wednesday, March 13, there will be three main sessions: I-1183 + One; Alcohol Server Liability: The State of Play; and The FAA Act and Exclusion. The Legal Symposium will adjourn at 12 PM.
NABCA anticipates having a great symposium and looks forward to seeing all of the participants. Be on the lookout for summaries about some of the sessions via the Daily News Update, which we will send at the end of the day on Tuesday and in the late afternoon on Wednesday.
NABCA will also be Tweeting from the sessions and providing some updates via our Facebook page.
BOOKS: Kentucky Bourbon Whiskey, An American Heritage
BY TIM KNITTEL
March 11, 2013
I finished reading Kentucky Bourbon Whiskey, An American Heritage in two days and referenced it repeatedly over the next three. I think that qualifies as a ringing endorsement.
As a bourbon education professional, my usage of bourbon historian Mike Veach’s new book as a reference might be unusual. Or perhaps not.
Veach is generally considered to be the foremost bourbon historian in the world. He is associate curator of Special Collections at the Filson Historical Society in Louisville, Kentucky and an inductee into the Bourbon Hall of Fame. He regularly teaches classes on bourbon history and appreciation to sold-out crowds.
One of the special things about Mike Veach is that he leaves a trail of rare, unique and specialty bourbons in his wake. He opened two ‘very special’ bottles for the recent launch party at the Filson Society – a 1918 Old Crow and a 1955-56 Old Fitzgerald. (It may be no surprise that the history of both brands are covered at least in part in his book.) I was fortunate enough to get to try both. (I stood next to Mike with an empty glass and begged.) Someone asked him how he comes up with the old and rare bourbons. “People give them to me,” he said
This book has been in the works since 1991 when Veach was hired to curate the archives of the Stitzel-Weller distillery. Since then he has been fully immersed in bourbon’s history, working with several spirits companies and the Filson Society.
Kentucky Bourbon Whiskey is clearly intended to be an academic reference. It is published by the University Press of Kentucky and has citations and references like a thesis. But that’s just one face of it – it’s also a fascinating read.
The book traces the path of bourbon’s origin, growth, collapse, growth again, collapse again and final rebirth as the modern spirit now sweeping the world. This is the story of bourbon – how it was influenced by the development of America and how it influenced America back.
The story starts with the founding of the United States, weaves through many wars, the Industrial Revolution, Prohibition, the Great Depression, and concludes in the modern era. People may not be aware – and might not even have been aware at the time – but bourbon has been at the heart of many of the major social and government movements including the taxation system, food and drug regulation, marketing conventions, trademarks and more.
“The history of the bourbon industry is a rich one that mirrors the history of America. The Whiskey Rebellion reflects the troubles that the newly united states had coalescing under a federal government. The whiskey tax, which sparked the rebellion, was the first federal tax and prefigured all others, especially the federal income tax. The changes wrought by the Industrial Revolution can be seen as the modernization of distilling technology writ large.”
Bourbon’s history is as much lore and legend as its fact and fiction, and maybe moreso. Veach does an excellent job incorporating the legends into his history and analyzes each from a historical accuracy perspective as well as the influence legends had on consumers’ embracing or snubbing of bourbon at various times.
The book won’t help to settle bourbon legend disputes because, as Veach writes, “the fact is that we may never know the identity of Kentucky’s first distiller.” Veach provides excellent reason as to why it probably wasn’t Evan Williams, Elijah Craig or anyone else whose name we knew today. But that doesn’t diminish the fun of telling those tales!
Kentucky Bourbon History is a fascinating exploration for anyone interested in U.S. history, Kentucky history and, obviously, bourbon history. For bourbon professions this is a must-read. For bourbon enthusiasts, it will top the want-to-read list.
Oregon wine industry heats up with talk of ‘significant’ California investment
Source: The Oregonian
By Dana Tims
March 08, 2013
The wine-grape factory that is the Eola Hills is buzzing with word that a major California wine producer is buying vineyards in the area with an eye toward significant future investments.
If it’s true, the infusion of cash and acclaim could represent the biggest bump for Oregon’s $2.7 billion commercial wine industry since Robert Drouhin startled the wine world a quarter century ago by being the first French investor in the state’s viticultural future.
Wine writers for the past two weeks have been chasing information that Jackson Family Wines, the Napa-based owner of Kendall Jackson, LaCrema and other prominent brands, has bought, or is in the process of buying, two large vineyards in the Eola-Amity Hills area of Polk County.
The two parcels, totaling 460 acres, were developed by Premier Pacific Vineyards in the mid-2000s, before the Napa-based company sold its Oregon holdings.
Richard Wollack, Premier Pacific’s managing trustee, said this week the stories are true.
“It appears that Kendall Jackson bought two of the properties that we developed,” he said. “And they are really good properties. They were developed with the state of the art.”
Wollack said Oregon’s ability to produce pinot noir grapes — a preferred varietal of Jackson Family Wines’ LaCrema label — explains the growing interest in doing business here.
“We believe that Oregon is America’s Burgundy,” he said. “Probably the best indication of that is that you can’t go to a decent restaurant anywhere in the country that doesn’t have an Oregon pinot noir on the wine list. Ten years ago, that would have been unheard of.”
Aimee Sands, Jackson Family Wines’ senior communications manager, declined Friday to address specifics, saying, “We do not discuss rumors or speculation nor do we share details around grape purchases or wines prior to release.”
She added, “However, as specialists in cool-climate varietals we’ve always focused on exploring the finest growing regions for Pinot Noir and Chardonnay, and the Willamette Valley has an excellent reputation.”
Dundee winemaker Joe Dobbes, reached Thursday at a trade event in Chicago, said he has signed a contract with LaCrema calling for him to make a “significant” amount of pinot noir for that label from grapes harvested in Oregon last fall.
Dobbes said he could not comment, though, on whether the company has bought vineyards in the state.
“But if they decide to make a permanent play in Oregon, I think that’s a good thing to have a major serious producer with large distribution working here,” said Dobbes, whose company, Wine By Joe, has received two significant infusions of cash in the past year from Bacchus Capital Management, a San Francisco- and New York-based investment firm. “We’re still a young and fledgling industry, but clearly, the snowball is rolling downhill and it’s getting bigger.”
Ted Casteel, a partner in Bethel Heights Vineyard northwest of Salem, said one of the two targeted properties, a vineyard named Zena East, is part of a “necklace” of vineyards ringing the Eola Hills.
Casteel added that a close friend, whom he declined to identify, has been approached by Kendall Jackson executives.
“Several of them came up on private jets for a day and stated their intention of investing in Oregon,” Casteel said. “It looks to me as if it’s only a matter of time.”
Kevin Chambers, past president of the Oregon Wine Board and chief executive of Oregon Vineyard Services, has heard the stories, too. He is convinced something official is bound to break soon.
“It’s really the talk of the town,” he said. “There’s too much smoke for there not to be fire pretty close by.”
Celebrities uncork the wine business
Source: USA Today
March 10, 2013
Fergie, Drew Barrymore and even Brad Pitt and Angelina Jolie are launching their own blends.
Star-powered clothing lines are so vintage.
There’s a new trend bubbling up: celebrity sommeliers.
Fergie just released her Ferguson Crest libations, from the Santa Barbara winery she founded with her father in 2006. Drew Barrymore unveiled her Barrymore Pinot Grigio, which hails from the Triveneto area of Italy. And without question, the most famous oenophiles-to-be are Brad Pitt and Angelina Jolie, who are launching a rosé called Miraval from their French chateau (the wine sold 6,000 bottles via online orders within six hours Thursday) with whites to follow. It’s a passion project in which Pitt and Jolie “are intimately involved,” according to a statement Pitt gave to Bloomberg.
So what’s behind the surge in bold-faced oenophiles?
“My wines are about having a dream and making it come true,” Fergie says. “It’s something for a father and daughter to share together. It’s coming from the inside out. It’s not about having a huge business.”
Same goes for Barrymore. “I love wine, especially Pinot Grigio. It’s what I drink with my girlfriends,” she says. “It feels so right when you’re sitting around a table having food and wine. I really wanted to start with a wine I was familiar with myself. I wanted it to be something that’s really from my family. That’s my grandfather’s crest on the label. I wanted to honor the tradition of family.”
Fergie, too, says her potables come straight from the heart and are a reflection of her California-based upbringing. After three decades of teaching, her father retired, left Los Angeles and decided to get into the wine business.
“He wanted to retire and move north and grow grapes. It was really special. And we thought, ‘Let’s not only bottle this for ourselves, let’s share it.’ I was always a big wine person. When I was little, my uncle would have these wine-tasting parties at our house. I learned that wines are about the smells and the experience as opposed to just chugging something to get drunk.
“It’s a social thing and a way for families to get together. It’s something I learned about and was excited about. Being a musician, wine and a good concert go hand-in-hand. Who doesn’t put on a nice record and have a nice bottle of wine?”
Famous names with booze brands are nothing new. Sammy Hagar has had Cabo Wabo tequila since 1996, and Willie Nelson is the proud name behind Old Whiskey River bourbon. But the latest crop of grape purveyors is decidedly A-list, with thriving careers independent of their ventures. And their offerings are equally impressive: Barrymore’s Pinot Grigio is sold at the upscale Eataly wine emporium, for example, where inventory is tightly curated.
She plans on launching more wines down the line, maybe one every few years, but she is in no rush.
“I want this to be the first in a curation of wines from around the world,” she says. “I get to go and search for them and have these great adventures. I want to pick great, great wines. This was a great way to start. It took me three years to get it off the ground.”
If you’re unsure about trying one of the wines, just think about the star responsible for the bottle and what he or she represents.
“Looking at the celebrity whose name is behind it would help,” says Gwendolyn Osborn, Wine.com‘s director of education and content. “A reality TV star may not be as focused on quality as they are on brand image, where a serious movie artist may be more likely to invest more into producing something of substance. When you taste and even read about Drew Barrymore’s entry into wine, she had a goal for taste and how it was to represent her. I liked it! I thought it was fun and fruit-forward and lively.”
Brad Pitt and Angelina are launching a rosé called Miraval from their French chateau. Already, it’s a hot seller online.
As for the Jolie-Pitts: “They will probably also make a quality product. They have partnered with the best in the region, they have a tie to the place where they are making the wine, and I think they have a true goal to have this wine reflect its place and its history,” Osborn says. On Thursday, the wine sold for ?105 ($139) for a six-bottle case or a little more than $23 a bottle, the Associated Press reported.
Miraval Cote de Provence is the first wine to be sold from a vineyard owned by Brad Pitt and Angelina Jolie.
When it comes to celebrities and whatever outside brands they launch, there has to be a clear connection between the person and product for a chance at long-term survival, never mind any guarantee of success.
“It has to be an authentic fit,” says Jessica Stark, one of the powers behind Pauly D’s brand of REMIX cocktails. “We are not going to hook a celebrity up to a liquor brand or create a liquor brand for a celebrity just because it seems to be the hot item of the moment. There has to be a sustainability factor between the celebrity and the product. If it’s not there, you are sunk.”
Antinori opens to the public for first time
Source: the drinks business
by Lucy Shaw
11th March, 2013
The wine cellars of renowned Tuscan estate Marchesi Antinori have opened to the public for the first time in the company’s 628-year history.
After seven years of planning, the family-owned company has opened the Marchesi Antinori Chianti Classico Cellar – a state-of-the-art facility in the Tuscan village of Bargino.
The facility, in Chianti Classico, offers guests the chance to explore the family’s 628-year winemaking history and their centuries-old art collection.
In addition, visitors will be given tours around the new cellars, designed by leading Italian architect, Marco Casamonti.
Set among olive groves, vineyards and oak trees, Casamonti designed the cellars to blend in harmoniously with the Tuscan landscape.
The majority of the expansive site is underground, concealed within a hill. From the outside, only the winery’s restaurant terrace overlooking the vines is visible.
The project, including a restaurant, auditorium, museum, book shop and wine shop, was masterminded by the 25th and 26th Antinori generations.
Dotted throughout the building are sculptures by contemporary artists specifically commissioned for the space.
The entire Antinori portfolio will be available for sample in the tasting room.
The ?20 admission cost includes a three-wine tasting, with the more expensive and rare wines like Solaia and Tignanello available to taste at an additional cost.
The site is open daily from 10am-4pm, with the restaurant expected to open for business in the next few weeks.
Antinori is credited for helping to kick start the “Super Tuscan” revolution in the 1970s with Tignanello, made from Sangiovese, Cabernet Sauvignon and Cabernet Franc.
‘Stupendous’ Vega Sicilia collection goes under the hammer
by Richard Woodard
Monday 11 March 2013
A ‘stupendous’ selection of Vega Sicilia wines shipped direct from the legendary producer’s cellars is to be auctioned by Sotheby’s in Hong Kong early next month.
Among the lots in the Sotheby’s sale at the Hong Kong Convention and Exhibition Centre on 4 April is a vertical of 22 magnums of Vega Sicilia Único, including vintages from 1970 to 1999.
The lot, which comes from the personal collection of managing director Pablo Álvarez, is expected to fetch HK$95,000-160,000 (US$12,250-20,600).
There are 234 Vega Sicilia lots in total, including 42 vintages of Único from 1941 to 2002 in multiple formats – with one lot of six bottles of the 1942 estimated to sell for HK$80,000-120,000 (US$10,000-15,000).
The sale also features the winery’s Reserva Especial and Valbuena No. 5 bottlings, as well as group wines Alión from Ribera del Duero, Pintia from Toro and Tokaji Oremus from Hungary.
Describing the collection as ‘stupendous’, Serena Sutcliffe MW, international head of Sotheby’s Wine, said: ‘Vega Sicilia is \a wine that has “soul”, with its own personality, honed over the years while, at the same time, it is a true reflection of its region, climate and the area’s oenological traditions.’
The sale, comprising 620 lots expected to raise a total of HK$14.8-21.2m (US$1.9-2.7m), also includes fine wines from Bordeaux, Burgundy, the Rhône Valley and California.
It comes the day after Sotheby’s stages the Asian leg of its auction of wines and memorabilia from famed Spanish restaurant El Bulli, and the eleventh part of the sale of The Classic Cellar From A Great American Collector.
Pennsylvania: State Lawmakers Tackle Liquor Sales
Source: CBS Philly
By Tony Romeo
March 11, 2013
State lawmakers return to Harrisburg today after a break for budget hearings, and members of the State House will find the privatization of liquor sales sitting on the front burner.
The odds are shrinking that any liquor privatization plan and the complete elimination of state stores may clear the legislature.
Last week, the majority leader of the House signaled that he wouldn’t take a hard line on that issue and a few days later, at an event in Gettysburg promoting his liquor plan, Governor Corbett indicated the same.
The governor says he still prefers the entire elimination of state stores.
Governor Corbett says, “we can’t just do it half way.”
Corbett also indicated he would not rule out consideration of an alternative plan sent to him by the legislature.
Mr. Corbett says, “I’d be foolish to say ‘no’ at this point in time, wouldn’t I?”
The House majority leader, meanwhile, says a committee vote on a liquor bill is expected next week, and a floor vote could come later that week.
Texas: Brewers, distributors said to reach compromise on beer legislation
Monday, March 11, 2013
A long day of negotiating has yielded a buzzer-beating compromise that could lead to passage of the most significant legislation affecting the beer industry in 20 years, report Scott Metzger and Rick Donley in Austin.
“I feel good,” said Metzger, the Freetail Brewing Co. founder who has been negotiating on behalf of the Texas Craft Brewers Guild. ” . We’ve come a long, long way from the beer bills of the past.”
Metzger, whose San Antonio brewpub would be able to expand dramatically with passage of one of the bills, said an agreement in principle was reached after hours of talks among the Brewers Guild, the state’s major distributor groups, major beer companies and Open The Taps consumer organization.
Final language is being prepared and Metzger said an announcement could come within 24 to 48 hours.
Donley, president of the Beer Alliance of Texas, said the talks – under pressure to meet a 5 p.m. deadline – created a “framework” for getting the bills passed.
“I would say the percentages went dramatically up,” he said.
Both men declined to provide details of the agreement, but Metzger said it scales back Senate Bill 639, a late addition to the legislative mix that was supported by the Wholesale Beer Distributors of Texas, and makes only minor tweaks to Senate Bills 515-518, the package favored by the small brewers. The latter bills would, among other things, allow small brewers to sell a limited amount of beer directly to consumers for on-premise consumption and would allow brewpubs like Freetail to package some of their beer for sale in outside retail accounts.
“Obviously, everybody gave something,” said Donley, who had spoken out strongly against SB 639. He said the compromises will be good for the three-tier system in Texas and for the state’s burgeoning number of craft brewers.
For more specific background on the bills and the legal wrangling to date, read this, this, this and this.
Metzger said the legislation, if passed, would be the most significant for the industry since the bill authorizing brewpubs in 1993.
He expressed thanks to state Sen. Leticia Van de Putte, D-San Antonio, who led a year-long series of pre-session talks to iron out differences between stakeholders; state Sen. Kevin Eltife, R-Tyler, who sponsored SB 515-518; and state Sen. John Carona, R-Dallas, who chairs the Business and Commerce Committee and who filed SB 639.
Carona last week ordered the various interest groups to come up with a compromise following a committee hearing in which his bill was lambasted by a string of pro-business groups. He gave a 5 p.m. Monday deadline and threatened to delay the legislation if it was not met.
Washington: Privatization of liquor industry hurting small Washington liquor stores
Written by Associated Press
Bonnie Roulstone’s business thrived when the state controlled the liquor business, and is fighting to survive now that it’s out.
She’s watched sales at her Clearview Spirits and Wine store plummet as competitors proliferate and new rules wrought by the voter-ordered privatization of the booze industry take root.
“It’s very questionable if I can keep going,” she said of the three-year-old store that operated under contract with the state before the change. “I would have had to (close) if I didn’t have other resources.”
She expected the cash register to ring less often when the state stopped selling hard liquor last June, just not this much less.
“There’s more competition. That’s what this was all about. I understand,” she said. “Coming out of the gate I knew I would lose 30 percent of my walk-in customers who can go get their liquor at the grocery store. I planned for that.”
What she, owners of other contract stores like her and buyers of state-owned stores through auction didn’t expect is a requirement that they charge a 17 percent fee on sales to bars and restaurants.
That rule cost her significant business as restaurateurs switched to buy from distributors who are not required by the law to impose the fee. Now she’s joined an alliance of small and large retailers, including Costco, to get lawmakers to erase the fee.
“I feel I can compete with anyone if I have a level playing field,” she said. “Right now the field is not level.”
She felt confident enough in the months after Initiative 1183 passed in November 2011 to set about opening a second store in Monroe. It is larger and she stocks a greater number and variety of craft distilled spirits, handcrafted beers and wines.
She knows it is a risky venture but she’s looking for privatization to pay dividends in much the way a state-run system did before.
“I hope that the niche we’re going after will be successful,” she said. “I think it’s going to come down to a few specialty stores and a lot of big-box retailers. I hope that we will be in the business.”
Voters overwhelmingly booted the state out of the liquor business when they passed Initiative 1183.
At that time, there were 329 stores in Washington — 167 state-owned and 162 contract — where you could buy a pint of vodka, fifth of bourbon or unique distilled spirit. And no matter which one you shopped at, the prices were the same.
Today, nine months after the law took effect, there are 1,428 places with licenses to sell spirits, a four-fold increase. Snohomish County had 25 stores before the initiative and, as of last week, 157 licenses to sell hard liquor had been issued, according to the state Liquor Control Board.
Yet while customers celebrate more places to shop, they are unhappy prices are mostly higher than when the government ran the industry.
“The consumer got shafted,” said state Sen. Mike Hewitt, R-Walla Walla, who is in the middle of talks about changes in the law. “It is very unlikely the prices will ever come back down to where they were.”
Backers of the initiative said it’s too soon to draw such conclusions because there is more that can be done to increase competition and lower prices.
“We have to see the market fully develop,” said Julia Clark, government affairs director for the Washington Restaurant Association. “It’s starting to work. Anecdotally I do hear prices are falling for some of our members.”
Opponents of Initiative 1183, however, are in a bit of an I-told-you-so mood.
“The promise of convenience has been borne out,” said John Guadnola, executive director of the Association of Washington Spirits and Wine Distributors. “The promise of lower prices has turned out be completely false.”
Not every liquor retailer is cashing in on privatization.
Twenty-nine stores have closed since June 1, according to the state. This includes 14 former contract stores and 15 stores auctioned off by the state. The tally includes stores in Everett, Edmonds and Mukilteo.
Those closures are providing fodder for a debate in Olympia on whether to do away with the 17 percent fee imposed on sales from retailer to restaurant.
Right now, in the battle for the business of restaurants, distributors have an advantage. Under the law, distributors pay a 10 percent fee on liquor sales to retailers, like Roulstone, as well as restaurants. Retailers must charge a 17 percent fee on top of the distributor’s fee. As a result restaurants don’t shop at the stores to avoid that added cost.
On one side is an alliance of contract store owners, major grocers and the Washington Restaurant Association pushing for eliminating the fee. Costco, which wrote I-1183 and spent millions of dollars getting it passed, is part of it, too.
They contend the state interpreted the law wrong. Eliminating the fee, they say, will help liquor stores compete with distributors and possibly offer lower prices for some types of booze.
“That 17 percent fee was never contemplated in the initiative,” Clark said. “We’re not able to realize that competition envisioned in Initiative 1183 because restaurants are constrained to buying from primarily two large distributors that control 95 percent of the market.”
On the other side are suppliers and distributors of spirits that contend the plain language of the initiative requires the fee. Young’s Market and Southern Wine and Spirits, the two large distributors referred to by Clark, are in the association led by Guadnola.
In the middle is the Liquor Control Board whose staff gave signals early in the rule-making process that the fee might not be required on all retail-to-retail sales. In the end they did require the fee across-the-board.
Owners like Roulstone said the state pulled the rug out from under them because they counted on sales to restaurants in their planning and ended up losing that business. Several, including Roulstone, sued the state on the issue.
“We are totally noncompetitive now for the restaurant business,” Roulstone said.
Agency officials responded publicly last June.
“The board’s rulemaking was based on its own interpretation, with advice and counsel of its assigned senior assistant attorney general. It was fully vetted as the soundest legal interpretation,” according to a statement issued in June.
“The truth is that the price of liquor is higher because of 10 percent fees at distribution and 17 percent at retail that the plaintiffs themselves drafted and voters approved in 2011. The taxes are the exact same spirits and liter taxes customers have paid for many years,” it read.
Bills introduced in the House and Senate deal with the fee in slightly different ways.
House Bill 1161 erases the fee immediately on sales to bars and restaurants by any retailer, regardless of size. Senate Bill 5644 would end the fee only for owners of contract stores and former state stores; major grocers and retailers would continue paying it.
If the fee is eliminated, the state would collect between $4 million and $5 million less in revenue for the 2013-15 budget. That’s according to fiscal analyses of the bills.
Costco prefers the House bill but will not oppose the Senate version, said Costco senior vice president Joel Benoliel.
“It is not enough. Politically it’s probably what they can get done,” Benoliel said. “They certainly ought to get that done.”
Guadnola said his members are “absolutely OK” with exemptions for the small stores but questioned the need for getting rid of it for every retailer.
“Costco really needs a level playing field,” he said sarcastically.
Neither bill has come up for a vote. Passage won’t be easy. Under state law, an initiative can only be changed in the first two years after its passage by a supermajority of the Legislature.
“I think we will end up somewhere between the House and Senate bills,” said Rep. Cary Condotta, R-East Wenatchee, whose represented his caucus in hours of meetings on the bills.
Rep. Cindy Ryu, D-Shoreline, who said she does not drink, sponsored the House bill to help create a “totally open market” for consumers.
“They should care about this (debate) because if you are an imbiber you want all the various places to get your poison of choice,” she said.
Maine: LePage pushes for liquor deal
Source: Morning Sentinel
BY JESSICA HALL
Gov. Paul LePage delivered the opening testimony Monday during a legislative hearing on bills dealing with the future of the state liquor contract and potential ways to address $184 million in Medicaid debt to the state’s hospitals.
“I have a plan to pay back the hospitals and make the liquor business more competitive with New Hampshire,” LePage told the Committee on Veterans and Legal Affairs. “I am very frustrated. … We must make the right decisions and we must pay our bills.”
The governor spoke just moments after Democratic leaders introduced an alternative plan to repay hospitals at a State House news conference. The Democrats, who control the Legislature, suggest combining the debt settlement with an expansion of Medicaid and other health-care related measures, in what party leaders called a more comprehensive approach.
LePage has offered an emergency bill that would use income from future liquor sales to pay hospital debt. He plans to issue bonds that would be repaid with future liquor sales.
LePage has promised to veto every bill that crosses his desk until his proposal passes. Once that happens, he said, he would advance $105 million in voter-approved bonds supporting infrastructure needs such as transportation and clean water.
If Maine settles its $184 million debt to the hospitals, the payment would trigger another $300 million in reimbursement to the hospitals from the federal government.
Another bill, from Senate Majority Leader Seth Goodall, D-Richmond, sets criteria that bidders on the liquor contract must meet, such as a down payment of up to $200 million.
“We may disagree on our approaches, but we agree with the governor. We need to pay back the hospitals. We must get the liquor contract right,” Goodall said in testimony on Monday.
The Maine Hospital Association testified in support of LePage’s proposal and said it did not speak in favor of or against Goodall’s new bill.
“We’re very happy to see there’s no controversy over using liquor revenue to pay the debt. We shouldn’t have to beg over an overdue bill,” said Jeff Austin, spokesman for the Maine Hospital Association.
When asked whether the $200 million upfront payment would squeeze out smaller bidders, Goodall said every publicly known bidder has the financial wherewithal to raise those funds. If a company can’t come up with the funds, it might not have the proper financial resources, he said.
“Cash is king in many negotiations,” Goodall said.
The hearing room was packed Monday, and so many people were waiting to testify that numbers were handed out, while others waited in overflow rooms. Testimony from about 45 people lasted about seven hours.
In 2004, Maine awarded a 10-year contract to operate the state liquor operations in exchange for a $125 million upfront payment that helped close a budget gap. The state also got a portion of revenue sharing, which last year came to $8.5 million. Gerry Reid, the head of the state’s liquor and lottery operations, estimated the state could get as much as $500 million over 10 years if a new contract is negotiated.
LePage’s proposal would outsource the management, inventory, warehousing and distribution of the liquor contract. The state also wants to lower the retail price of liquor to make Maine more competitive with New Hampshire, and pay higher commissions to agency liquor stores.
Reid said bottles under 750 milliliters and other items wouldn’t see their prices cut, to protect against overconsumption. Reid said small bottles can be tucked into pockets, which encourages consumption.
From mid-2004 through 2011, liquor sales totaled $864.7 million under the contract awarded to Maine Beverage Co., according to financial documents filed with the state.
Maine Beverage Co. previously said it was unlikely to bid on the new contract under the scenario proposed by LePage. Two potential bidders have emerged, Dirigo Spirit and All Maine Spirits. Reid said two other bidders also might bid, but they haven’t been named publicly.
“Nobody at Maine Beverage Co. believes a future contract would look like it did 10 years ago,” said Jim Mitchell, speaking on behalf of Maine Beverage Co. “The business is in a very strong position today. We can’t know how the business will do going forward.”
John Menario, vice president of All Maine Spirits, spoke against Goodall’s bill.
“Anyone who proposes legislation that delivers less than $450 million to the state is sticking it to the state of Maine,” Menario said. “If it were left to me, I’d let the governor get along with the RFP process.”
He objected to the nonrefundable application fee of $25,000 in Goodall’s bill, as well as the requirement for an upfront payment of up to $200 million.
Menario said his company could come up with that financing, if needed, but there would be interest costs involved.
He said that 10 years ago, Maine Beverage Co. delivered to the state “a pill that was sugar-coated cyanide that bought them control of the state liquor business. More than $330 million in profits left the state of Maine.”
Sixty percent of Maine Beverage Co. is owned by a New York private equity company, while the remaining 40 percent is owned by Massachusetts-based Martignetti Cos. All Maine Spirits was formed last year by six Maine residents for the purpose of bidding on the liquor contract.
Ford Reiche, president of Dirigo Spirit, said Goodall’s requirement of an upfront payment repeats the mistakes of the past by selling off liquor revenue to a company that writes a big check upfront.
Minnesota: Lawmakers consider tax increase on alcohol
Source: Post Bulletin
March 11, 2013
Two Rochester Democrats are considering a proposed increase in the state’s liquor taxes as a way to fund a drug court in Olmsted County.
A bill sponsored by Rep. Karen Clark, DFL-Minneapolis, would raise the taxes by 3.5 cents a glass on beer, 4 cents a glass on wine and 10 cents a glass on hard liquor. Money generated by the tax would go into an “Alcohol Health and Judicial Impact Fund,” with half the money dedicated to judicial and public safety costs and the other half to chemical dependency treatment. Rep. Tina Liebling, DFL-Rochester, is a co-sponsor of the bill.
“Liquor taxes have not been raised in a very long time, and we know that alcohol does a lot of harm in society, and it’s pretty clear that the amount of taxes we collect on alcohol doesn’t pay for the harm,” Liebling said.
But the measure faces strong opposition from liquor store owners, who say it would mean much higher costs for consumers. Under the bill, taxes on a 31-gallon barrel of beer would nearly quadruple, from $4.16 to $16.17. Ari Kolas, owner of Apollo Liquor, said those added costs will end up being passed to consumers. It could also hurt sales, with customers opting for cheaper products. He is also bothered by “the unfairness of singling out one or two beverages and a certain percentage of the population that drinks it.”
He added that as members of the Minnesota Licensed Beverage Association liquor store owners contribute money to fund education about the dangers of drinking alcohol. If lawmakers are going to boost taxes, he said, “We should have a more broad-based tax, instead of one on a specific industry.”
It’s been 26 years since lawmakers raised taxes on alcohol. The Minnesota House Taxes Committee agreed last week to consider including the provision as part of a larger tax bill. While the idea has the backing of some legislative Democrats, Gov. Mark Dayton has said he does not support raising taxes on alcohol.
For Olmsted County, the liquor tax could offer a way to pay for creating a drug court. The county has long sought funding for an additional judge to help handle the high volume of caseloads. One way to help make that happen would be to create a drug court that would be funded by the new tax. Rep. Kim Norton, DFL-Rochester, is sponsoring a bill to set up a local drug court and said she supports the alcohol tax as long as the money is dedicated for these kinds of uses.
“If I am going to vote for that, I want to see this drug court put in there,” she said.
But getting lawmakers to agree that money should be designated for a specific use could prove challenging. Rep. Greg Davids, the ranking Republican on the House Taxes Committee, said he is strongly opposed to the liquor tax and trying to dedicate the money for specific uses.
“If (Rep. Clark) wants to carry an increase on the liquor tax, that’s one thing. But we are not going to allow someone to come in with a tax increase for her pet programs,” he said.
The proposed tax increase would raise nearly $175 million for the state for fiscal year 2014 and nearly $200 million the year after that.
Four Daughters Vineyard & Winery’s winemaker Justin Osborne was deeply concerned when the liquor tax proposal was first announced. But he was relieved that the author has made changes to the bill to exempt small wineries like his in Spring Valley.
“This would actually help give us a competitive advantage,” he said. “We would also have an advantage over liquor stores and bars.”
Even so, he is generally not a fan of the idea of raising the alcohol tax and said it could lead to proposals to tax other things, like French fries to address obesity.
Rep. Tim Kelly, R-Red Wing, shares his opposition to the proposal.
“I just don’t understand why we want to dictate people’s behavior legislatively,” he said. “That is a very bad policy. I believe education is a much better form.”
Rhode Island: Editorial: Spirits for a patriotic spirit
Source: Brown Daily Herald
By Editorial Page Board
Monday, March 11, 2013
Rhode Island House Bill 5603 proposes any person 18 years of age or older currently serving in the United States military may purchase and consume alcoholic beverages in the state.
State representatives Thomas Winfield, D-Glocester, Smithfield, Raymond Hull, D-Providence and Raymond Gallison, D-Portsmouth, Bristol introduced the bill in the Rhode Island General Assembly Feb. 27. The rationale behind the bill is that if a person is old enough to volunteer for the military, that person should also be allowed to choose to drink alcohol. While we agree the ages for military service eligibility and legal drinking should be one and the same, this legislation raises concerns about our society’s drinking culture by establishing alcohol consumption as a sign of maturity.
The United States has had a national drinking age of 21 since 1984, making it the only western nation with a drinking age above 20. One of the chief concerns that motivated lawmakers to pass the National Minimum Drinking Age Act was the troubling trend of alcohol abuse by college students, with related concerns surrounding motor vehicle accidents and emergency room visits. The law is intended to bolster public safety by relying on a three-year age gap to distinguish between those considered mature enough to be thought of as adults and those who cannot physically or mentally handle alcohol consumption.
The problem with the drinking age is more about drinking culture than the age itself, which is somewhat arbitrary. At Brown, it seems easy to get away with underage drinking, with law violators often being allowed to pass freely when caught. But underage binge drinking represents a very real danger across almost all college campuses. This is why more than 100 college presidents are involved in the Amethyst Initiative, a movement launched in 2008 that calls for the reconsideration of the legal drinking age. The movement asserts that the current drinking culture encourages underage individuals to abuse alcohol on campus, rather than to responsibly consume it. Yet the Rhode Island General Assembly is considering enacting legislation that distinguishes between the underage people who serve in the military and those who attend college.
Serving in the armed forces is a sacrifice more than 1 million Americans are currently making. Those who serve are required to put their lives at risk in the line of duty. Electing to serve in the armed forces is certainly graver than choosing to drink an alcoholic beverage – and anyone who can volunteer for such a commitment should be allowed to consume such a beverage. But lowering the drinking age solely for those who serve implies a discrepancy in maturity between them and civilians – which in turn encourages young civilians to drink in order to establish their entries into adulthood.
Our government has a strong history of trying to give back to service members and veterans, through measures such as subsidized housing and the GI Bill. House Bill 5603 is another gesture from our government to the military – but it is has dangerous implications for our country’s drinking culture.
Utah: Senate moves to beef up fines for underage drinking in Utah
Source: The Salt Lake Tribune
By Lee Davidson
Mar 11 2013
The Senate moved Monday toward beefing up fines for selling alcohol to underage drinkers, along with numerous other tweaks to liquor laws.
It voted 24-1 to pass SB261, and sent it to the House.
Its sponsor, Sen. John Valentine, R-Orem, said the state has found that undercover youth who attempt to buy alcohol in Utah bars and restaurants are successful about 30 percent of the time.
“This is a failure of the system,” he said. “We have to make sure our restaurants get the message. I think they will get the message very quickly” with the bill.
It sets the mandatory minimum fine for selling alcohol to a minor at $2,500 for a first offense; $5,000 and a five-day suspension for the second; and $15,000 and a 14-day suspension for a third offense in an 18-month period.
Valentine said his bill tries to seek a balance between several recent moves to improve hospitality and the need to ensure that does not increase underage or other illegal use of alcohol.
It would also make several other tweaks to liquor laws, including:
. Adds an attorney to the Attorney General’s Office to prosecute alcohol violations.
. Allows small cities to permit a new bar on the location of an old one without waiting three years.
. Permits liquor and beer “flights,” tastings of multiple drinks, often with a theme. They were already allowed for wine.
New York: Judge strikes down New York City beverage ban
March 11, 2013
A judge on Monday ruled that a ban on sugar sweetened beverages served in containers larger than 16 ounces is invalid and cannot be enforced.
The ruling by State Supreme Court Justice Milton Tingling in Manhattan came down just one day before the ban was supposed to take effect. Tingling said he found the ban to be arbitrary and capricious.
“It is arbitrary and capricious because it applies to some, but not all food establishments in the city,” Tingling wrote in his decision. “It excludes other beverages that have significantly higher concentrations of sugar sweeteners and/or calories on suspect grounds, and the loopholes inherent in the rule including but not limited to no limitations on refills defeat and/or serve to gut the purpose of the rule.”
The National Restaurant Association was a lead plaintiff along with the American Beverage Association in filing the lawsuit that challenged the ban. At the time of the filing, the NRA argued that the ban was arbitrary and subjected restaurateurs to a standard many of its competitors, including groceries and c-stores, didn’t have to meet.
After the judge’s ruling, the NRA said his decision to strike down the ban was a huge win.
“This is a great victory, particularly for thousands of restaurant operators and industry suppliers serving New York City who would have experienced financial hardships had the ban been enacted,” said Dawn Sweeney, the NRA’s president and CEO. “We are extremely pleased that the judge recognized that the Board of Health exceeded its authority when it initially passed the ban.
“We look forward to working with public health officials to engage in a constructive dialogue that will have a positive and sustained impact on the people of New York City,” she added.
Had the ban been enacted, it would have prohibited restaurants, delis, stadiums and arenas, concession stands and food carts from selling sugar-sweetened beverages in containers above 16 ounces. Banned beverages would have included soda, sweetened iced tea, some smoothies and coffee drinks and lemonade.
The New York City Department of Health & Mental Hygiene enacted the regulation late last year, saying it would help curb the obesity crisis affecting New York City.
The city said it plans to appeal the judge’s decision.
“We plan to appeal the decision as soon as possible, and we are confident the board of health’s decision will ultimately be upheld,” said Michael A. Cardozo, corporation counsel for the NYC Law Department. “This measure is part of the City’s multipronged effort to combat the growing obesity epidemic, which takes the lives of more than 5,000 New Yorkers every year, and we believe the Board of Health has the legal authority – and responsibility – to tackle its leading causes.”