Liquor Industry News 4-4-13

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Franklin Liquors

Thursday April 4th News

U.S. Company on How to Go Broke Selling Vodka in Russia

 

Source: Bloomberg

By Beth Jinks

April 04, 2013

 

Going broke while dominating vodka sales in Russia and Poland may seem tough to do. A company founded by a Florida golfer, listed on Nasdaq Stock Market and until recently based in New Jersey, is almost there.

 

Unable to repay $258 million in bonds due last month, Central European Distribution Corp. (CEDC), which owns vodka brands including Bols, Zubrowka and Parliament and once imported Dom Perignon to Russia, is preparing to file for bankruptcy. Creditors will vote by April 4 on a restructuring plan that would hand CEDC to Russian billionaire Roustam Tariko, solidifying his control of the distiller and distributor he’s toyed with for years.

 

The company’s unlikely troubles show how timing and local knowledge are crucial. After almost two decades of success in Poland, CEDC expanded into Russia via acquisitions (CEDC) just as Poles began drinking less vodka and the Russian government raised taxes and costs to discourage alcohol consumption. The global financial crisis, a 37 percent collapse in Russia’s currency, and accounting errors that followed didn’t help either.

 

“If we had to do it over, we probably should have bought one company to see how it went, rather than buying three within six months,” CEDC co-founder William V. Carey, who resigned in July as chief executive officer, said in a phone interview from Warsaw, where he still lives. Russia’s “new regulations weren’t there when we invested, making it much more difficult to manage growth and profitability over the last three years.”

 

Cattle V. Beer

 

Carey, 48, a University of Florida economics graduate, had moved to Poland after unsuccessfully pursuing professional golf. He set up a company in 1990 exporting cattle, soon shifting into the more lucrative business of importing beer to Poland from brewers including Anheuser-Busch and Foster’s Group Ltd.

 

CEDC listed on the Nasdaq in 1998 after an initial share sale that funded expansion into wine and other liquor distribution, according to its website. It began manufacturing with the company’s 2005 takeover of a distillery and Polish vodka brand Bols. While its operational base was in Warsaw, CEDC maintained official headquarters in Mount Laurel, New Jersey, to manage its U.S. listing until closing the small office just weeks ago.

 

Revenue peaked at $1.65 billion in 2008, the year Carey bet heavily on Russia, acquiring stakes in three other liquor groups within months, and agreeing to buy the rest over time.

 

Spending Spree

 

Carey spent about $1.2 billion in cash, stock and other securities to acquire Russian Alcohol Group, the largest vodka producer in Russia with brands including Green Mark and Zhuravli; Copecresto Enterprises Ltd., owner of Parliament, a top-selling vodka; and the Whitehall Group, an importer of premium drinks to Russia including Moet champagne and Hennessy cognac.

 

Then the party stopped. As global debt and equity markets reeled and the ruble plunged, drinking habits were also changing. Russians consumed 17 percent less vodka in 2011 than they did in 2008, while Poles cut back by 7.7 percent, based on volume sales compiled by International Wine & Spirit Research, known as IWSR.

 

Poles developed a taste for wine, beer, whiskey and lower- alcohol flavored vodkas. Much of Russia’s decline was driven by the Vladimir Putin-led government’s efforts to restrain alcohol consumption by raising taxes and prices, controlling raw- material supplies, curbing sales and banning advertising — market changes that boosted costs more than fourfold, Carey said. It drove more Russians to the black market where as much as half of the vodka consumed there is purchased, IWSR estimates.

 

Restating Earnings

 

The company reported a loss of $1.3 billion for 2011, writing down $1.06 billion in goodwill and brand value. Last year CEDC restated exaggerated earnings (CEDC) for 2010 and 2011, blaming managers at its Russian unit for failing to fully account for customer rebates, and replaced the executives.

 

At its peak in July 2008, CEDC shares (CEDC) traded at more than $75, giving the company a market value of $3.48 billion. Today they trade around 30 cents, and the company has about $1.38 billion of debt (CEDC). Along the way, CEDC lost the right to import drinks to Russia from LVMH Moet Hennessy Louis Vuitton SA. (MC)

 

“They did too many acquisitions at the same time,” Moody’s Investors Service analyst Paolo Leschiutta said in a phone interview from Milan. “There was increasing competition in Poland, which was a distraction for the management because they focused more on Russia, and they didn’t realize that they were losing market share in Poland.”

 

Poised to Rule

 

Meanwhile, Tariko, who parlayed his Russian Standard premium vodka brand into a banking empire, has positioned himself to take ownership (CEDC) of CEDC. He’s been investing in the company’s troubled debt and stock since 2011, and through his Roust Trading Ltd. unit spent more than a year negotiating –and renegotiating — rescue offers.

 

Last month he won support from some CEDC bondholders and the company’s board (CEDC) for a revised restructuring plan, in which he would take ownership, forgive debt owed to Roust and partially repay other creditors in part with cash and new bonds. Tariko was named CEDC chairman after Carey left, and in September became interim president. By the end of 2012, he had operational oversight.

 

A rival bid led by fellow Russian billionaire Mikhail Fridman’s A1, CEDC shareholder and bond investor Mark Kaufman and SPI Group, which sells Stolichnaya vodka, was withdrawn last week, leaving Tariko’s plan unchallenged. He still needs overwhelming creditor support and a U.S. bankruptcy court to agree to his offer. Kaufman, who nominated Carey to return to the CEDC board, sold his Whitehall Group to the company in 2008.

 

Less Than Successful

 

“Very few people have been successful in the Russian alcohol business,” Kaufman said by phone before his rival consortium’s bid was withdrawn. “CEDC had a very successful business in Poland, but it’s not the same as Russia.”

 

Carey, who is working on a new business he declined to discuss, said he’s unlikely to tackle the Russian market any time soon.

 

“After living in Eastern Europe for 23 years, I’d certainly never say never — but I would prefer further west,” he said.

 

 

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Beam liquor company aghast over Kraft copycat ad campaign

 

Source: Chicago Business Journal

Lewis Lazare

Apr 3rd

 

A juicy marketing catfight could be brewing between Deerfield, Ill.-based Beam Inc. and Northfield, Ill.-based Kraft Foods Inc. Both companies, it turns out, are releasing ad campaigns with the same beefcake actor, Anderson Davis, doing a similar s–y shtick in both.

 

Only problem is Beam, the spirits and liquor company, and its ad agency, Havas/Chicago, first developed the effective shtick a year ago.

 

That is why Beam (NYSE: BEAM) and Havas are rushing to release later today their newest Sauza Tequila ad campaign with a new lifeguard character.

 

The speeded-up release of the Sauza video comes after Beam discovered on Monday that – much to its surprise – packaged foods behemoth Kraft Foods (NASDAQ: KRFT) was unveiling this week a Zesty Italian dressing campaign from Being/Los Angeles (a unit of TBWA) that is startlingly, shockingly similar to the hugely successful Sauza campaign released last year.

 

That original Sauza campaign from Havas, which featured an online video of a sultry fireman (portrayed by Thomas Beaudoin) making a margarita with Sauza Tequila, went on to become one of the most-watched videos on YouTube in 2012 – getting more than 10 million views.

 

The new Sauza campaign that will break later today is in a similar vein, a Beam spokeswoman said, but uses a different actor playing a lifeguard. That actor is Anderson Davis, the very same chiseled actor who is featured in Kraft’s new “Let’s Get Zesty” campaign.

 

A Beam spokeswoman this morning maintained that no one at Beam or Havas was informed that Davis was also doing the Kraft campaign in which he plays a similar s– symbol selling salad dressing with ad copy that includes the same kind of overtly s—-l innuendo that made the original Sauza video such fun to watch.

 

 

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2012 was the year of the India Pale Ale. and its momentum has continued in early 2013

 

Source: GuestMetrics

April 5th

 

According to GuestMetrics, based on its database of POS sales in restaurants and bars, India Pale Ale displayed the strongest growth and market share gains of all the various types of beer last year in the on-premise channel.

 

“Of the over 25 different types of beer classifications we have in our system, India Pale Ale displayed the strongest unit growth in 2012 at +39% compared to the prior year, and in terms of share of the overall beer category, also displayed the largest gain at about 55 basis points,” said Bill Pecoriello, CEO of GuestMetrics LLC.  “While IPA is still quite small at just 1% of all beers sold in on-premise, our data indicates thus far in 2013, India Pale Ale’s strength has actually picked up some additional strength, growing units at 40% compared to the prior year, and achieving around a 70 basis point share gain.”  Based on data from GuestMetrics, the IPA brands with the largest share gains last year were Widmer Broken Halo IPA, Lagunitas India Pale Ale, Sierra Nevada Torpedo Extra IPA, and Ballast Point Sculpin.

 

“At the other end of the spectrum are the Pale Lagers, which are the largest of the different beer types with a 33% share of all beers sold.  Pale Lagers saw unit sales contract by 5% in 2012 compared to the prior year, and as a result, experienced by far the largest share loss at about 170 basis points in 2012,” said Peter Reidhead, VP of Strategy and Insights at GuestMetrics.  “Additionally, in analyzing the quarter of 2013, the picture does not appear to be improving for Pale Lagers, with units contracting 6.2% against prior year, and the share loss accelerating slightly to 180 basis points.”  Based on data from GuestMetrics, the Pale Lager brands with the largest share loss last year were Miller Lite, Bud Light, and Budweiser.

 

“It’s important for restaurant and bar operators to understand the rapidly changing dynamics in the beer category to ensure their offerings are on-trend and optimize sales and profits,” said Brian Barrett, President of GuestMetrics. “While it’s important to have a balanced offering that includes mainstream beers, the strong growth in India Pale Ale and the other ales should prove to be a positive, particularly given the difference in pricing.  The average Ale is priced at $5.62 versus $4.51 for the average Lager, and the pricing specifically for an IPA is even more favorable, at $5.88.”

 

 

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Washington: Liquor control board wants to prevent marijuana consumption in bars

 

The Washington State Liquor Control Board wants to pass new rules preventing marijuana use by customers in businesses with liquor licenses.

 

Source: Puget Sound Business Journal

Valerie Bauman

Apr 3rd

 

The Washington State Liquor Control Board voted Wednesday to create rules that would prevent marijuana from being consumed in bars or restaurants with a liquor license.

 

With Washington state voters passing Initiative 502 legalizing marijuana, The Associated Press reported that two businesses in Tacoma and Olympia have allowed customers to consume marijuana on the premises.

 

The rules under I-502 provide for a $103 fine for any person who pulls out marijuana or marijuana-infused products and uses them in public. But laws do not address penalties for businesses that let customers use marijuana.

 

“It is important that the board clarify now that consuming marijuana in a state liquor-licensed establishment is not acceptable,” said Board Chair Sharon Foster in a statement. “Public consumption of marijuana is clearly illegal under Washington’s new law.”

 

The board also raised questions about what public risks could result from mixing alcohol and marijuana.

 

The board is taking public comment on the new rules, but won’t file a draft until May 22. A public hearing will follow June 26, with a final decision on rules by July 3.

 

 

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United Kingdom: Children as young as SEVEN are being admitted to hospital with alcohol addiction

 

Source: Daily Mail

By Anna Hodgekiss

Apr 2nd

 

380 children aged 10 or under treated for intoxication over four year period

Figures are likely to be higher as 67 NHS trusts did not supply information

One seven-year-old boy treated was deemed to be ‘addicted’ to alcohol

Affected children often come from homes where alcohol already a problem

 

Children as young as seven are being admitted to hospital with alcohol problems, an investigation has found.

 

Shocking new figures have revealed dozens of under-10s have been hospitalised suffering from mental and behavioural disorders due to alcohol use.

 

A Freedom of Information request to all of England’s 166 NHS hospital trusts revealed a total of 380 children aged 10 or under were treated for alcohol intoxication between 2008 and 2012.

 

Worryingly, 67 of the trusts approached either failed or refused to the Freedom of Information request, meaning the figures are likely to be even higher.

 

The most alarming incident was that of an intoxicated seven-year-old boy said to be ‘addicted’ to alcohol who was treated at a hospital in Sussex.

 

The Brighton and Sussex University Hospitals NHS Trust described his diagnosis as ‘alcohol intoxication’ and the reason for his attendance as ‘alcohol related’.

 

‘The primary diagnosis was a mental and behavioural disorder due to acute intoxication with alcohol,’ a report said.

 

For patient confidentiality reasons, the trust would not divulge any other detail except to state he was admitted to hospital in 2008.

 

In another case, a 10-year-old boy was admitted to a hospital in Devon after drinking so much he collapsed.

 

Meanwhile, at least 25 girls and boys aged between seven and ten were taken to hospital in England between 2008 and 2012 to get help for an alcohol-induced disorder.

 

And hundreds more children were rushed to A&E because they were drunk, though not necessarily suffering from an ongoing issue with alcohol.

 

In some of the cases it is likely the alcohol was consumed accidentally, although the data held by hospitals does not always specify this.

 

In one worrying example of child neglect, a two-year-old boy was rushed to a hospital run by Peterborough and Stamford Hospitals NHS Foundation Trust last year after accidentally drinking vodka.

 

And in another case, a baby who hadn’t even turned one was hospitalised in Gloucestershire after sustaining a head injury while intoxicated with alcohol.

 

The research, by the Ferrari Press Agency, revealed all five of the worst-hit hospital trusts were in the south of England – with the Royal Berkshire NHS Foundation Trust topping the list.

 

A total of 46 drunk children aged ten or under were rushed to A&E at the Royal Berkshire Hospital in Reading between 2008 and 2012.

 

Two of these – a nine-year-old girl and a ten-year-old boy – were admitted as in-patients to receive treatment for an alcohol-induced mental and behavioural disorder.

 

Nick Barton, chief executive of the charity Action on Addiction, said children who suffered from alcohol problems were likely to have an alcoholic parent.

 

He said: ‘Children who grow up in homes where their parents have alcohol and drug problems are seven times more likely to develop substance misuse problems themselves.

 

‘A recent study indicated that 22 per cent of children live with a parent who drinks hazardously.

 

‘A particularly worrying finding was the lack of awareness among parents about the effects of their drinking on their children.

 

‘These children are at risk in a variety of ways, from disruption of family life, social isolation and a threat to safety as a result of parents’ alcohol related behaviour, to the accessibility of alcohol. Often they assume the parental role.’

 

 

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When It Comes to Curbing Drinking, College Students Do Listen

 

Source: Time

By Maia Szalavitz

March 29, 2013

 

One of the more effective ways to reduce excessive drinking in college is also the most obvious – talk to freshman before they set foot on campus.

 

It turns out that discussing drinking in any way, including why some teens drink while others abstain, as well as the potential dangers of over-indulging, during the summer before students start school can both reduce the odds that light drinkers will escalate their alcohol intake, and increase the likelihood that already heavy-drinking teens will cut down or stop, according to new research.

 

Rob Turrisi of Penn State University and his colleagues surveyed 1,900 students and their parents just before the teens started college and again during the fall of their freshman and sophomore years.  Their parents agreed to be randomized into one of four groups.  One group used a handbook provided by the researchers to guide discussions, which occurred before freshman year, with their teens about drinking. The conversations were designed to be casual and nonjudgmental, with the parents providing accurate information about the reality of underage drinking and its risks, such as alcoholism and alcohol poisoning.

 

“The materials are designed for parents to pick and chose what they think is most important and what they think they can do best, given the individual relationship they have with their sons or daughters,” says Turrisi, “It respects the individuality and  uniqueness of each relationship.  That said, it will differ from family to family.” Some of the topics included why some teenagers drink while others abstain, alternative ways of getting the effects people seek from alcohol, as well as parents’ own drinking habits that served as models for responsible alcohol consumption.

 

Another group did the same thing, with some additional “booster” discussions later on. The third group didn’t start the discussion until after the students had already begun school and the fourth was a control group where parents were not instructed to take any particular action.

 

Before starting college, 51% of the students were nondrinkers, defined as not having had a drink in the past month, while 30% reported drinking heavily on some weekends and 15% drank moderately on weekends. Only 5% were frequent, heavy drinkers. But after 15 months of college – when most of the students would still not be of legal drinking age – only 25% were nondrinkers and 29% had become heavy drinkers.

 

Turisi and his team found, however, that the discussions about alcohol seemed to have some effect in curbing drinking habits, especially among students that started college as heavy drinkers. But timing was everything. If their parents talked to them about things like why people drink and substitutes for drinking before they left for school, they were 20 times more likely to transition to a more healthy drinking pattern-including nondrinking- than they were to stay heavy drinkers 15 months later.

 

In fact, the study found that the talks were only effective if they occurred before the students left for school – having a talk after college started was no more effective than doing nothing and adding “booster” conversations didn’t improve the results either. (A previous study of the same intervention suggested that additional discussions could help in reducing drinking and showed no evidence of harm.)

 

“By parents doing the intervention [before college], their young adult children are less likely to transition to high risk or heavy drinking groups while at college,” says Turrisi.  “Young adult children who have already started high risk or heavy drinking are more likely to transition out of these groups while at college.  In both cases, risk dramatically goes down,” he says.

 

Turrisi believes that the discussions can impact heavy drinkers because the conversations provide an opportunity for parents and their teens to better understand why the teens drink, and, if the alcohol is a coping mechanism for stresses or painful experiences, how they can find healthier ways of handling these pressures. “The heavy drinkers can explore the motivations they have for drinking,” he says.

 

The benefit of dialogue is that it provides an opportunity for understanding, and that connection alone can have a positive impact on reducing harmful behaviors such as underage drinking. Talk may be cheap, but it can also be pretty powerful.

 

The research was published in the Journal of Studies of Alcohol and Drugs.

 

 

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Mixologist Tony Abou-Ganim’s new book shows vodka in a new light

 

Source: Las Vegas Weekly

Sabrina Chapman

Apr 3, 2013

 

“In a way, we are all magicians. We are all alchemists, sorcerers and wizards. We are a very strange bunch. But there is great fun in being a wizard.”

 

That Billy Joel quote, printed in Tony Abou-Ganim’s new book Vodka Distilled, feels especially fitting in the mixologist’s Las Vegas home. Walking through the house is like following a yellow-brick road of booze. Closets are filled with liquid treasures: homemade limoncello, Tito’s vodka, a rare bottle of Absolut Elyx that hasn’t been publicly released yet. Instead of spices, a kitchen cabinet has rows of bitters. Antique glassware and mixing spoons are in the living room, and there’s a freezer in the garage dedicated to Abou-Ganim’s unique process of cultivating ice. (Next time you see him, ask about the chain saw in his backyard.)

 

Abou-Ganim eats, drinks and lives as a wizard of booze, taking pride in dispelling the smoke and mirrors of his craft. “I write a lot for the consumer. Within the consumer world, we drink a lot of vodka but don’t know why we drink certain vodka or stop to evaluate and better appreciate it,” Abou-Ganim says.

 

Vodka Distilled does just that. It breaks down one of the most popular spirits on the planet with a wealth of information, 28 recipes and an analysis of 58 featured vodkas. Once you understand vodka and can identify flavors and nuances, tasting and identifying the layers of other spirits becomes so much easier. “I admit that it takes practice to exercise and fine-tune those tasting muscles, but anyone with a sense of smell and taste can find the experience revealing,” Abou-Ganim says.

 

“Taste and Tasteability,” a chapter Jane Austen would certainly enjoy, is a how-to for vodka tasting. And details such as glassware, tasting notes and palate cleansers are also covered in the new book.

 

“Through deeper knowledge comes better enjoyment,” Abou-Ganim says. “I’ve fallen in love with vodka again.”

 

 

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Judges Bring Spirit to International Competition

 

Source: Fairplex

Apr 2nd

 

A panel of judges representing expertise at every level of the consumer spirits marketplace is preparing to put its palates to the test when the seventh annual Los Angeles International Spirits Competition gets under way in May.

 

Joining this year’s eclectic council are Tadeusz J. Dorda, Brian Bowden, Chris Snyder and Jessica Gelt. Dorda is chairman, chief executive officer and majority shareholder of Podlaska Wytwórnia Wódek “Polmos” S.A., the historic distillery in eastern Poland that owns and produces Chopin Vodka. A champion of authentic Polish vodka, Dorda is working steadfastly to change Western perceptions of a spirit that is far more complex, with many more subtleties in taste and quality, than is widely recognized. Bowden, vice president Spirits, Beer, Beverages & Tobacco, GMM New Markets for BevMo!, has more than 32 years of experience in the beverage industry in all departments: wine, beer and spirits. He has worked in the retail side of the industry as well as sales.

 

Snyder is president of TAPS Fish House & Brewery and The Catch Restaurant. Under his leadership, the restaurant’s revenues grew from $5 million to nearly $10 million in annual sales. Gelt is a food and nightlife writer for the Los Angeles Times. She has reported extensively on cocktails and cocktail culture. Her cocktail recipe column, “Destination: Cocktail,” runs twice a month in the Saturday section of the paper.

The competition, May 20-22, is led by Chairman Dana Chandler, vice president and general manager of Chopin Vodka. Chandler has spent 30 years in the wine and spirits industry.  Beginning with Gallo Wine and Kendall-Jackson, he has held a succession of wholesaler and supplier positions managing all channels of business, including on-premise, off-premise, chains and clubs.

 

“I am truly excited to be this year’s Honorary Chairman of the Los Angeles International Spirits Competition.  Fairplex has a long tradition of wine and spirits competition excellence that we intend to build upon with this year’s event,” said Chandler. “We have assembled a best of class judges panel featuring buyers, owners and representatives from all aspects of the spirits industry including distribution, retail, on-premise, production, mixology, design and media. This diversity will bring balance, focus and growth to our tasting. Our goal is to build the LAISC into the best, largest and most prestigious spirits competition not only California but the U.S.”

 

The judging panel also includes:

.         Kevin J. Johnson, vice president of the Golden State Chain Division at Southern Wine & Spirits.

.         Josh Wand, founder and motivator-in-chief of BevForce, a boutique recruiting and staffing agency that specializes in hiring strategies and organizational structuring for beverage companies.

.         Michael Nemick, a restaurant veteran and well-traveled foodie. He is a managing partner in red clay industries, a cocktail consulting and hospitality organization and is currently working as a managing sommelier at West Hollywood restaurant Sirena.

.         Ryan Steely, a creative design entrepreneur working with leading brands in the alcohol industry.

.         Toshio Ueno, a Master Sake Sommelier & Shochu Sommelier, Jizake Educator.

.         Tricia Alley, director of mixology for Southern Wine & Spirits, Southern California, United States Bartenders Guild Los Angeles Chapter President

.         Tim Moore, vice president Central Coast Branch Manager Young’s Market

The competition is accepting entries through April 15. For more information, visitwww.laspiritscomp.com.

 

The public will have its first opportunity to taste the award winners at Cheers – L.A.’s Wine, Spirits, Beer & Food Festival, celebrating all the winners of the Los Angeles International Wine, Spirits, Beer and Extra Virgin Olive Oil competitions. Enjoy the fun June 22 at Fairplex. For tickets, visitwww.tlcfairplex.com/cheers.

 

 

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California wines pour on the marketing

 

Source: China Daily

By Yu Wei in San Francisco (China Daily)

April 3rd

 

A brand-awareness campaign in China by California wine makers will meet the palates of local oenophiles next week when a bottle-bearing trade delegation from the state visits Beijing and other cities.

 

The Wine Institute, a San Francisco-based group that promotes California’s wine industry, will host a “master class” to educate Chinese consumers about vintages produced in the state, part of an April 8-15 trade and investment trip led by Governor Jerry Brown.

 

“The Chinese mainland is now the fifth-largest export market for California wines and has been considered a very high-priority market for California vintners,” said Linsey Gallagher, international marketing director for the Wine Institute.

 

US wine exports, 90 percent of which come from California, reached a record $1.43 billion in sales last year, a 2.6 percent increase from 2011. It was the third straight year of increases, according to the Wine Institute. On the Chinese mainland, 2012 sales of American wine totaled $74 million, up 18 percent from the previous year.

 

California, with over 3,600 wineries and 4,600 wine-grape growers, shipped 18 million liters of its many varieties to China last year. The state’s wine shipments to the Chinese mainland have been on a decade-long upswing, starting from a modest $3.4 million in sales in 2002, Gallagher said.

 

A number of red and white wines from California are popular in China, including Zinfandel, the state’s signature varietal.

 

“The quality, diversity and value of California wines are our strength in the fast-growing and increasingly important China market,” Gallagher said.

 

To promote the industry and its output, the Wine Institute is in the final leg of a three-year brand-awareness and advertising campaign in China. The effort involves frequent trips by representatives of California wineries along with wine tastings.

 

The reputation-building drive by California officials and wine makers faces some hurdles. There is a perception among Chinese consumers that wines from the state are often overpriced and of low quality.

 

The Wall Street Journal recently quoted a San Francisco-based vintner as saying that he has heard such complaints while attending wine events in China. He told the newspaper that this is due to vendors flooding the Chinese market with cheaply made wine and selling it at inflated prices.

 

The Wine Institute’s Gallagher defended the value of California wines sold in China.

 

“California wines offer great value at all price points, despite the tariffs and taxes that are levied on imported wines in China,” she said. “In our experience, the California wines that are available in the China market are very high-quality and reasonably priced as compared with our competition.”

 

The value proposition for wine in China has to factor in the young, fast-growing character of the market, said David Duckhorn, president of Via Pacifica Selections, a wine distributor based in Napa, a center of California wine production. Wine-drinking is relatively new in China, and middle-class consumers are still working out their tastes and preferences.

 

“Historically, there was not enough information about wine in the market and consumers were paying prices that were unreasonable for the wine quality. This was true for wines from all regions, not just California,” Duckhorn said, adding that he saw as many examples of overpriced French wine as overpriced California wine.

 

Now, with Chinese consumers sharing opinions on social media, he said, there’s greater sophistication in the market and an understanding of how imported wines are priced, such as the impact of shipping costs and import tariffs. Many wine drinkers in China have developed a personal price range for their purchases, the wine company executive said.

 

“In general, I have not seen ‘poor-quality’ wine prevalent in the market – overpriced, yes, but not necessarily poor quality. The value just wasn’t in line with the quality at all price points, but it is getting there quickly,” Duckhorn said.

 

He founded Via Pacifica in 1998 to import and distribute wines in the US market. After some exploratory sales to China two years earlier, the company in 2008 opened an office in Shanghai, focusing on importation and distribution of California wines for the burgeoning Chinese middle class. It now has an office and warehouse in four Chinese cities and employs 18 people.

 

Currently, Duckhorn’s company sells about 75 individual wine products – 80 percent reds, 20 percent whites – from 10 producers. “Our sales have increased steadily since 2006 and exceeded 25 percent growth from 2011 to 2012,” he said.

 

Most of the wines Via Pacific sells to Chinese are in the middle of price range, according to Duckhorn. About half retail in China for $16 to $32 a bottle, about 40 percent are priced at $32 to $160, and 10 percent are listed at $160 or more.

 

According to International Wine & Spirit Research, a UK-based research and data provider, Chinese drank 2.17 billion bottles of wine last year, 2.7 times the consumption level in 2007. By 2016, the organization forecasts, Chinese will consume 3.02 billion bottles.

 

On Monday, China Foods Ltd, part of State-owned food conglomerate Cofco, said it will spend about $20 million to buy two or three wineries in Australia and the US in hope of increasing its wine sales and beating back competition from imports. Managing Director Luan Xiuju also said the company is in talks with two leading international wine dealers to become their exclusive brand representative and distributor in China.

 

China Foods already owns two wineries abroad: Chateau Viand in Bordeaux, France, and Bisquert in Chile. Sales from its wine-importing business were less than $15 million last year.

 

According to a report by Netherlands-based Rabobank Group, wine imports to China surged to 1.4 billion liters in 2011 from fewer than 400 million liters in 2004, with France the largest exporter.

 

Although consumers in China are more accustomed to beer and traditional baijiu, “they are open and earnest in their desire to learn and try our wines”, Duckhorn said.

 

The biggest challenge, however, is educating potential wine aficionados so that they make informed buying decisions, he said.

 

“We work very hard to make consumers feel OK in making their buying choice – for any occasion. If a consumer wants a bottle to share with friends at home, it is different than buying a wine to give as a gift for your boss.

 

“We want consumers to have the confidence that what they are buying and drinking is right for the situation. The worst thing we can do as an industry is to ‘elevate’ wine into a special-occasion drink. Wine is meant for everyday consumption as part of a healthy lifestyle.”

 

Yuan Yuan, marketing director at Shanghai Hitrust Imported Food Trade Market Co, a wine importer, said one of the most popular California wines in China is Carlo Rossi, made by Ernest & Julio Gallo Winery. She attributes this to the marketing strategies of Gallo’s Chinese partner, Nanpu Food Co.

 

“In addition to Carlo Rossi, Napa also has some reputation in China,” Yuan said, referring to the famous wine-growing valley in Northern California.

 

Still, she said, many Chinese haven’t caught on the idea of the US as a major wine-producing nation.

 

In late March at the Chengdu Food and Drinks Fair, a major annual showcase in southern China for wine and spirits, there were more people packed into the room where French wines were presented than in the one for American wines, Yuan said.

 

“Although nowadays the quality of French wines varies widely, our distributors still tend to choose them to promote because it’s relatively easy,” she said.

 

But Yuan considers wine from the United States to have many favorable qualities, such as the absence of an aftertaste found in some French wines.

 

“Wine-drinking should be fun, easy and relaxing,” she said.

 

 

——

Wine business Truett-Hurst plans $43 million IPO

 

Source: San Francisco Business Times

Steven E.F. Brown

Apr 3rd

 

Truett-Hurst Inc., a Healdsburg wine business, registered with regulators for an initial public offering worth up to $43.5 million.

 

The company plans to offer 2.25 million shares itself, while some of its existing shareholders will also sell 652,557 shares, keeping those proceeds for themselves.

 

WR Hambrecht, Sidoti & Co. and CSCA are underwriting the offering.

 

Phillip Hurst is president and CEO of the business, which plans to list itself on the Nasdaq Capital Market using the symbol THST.

 

Truett-Hurst describes itself as a “Super-premium and Ultra-premium wine sales, marketing and production company.”

 

The business plans to disrupt the “oligopoly” of a few producers who dominate California’s wine industry. It sells wine direct to consumers through its own tasting rooms and wine clubs, and it also has a stake in an Internet wine retailer, Wine Spies LLC, which holds short “flash” sales.

 

The company also sells through four labels of its own — Truett-Hurst, VML, Healdsburg Ranches and Bradford Mountain.

 

Truett-Hurst plans to spend money from this offering paying down its debt.

 

Like every business in the wine industry, Truett-Hurst faces “significant competition which could adversely affect our profitability.”

 

In the fiscal year ended June 2011, Truett-Hurst lost $820,815, but it recorded a profit of $26,462 the following fiscal year, after its sales more than doubled from 2011’s $5.4 million to 2012’s $12.7 million.

 

As of Dec. 31, the company had accumulated a deficit of $3,087,000. That’s how much money it has lost or written off since it started.

 

 

——

Treasury Wine Lifts 2008 Grange Price 15% as China Demand Rises

 

Source: Bloomberg

By David Fickling

April 03, 2013

 

Treasury Wine Estates Ltd. (TWE), the world’s second-biggest listed winemaker by revenue, lifted the price of its premium 2008 Penfolds Grange vintage by 15 percent as growing Chinese demand for high-end wines outpaces supply.

 

The rise to a recommended retail price of A$785 ($821) a bottle will be the second for 2008 Grange in four months. It puts the 2008 vintage, on sale in May, 26 percent above the price of Grange’s 2007 output, Sandy Mayo, global brand business director for Penfolds, said in an interview.

 

Treasury Wine is hoping to boost sales to about 60 cities in China within five years from less than 16 at present as it tries to capitalize on Asia, its fastest-growing and highest- margin market. Treasury is allocating a larger share of its 7,000 case to 9,000 case production of the high-end wine to China, amid strong demand for a label produced in the year of the Beijing Olympics and ending in the auspicious number eight.

 

“For premium wine around the world, there’s an equalizing of supply and demand and particularly in premium wine,” Mayo said by phone.

 

Global stocks of wine declined by nearly four billion liters between 2006 and 2011 to at least a 10-year low, according to an October report by Rabobank International, reversing a glut that’s weighed on industry prices.

 

The recommended retail price for Grange, which sellers aren’t obliged to match, was A$625 for the 2007 vintage. For the 2008 produce it was first marked at A$685 in January.

 

The second price increase was applied in response to increased interest from wholesalers and consumers, Mayo said. The 2008 vintage last month scored the maximum 100 points in a review by Robert Parker’s Wine Advocate magazine.

 

Treasury Wine shares closed up 1.2 percent in Sydney, capping a 38 percent rise over the past year that’s outpaced the 14 percent gain in the benchmark S&P/ASX 200 index.

 

 

——

Rhône Valley wine exports hit new high – figures (Excerpt)

 

Source: Just-Drinks

By Stuart Todd

3 April 2013

 

Wine exports from France’s Rhône Valley last year have built on 2011’s record high, according to recently-released figures.

 

Trade body Inter-Rhône said earlier this week that exports in 2012 were up by 5.5% in volumes and by 10% in value terms. Shipment volumes, which exceeded 900,000 hectolitres, represented 31% of the region’s volume sales. The remaining 69% was sold domestically.

 

 

——

In-Depth Tastings Flow Like Wine at Society of Wine Educators Annual Conference

 

Source: Balzac

April 3rd

 

Three-day event features internationally known speakers on a wide-range of topics

 

The Society of Wine Educators (SWE) will present an impressive lineup of in-depth classes for wine devotees at its 37th annual conference, to be held July 31 through August 2, 2013 at the Renaissance Hotel at SeaWorld in Orlando, Florida. Guided tastings will present wines and/or spirits from at least 15 different countries and 42 wine regions from around the world. Among the instructors teaching the sessions will be 21 Certified Wine Educators, 6 Master Sommeliers and five Masters of Wine.

 

The SWE annual conference is the country’s most comprehensive wine education event, offering a full spectrum of opportunities for wine educators, culinary students, sommeliers and general enthusiasts who seek to deepen and expand their knowledge about wines and spirits, and meet others who share their passion. Registration for the conference opened April 1st. A full list of sessions and speakers is available on the SWE website, www.societyofwineeducators.org/conference.

 

The concentrated three-day conference schedule will feature more than 60 sessions, as well as an International Wine and Beer Tasting, wine pairing events and networking opportunities with top educators in the field. Many of the presentations at the conference are one-of-a-kind opportunities. “You might never have the opportunity to taste these wines anywhere, unless you go there [to the source],” says Bill Whiting, CSW, Education Director for Banfi Vintners. “You might have to even spend hundreds or thousands of dollars to do so. And you get all that here, at the Conference.”

 

Now in its 37th year, the SWE annual conference has long been known among educators as an unusually rich resource in the world of wine and spirits. “It is an enormous amount of information and education, in a very small period of time,” said Linda Lawry of International Wine Center (NYC). “It’s very concentrated. There is nothing else like it.”

 

The Society of Wine Educators is the leading international organization of professionals dedicated specifically to wine and spirits education. It offers several highly-regarded certification programs for professionals in the wine and spirits industry, and its annual conference is the most comprehensive wine education event in America. Exams and seminars are offered throughout the USA and internationally. For more information, please contact: www.societyofwineeducators.org or call 202-408-8777.

 

 

——

Russian Standard Vodka Announces the Appointment of Mike O’Connell as Vice President On Premise National Accounts

 

Source: Russian Standard

Apr 3rd

 

Russian Standard Vodka, World’s Number One Premium Russian Vodka, announces the appointment of Mike O’Connell as Vice President, On Premise National Accounts. In this role, Mike will be responsible for the development and execution of the critical strategy and business development in National Accounts. Mike will report to John Palatella, Senior Vice President of Sales.

 

Mike is an industry veteran with more than thirty years of experience in both distributor and supplier management.  Mike joins us from The Patron Spirits Company, where he spent the last 7 years as their VP of National Accounts and was the architect of their award winning program.  Prior to Patron, Mike spent 12 years at Allied Domecq including 7 years on their National Accounts team.

 

 

——

UJA-FEDERATION OF NEW YORK’S WINE & SPIRITS DIVISION HONORS ROBERT FURNISS-ROE OF BACARDI U.S.A., INC.

 

Source: UJA-FEDERATION

Apr 3rd

 

Hundreds of professionals from the wine and spirits industry will honor Robert Furniss-Roe, president of Bacardi U.S.A., Inc., with the Samuel Bronfman Memorial Award at UJA-Federation of New York’s Wine & Spirits Division Reception on Thursday, June 20, 2013, at The Pierre in New York City.

 

A prominent member of the wine and spirits industry, Robert Furniss-Roe is being honored for his achievements as a businessman and his outstanding generosity in the philanthropic world.

 

Robert Furniss-Roe has been with Bacardi for nearly 25 years. Since 2011, he has been responsible for the operations of the company’s largest region as president of Bacardi U.S.A., Inc. He had previously held a variety of international executive management positions, including regional president for Latin America, regional president for Europe, and vice president of global sales. Prior to joining Bacardi, Mr. Furniss-Roe served in marketing roles at Dunhill, L’Oréal, and JPA. He holds a master’s degree from Oxford University.

 

UJA-Federation of New York’s Wine & Spirits Division brings together exceptional individuals working in the industry who are committed to their careers and passionate about philanthropy. Since 1965, the Division has honored leaders in the wine and spirits field with the Samuel Bronfman Memorial Award, which was created to commemorate Bronfman’s legendary professional accomplishments and dedication to improving the lives of others.

 

Previous honorees of the Samuel Bronfman Memorial Award include Bill Newlands of Beam Inc., Mel Dick of Southern Wine & Spirits of America, and Charles Merinoff of the Charmer Sunbelt Group.

 

Funds raised will go to UJA-Federation’s annual campaign that helps sustain a network of nearly 100 health and human-service agencies in New York, in Israel, and around the world.

 

 

——

Tennessee: Wine bill held up in Senate

 

Debate sets framework for next year

 

Source: The Tennessean

Apr 2, 2013

 

Wine-in-grocery stores legislation was given another chance Tuesday after what was thought to be the last vote on the matter for the year.

 

But prospects for its passage in 2013 remain slim.

 

Members of the Senate Finance, Ways and Means Committee will hold one final vote on a measure that would let voters decide through local referendums whether to let their grocery stores sell wine. Senate Bill 837 will be placed at the end of the committee’s last calendar before they adjourn for the year.

 

The House Local Government Committee voted down the measure last month, effectively killing the bill for the year in that chamber. House leaders have resisted pressure to revive the legislation.

 

But supporters of the bill have been working to keep the measure alive in the state Senate in the hope of setting the table for debate on wine-in-grocery stores legislation next year. If the bill passes the Senate Finance Committee this year, it could be taken up on the Senate floor next January, putting pressure on the House to act.

 

Those plans were dealt what at first appeared to be a decisive blow Tuesday, when committee members split 5-5 on the bill, preventing it from advancing. But within hours, state Sen. Douglas Henry, D-Nashville, had joined with the five supporters to request a new vote.

 

Henry had abstained earlier, saying he objected to a provision that would have let liquor stores open on Sundays. The measure’s sponsor, state Sen. Bill Ketron, agreed to strike the language.

 

“It’s like momentum in a ballgame,” the Murfreesboro Republican said. “We want momentum for when it comes up in January.”

 

Already, wine-in-grocery stores has advanced farther in the state legislature this year than many expected before the session began. Lawmakers have been filing bills to permit grocery store wine sales for decades, but until this year, no committee in recent memory had voted for the measure.

 

The bill has moved ahead by the slenderest of margins, and as it has progressed, senators have used it as a framework to discuss some of the most extensive revisions to Tennessee liquor laws since lawmakers approved sales of liquor by the drink in the late 1960s.

 

“I think there’s been huge strides,” said Jarron Springer, president of the Tennessee Grocers and Convenience Store Association. “Overall, it’s a very positive year, but it’s a result-driven world. Ultimately, we want to see this pass.”

 

In addition to Sunday sales, they have considered lifting restrictions on what liquor stores can sell. Another bill in the legislature would let liquor stores own more than one location.

 

The concessions have not been enough to bring liquor store owners to the table. But they signal progress, said Senate Majority Leader Mark Norris, R-Memphis.

 

“We should go ahead and take some definitive action, to send a signal to our constituents that we value their input,” he said. “This may not be completely, precisely correct, yet, but I think it’s getting there.”

 

 

——

Pennsylvania: OFF THE FLOOR: Gov tells lawmakers, donors that liquor privatization’s vital to his re-election

 

Source: Capitolwire

By Peter L. DeCoursey

April 3rd

 

Gov. Tom Corbett is making an interesting pitch to Senate Republicans on liquor privatization: he says he needs it to ensure his re-election.

 

That is a remarkably honest and plaintive admission, and maybe an over-optimistic assessment of that issue and its potential.

 

But that assessment, first evangelized by House Majority Leader Mike Turzai, R-Allegheny, now has become an article of faith for Corbett. So that notion is now a frequent comment he makes both to donors, who ask him how he will turn around his poll numbers, and to GOP senators, who are wary of doing much with liquor privatization.

 

While it is unusual for a governor to admit he is weak and needs the legislative equivalent of a long, long touchdown to win the game midway through his term, the fact is that everyone can read his historically bad polling numbers. Everyone already knows he is weak. And everyone knows he needs to do something to turn that around.

 

So it is smart for him to frame the “How I Will Win” narrative around some achievement that will be difficult but is possible. For one thing, it gives him a comeback narrative to sell to the Republican Governors Association, whom he still needs to give him $10 million.

 

Also, this is a way for him to let the Senate GOP leaders know: we ain’t finishing the budget without doing something that privatizes liquor.

 

What might that be? Well, Senate GOP leaders are quietly suggesting that a major problem they have with the House bill is that its beer provisions have left the distributors and others somewhere between cold and unenthused.

 

So one likely Senate move would be to simply leave beer out of the equation.

 

“Beer is a private industry already,” said Senate Appropriations Committee Chairman Jake Corman, R-Centre. “Liquor is not. So if we are going to privatize something, I am not sure why beer is in there.”

 

Based on that comment, widely echoed among Senate leaders, and the key chairman, Sen. Chuck Mcilhinney, R-Bucks, it seems as if the Senate may move a bill to sell the state liquor wholesale operations and to move towards replacing public stores with private stores, as long as the rural communities experience no loss in service.

 

If the Senate passes a bill that does that, it will mean one of two things: either they really do want to leave BeerWorld out, or that they are telling BeerWorld: “Somebody is going to get permits to sell wine and liquor. If you want them, tell us, otherwise you aren’t getting them.”

 

So it is not clear to me, and may not be clear to the Senate GOP leaders, whether they are actually leaving beer out of the bill, or just administering reality therapy to BeerWorld.

 

Either way, Corbett and the House win. If the Senate can pass out a bill that gets rid of most of the state stores soon – how to ensure rural service is still an unresolved issue – and sells the wholesale system, Corbett and Turzai declare victory and will have passed historic change.

 

Which the Senate GOP is beginning to realize. Corman commented: “I think we have some guys in our chamber and our caucus, including me, who don’t want to be on the wrong side of history on this.”

 

But if that happens, does it, as Corbett and Turzai believe, mean the governor will win re-election?

 

Well, Corbett’s biggest problem is that women voters in both parties and among independents have lost confidence in him. And while women favor privatization, it does not seem to be a life-or-death issue for them.

 

But on the other hand, what Corbett has to sell is: “I put government back in its place. As attorney general, I got government out of campaigns. Then as governor, I got it out of the way of jobs, cutting $1 billion so I could reduce business taxes so businesses could grow jobs. And I am working to get private business into the Lottery, to get more funds for our seniors and get the state out of the liquor business, and put $1 billion into smart public education investments.”

 

Now you can argue with all or any of those statements. But the fact is Corbett has stood for the idea that business is better than government, and does almost everything better than government and his job is to get government out of the way of jobs and taxpayers.

 

And wine and spirits for sale in Wegmans and Costco is a potent symbol of that argument.

 

So liquor privatization could be helpful because it is a simple and, compared to his other policies, less controversial symbol of Corbett’s mantra: less power and sway for government, more for the more effective private sector.

 

But at the end of the day, privatization is only a nice new way to illustrate the argument about “government v. private sector” that Corbett has been waging, and losing, for two years, so far. But it gives his “I trimmed government back” narrative a nice closing kick, which it desperately needs right now.

 

 

——

Maryland: Auditors find widespread problems at Balto. liquor agency

 

Applications not checked thoroughly and complaints not dealt with properly

 

Source: The Baltimore Sun

By Ian Duncan

April 3, 2013

 

State auditors found widespread problems at Baltimore’s liquor agency in a review made public Wednesday, accusing regulators of failing to follow state law in awarding licenses, prematurely closing 311 complaints and handling inspections inconsistently.

 

The Baltimore Board of Liquor License Commissioners failed in some cases to document whether bars were being opened far enough away from schools and churches, the auditors said. They concluded that the work of 14 full-time and five part-time inspectors employed at the time of the review could be done with just six workers.

 

The board did not keep investigative records on half the 311 complaints reviewed by the Office of Legislative Audits. And while some establishments were subjected to numerous routine inspections, others never received a visit, according to the report.

 

Samuel T. Daniels Jr., executive secretary of the agency, said his organization runs on an “obsolete system that does function and functions far better than the suggestion of dysfunction that the audit report finds.”

 

The board consists of three appointed commissioners and an agency that handles day-to-day work.

 

“The problem with the audit and auditors, they want to see every conceivable piece of paper, and if they don’t there’s the implication … it never existed, it wasn’t done,” Daniels added.

 

The auditors recommended 24 fixes. Legislative auditor Thomas J. Barnickel III said in an interview that the board should put written procedures in place and better record its actions so managers can check the work of employees.

 

“There’s a number of issues that they need to address to make sure that they’re accomplishing their mission,” Barnickel said.

 

Steve Fogleman, chairman of the liquor board, said that it has relied on informal institutional knowledge, but will work to publish policies and guidelines in response to the audit. He said it could take up to two years to carry out all the auditors’ recommendations.

 

“We certainly weren’t aware of the exact magnitude” of the problems, Fogleman said. “The liquor board relies on antiquated technology, they have relied on oral history . and have not written down specifics on what inspectors need to do.”

 

The result, according to the auditors, is a lack of consistency in the way the board sets about its work.

 

For example, 96 license holders were inspected eight or more times in a single year, the auditors reported, but 202 were not inspected at all, and no inspector regularly met an internal target of four inspections a day. They found reports dating back to 2007 that had never been filed.

 

The liquor board is a state agency and not directly controlled by city authorities, but it gives revenues from fees and fines to the city, and the city’s budget funds its operations.

 

In their response to the auditors, liquor agency officials said some problems could not be fixed without more funding, and Fogleman said in an interview that tight funding had forced the agency to lay off staff in the time since the audit was conducted.

 

Ryan O’Doherty, a spokesman for Mayor Stephanie Rawlings-Blake, said the board should make better use of the money it has.

 

“We are hopeful that the board will work quickly to address the audit findings – especially the findings that make clear that the issue is not a lack of city funding, but wasted staffing resources,” he said.

 

Fogleman disputed the auditors’ conclusions on staffing numbers, saying that Baltimore residents are very demanding of liquor inspectors, regularly bringing up issues at community association meetings and filing 311 complaints.

 

“The citizens of Baltimore require the services of the liquor board more than they ever have – there’s so much more than these routine inspections,” he said.

 

But the auditors found problems there, too. They wrote that board staff did not always document the results of complaints. In half of the 311 complaints they checked, auditors found no evidence of an investigation.

 

“Our review also disclosed that BLLC often closed cases in the 311 System prior to performing an investigation of the complaints,” the auditors added. The report said the agency closed some complaints because the issue had not been tackled promptly and officials did not want city statistics to reflect poorly on them.

 

Auditors did find a bright spot: “The Board appeared to assess fines to licensees in a consistent manner based on the violation types.”

 

Not all violations were handled at regular board hearings, however. The auditors reported that in some cases, agency staff would deal with problems in closed-door meetings.

 

“The legality of their use is questionable since they were not addressed in State law,” the auditors wrote of those meetings.

 

Sen. Verna Jones-Rodwell, a Democrat who is chair of the Baltimore Senate delegation, said city senators have been aware of the problems identified in the audit for some time. “They are bad and they’re significant,” she said.

 

Now that the full report has been released, she said, the delegation will again review the audit. She said that if senators determine a legislative fix is needed, there may still be time to act before the legislature adjourns Monday night.

 

 

——

United Kingdom: UK pub industry craves parity over tax

 

Source: FT

By Duncan Robinson

Apr 3rd

 

George Osborne is rarely cheered when he enters a room. But one such exception occurred last week, when the chancellor turned up to a shindig held by the British Beer and Pub Association, following his decision to cut duty on beer.

 

“People spontaneously cheered when he walked in,” said Brigid Simmonds, chief executive of the lobby group. Mr Osborne then drank a pint of slightly-less-heavily-taxed-than-last-week Spitfire, and left after 20 minutes.

 

His Budget move to axe the “beer duty escalator”, which increased the tax on beer by 2 percentage points above inflation each year, had made him a popular man in the pub industry – no mean feat for a chancellor. His predecessor, Alistair Darling, faced a campaign to ban him from every pub in Britain when he first introduced the escalator policy.

 

Even though Mr Osborne’s reversal of the escalator only cut the duty on a pint by 1p, it has been welcomed by pub operators that were expecting an automatic 5 per cent rise.

 

“It’s not before time,” says Ted Tuppen, chief executive of Enterprise Inns, which owns 6,000 pubs across the UK. He points out that the tax on a pint has risen more than 40 per cent in the past five years.

 

Some industry watchers are critical, however. “It’s a gimmick,” says one analyst, pointing out that Mr Osborne also increased the duty on wine and spirits heavily – adding 10p and 38p respectively to the tax on 75cl bottles. “While the supermarkets keep selling cheap booze, the high street drinking emporium will struggle,” the analyst warns. A typical pint costs £3 in a pub – with around a third of this going on tax – compared to barely £1 in a supermarket.

 

But, gimmick or not, most analysts expect the industry to pass the duty saving straight to consumers – as some pubcos, such as Enterprise Inns, have already promised to – in an attempt to get them back into pubs.

 

Britain’s pub industry has floundered in the past decade, as people have drunk gradually less outside the home. The total volume of beer sold in pubs has fallen by a fifth since 2008. A combination of the smoking ban, the escalating price of beer outside of supermarkets, and people drinking less proved too much for many in the industry – putting nearly 10,000 pubs out of business over the past decade.

 

Punch Taverns and Enterprise Inns, the two largest pub groups in the UK, have both flirted with disaster since the onset of the financial crisis, because of their large debt piles. Many independent landlords, meanwhile, have been drowned in rising utility bills. Even national chains, such as JD Wetherspoon, have struggled to maintain margins in the face of rising costs.

 

The industry has not provided investors with much cheer either.

 

Shares in Marston’s, which has 2,000 pubs across the UK, are still priced at less than half their pre-crisis peak. Enterprise Inns’ share price quadrupled over 2012 but it still trades at around a third of its net asset value, suggesting investors are yet to be convinced by its potential for growth. Punch, meanwhile, is still embroiled in a tug of war with its bondholders as it tries to restructure its debt – with some bondholders spurning the company’s latest offer only last week.

 

A marginally cheaper pint appears unlikely to act as a cure. “It won’t in itself have a huge effect,” says Tim Martin, chairman of JD Wetherspoon. “Every little helps, as they say. But, in and of itself, a 1p reduction does not make much difference.”

 

Nevertheless, this minor breakthrough on the duty escalator has rekindled some hopes of turning a long-held industry pipe dream into a reality: tax parity with the supermarkets.

 

“It is certain to happen at some point,” insists Mr Martin. “Pubs employ so many more people per pint or meal than a supermarket. The economics will drive a chancellor and a government towards the job-creating option.”

 

Mike Tye, chief executive of Spirit Pub Company, which has 1,200 pubs across Britain, has also called on the government to equalise taxes on food.

 

“We are disadvantaged on food versus supermarkets, where there’s no VAT on ready meals. It penalises people who don’t have a lot of money and want to have a treat.”

 

Not everyone in the pub sector is hopeful of a breakthrough, though. Will pubs be on a level tax pegging with supermarkets any time soon? “Not a chance,” says the chief executive of one major pub chain.

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