Friday April 12th 2013
Chhabria eyes $1bn Tilaknagar deal
Source: Times of India
Boby Kurian & Reeba Zachariah
Apr 12, 2013
Liquor baron Kishore Chhabria’s Allied Blenders & Distillers (ABD) is discussing a merger deal with rival Tilaknagar Industries, makers of Mansion House brandy, in what could be the biggest consolidation move in Indian liquor industry after Vijay Mallya’s takeover of Shaw Wallace & Co almost a decade ago.
The privately held ABD, India’s third largest distiller, and the listed Tilaknagar have talked about a stock swap cum cash deal to create a combined entity valued at $1 billion, said people directly briefed on the matter. Chhabria has 95% stake in ABD which owns the top selling Indian whiskey brand Officer’s Choice, while the Dahanukar family controls 56% stake in Tilaknagar. Its Mansion House is the world’s second largest selling brandy after McDowell’s.
Chhabria, on a comeback trail after settling legal battles with long time rival Mallya, would be the majority shareholder, while Tilaknagar chairman Amit Dahanukar will retain a sizable minority interest in the joint company, said the source cited earlier. The talks are preliminary and there is no certainty of a deal, the person added.
Alcobev industry veteran and ABD chief executive Deepak Roy is seen as the intermediary in the discussions between Chhabria and Dahanukar. Roy and Dahanukar declined to comment on the story, while Chhabria is traveling abroad and could not be reached for immediate comments. Analysts said French drinks giant Pernod Ricard, which has a bottling tie-up with Tilaknagar, could be attracted to a potential takeover, but the former said it hasn’t had any discussions in this regard.
Dahanukar has had multiple rounds of talks with Chhabria and Roy in recent months, with both parties agreeing that a deal was a workable and winning idea. But substantial issues – including valuations and the question of their respective equity ownerships – have not been tackled yet, said a second source. Chhabria will not settle for anything less than a big majority stake if there’s a merger, he added.
ABD sold 20 million cases (of nine litres each) in the just ended financial year, while Tilaknagar’s volume sales were closer to 10 million cases. India’s spirits sale is estimated at 275 million cases in FY13 even as growth slowed to 4%, possibly the slowest in a decade.
A possible deal would give Chhabria a big presence in the fast growing brandy segment, better access to the southern markets besides a base of distilling and bottling assets. Tilaknagar, which has faced a probe from taxmen and legal disputes on the brand Mansion House, would have a strong ally in Chhabria and get to play a bigger role in India’s consolidating liquor industry. ABD recently appointed Ambit Corporate Finance for a $100-million fund-raise, eyeing $750 million in valuation as part of this separate exercise. Tilaknagar, which saw its stock price decline 33% since January this year, has a market capitalization of Rs 700 crore, or roughly $130 million. Tilaknagar Industries stock ended marginally higher at Rs 57.50 by close of Thursday’s trade on the BSE.
STZ: Solid Finish to FY13; Crown Imports Remains the Focus Heading into FY14
STZ Posts 4Q13 EPS of $0.47 – STZ reported adjusted 4Q13 EPS of $0.47, two cents ahead of our estimate and the Street, largely driven by a lower-than-expected tax rate, as better-than-expected wine and spirits results were offset by below expectation growth from Crown Imports.
Wine and Spirits Trends Look Solid – On a full-year basis, we were encouraged by the acceleration in North American wine and spirits net sales (to +5.3% in FY13 vs. +3.8% in FY12). Furthermore, we applaud management’s decision to continue to invest behind its brands, despite the implication for margin pressure in FY14 (we’re looking for operating margin contraction of 40 bps for the year), as we expect this to result in more sustainable top- and bottom-line growth for the segment over the long term.
Beer Pricing Remains the Focus – While we understand the motivation behind Crown Imports’ pricing restraint, the business’ below-industry price increases and negative mix-shift (resulting primarily from the growth of Modelo Especial) are hindering the opportunity for margin expansion. Looking ahead to FY14, we expect to get an initial read into STZ’s pricing strategy for the Crown Imports brands in June, at the company’s analyst meeting as this will (likely) be the first presentation from management following the close of the deal.
Updating Our Estimates; Maintain Neutral Rating – Taking into account the guidance provided by management and continuing to assume that the Crown deal closes at the end of fiscal 1Q14, we are updating our estimates as follows: FY14 to $2.80 (from $3.24) and FY15 to $3.32 (from $3.70). Our FY16 estimate is $3.59. We assert that STZ should trade at a 16x multiple (reflecting the company’s diverse earnings base and significant accretion opportunities from the pending Crown Imports deal) and derive a $52 target price based on our CY14 EPS estimate of $3.27. As this represents 5% ETR, we maintain our Neutral rating on the stock.
Constellation Brands A Look at FY2014 with US Modelo Ops
Introducing Full P&L for Pro-Forma Entity
With the deal expected to close by June, we are adjusting the accretion in our model. We expect FY14 consolidated revenue to be $5.3bn ($2.35bn from Crown) and generate $1.2bn in EBIT ($630m from Crown). Organically, we have 5% topline growth with 4.8% EBIT growth in wine, and 5.5% topline growth at Crown with 6.5% EBIT growth. Interest expense is expected to be $350m (guided), but we expect tax closer to 32% than the guided 37%, resulting in FY14 EPSe of $2.99 (guidance $2.55-$2.85). Our FY15e EPS is now $3.83 (from $3.87).
We Differ from Guidance on Taxes
At the guided tax rate, our FY14 and FY15 EPS estimates would be $2.77 and $3.54, respectively. Recall initial FY13 tax guidance was 34% (26% actual), FY12 was 29% (17% actual), FY11 was 35% (30% actual), and FY10 was 38% comparable (30% actual). We consider the guided 37% FY14 tax rate to be an absolute ceiling rather than the most likely outcome and are using 32% in our estimates.
Investment Thesis – Post-Deal World
We believe future STZ will feature: 1) structurally improving wine business, 2) strong, steady-cash flow generating beer biz, with margins that will improve as increased capacity eliminates need for supply from ABI; and 3) Spirits growing double-digits. As STZ pays down debt and capacity at Piedras Negras is optimized, we expect Constellation will generate ~$1bn in FCF on a normalized (i.e. excluding incremental CAPEX) basis.
Valuation: Reiterate Buy; Price Target Remains $54
Our $54 price target is based on 14 times our FY15e EPS of $3.83.
A NEW WHISKEY AND CLASSIC FAVORITES FROM BUFFALO TRACE DISTILLERY WIN 2013 ULTIMATE SPIRITS CHALLENGE
Blanton’s Bourbon and Caribou Crossing Whisky Win Chairman’s Trophies for the Second Consecutive Year
Source: Buffalo Trace Distillery
The winners from last month’s 2013 Ultimate Spirits Challenge have been announced. Buffalo Trace Distillery was honored for one of its newer whiskeys introduced in 2012, along with some classic favorites.
For the second year in a row, judges awarded Blanton’s Single Barrel Bourbon the highest honor of “Chairman’s Trophy” winner among all other bourbon whiskeys. Blanton’s was the first Single Barrel Bourbon Whiskey ever commercially sold back in 1984 and remains a favorite among connoisseurs.
Within the Canadian Whisky category, Caribou Crossing Single Barrel Canadian Whisky was awarded the “Chairman’s Trophy,” also for the second year running. This $50 Canadian Whisky is the first Canadian Single Barrel whiskey of its kind and has been well received by both consumers and reviewers alike since its introduction in 2010.
Colonel E. H. Taylor, Jr. Small Batch Bourbon was the newest whiskey created by Buffalo Trace Distillery that earned the distinction of “Extraordinary, Ultimate Recommendation.” This bourbon, introduced last year, was described by the judges as being, “Pleasantly fruity on the nose suggesting, apricot, pear and cherry while maintaining a toasted oak characteristic as well.”
The other Buffalo Trace Distillery whiskeys awarded the distinction of “Extraordinary, Ultimate Recommendation” include:
– Pappy Van Winkle Family Reserve 20 Year Old Bourbon
– William Larue Weller Bourbon
All three of these bourbons were also named Finalists for the Chairman’s Trophy.
Awarded the distinction of “Excellent, Highly Recommended” were:
– Benchmark Old No. 8 Kentucky Straight Bourbon
– Buffalo Trace Kentucky Straight Bourbon
– Eagle Rare Single Barrel Bourbon
– George T. Stagg Bourbon
– Sazerac Straight Rye Whiskey
Buffalo Trace and Sazerac Straight Rye were also named Finalists for the Chairman’s Trophy in their respective categories, and Benchmark and Buffalo Trace were deemed to be “Great Values.”
In all, the whiskeys from Buffalo trace Distillery received a total of 10 “Ultimate” or “Excellent” recommendations.
Find a complete list of winners online at http://www.ultimate-beverage.com/the-results/2013-spirits-results/.
Johnnie Walker usurped as whisky’s no.1
Source: Drinks International
By Hamish Smith
11 April, 2013
Johnnie Walker’s has been knocked from the apex of the whisky category after United Spirits’ aptly named McDowell’s No.1 sold more bottles in 2012, according to The Millionaires’ Club 2013.
Despite sales volumes of Diageo’s flagship Scotch climbing 5% last year to 18.8m 9-litre cases, its Indian adversary – and soon-to-be stable mate – reached 19.5m cases, piling on 21% growth.
It is the first time Johnnie Walker has not been the world’s no.1 selling whisky since at least 2002, and probably going back much further.
A spokesperson for Intellima, the research agency that compiled The Millionaires’ Club 2013, said: “The upper reaches of the whisky sector remain a battle between two seemingly unstoppable forces – the global might of Johnnie Walker and the domestic market-driven volume increases of Indian brands selling to a growing moneyed middle class. But now Johnnie Walker has been knocked off its perch by United Spirits’ McDowell’s No 1.”
If growth rates remain constant through 2013, Johnnie Walker could find itself leapfrogged by Allied Blenders & Distillers’ Officer’s Choice by the time The Millionaires’ Club 2014 is published.
Officer’s Choice, another Indian brand, grew 10% last year, registering volumes of 18.1m cases. The brand has grown an average of 22% annually over the last six years.
The overall picture is one of Indian whisky dominance with eight of the world’s top ten whiskies based in India.
Jack Daniel’s headed up the North American contingent, ranking eighth with volumes of 10.7m cases and growth of 1%.
Intellima said: “US whiskey Jack Daniel’s is the only gatecrasher in the top 10 party but a relatively flat performance did little to enhance its volume standing this year, though Brown-Forman has reported a healthy rise in brand revenues after its first global price increase for several years.”
Jim Beam was in 11th place with volumes of 6.3m cases and 8% growth, while Diageo’s Canadian whisky Crown Royal finished 13th with volumes of 4.8m cases and 2% negative growth.
The 2013 edition of The Millionaires’ Club will be available to download in May from drinksint.com.
Diageo to close Waterford plant with loss of 22 jobs
Shock as state-of-the-art Guinness essence facility to close by the end of the year
Source: Irish Times
Thu, Apr 11, 2013, 17:56
Diageo has announced that it intends to pull out of its Waterford city facility ending hundreds of years of brewing on the site.
Guinness will close its plant by the end of the year with the loss of 16 full-time and six support staff.
The plant makes Guinness flavour essence (GFE), a liquid concentrate made from barley, which is used in all Guinness brewed worldwide.
Though parent company Diageo said the plant was under review, the closure of the operation still came as a shock to the workers involved.
Diageo invested ?40 million in the brewery in 2004 and it remains a state-of-the-art facility.
The company is now looking to consolidate its brewing operations in an expanded facility in St. James’ Gate.
Siptu representative Terry Bryan said the workers were particularly shocked that the plant is closing at the end of this year.
When Diageo announced that it was closing its Dundalk and Kilkenny facilities, the lead in time was almost five years.
He said that the workers did not intend to take the proposed closure as a “fait accompli” and would be making the case for it to remain open.
In the event that it does remain open, he said the workers would look for deployment to the new facility in Dublin and decent redundancy terms.
Diageo Europe beer supply chain director Paul Armstrong said the decision was being made with “sadness and regret” but the company was already working with Enterprise Ireland to find an alternative use for the site.
Sinn Féin Senator David Cullinane described the proposed closure as a “devastating shock to the workers and their families”.
He said it was a further body blow for a city where unemployment is 25 per cent higher than the national rate.
Bacardi sets $1B refi, shifts to U.S. model
By Michelle Sierra
Thu, Apr 11 2013
Bacardi International Ltd is shifting to a U.S. pricing model as it looks to refinance an existing $1 billion revolver, allowing the company to pay lower initial interest rates, banking sources told Thomson Reuters LPC.
Bank of America Merrill Lynch, Barclays and BNP Paribas are leading the $1 billion, five-year refinancing revolver that launched this week. Pricing on the new facility is based on the company’s debt to Ebitda ratio. It opens at LIB+112.5 with a 12.5bp commitment fee.
The new credit will refinance a $1 billion revolver the company entered into in 2010. Pricing on that facility followed a European-based pricing model at LIB+75 undrawn with a 26.25bp commitment fee, according to sources.
In Europe the undrawn pricing is determined as a percentage of the drawn margin. In this case the undrawn pricing was 35 percent of the undrawn. In the U.S., however, pricing grids are determined by comparison with deals for companies in the same industry or ratings category or a smaller percentage of the drawn spread, banking sources explained.
Because the new facility is expected to remain undrawn, Bacardi will end up paying only the commitment fee on its loan, making the U.S. pricing model more attractive.
“The perception is that undrawn pricing is cheaper in the U.S. for the better-rated names,” a banker following the situation said.
Though the company’s bank group currently includes U.S., European and global banks, Barcadi’s relationship lending had been conducted mainly out of Europe, according to banking sources.
“Particularly in 2010, in Europe drawn spreads were tighter,” a banking source said. “But now, the commitment fee as a percentage of the draw margin is higher than in the U.S.”
The new pricing is on a grid tied to the company’s debt-to-Ebitda ratio ranging from LIB+150 to LIB+87.5 for a debt-to-Ebitda ratio of greater or equal to 3.5 times to under 1.5 times. The facility pays an undrawn fee ranging from 22.5bp to 8bp if it remains undrawn for the same debt-to-Ebitda ratio.
For some, the fact that European desks would sign on to a deal with U.S.-type terms is a sign of the times. The low new issue loan volume has created fertile ground for a borrower’s market where corporates dictate the lending terms.
“People are saying, ‘I might as well lend right now because I don’t know when I will get a chance to lend again,'” a banker said.
It is unlikely, though, that Bacardi’s option to shift terms would be available for other companies in the same BBB- ratings category. This comes as the market views Pembroke Bermuda-based Barcardi as a unique issuer with deep pockets and global banking relationships that is increasingly behaving like a U.S. borrower issuing both U.S. dollar-denominated bonds and commercial paper.
Bacardi is a global, privately-held, spirits company.
Credit agency lowers ThaiBev rating (Excerpt)
By James Wilmore
11 April 2013
Trading in ThaiBev’s shares resumed earlier today (11 April), after a credit agency lowered its rating on the group.
Standand and Poor’s dropped its long-term credit rating for the Chang brewer to BBB- from BBB and gave it a negative outlook. ThaiBev had suspended trading in its shares on the Singapore Stock Exchange ahead of the announcement.
Governments should use zoning to limit liquor stores, Hopkins researchers say
Source: The Baltimore Sun
By Andrea K. Walker
April 11, 2013
Zoning laws have become a powerful way to reduce the number of liquor stores in cities, but too few government officials use them, Johns Hopkins University public health researchers said in a new report.
Researchers from the Center on Alcohol Marketing and Youth at the Johns Hopkins Bloomberg School of Public Health have created a guide to advise governments of the regulatory power they have to combat alcohol abuse.
They hope the report, published in the journal Preventing Chronic Disease, will bring more attention to the issue.
Studies have found that reducing the number of places where people can buy alcohol helps curb excessive drinking in communities. Los Angeles County researchers said that one additional liquor store was associated with 3.4 additional acts of violence a year. New Orleans researchers found that a 10 percent increase in liquor stores would correlate to a 2 percent increase in the homicide rate.
“So many health departments are unaware that they can influence alcohol-related problems through the planning and zoning process,” said David Jernigan, the report’s lead author, who is director of the Hopkins center.
Excessive alcohol use is the third-leading cause of preventable death in the United States and causes 80,000 deaths each year, Jernigan said.
He cited Baltimore as a good example of a place’s using zoning to combat alcoholism.
About 100 stores throughout the city would be forced to stop selling alcohol under new rules being considered as part of the most extensive change in zoning regulations in 40 years.
Baltimore officials have said that they think reducing the concentration of liquor stores and taverns will improve health and safety.
The code would prohibit liquor stores from being located in the middle of a residential block and redefine what qualifies as a tavern. For example, more than 50 percent of a store’s average daily alcohol receipts would need to come from sales consumed on the premises for it to qualify as a tavern.
Liquor store owners have said the city is discriminating against them and that their stores do not cause the city’s health and crime problems. The proposed zoning has passed the planning commission and is now before the City Council.
“Baltimore is a leader on this issue,” Jernigan said.
The Hopkins report outlined four ways states and localities can thin the density of liquor stores in their communities.
It said cities can limit the number of alcohol outlets per geographic area or limit the number of stores based on population. Zoning laws also could be used to establish a cap on the percentage of liquor stores based on the total number of businesses in an area. Municipalities could limit the places alcohol outlets locate as well as their operating hours. Land-use powers can be used to limit and deny certain places from selling alcohol.
United Kingdom: Pubs demand minimum alcohol price
The heads of pubs, nightclubs and breweries are pleading with David Cameron to stick to his plans to introduce a mininum alcohol price.
Source: Daily Telegraph
By Laura Donnelly, Health Correspondent
11 Apr 2013
In recent weeks, sources have indicated that the Prime Minister has bowed to pressure from the Treasury, which opposes plans for a 45 pence per unit minimum price which would reduce tax revenues.
Mr Cameron had argued that making drinks more expensive would curb problem drinking, but several ministers said that a minimum price would only serve to penalise the responsible majority of drinkers.
Now the chief executives of 12 pub chains, nightclub groups and brewers have written a letter to The Daily Telegraph, urging the Prime Minister to “stick to his guns”, saying that the proposed measure would “save lives and protect great British pubs”.
The executives say that the introduction of a minimum price for alcohol would protect society from “irresponsible” drinking blighting Britain’s streets.
In the letter, they say: “Minimum unit pricing will not solve all our alcohol-related ills but it will help to encourage responsible drinking and curb excessive drinking.”
They urge Mr Cameron “not to waste this opportunity and ask that he continues to show courage and strong leadership in these difficult times, by sticking to his guns.”
The introduction of a minimum price would not increase prices at pubs and nightclubs, who charge more for their drinks than off-licences and supermarkets, some of whom have been criticised for selling beer more cheaply than water.
Rooney Anand, chief executive of Greene King pub chain and brewer, one of the signatories to the letter said the easy availability of “excesssively cheap alcohol” was causing “devastating” effects across society.
Peter Marks, chief executive of the Luminar Group, which runs 56 nightclubs in England, said too many town centres were now suffering the consequences of binge drinking, especially from young people who “pre-loaded” by drinking cheap alcohol at home before arriving in pubs and nightclubs. .
He said: “What we are finding more and more is that when people arrive at our venues, there are too many who arrive having had too much to drink, having drunk spirits and wine at home before they go out. We will people away if they are worse for wear – but then we are left with people causing trouble in high streets and town centres all over the country.”
According to research by the Wine and Spirits Trade Association a 45p increase would bring the minimum cost of a bottle of wine to £4.39 and a bottle of vodka to £11.81.
The Treasury has opposed the plans, on the basis that they will reduce tax revenues, while several ministers have argued that the plans would penalise the majority of drinkers who consume in moderation.
Theresa May, the Home Secretary, Michael Gove, the Education Secretary, and Andrew Lansley, the former health secretary, are all understood to have put pressure on the Prime Minister to abandon the plans.
There have also been concerns that a minimum alcohol price in England and Wales would be subject to legal challenge.
A plan to introduce a 50p minimum price in Scotland is being considered by courts, after a claim that it infringes European Union competition laws.
Billionaire wins wine fight; jury awards him $380K
Source: MSN News
By Larry Neumeister of AP
A Florida billionaire said he planned to drink a glass of wine to celebrate a federal jury’s conclusion Thursday that he was defrauded by a California businessman who sold him two dozen bottles of fake vintage wine at a 2005 auction.
“It’s a home run!” a smiling William Koch told a supporter immediately after the jury in U.S. District Court in Manhattan awarded him $380,000 in compensatory damages for the counterfeit bottles of Bordeaux labeled as if they were created from 1864 to 1950. Koch paid $29,500 for the most expensive bottle, a 1921 magnum bottle of Chateau Petrus. The jury returns Friday to decide if punitive damages are warranted.
Koch, a yachtsman who won the America’s Cup in 1992, had accused Eric Greenberg of fraudulent misrepresentation, fraudulent concealment, deceptive business practices and false advertising. The jury’s six men and two women sided with Koch on each civil charge.
Outside the courthouse, he said he was going to a trendy French restaurant on Manhattan’s Upper East Side to celebrate.
“I’m thirsty,” he said with a smile. “I want a glass of wine.”
A dejected Greenberg only shook his head when asked to comment. One of his lawyers said he did not want to comment until the jury had completed its work.
For Koch, though, the jury verdict was part of a crusade against counterfeit wine sellers that he promised would continue.
“To me, the whole industry is being corrupted,” he said, recounting how his investigators had helped put one wine seller in jail and forced a judgment against another. “I absolutely can’t stand being cheated.”
“Now we have this faker,” he said, referring to Greenberg. “We’re moving down our hit list of fakers. This is just a start.”
Koch, 72, testified during the trial that he has mostly stopped buying wines at auction because he has been cheated so many times and no longer trusted the market.
Greenberg – a former billionaire who built two Internet consulting companies before the 2000 collapse of those stocks reportedly reduced his net worth by as much as 90 percent – had insisted on the witness stand that he never intentionally sold a bad bottle of wine.
“I wouldn’t sell a fake wine,” he said as one of the trial’s first witnesses. “I’ve never intentionally sold fake wine in my life.”
Millions were spent by both sides on lawyers in the case.
Koch, the founder and president of the Oxbow Group, based in West Palm Beach, Fla., spent $3.7 million at the 2005 auction, buying 2,600 bottles of wine. He paid someone more than $75,000 daily for two days to make his bids, though he decided before the sale not to inspect the wines he eventually bought.
Koch, a Palm Beach resident and the brother of industrialists and conservative political supporters David and Charles Koch, conceded on the witness stand that the wine he bought from Greenberg was not his first encounter with fakes. In 1988, he said, he paid $400,000 for four bottles of French wine he falsely believed had been owned by Thomas Jefferson.
Amazon Wine expands services to Texas
Source: San Antonio Business Journal
Mike W. Thomas
Amazon Inc. is expanding its online wine delivery service to include Texas.
Amazon Wine allows customers to make purchases directly from more than 350 wineries and 2,200 participating labels and will now include Texas wineries as well.
“Amazon.com is a one-stop shopping place. With Amazon Wine, we will be able to get in front of millions of new customers,” says Mike Laughlin, tasting room manager for Llano Estacado Winery in Lubbock.
Other highly-rated Texas wines that will now be available through the service include selections from Messina Hof, Becker Vineyards, McPherson Cellars and Brennan Vineyards.
In addition to Texas, Amazon’s direct-to-consumer shipping from wineries is available in California, Colorado, Connecticut, Florida, Idaho, Illinois, Iowa, Maryland, Nebraska, Nevada, North Carolina, Oregon, South Carolina, Washington, Wyoming, and the District of Columbia. Customers can ship up to six bottles of wine for $9.99.
Offering Large Selection of Wine Brands Boosts Sales at Restaurants and Especially at Bars, Survey Shows
Source: Consumer Edge Insight
According to Alcoholic Beverage DemandTracker, a periodic survey of US adults age 21+ who consume any type of alcohol at least once a week or more, offering a larger selection of wine brands in the on-premise channel helps the operator sell more wine, especially for bars.
Among wine drinkers who visit restaurants regularly, 31% of them say they are more likely to drink wine and 23% say they order more servings of wine as a result of being offered a larger selection of wine brands. Some wine drinkers are also more likely to experiment by ordering wine brands they’ve never tried before (26%). Only 32% of wine drinkers who visit restaurants say that a larger selection of wine brands has no effect on their consumption.
Among wine drinkers who visit bars regularly, 38% of them say they are more likely to drink wine and 31% say they order more servings of wine as a result of being offered a larger selection of wine brands. Some wine drinkers are also more likely to experiment by ordering wine brands they’ve never tried before (25%). Only 25% of wine drinkers who visit bars say that a larger selection of wine brands has no effect on their consumption.
“Our latest findings confirm the value for on-premise operators of offering a large selection of wine,” said David Decker, President of Consumer Edge Insight. “For those who enjoy wine, seeing a large selection of wine brands at a bar or restaurant is an invitation to consume and experiment. Bars and restaurants that provide a larger wine offering should lead to a larger number of servings consumed on each occasion.”
Unveiling Bordeaux’s New Vintage
By Will Lyons
IN A SMALL BISTRO off the Place des Quinconces, a large tree-lined square in Bordeaux’s 18th-century city center, two men-a négociant and courtier-sit hunched over their supper, steak frites and red wine. It’s early spring, which in Bordeaux means only one thing: Conversation is dominated by talk of the new vintage.
Growing conditions in 2012 were capricious. Flowering was late, there was too much rain in the spring and the summer was very dry. A late heat wave in August allowed the grapes to ripen evenly so by mid-September things were looking up. Then came the rain.
En Primeur week is the yearly ritual when wine professionals from all corners of the world descend on Bordeaux to taste and evaluate the new wines that been aging in barrels for just a few months. WSJ travelled to Bordeaux to taste the 2012 vintage.
“The rain prevented it from becoming a very good vintage,” says Patrick Maroteaux, owner of St.-Julien’s Château Branaire-Ducru.
Those châteaux that picked before the rain or, in the case of the Right Bank communes of Pomerol and St.-Émilion, that benefited from early-ripening varieties such as Merlot, made good wines. Others resorted to the technical innovations that have made it easier to make drinkable wine during unfavorable growing seasons. From the few wines I tasted in early March, my impression was that the fruit was expressive and ripe, but the wines lacked the weight and structure of 2010.
At the Place des Quinconces, talk isn’t about the quality or the weather, but the price. The past two decades have seen a phenomenal bull run in Bordeaux. This, coupled with a trio of outstanding vintages beginning with the 2005 and including ’09 and ’10, has seen prices increase dramatically-in some cases climbing as much as sevenfold. But after increases in ’09 and ’10, many in the industry feel that the opening prices didn’t drop far enough in ’11 to attract consumers who simply refuse to pay what is being asked (up to ?450 a bottle).
In Bordeaux, the châteaux determine the price, but unlike any other wine regions in the world, the châteaux sell their wines directly to négociants-collectively known as the Place de Bordeaux-who, in turn, sell the wine to restaurants, merchants and major retailers. Added to this is yet another layer, the courtiers, who act as middlemen between the châteaux and the négociants.
“Everyone got carried away in 2009 and the prices haven’t come down,” says one courtier, who wished to remain unnamed. “If the châteaux do not get the price right, the 2012 campaign could be a disaster.”
Most agree that prices have to drop by around 30% to attract interest. Whether the châteaux owners, who are in some cases four tiers away from the consumer, listen is another question. But Gary Boom, founder of London wine merchant Bordeaux Index, says that in order to give the general public a reason to buy this vintage, the prices will have to fall. Compounding the problem is the small matter of unsold ’10 and ’11. As one négociant tells me: “There is an awful lot of stock on the market that is sitting in warehouses waiting to find buyers.”
Back at the Place des Quinconces, the two men smile ruefully. “In Bordeaux, it is always the same,” says the courtier, explaining the annual cycle of events: talk of crisis, followed by selling and a period of calm, then all talk is “of the new vintage.”
Leading Man of Burgundy Puts Down His Glass
Source: New York Times
By ERIC ASIMOV
To watch Jacques Lardière scoot about the cellar at the headquarters of Louis Jadot in Beaune, France, the crossroads of Burgundy, is to see a man in his element. With white hair cascading from his head like a puffy cumulus cloud, red pants the likes of which only a Frenchman could even think of carrying off, twinkling eyes magnified by spectacles and an ever-present smile, Mr. Lardière is a cross between a wizard and an elf, climbing over barrels and digging deeper into Jadot’s rich Burgundian holdings in a determined effort to explain the wondrous mysteries that keep Burgundy lovers so everlastingly entranced.
In his 42 years as technical director, supervising winemaking and viticulture, Mr. Lardière has traveled the globe promoting Jadot and Burgundy while solidifying his status as one of the most unforgettable characters in wine. He has led tastings, sat through thousands of dinners and greeted countless collectors. If a record exists for posing for most snapshots with awe-struck Burgundy fiends, Mr. Lardière most likely holds it.
I, for one, have run into Mr. Lardière in Jackson Hole, Wyo., and Portland, Ore., San Francisco and Pismo Beach, Calif. I’ve walked vineyards with him in Beaujolais and tasted Pouilly-Fuissé with him in the Mâconnais. Yet in my mind, I will always see him scampering through the Beaune cellar, a scheduled 30-minute tasting of the new Jadot wines turning into an hour, then two hours, the points he is trying to make never quite catching up to the rush of thoughts conveyed in a combination of French, English and Lardière-speak, a mystifying torrent of brain-twisting notions that communicate in passion and impressions rather than in smoothly linear ideas.
He was at it again in New York last month, though this was different. Mr. Lardière, 65, was stepping down. He had already turned over his duties to Frédéric Barnier. “The breadth of the new generation is very good,” Mr. Lardière said.
It was the culmination of a two-year retirement tour in which he had spanned the globe, receiving honors and tributes even as he continued to offer the usual thought-provoking monologues.
The occasion was an extraordinary tasting of 20 vintages of Jadot’s Chevalier-Montrachet “Les Demoiselles,” a superb grand cru white Burgundy, as part of La Paulée de New York, Daniel Johnnes’s homage to a Burgundian harvest festival.
“This is maybe your 20th last event,” Mr. Johnnes said, by way of an introduction, to the audience in an upstairs dining room at Eleven Madison Park.
Mr. Lardière plunged right in, only hinting at the elegiac.
“When you drink wine, you must realize you are drinking something more than wine,” he said to start things off. “It’s a very meditative beverage.”
He spoke of the vines pumping minerality from the ground and pulling molecules from the air, “some lighter and higher than others.” He referred to the flavors of hawthorn and green hazelnuts, studding his English sentences with regular “doncs,” a French transitional that served as connective tissue between thoughts. “The more you drink, the more you are,” he concluded.
More concretely, Mr. Lardière played the sly provocateur in assessing the wines, his own views of vintages often contradicting the conventional wisdom. The first flight included three recent vintages, 2011, 2010 and 2009. I loved the beautiful, energetic, tightly coiled 2010, but Mr. Lardière selected as the best of the three the ripe, opulent ’09, a year in which many white Burgundies seem to lack finesse.
“It will be more elegant than we suppose,” he said.
As a group, the wines were gorgeous, showing the differing characteristics of many vintages yet bound by their vitality, the persistence of their flavors and their savory mineral character. Among my favorites were the precise, transparent 2008, the sedate ’97 and the urgent ’96, the rich yet balanced ’90, the grand ’85 and the golden, placid ’84, a notoriously poor vintage in Burgundy.
“I must be crazy to show you the ’84,” Mr. Lardière told the group, “but after 30 years, ahhhh.”
Older vintages included a shining ’78, a minty, apple-tinged ’67, which happened to have been bottled by Mr. Lardière in his first year at Jadot, and a fresh, spicy 1929 that got better and better in the glass.
It was left to others to speak of what Mr. Lardière has meant to Burgundy and Jadot, a leading négociant who over the course of his tenure has improved the quality of its wines to the point where they are now among the best values in Burgundy.
“Jacques taught me everything,” said Pierre-Henry Gagey, who succeeded his father, André, as president of Louis Jadot in 1992 after joining the company in 1985. “He’s been so energetic and positive in his outlook. For me, who has tasted with him every day in the last 28 years, I am always amazed by this capacity.”
More specifically, Mr. Gagey credited Mr. Lardière with making the wines purer, with a finer texture, after they had been darker and more concentrated, and for pushing Jadot to adapt biodynamic viticulture in its own vineyards. Mr. Lardière is originally from the Atlantic coast, near the Fiefs Vendéens, a small wine region near the mouth of the Loire, and Mr. Gagey said not being a native of Burgundy had been a tremendous advantage.
“He didn’t have an idea of how things were supposed to taste, which allowed him to find the direct link between the soil and the wine,” he said.
Larry Stone, a leading American sommelier and wine executive, who has known Mr. Lardière since 1988, said he had helped improve the region as a whole, and had especially inspired small producers.
“His winemaking is very modern and intuitive, with lots of room for creativity and different styles,” Mr. Stone said. “He gave small producers the courage to move forward, inspiring them by the improvement of the négociants.”
As for Mr. Lardière’s flights of oratory, Mr. Gagey said, “It’s absolutely true, we don’t always understand Jacques, but we understand the meaning of what he says.” He said that Mr. Lardière would continue to work on various projects for Jadot, but that Mr. Barnier was now in charge.
As much as I’ve enjoyed Mr. Lardière’s company and learned from parsing his words, I’ll probably remember best one of the clearest bits of wisdom he imparted to me.
“Good wine is not enough to explain the potential of Burgundy,” he told me on a visit in 2008. “Some wines are like mystery books that you read fast, enjoy and forget. Burgundy is like a classic that you take in slowly, assimilate and always remember.”
Just like Mr. Lardière.
Treasury Wine Seeks Cooler Land as Climate Shifts Season
By David Fickling
Apr 11, 2013
Treasury Wine Estates Ltd. (TWE), the world’s second-largest listed wine company, is seeking out vineyards in cooler regions in preference to ones in warmer areas as climate change starts to shift growing seasons.
The wine maker’s land acquisition teams are looking to buy and lease vineyards in Australia’s Tasmania state, Chief Executive Officer David Dearie said in an interview yesterday. Harvests are already starting as much as a day-and-a-half earlier each year as a result of climate change, he said.
Areas suitable for viticulture may drop 68 percent in Mediterranean Europe by 2050 and fall 73 percent in regions of Australia with a so-called Mediterranean climate, according to a study published this month in the Proceedings of the National Academy of Sciences of the United States of America. New Zealand’s area will more than double and it will also surge in northern Europe and western North America, the authors wrote.
“As the world heats, Tasmania’s very well positioned because of the cooler climate,” Dearie said. “We’ve got out of places like the Hunter; in the longer term I think it will be hot and dry and expensive.”
The Melbourne-based company earlier sold its vineyards in the Hunter Valley north of Sydney, where the Lindemans brand originated, as part of a shift to more profitable growing regions, he said.
Australia’s most prestigious wine award went in 2011 to a shiraz from southern Tasmania, a region better-known for cooler- climate white wines and pinot noir grapes.
Treasury’s growers are monitoring vineyards’ growing seasons to update their forecasts of local climate change impacts, and delaying pruning work to give time to harvest grapes as seasons move later, Rebecca Smith, a spokeswoman, said by e-mail.
Shares of Treasury have climbed 39 percent in the past 12 months in Sydney trading, outperforming the S&P/ASX 200 Index’s 18 percent gain in the period.
Treasury needs to source more high-quality land to meet demand for premium wines and is looking in the U.S., Australia and New Zealand, Dearie said. While the company would also like to find vineyards in France as a means to gain access to the Asian market, prices were too high at present, he said.
“We don’t actually have the wine,” he said. “It’s a question of making the wine first and then selling ourselves into the market.”
The wine maker wasn’t finding the limits of demand for the most expensive wines, Dearie said. Treasury April 4 increased prices for its 2008 Penfolds Grange vintage to A$785 ($827) a bottle, a 26 percent increase on the previous year’s output and 15 percent above an initial pricing in January, as growing Chinese demand for high-end wines outpaces supply.
China will become the largest wine market in the world within 10 years, Dearie said in an interview with Bloomberg News last month. Still, it will take 30 to 50 years for the country, the fifth-largest grower of wine grapes, to establish high quality wine growing regions, he said yesterday.
Costco posts disappointing March sales
Source: The Associated Press
Costco Wholesale Corp.’s revenue from established stores rose 4 percent in March, but that was short of Wall Street expectations.
The Issaquah, Wash., company said changes in gas prices and foreign exchange rates hurt revenue from stores open at least a year for the five-week period that ended April 7.
Analysts expected, on average, that revenue from stores open at least a year would rise 5.2 percent, according to Thomson Reuters.
Revenue at stores open at least a year is a key gauge of a retailer’s health because it excludes results from stores recently opened or closed.
The wholesale club operator said revenue from established U.S. locations climbed 5 percent, while international sales rose 2 percent. Not counting the effect of gas and foreign exchange rates, revenue from stores open at least a year increased 6 percent.
Total revenue for that period climbed 7 percent to $9.67 billion compared to the same period last year.
The company currently runs 626 warehouses, including 449 in the United States and Puerto Rico, 85 in Canada and 33 in Mexico.
Costco said last month its fiscal second-quarter net income climbed 39 percent, topping Wall Street expectations, as it pulled in more money from membership fees, sales improved and it recorded a large tax benefit. The company earned $547 million, or $1.24 per share, for the period that ended Feb. 17 on $24.87 billion in revenue.
Its shares finished at $102.56 per share on Wednesday. Its shares set a 52-week high of $107.75 on April 2.
Chuy’s: 3-Million Share Secondary Offering Prices at 3.4% Discount
By Nathalie Tadena
Chuy’s Holdings Inc. (CHUY) said an offering of 3 million shares sold by certain shareholders priced at a 3.4% discount to the restaurant chain’s Thursday closing price.
The company said the secondary offering priced at $33 a piece. It won’t get any of the proceeds from the sale, which is being made by selling stockholders, primarily Goode Partners LLC. After the sale, Goode will have reduced its stake in Chuy’s to 4.7% from 22.7%.
As of March 25, Chuy’s had 16.2 million shares outstanding.
Based in Austin, Texas, Chuy’s operates a chain of about 40 namesake restaurants serving Mexican and Tex-Mex food. The company was founded in 1982 and boasts that it prices only three out of 49 menu items at more than $10.
Earlier this week, Chuy’s disclosed its revenue for the fiscal first quarter rose about 25% from a year ago to $46.7 million, as comparable restaurant sales increased about 2.3% for the 13-week period ended March 31, compared with the 13-week period ended April 1 of last year.
Shares were off by 15 cents to $34.02 after hours. The company’s stock has more than doubled from its July initial public offering price of $13.
Texas: Bill aims to level Texas’ playing field for alcohol marketing
Source: Austin Business Journal
Supporters of legislation filed this week claim it will provide Texas’ beer industry with long-needed parity with the wine and liquor industries when it comes to marketing practices.
State Sen. Leticia Van De Putte’s, D-San Antonio, Senate Bill 870 would remove the current $1 value limit on consumer novelties – a value established more than 25 years ago – and instead permit it to be a reasonable value as mandated for ale, wine and liquor novelties. It would remove the prohibition on using advertising specialties for beer and would allow for the co-packing of items such as holiday glassware or steins, practices already permitted for ale, wine and liquor.
“There is no legitimate reason to regulate beer more restrictively than these other offerings with higher alcohol content with regard to these kinds of promotional items,” said Keith Diggs, vice president of sales for Anheuser-Busch in a five-state region including Texas. “This legislation will move toward correcting those inequities.”
The legislation would also help avoid situations such as those that led to Jester King Craft Brewery’s lawsuit filed in 2011 against the Texas Alcoholic Beverage Commission, claiming that several of the commission’s regulations were unconstitutional, Diggs said.
No one spoke in opposition to the bill during an April 9 hearing before the Senate Committee on Business and Commerce, and it remains pending in committee.
“This bill is just one part of a broader, yearlong effort by my colleagues and I to iron out inconsistencies in the Texas Alcoholic Beverage Commission code,” said Van de Putte, who has worked with fellow lawmakers in shaping other legislation to help craft brewers. “I hope this will level the playing field.”
Canada: Beer dominates Canada’s $21B alcohol industry, but thirst for wine growing
Source: The Province
By Karl Kofmel
April 11, 2013
Statistics Canada’s yearly report on alcohol sales shows Canada is slowly refreshing its love for beer. But it seems our affection for wine and spirits is bubbling even more.
After beer sales fell 0.6 per cent in 2010-11, they shot back up by 0.6 per cent in 2011-12. Sales are still below 2009-10 levels by approximately 0.25 per cent, however.
Here are a few other facts from the report:
-Wine sales increased by 5.9 per cent and spirits sales went up 3.9 per cent last year. For the second year in a row, both wine and spirits saw bigger spending boosts than beer.
-By volume, 236.2 million litres were purchased in 2011-12 – an increase of 3.5 per cent over 2010-11.
-Beer still led sales, however: Canadians purchased $9.2 billion worth of suds, $6.5 billion worth of wine, and $5.3 billion worth of spirits. In total, it’s a $21-billion alcohol industry.
-Canadians spent over $8 billion on imported products, with Ontario and Quebec accounting for over two-thirds of those sales.
-Most beer imports come from the United States (23.5 per cent), most wine from Italy (19.2 per cent) and over half of our imported spirits also come from the U.S. (53.9 per cent).
-Yukon is the leading consumer of alcohol per capita, at 167.7 litres annually. Yukoners also purchase the most beer and spirits, 131.4 and 14.8 litres respectively. Only Quebec purchases more wine per person at 23.4 litres.
-Among the provinces, Quebec purchases the most per capita: 121.7 litres. Alberta (114 litres), Saskatchewan (101.3 litres), B.C. (98.9 litres ) and Ontario (95.1 litres) all trail la belle province.
-Newfoundland and Labrador are the biggest beer purchasers among the provinces (99.6 litres per person per year) and spirit purchasers (12.3 litres).
-Since 1950, the only times that the sale of alcohol went down year-to-year were the fiscal years 1954-1955 and 1993-94.
The Statistics Canada report looks at sales for the previous fiscal year. This year’s report was based on numbers up to March 31, 2012.