Liquor Industry News 5-28-13

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Tuesday May 28th

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Diageo boss calls time with £50m ($77 million)

 

Paul Walsh, the departing chief executive, is to receive one of the biggest-ever farewell packages

 

Source: Sunday Times

Matthew Goodman

26 May 2013

 

PAUL WALSH will leave Diageo, the world’s biggest spirits producer, with a farewell package that could be worth close to £50m.

 

The 58-year-old steps down as chief executive of the Johnnie Walker and Smirnoff maker at the end of next month and will remain on the board until September. He is due to retire in June next year after completing a handover to his successor, Ivan Menezes.

 

The “golden goodbye” could be one of the most lucrative in British corporate history. Walsh, who has been Diageo’s chief executive since 2000, holds stock worth £15.5m at today’s share price of £20.19Å. In addition, he is sitting on share options that have a theoretical value of £11.7m. He also has a pension pot worth £19.2m, which will generate an annual payment of £578,000.

 

But Diageo insiders said he may not be entitled to the full amount. They pointed out that the share options, which vest over the next three years, are performance-related. Walsh will also be unable to touch his pension pot until he retires.

 

Last month the outgoing boss sold shares worth about £16m after cashing in some of his options.

 

Walsh has been with Diageo since 1982 and, as chief executive, transformed it from a sprawling consumer goods giant into a drinks specialist. He sold off Burger King restaurants and food brands such as Häagen-Dazs ice cream to focus on drinks including Guinness. Under his 13-year stewardship, the company’s market value has climbed by £30bn.

 

Walsh also presided over a string of deals that have strengthened Diageo’s presence in America and seen it grow in emerging markets such as China and Brazil.

 

The most notable was the $8bn takeover of the Seagram spirits empire in 2000, which Diageo pulled off in partnership with its rival, Pernod Ricard.

 

 

——

Post taste test reveals drinkers can’t tell good from cheap vodka

 

Source: New York Post

By CYNTHIA R. FAGEN

May 26, 2013

 

It’s just a shot in the dark.

 

More than two dozen New Jersey bars caught pouring cheap hooch into top-shelf bottles got away with cheating customers likely because 44 percent of tipplers can’t even taste the difference, a Post survey has found.

 

We enlisted eager volunteers to sample a shot of the $35-a-bottle French-made Grey Goose vodka and a shot of upstate Syracuse’s $8-a-bottle grain vodka Alexis to see whether they could pick the “better” booze.

 

The results were sobering – 22 of the 50 tasters preferred the low-end elixir.

 

“I would just order the cheap one from now on. If you can’t taste the difference, I would go for the low end,” said Emma Taylor, 22, after knocking one back. “I don’t make that much money.”

 

Said Lee Hsieh, 27, “You wouldn’t be able to tell the difference, especially if you had a few drinks.”

 

But Thalita Cudzik, 26, winced after guzzling the Alexis.

 

“Even if you can’t tell the difference, you are paying more, and that’s not right. If it’s bad liquor, then you’re going to have to deal with it in the morning with a hangover,” said Cudzik, a nanny.

 

Christian Joseph, 46, an IT manager from Connecticut, preferred the Grey Goose.

 

“If I had a watered-down drink, that would be just wrong,” he said.

 

Air Force Officer Todd Inouye, 35, called the test a wash, joking, “They both taste like jet fuel.”

 

A yearlong investigation by the New Jersey Division of Alcoholic Beverage Control found one New Jersey drinking establishment used rubbing alcohol and food coloring as a substitute for scotch. Another, it said, poured dirty water into an empty liquor bottle.

 

As part of the probe, called Operation Swill, undercover testers ordered “neat” drinks (no ice or mixers) from 63 establishments. Some had been named in complaints. Others were chosen at random.

 

Using a device called a True Spirit Authenticator, they analyzed 150 samples of supposedly straight premium shots on the spot. The results: 30 were phony.

 

The Post’s tasters called the deception tasteless.

 

“That’s like when we used to water down our parents’ liquor. I guess they thought they wouldn’t get caught,” said one female liquor lover, who chose the Alexis.

 

 

——

India: Spurious liquor claims 4 lives in Sultanpur district

 

Source: Times of India

TNN

May 26, 2013

 

Celebratory drinking claimed four lives in Sultanpur district on Friday as four people from the groom’s side, including his father, died after consuming spurious liquor. In another incident that was reported from a village in Amethi district, ten people had lost their lives after consuming illicit liquor on May 8.

 

Ramnarayan Dhuria, a resident of Shrirampur Lamoli village in Sultanpur had organised his daughter’s wedding at the village on Friday. 55-year-old Mastram Dhuria, father of the groom, along with several others arrived at the Sultanpur village from Ambedkar Nagar district.

 

Ramnarayan served two bottles including a branded whisky bottle to Mastram, Ramchandra Verma (30), Indrajeet Verma (35) and Rajendra (28). The group had consumed one bottle when they started feeling uneasy. The liquor was apparently spiked with some dangerous chemicals locally.

 

The condition of the group started deteriorating and three members were rushed to a nearby hospital. Meanwhile, Indrajeet said he was sick and decided to sleep at the village as he felt dizzy. The three died at the hospital while undergoing treatment while Indrajeet was found dead in the morning.

 

Senior officials from district administration, excise department and Sultanpur police visited the village on Saturday. The officials took the whisky bottles in custody and sent the bodies for autopsy. The incident took place under the jurisdiction of Motipur police station and owner of the store that sold the liquor to Ramnarayan as well as persons responsible for manufacturing of the illicit liquor will be booked, said police. In the Amethi incident, 10 persons died after consuming illicit country liquor during a local event at Miyan Ka Purwa village. Several including the manufacturer and supplier were arrested subsequently.

 

 

——

You May Be Liable For Someone Else’s Overintoxication

 

Source: Law360,

Ashley Watkins

May 24th

 

Recently, the parents of a young man who died of alcohol poisoning filed a wrongful death suit against Phusion Projects Inc., the company behind the Four Loko beverage. This type of lawsuit against the manufacturer of an alcohol beverage is uncommon.

 

The complaint, filed in King County Superior Court, made allegations under the Washington Product Liability Act, claiming that Four Loko is not reasonably safe as designed and that the product was not adequately labeled regarding the dangers of the drink. Dram shop laws facilitate lawsuits against retailers for overserving someone who causes a drunk-driving accident or for serving minors, but courts typically have not found the manufacturer liable for harms to the consumer caused by his own overconsumption.

 

Four Loko in its original form was an innovative product, combining caffeine and malt liquor into a single beverage. While initially very popular, the drink came under attack after a string of incidents in 2011. In Washington, nine college students were hospitalized after consuming Four Lokos at a party, leading the attorney general to push for a national restriction on the sale of the product. In the face of this backlash against the product, the company removed caffeine from its formulation.

 

The complaint filed in Washington parrots two of the major criticisms of the product: first that the 23.5-ounce drink contained the alcohol equivalent of up to four or five beers, rather than the one or two advertised and second that the combination of alcohol and caffeine allegedly prevented the consumer from feeling the effects of the alcohol, leading them to drink more than they otherwise would have.

 

The claims raise a number of case-specific issues when determining liability for over-consumption of alcohol. In Washington, a plaintiff’s claim of defective design requires him or her to show either that the product’s risk outweighs its utility or that the product was “unsafe to an extent beyond that which would be contemplated by the ordinary customer.” RCW 7.72.030(3).

 

Typically, inherently dangerous products fail under the first theory. For example, a Washington court found that given the purpose of a trampoline, there was no alternative design that could have prevented injury from jumping. Anderson v. Weslo Inc., 79 Wash.App. 829, 837 (Wash. App. 1995). The same is true with an alcohol beverage. By its nature, overconsumption of wine, beer or spirits has an intoxicating effect. And removing the alcohol leaves you with something other than an alcohol beverage.

 

The plaintiff’s claim under the second theory also suffers limitations. The ordinary consumer would likely anticipate that overconsumption of a malt liquor could make them inebriated. The Second Restatement of Torts on products liability even uses alcohol as an example of reactions that are contemplated by the ordinary consumer:

 

The article sold must be dangerous to an extent beyond that which would be contemplated by the ordinary consumer who purchases it, with the ordinary knowledge common to the community as its characteristics. Good whiskey is not unreasonably dangerous because it will make some people drunk, and is especially dangerous to alcoholics.

 

In this case, it could be argued that the ordinary consumer may not anticipate the effects of the interaction of caffeine and alcohol. The biological reactions to the competing stimulant and depressant may be presented as a complicating factor, masking the effects of intoxication and making it more difficult to gauge how much could be consumed safely.

 

But bars and restaurants have been safely serving “rum and Cokes” and Irish coffees for many years, without specific liability. A court would be hard-pressed to figure out a way to impose liability for this type of beverage but overlook the combinations of caffeine and alcohol so readily accepted in other situations.

 

A second issue likely to arise is causation. As with the Central Washington University students mentioned above, the decedent in this case consumed Four Loko along with other types of alcohol. Pinpointing his reaction to a single beverage among the group could prevent plaintiffs from being able to prove causation, a mandatory element of a wrongful death tort claim.

 

A third issue will be the interaction between a claim of inadequate warnings for a product whose warnings and labels are heavily regulated under state and federal law. The plaintiffs have not alleged that the product was sold in violation of strict federal production standards or that the labels used on the product were not approved in accordance with federal law.

 

While compliance with federal regulations is not a bar to inadequate warning claims, it most certainly would give the courts pause. Alcohol beverage manufacturers would be put in a tough situation if compliance with production and labeling requirements still left them open to liability based on an improper labeling theory.

 

Perhaps the plaintiff’s strongest claim is for nonconformity to express and implied warranties. Not only is this claim under a strict liability standard, as opposed to the negligence standard applied to the charges above, but the U.S. Food and Drug Administration’s review and subsequent pressure on Four Loko to change its formulation could be used as evidence that the product did not conform to implied or express warranties. This would be particularly true if the alcohol or caffeine content was found to be substantially different than what was disclosed on the label.

 

In addition to accuracy in labeling, the packaging of Four Loko proved problematic. Some groups argued that the colorful, bright packaging of the product targeted a younger consumer, making it more appealing to underage drinkers. It could also be argued that the consumer’s reasonable expectation was that they could safely consume all of a seemingly single-serve can. Both of these issues are further wrinkles in any potential lawsuit against beverage manufacturers.

 

A number of lessons can be learned from this representative lawsuit in Washington. While the liability addressed in this case may seemingly be specific to Four Loko’s combination of caffeine and alcohol, pioneers of new alcohol beverage categories often face a similar gauntlet of accusations.

 

As the experience of Black Death Vodka and Sparks proved, image problems can create consequences with regulators and private parties that ultimately make continued business unprofitable. Along with testing, accurate labeling is also critical. The final point, unrelated to the substance of the liability analysis above, is to ensure that liquor liability is included in the company’s insurance policy. This failure may prove to be one of Four Loko’s greatest challenges.

 

In addition to the specific lessons learned, this case raises a number of public policy concerns in light of the possibility that a court may impose liability for overintoxication on alcohol manufacturers. Imposing liability in this instance rejects the “individual responsibility” approach often favored in American society.

 

The pushback from Big Brother-type restrictions on drinking is what led to the repeal of Prohibition and the 21st Amendment (notably, the only amendment actually repealing a prior amendment). As alcohol was ultimately legalized by the 21st Amendment, society has arguably already determined that the benefits of alcohol beverages outweigh the harms.

 

Finally, at risk of relying on the cliche of a slippery slope, the industry as a whole may fear: Once a court finds a manufacturer liable for an individual’s overconsumption, what is to stop that liability from extending to distributors, retailers or even individuals who provide alcohol beverages to their friends?

 

 

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Australia: Regulator seeks to put big alcohol promos in ‘high-risk’ basket

 

Source: SMH

Kirsty Needham

May 26, 2013

 

Discounts at bottle shops of more than 50 per cent off wine, beer and liquor will be classified as high-risk promotions likely to cause alcohol-related harm under tough draft guidelines by the liquor regulator.

 

The tightening of NSW liquor promotion guidelines to include discounting at bottle shops for the first time comes amid fierce price competition by the liquor retailers, particularly the big supermarkets, who have blitzed the market with two-for-one wine and free beer promotions on grocery receipts. The classification of the promotions could lead to the ban of such offers.

 

The Office of Liquor Gaming and Racing has circulated a draft copy of the contentious new guidelines to the liquor industry for feedback, but has refused to comment until the guidelines are signed off by Hospitality Minister George Souris.

 

The Liquor Stores Association has reacted by calling on the regulator to produce evidence that discounts of more than 50 per cent cause harm to consumers.

 

Public health groups, which have complained they have been locked out of the consultation process, have lodged complaints with the office in recent months about supermarket bottle shop promotions they say are encouraging the bulk purchase and heavy consumption of alcohol among young people, including Woolworths and Coles, pictured, offering two-for-one prices on wine and free beer on grocery receipts. The regulator formed a preliminary view the coupon offers may pose a risk and is deciding what action to take. Coles also offered on the internet to give away free bottles of premium Fifth Leg wine to customers who bring ”bad, unopened wine” into First Choice bottle shops. The promotion was banned last month by the office.

 

Under the Liquor Act, the director-general of NSW Trade and Investment can restrict or ban promotions it believes risk encouraging the misuse of alcohol, but must first publish guidelines for industry that indicate the types of promotions likely to be deemed risky.

 

Under 2009 guidelines, price discounts of ”50 per cent or higher for consumption on premises” were classed as an unacceptable risk. .

 

The liquor industry has bristled at the move to more tightly regulate retail discounting, claiming pensioners and low-income households will be disadvantaged. But the Foundation for Alcohol Research and Education, the Australian Medical Association and the Police Association of NSW jointly wrote to the office last week requesting they be given the opportunity to give feedback on the new guidelines, but have received no response.

 

NSW Greens MP John Kaye said he was concerned the delay in publication of the guidelines was because the industry was being allowed to ”negotiate changes that work for them”.

 

”Once again the O’Farrell government is negotiating an important health policy behind closed doors with the industry that is being regulated,” he said.

 

 

——

Young Drivers and Alcohol: A Deadly Mix

 

Source: New York Times

By HANNAH FAIRFIELD

May 27th

 

It is well known that young drivers are more likely than older ones to have accidents. But a visual analysis of national data on drunken driving puts the disparity into stark relief – and suggests whose lives might be saved by a proposal to lower the legal blood-alcohol limit.

 

The recommendation, by the National Transportation Safety Board, urges the 50 states and the District of Columbia to lower the limit of 0.08 percent to 0.05 percent, the standard in most industrialized countries.

 

Drivers younger than 26 cause the most auto fatalities in the United States, regardless of alcohol consumption. But 21 percent of young drivers involved in a fatal accident have some alcohol in their system – higher than in other age groups. Researchers have shown that even a small amount of alcohol can disrupt a person’s ability to concentrate or do two things at once. For less experienced drivers, one or two drinks can cause the loss of reasoning and reaction time that might result in a fatal crash.

 

“Young drivers have a far greater risk differential in the 0.08 to 0.05 range,” said Deborah A. P. Hersman, the board’s chairwoman. “Lowering the legal limit can make people more thoughtful about having the second, third or fourth drink – because every drink raises a driver’s crash risk level exponentially.”

 

More than 6,600 impaired drivers are involved in fatal accidents every year, causing about 10,000 deaths. About half of those accidents are caused by drivers with blood alcohol levels at or below 0.16 percent.

 

The chart shows that the red “hot spots” start with young drivers at even the lowest blood-alcohol levels, and decline as drivers get older. If the proposed legislation is adopted by the states, young drivers and their passengers may be the biggest winners.

 

 

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On-premise premiumization of Spirits continues, with most spirits categories seeing accelerated price/mix in 1Q13 relative to 2012 trends

 

Source: GuestMetrics

May 27th

 

According to GuestMetrics, the overall average price for spirits in full service restaurants and bars accelerated during the first quarter of 2013, the result of consumers trading up to more expensive brands in the Bourbon, Scotch, Tequila, and Vodka categories, as well as incremental pricing being taken in the majority of the spirits categories.

 

“While spirits’ price/mix was up +2.5% during 2012 compared to the prior year, that accelerated to +3.2% during 1Q13,” said Bill Pecoriello, CEO of GuestMetrics LLC.  “As we wrote about several months ago, there has been a “hollowing out” taking place in the spirits category, with consumers migrating away from the Premium tier in favor of High End & Super Premium brands, as well as Value brands.  This is likely a reflection of the impact of creative marketing for top tier brands causing trade-up, and simultaneously, a consumer base that continues to be under economic pressure causing trade-down to less expensive brands,” continued Pecoriello.  Based on data from GuestMetrics, Super Premium’s share of spirits sales increased from 32.1% in 2011 to 32.6% in 2012 and has accelerated to 33.8% in 1Q13; High End Premium’s share increased from 52.3% in 2011 to 53.0% in 2012 to 53.8% in 1Q13; and at the other end of the pricing spectrum, the Value segment increased from 21.9% in 2011 to 22.3% in 2012 to 22.5% in 1Q13.  Those gains came at the expense of the Premium segment, which contracted from 25.7% in 2011 to 24.7% in 2012 to 23.7% in 1Q13.

 

“In terms of changes in price/mix across the various spirits categories, eight of the 10 main spirits categories saw an acceleration in their year-over-year price/mix from 2012 to 1Q13, and only Bourbons and Brandy/Cognac saw any deceleration,” said Peter Reidhead, VP of Strategy and Insights at GuestMetrics.  Based on data from GuestMetrics, year-over-year growth in price/mix for Vodka accelerated from +2.0% in 2012 to +3.8% in 1Q13; Tequila accelerated from +2.0% to +3.1%; Scotch accelerated from +4.6% to +5.5%; Rum accelerated from +2.4% to +3.1%; Irish accelerated from +1.2% to +2.6%; Gin accelerated from +3.4% to +3.6%; Cordials accelerated from +3.1% to +3.9%; and Canadian accelerated from +3.2% to +3.5%.  Price/mix for Bourbons and Brandy/Cognac remained in positive year-over-year territory, but both decelerated slightly: Bourbons from +2.1% to +1.5%, and Brandy/Cognac from +1.5% to +0.7%.

 

“Looking at the spirits categories that saw the largest shifts in price segments, Bourbons has seen the most dramatic hollowing out effect.  Super Premium’s share of Bourbon sales increased from 14% in 2011 to 15% in 2012 and reached 16% in 1Q13, while Value’s share increased from 9% in 2011 to 12% in 2012, and is now almost 16% in 1Q13,” said Brian Barrett, President of GuestMetrics. “Super Premium in Scotch saw its sales share increase from about 58.5% in 2011 to 60.5% in 1Q13, and in Tequila, increased from about 14% of sales in 2011 to about 16% in 1Q13.  The largest spirits category, Vodka, has also seen some premiumization take place, with Super Premium and High End brands together gaining about 1.5 points of share from 2011 to 1Q13.”

 

 

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Pernod Ricard Forecasts Slower China Growth on Weaker Economy

 

Source: Bloomberg

May 28, 2013

 

Pernod Ricard (RI) SA, France’s biggest distiller, forecast weaker growth in China as slower economic growth hurts demand and the government’s austerity campaign weighs on entertainment spending.

 

The maker of Martell Cognac and G.H. Mumm champagne expects “high single digit” growth in China in the year ending June 2013 and “high single digit, low double digit,” growth in the midterm, Pierre Coppere, head of Pernod’s Asian unit, told investors in Beijing today. The company reported a 24 percent sales rise in China last year.

 

Distillers including Paris-based Pernod and Remy Cointreau SA (RCO) are counting on emerging markets to drive sales as a credit crisis crimps consumer spending in Europe. Pernod posted third-quarter revenue which missed estimates on April 25 as consumers in developing markets held back spending.

 

A tougher macroeconomic environment in China and President Xi Jinping’s crackdown on extravagant gift-giving and banquets by government officials have weighed on sales in the nation, Gilles Bogaert, Pernod’s chief financial officer, told investors on April 25. To drive sales in its second-largest market the company is targeting new consumers such as female drinkers and trying to convert beer drinkers to its liquors.

 

Coppere in March reported “softness” over the key Chinese New Year period, when consumers buy high-priced spirits for celebratory gifts. Pernod, which sells its ABSOLUT-brand vodka and Chivas Regal range of Scotch whiskies on the Mainland, expects net sales growth in China to be between 9 to 11 percent this year, Bogaert has said.

 

The world’s second-largest economy grew 7.7 percent, more slowly than expected in the first quarter, with economists at Goldman Sachs Group Inc. and Royal Bank of Scotland Group Plc among those who have cut China growth estimates since April 19.

 

The growth in the cognac market in Asia is decelerating in 2013 and likely to grow low single digits this year by volumes with the slowdown more evident in premium brands, Philippe Guettat, head of the company’s Martell Mumm Perrier-Jouet, business said today.

 

 

——

Quick Note – Pernod Ricard (RI FP, Neutral) – Feedback from presentation in China

 

Source: Nomura

May 28, 2013

 

European Beverages

Stock Rating: Neutral

Target Price: EUR 104.00

PERP.PA (EUR 95.44)

Ian Shackleton – NIplc

 

Long-term story robust, but see short-term concerns in Asia

Although the long-term story in Asia looks robust and the company benefits from its strong position, especially in China, the company has acknowledged short-term challenges still and is guiding for more normalised medium-term revenue growth rates (high single to low double digit revenue growth) after high single digit in FY13. This is in line with our estimates, where we see FY13 revenue +8pc with some recovery in FY14 (+10pc). As a result, we continue to see more subdued group EBIT growth in FY14 (+6-7pc) after +6pc in FY13 before returning to +8pc in FY15. We continue to prefer investment in Diageo (Buy), given the broader geographical spread and M&A opportunities. Valuation calendar 2014 PE 17.3x vs. Diageo 17.0x and spirits sector avg 18.3x.

 

Investor day presentation

Company hosted the presentations at its investor day in Beijing earlier today. Presentations will be released on the website tomorrow, no webcast available. Further breakout sessions are planned later today. Company is also planning an investor event on innovation in H1 FY14 in Paris. We estimate the Asia/ROW division will account for 46pc of EBIT in FY13, with Asia accounting for 83pc of the division’s sales.

 

Key points from the presentations and Q and A.

Group CEO Pringuet highlighted that, even with some slowdown, Asia has the highest growth potential still for the group. Company is targeting high-single to low double-digit revenue growth from the region going forward (with profits growing faster), after high single digit in FY13, with similar growth rates for cognac and Scotch. Company indicates underlying growth rate in China is c 7pc.

 

Head of Asia flagged 3 key priorities:

1. Be the leader in premium western-style spirits 2. Increase value share (sales) from 35pc to 40pc 3. Achieve double-digit growth Premium western-style spirits; Premium western-style spirits only represent 3pc of Asian spirits. Company prestige plus (over USD84 per bottle) represents a third of sales and company has 45pc share; however, in ultrapremium (over USD300 per bottle) share is only 23pc and co aims to become no 1 here. Company does not rule out buying into local wine and spirits to achieve this.

 

Head of Martell indicated 35pc value share of cognac in region and 32pc of volume share. Martell overindexes in highend, XO+, being 40pc of volume v 20pc for others. However, 2013 has seen some slowdown and rebasing of growth with volumes growing low single digit and price in line with inflation. Going forward, company sees growth opportunity across the region from wider geographies and new occasions (esp. converting beer drinkers). Company now sees more normal stock levels in the Chinese market v historically when supply was limited. Company sees cognac and Scotch both growing revenue high single-digit/low double digit going forward. Recent price increases in China were 3-6pc and these are being rolled out into other countries.

 

Key brands for growth

As well as the core cognac and Scotch brands, company aims to grow Absolut vodka, malt whiskies, champagne and wine. On champagne, co is no2 in the region, with 12pc value share. In premium imported wine, co has no 3 position globally and no 2 in Asia; using the spirits distribution co can leverage this position.

 

Key markets in the region are China, India and Korea, which represent two thirds of revenue. Company sees long-term outlook for western-style spirits to grow 12pa in volumes and 10pc in gross profit in Asia.

 

In China, company aims to grow value share of western-style spirits from 47pc to 50pc and to grow revenues double digit. Key battlegrounds remain leadership in cognac and whisky (90pc of profits). Co benefits from a strong distribution network across China, with 7 tier-1 wholesalers, 340 tier-2 and 600 smaller wholesalers. Co remains optimistic about the mid to long-term opportunity, but acknowledges short-term challenges, which began with the 2011 5 year plan and have led more recently to the anti-extravagance campaigns and advertising restrictions on luxury goods.

 

In India, company also aims to grow value share of premium plus whisky (over USD7) from 47pc to 50pc. It sees volumes in premium plus growing 14pc pa and gross margin 17pc.  Although the Diageo/United Spirits deal may create more competition, it should also help to grow the premium plus category. No new news on import tariff reductions – probably now not until after Indian elections next year.

 

 

——

Washington: State revenues grow from liquor privatization

 

A year after liquor privatization, it looks as though state and local governments are getting more revenue, and customers are paying more.

 

Source: Seattle Times

By Melissa Allison

May 25th

 

A year ago, you couldn’t buy liquor at grocery stores in Washington. Now you can, but you probably pay more for it.

 

June 1 will mark the one-year anniversary of the state’s departure from the liquor business, when it turned sales over to private retailers such as Costco Wholesale and Safeway. The conversion happened at the behest of voters, who approved a Costco-written initiative in the fall of 2011.

 

Back then, only 329 stores – all state-run or contracted with the state – sold liquor in Washington.

 

Now more than 1,400 retailers sell slightly more liquor than the state used to – an average of 2.7?million liters a month since privatization, compared with 2.5?million before.

 

Prices spiked sharply last summer, but the rate of increase has steadily declined. In March, prices were 7 percent higher year-over-year, according to the Washington State Department of Revenue.

 

Additional repercussions from Washington’s conversion include hundreds of former Liquor Control Board workers still collecting unemployment benefits, shoplifting concerns among law-enforcement authorities and possibly more liberal attitudes about alcohol among youth.

 

A key concern in privatization efforts, particularly in an earlier attempt turned down in 2010, was the amount of revenue the government would collect after the change. And so far it’s been a pretty good deal for the state.

 

The state Economic and Revenue Forecast Council projects that spirits taxes and fees will generate $425?million in revenue for fiscal 2013, which ends June 30. About $392?million has been collected already, more than the $309?million the liquor business generated for the state and local governments in fiscal 2011.

 

Legal challenges have dogged implementation, as they do many voter initiatives.

 

One change resulting from the litigation involved the Liquor Board’s interpretation of a provision that allowed retailers to sell only 24 liters of liquor and wine in a “single sale” to bars and restaurants. The Liquor Board decided that meant 24 liters a day, but retailers fought and won the right to buy 24 liters per transaction, with no time limit.

 

That puts many locally owned grocery chains at an even greater disadvantage, said Jan Gee, president of the Washington Food Industry Association, which represents most grocers, except national chains.

 

Prices higher

 

High prices are probably the most divisive issue in the new liquor system.

 

Large retailers, who wrote and financially backed the voter initiative, blame distributors, who fought the measure and lost.

 

“Distributors are taking a huge margin in the middle,” Joe Gilliam, president of the Northwest Grocery Association, said, citing what he estimates as a 30 percent markup.

 

“Over time there will be competition, and distillers will complain,” said Gilliam, whose organization counts Costco, Safeway and other big grocers among its members.

 

The distributors disagree.

 

“My understanding is that (distributors’) margins in Washington are as low as anywhere in the country, and suppliers are not very happy about it,” said John Guadnola, executive director of the Washington Spirits & Wine Distributors Association.

 

And distillers do not appear willing to step in.

 

“You started off with the highest level of taxation in the country and to that added two new fees,” said David Osgood, chief economist for the Distilled Spirits Council of the United States.

 

The voter initiatives included those new fees – assessed on retailers and distributors – to ensure the state nets as much money as it used to from the liquor business.

 

The retailer fee is 17 percent. The distributors pay 10 percent for the first two years they do business in Washington, then the amount drops to 5 percent. For most, fees will drop in the spring of 2014.

 

On top of that, the voter measure required distributors to have collectively paid at least $150?million in fees by March 2013. They were expected to miss that target all along, and the Liquor Board recently sent letters telling them how much they owe.

 

Southern Wine & Spirits, which sold 57 percent of the liquor in Washington in 2012, owes $59.5?million, while Young’s Market, which sold 36 percent, owes $37.7?million. (The next largest distributor is Click Wholesale Distributing, with 2 percent.) All payments are due May 31.

 

No one is sure what will happen after distributors pay off the shortfall and see their fee drop to 5 percent next year.

 

David Trone, president of the Total Wine & More chain, says prices on a lot of popular items are lower, particularly at discounters such as his company and Costco.

 

He has a list of 50 popular products, most in the 1.75-liter category, that Total Wine’s analysis shows are $5.72 cheaper on average than state store prices.

 

For example, a 1.75-liter bottle of Absolut vodka at Total Wine in early April cost $40.33, including taxes, compared with $47.95 at state stores just before they closed last year, the chain says.

 

A comprehensive comparison of pricing is not available because the state, with its exit from the liquor business, no longer tracks individual brands.

 

Net job gain

 

Trone also touts job creation, saying his four stores alone have hired 200 people.

 

Southern Wine and Young’s Market have added more than 1,000 jobs to handle the new business, some at Southern’s new 350,000-square-foot distribution facility in Puyallup.

 

That would offset the 902 Liquor Control Board jobs lost because of privatization. The layoffs included people who worked at the state’s liquor-distribution center in Seattle, which is being bought by Panattoni Development Co. for $23.4?million in a sale expected to close in July.

 

Many of the laid-off employees are still out of work. In April, 458 claimed at least one week of unemployment benefits, according to the Washington Employment Security Department.

 

One worker who did find a job is Pat McLaughlin, the Liquor Board’s former head of business enterprise, who also oversaw the sale of the state’s liquor stores before losing his own job.

 

“I consider myself blessed that my transition was surely easier than most,” said McLaughlin, who now runs the solid-waste division of King County’s Department of Natural Resources and Parks.

 

He still lives in Olympia and takes the Sounder from Lakewood to Seattle for work.

 

Concerns about crime

 

A concern among opponents of liquor privatization was the notion that it would make access to booze easier for minors.

 

The Liquor Board monitors that with store-by-store stings to see if retailers are selling to minors, and the numbers have not changed much.

 

Typically, 5 to 6 percent of stores under the state-run system were found to have sold to minors. Under private retailers, the range since last June is 5 to 10 percent.

 

It may be that youth-alcohol consumption hasn’t changed much, but a survey last fall showed changing attitudes among Washington state youth.

 

“Significantly fewer students in eighth, 10th and 12th grades believe their peers think it’s ‘very wrong’ for someone their age to drink alcohol,” said Julia Dilley, an epidemiologist who also teaches at the University of Washington.

 

That attitude change is an early warning signal, said Dilley, who received a grant from a program of the Robert Wood Johnson Foundation to study how privatization changes consumption patterns.

 

She also plans to study whether changes in consumption are associated with more alcohol-related consequences, such as hospitalizations, crime and traffic accidents.

 

Already, the Washington Traffic Safety Commission has found that the number of fatal crashes involving a drunken driver in the second half of 2012 – 53 – was lower than the same six months in the previous five years.

 

One crime that seems to have risen is shoplifting, possibly because retailers are not as careful about security as the state was.

 

“Some (police) chiefs and sheriffs have noted an increase in shoplifting related to spirits,” said Mitch Barker, executive director of the Washington Association of Sheriffs & Police Chiefs. “There’s no question organized crime is involved. Groups are taking large amounts and selling it on the black market.”

 

Evidence so far is anecdotal, but state Rep. Christopher Hurst, D-Enumclaw, has asked retailers to share information about which stores are experiencing liquor losses and how much.

 

He expects to consider those data soon as part of a working group of the House Government Oversight and Accountability Committee, which he chairs and which has jurisdiction over liquor.

 

Hurst is responding to Washington cities, which reported they do not have the resources to litigate all the spirits-shoplifting cases they are getting.

 

“It’s a lot bigger problem than people expected,” Hurst said.

 

 

——

Delaware: 3 cited for bringing alcohol from Del. into Pa.

 

Source: Philly.com

The Associated Press

Friday, May 24, 2013

 

Pa. – Liquor control authorities in southeastern Pennsylvania have cracked down on those trying to buy tax-free alcohol across the state line in Delaware.

 

Police with Pennsylvania’s Bureau of Liquor Control Enforcement conducted checkpoints Friday at two stores in Claymont, Del.

 

The Daily Local News reports (http://bit.ly/13QZV3V) three summary citations were issued for illegal transportation of liquor into Pennsylvania.

 

Officers also confiscated more than 400 bottles of beer, nearly 125 bottles of wine and 15 bottles of liquor.

 

 

——

Russia: Liquor production in Russia drops 23 percent

 

Source: New Kerala

May 25th

 

Production of vodka and other spirits in Russia dropped 23.3 percent in the first four months of 2013 year-on-year to 5.7 million decaliters, a report said.

 

The Federal Statistics Service (or Rosstat) said in a report that beer production declined 10.7 percent compared to the same period last year, to 78.2 million decaliters.

 

Production of wine rose 19.1 percent in the reporting period to 3.5 million decaliters.

 

Production of low-alcohol drinks (defined as those containing less than 9 percent alcohol by volume) fell 9.7 percent.

 

 

——

SAB fosters beer brands in Australia

 

Source: FT

By Neil Hume in Sydney

May 26th

 

A bartender pours a pint of Fosters lager at The Knights Templar public house, operated by JD Wetherspoon Plc, in London, U.K., on Wednesday, Sept. 7, 2011. U.K. retail sales dropped in August as consumers remained concerned about their jobs and incomes, the British Retail Consortium said.©Bloomberg

 

When SABMiller launched an $11.8bn cash bid for Australian brewer Foster’s in 2011, analysts and investors were not impressed.

 

Why would a company known for its exposure to fast-growing emerging markets enter a mature beer market and pay a very full price for the privilege?

 

SAB, which owes its existence to mergers and acquisitions, was not put off. Graham Mackay, then chief executive, said he would “sweat the assets” and “make the numbers work”.

 

SAB last week revealed that Foster’s – also known as Carlton United Breweries – had generated $700m of earnings before interest, tax and amortisation in its first full year of ownership. And more importantly, given the declining market, it announced a 3 per cent increase in underlying beer volumes in the three months to the end of March.

 

Speaking before the results, Ari Mervis, the South African executive in charge of integrating CUB, told the Financial Times that he was encouraged by the performance of the Australian unit.

 

“We expect it to take a good few years to turn the business around and put it on a sustainable platform, but we are very encouraged with where we are at the moment,” said Mr Mervis, SAB’s head of Asia-Pacific.

 

Plans to extract $180m in cost savings by March 2015 from better procurement and lower back-office costs, are running ahead of schedule. Meanwhile, Victoria Bitter, one of CUB’s six core brands, has been successfully repositioned.

 

Analysts reckon SAB has already achieved half the targeted cost-cutting and could deliver a further $60m in the year to March 2014. But the performance of VB, which has just recorded a second consecutive quarter of sales growth, is the most eye-catching.

 

When SAB completed the Foster’s acquisition in December 2011, VB was a shadow of its former self. Over 10 years, its market share had plunged from 25 per cent to less than 12 per cent as its core drinkers – Aussie tradesmen in shorts and singlets – deserted the brand. This followed a disastrous decision to lower VB’s alcohol content to 4.6 per cent to save on excise duty and chase a younger demographic.

 

One of the first things Mr Mervis did when he took control of CUB was to launch a project to save VB as part of a broader plan to put “beer back at the centre”.

 

Mr Mervis and his teams decided to return VB to its roots as a beer for blue-collar tradesmen. They revived its iconic packaging and old advertising slogan: “A hard-earned thirst needs a big cold beer.”

 

VB’s original recipe was also revived, using new production processes to remove preservatives and enzymes, and the alcohol content was boosted to 4.9 per cent.

 

Returning VB to its “full flavour and full strength” has been a success. Since the beer was relaunched in October, it has enjoyed two straight quarters of growth, with sales rising 8.6 per cent in the three months to March. It has also regained the mantle of Australia’s biggest-selling beer, just ahead of XXXX Gold.

 

“It’s given an enormous amount of energy and enthusiasm to the organisation,” Mr Mervis says, adding that it “put our sales guys on the front foot”.

 

With VB stabilised, Mr Mervis says the focus is now on the other CUB brands that “deliver the majority of our volume”, as well as lifting sales of SAB’s international brands, which include Peroni and Miller, in Australia.

 

Although beer drinking in Australia has been declining as wine and spirits have become more popular, the country’s A$5bn ($4.8bn) a year brewing industry still boasts some of the highest margins in the world. This is because the market is a duopoly between CUB and Lion, the food and beverage group owned by Japan’s Kirin.

 

Mr Mervis says there was a “lot of opportunity” for beer in Australia as its “share of throat” is about 40 per cent – lower than both the US and the UK.

 

“The climate, the environment and culture of Australia, certainly lends itself to beer consumption,” he says. “So, we’re very optimistic about the long-term growth.”

 

 

——

Brands by Value preview

 

Source: Drinks International

By Drinks International News Desk

24 May, 2013

 

Brand valuation and marketing company Brand Finance has compiled a ranking of the world’s biggest spirits by  brand value.

 

The full results of Brands by Value will be published on Drinksint.com on June 4 and the June edition of Drinks International magazine, but here we present a first look at ranks 26-50.

 

Brand value in brief

 

Brand value is the amount that an independent third party might pay to buy the trademark and associated intellectual property. For example, Jose Cuervo’s brand value represents Brand Finance’s opinion on how much someone should pay to buy the Jose Cuervo trademark.

 

As part of a brand valuation exercise, the strength of a brand is evaluated against its peers across a number of measures, including emotional connection, financial performance and sustainability, among others. This is used to arrive at a brand rating which ranges from D to AAA.

 

This year’s Brands by Value table continues to see a volume shift towards local brands from developing countries. The potential for these brands, especially from China, is immense and opportunities to develop variants to enhance margin – and, in turn, cross borders – remain. Margin growth remains with the global power brands however.

 

Famous Grouse continues to be the goose that laid the golden egg for Edrington Group. Its brand value is up US$69.6 million to US$398 million following an increase in case sales of 400,000, making it the biggest riser in the table’s lower half. Famous Grouse also has the strongest brand rating at AAA-, suggesting the consumer affection and loyalty needed for continued growth.

 

The table is dominated by Diageo and Pernod Ricard with over half of the 25 brands in the lower half of the table owned by these two companies. Diageo’s Ketel One has enjoyed the second largest jump in brand value, US$65.9 million, bringing its total to US$381 million.

 

Despite the success of Famous Grouse, it has been a less successful year for some other whiskies. Glenfiddich has dropped from 27th in 2012 to 35th in this year’s table after losing US$39 million in brand value. Meanwhile J&B has had an even more difficult year. Following a fall in case sales of 200,000 its brand value has fallen US$46.7 million to US$371 million, pushing out of the top half to 30th place in this year’s list.

 

The methodology

 

Brand Finance calculates brand value using the Royalty Relief approach. This involves estimating the likely future sales attributable to a brand and calculating a royalty rate that would be charged for the use of the brand.

 

The steps in this process include:

 

– Calculate brand strength on a scale of 0-100 according to a number of attributes, such as emotional connection, financial performance and sustainability. This score is known as the Brand Strength Index

 

– Determine the royalty rate range for the alcoholic drinks sector by reviewing comparable licensing agreements sourced from Brand Finance’s database of licence agreements and other online databases

 

– Calculate royalty rate – the brand strength score is applied to the royalty rate range to arrive at a royalty rate. For example, if the royalty rate range in a brand’s sector is 1%-5% and a brand has a brand strength score of 80 out of 100, an appropriate royalty rate for the use of this brand in the given sector will be approx 4%

 

– Determine brand-specific forecast revenues using a function of case sales, average prices and equity analyst forecasts to determine the proportion of a parent company’s revenues attributable to a specific brand

 

– Apply the royalty rate to the forecast revenues to derive brand revenues

 

– Brand revenues are discounted post tax to a net present value which equals the brand value

 

Brand ratings

 

These are derived from the Brand Strength Index which benchmarks the strength, risk and future potential of a brand relative to its competitors on a scale ranging from D to AAA. It is conceptually similar to a credit rating

 

AAA – extremely strong, AA – very strong, A – strong, BBB-B – average, CCC-C – weak, DDD-D – failing

 

 

——

After PBR: Will the Next Great Hipster Beer Please Stand Up

 

Source: Time

By Brad Tuttle

May 26, 2013

 

Pabst Blue Ribbon, the so-called “nectar of the hipster gods,” has been hip for longer than anyone could have possibly imagined. Now that PBR’s popularity is mainstream, and the beer has lost some of its authentic, cheap no-frills appeal, the assumption is that another beverage will take its place as the top hipster brew. But there are reasons why the “next PBR” might never come.

 

The research firm Restaurant Sciences recently released data indicating that not only had Pabst Blue Ribbon prices in bars and restaurants risen substantially-up over 10% from April 2012 to April 2013-but that the entire category of cheap “sub-premium” beer had gotten more expensive due to PBR. “I believe the single biggest driver in sub-premium beer price increases is indeed specifically PBR,” Chuck Ellis, Restaurant Sciences president, told the Daily News. “It has become quite fashionable.”

 

Tons of publications jumped on the study and issued hipster-bashing headlines, usually to the effect of how PBR-loving hipsters “ruin everything,” even cheap beer. But wait a sec. PBR didn’t just become hip recently. It’s been years, in fact, since PBR emerged as the beer of choice of the bearded, Brooklyn-focused masses. In the New York Times magazine, Rob Walker wrote of hipsters embracing PBR thanks to its non-marketing marketing back in the early ’00s. Why would PBR prices be only spiking just now?

 

Well, it’s not clear Pabst’s recent price hike is much of an anomaly at all. Restaurant Sciences only has data for a little over a year, so there’s no way of telling if the latest price increase is unusual, or just part of a years-in-the-making trend. The recession gave inexpensive PBR an extra boost with budget-conscious drinkers, and its popularity allowed the company to increase prices in 2009. AdAge noted that in 2011 beer manufacturers raised the prices of several subpremium brands such as Keystone Light mainly in order to help push consumers into trading up to slightly pricier, supposedly tastier brews like Bud and Coors.

 

So there’s nothing particularly new about rising beer prices, even at the subpremium level. Also, while Restaurant Sciences data focus on the price increases as percentages, it’s easy to see that the figures don’t add up to big cash in terms of your bar tab. A 10% price increase sounds like a lot, but when we’re talking about a PBR draft that costs $2.50, that amounts to a bump of just 25¢. That $2.75 PBR is still way cheaper than the typical $5 or $6 craft pint. And none of those prices are as nonsensical as the absurd $10 or $11 charged for Bud Light in certain Manhattan “whale” restaurants.

 

In any event, as PBR has grown incrementally more expensive and increasingly mainstream, it’s been assumed that the beer will inevitably lose its hipster following. “No product stays hip forever, and at 7 years old, the Pabst boomlet is reaching a generational breaking point.” That’s a quote from a Salon.com post-published in 2008. In 2011, the Pabst Brewing Co. and its portfolio of working-class beers was sold and the headquarters shifted from the Midwest to southern California, of all places. Many thought that the people drinking PBR “because it is unsexy, unpretentious and blue-collar Midwest,” in the words of the Chicago Tribune, would turn away from old-school brew now that it was perceived as a sell-out.

 

And yet here we are, in 2013, discussing how PBR’s popularity is responsible for pricing shifts throughout the entire beer industry, even as the craft brewer movement continues to explode-and has changed the beer marketplace far more than Pabst.

 

So why the fascination with PBR? And considering that hipsters shun the mainstream, why haven’t they turned their tastes elsewhere? Some would argue that some hipsters have, in fact, done just that. Several PBR sister brands-Old Style, Lone Star, National Bohemian-are often in the discussion concerning the “next PBR.” So are a few brews from the world’s largest beer companies, including Natural Light, Hamm’s, and Miller High Life. Then there are regional beers such as Genessee, Narragansett, and Yuengling; they’re all relatively cheap brews, and they’ve all been mentioned by beer industry experts as hipster favorites and potential contenders for PBR’s crown.

 

Despite the fact that hipsters seem willing to pay top dollar for things like artisanal mayonnaise, cheap price is essential for any hipster beer, says Rene Reinsberg, the founder and CEO of the menu advisory company Locu. In March, Locu published heat maps of hipster neighborhoods revealing the availability of PBR in bars and restaurants. “Cheap signifies underdog,” Reinsberg says. “The underdog thing is important to this audience. If a beer is expensive, it doesn’t fit the story. Hipsters are into adopting the underdog.”

 

Such criteria would seem to rule out the possibility of a small craft brewer from becoming the next big hipster success story. Don’t count craft out, though, says Restaurant Sciences’ Ellis. “My own theory is that there’s been such intense competition at the high craft end, there is bound to be a fierce battle for the low end,” he says. “There are so many craft brewers out there, and they’re all trying to break through. There could be someone willing to trade volume for price.”

 

Another wholly unscientific factor in a beer’s rise in popularity could be its nickname. It seems to help a beer’s street cred to have a code name or sorts, perhaps so the “in the know” crowd knows how to order at the bar, and how to recognize fellow enthusiasts. Pabst Blue Ribbon, of course, is shortened into PBR. Natty Boh (National Bohemian), UC (Utica Club), Natty Light, Genny, and ‘Gansett are a few of the others.

 

Speaking of ‘Gansett, the Rhode Island beer appears to be one of the most overt in its pursuit of the hipster drinking crowd. The brand had been dead for a decade before new owners took over in 2005, a time that just so happened to coincidence with PBR’s rise. Since then, Narragansett has kept retail prices low-around $4.99 for a six-pack of 16-ouncers in the Northeast and Mid-Atlantic-while making other efforts to appeal to hipsters. Last summer, for instance, the company released retro “Crush It Like Quint” cans, named in honor of the memorable character who drank Narragansett (and crushed the can) in “Jaws.” The company website also features a “‘Gansett Girl of the Week,” who, in addition to enjoying the beer, is usually an enthusiast of some hipster activity, such as roller derby.

 

Mark Davidson, one of the founders of the beer price-tracking site SaveOnBrew.com, says that Narragansett’s active targeting of hipsters could backfire. “You can’t set out to be the beer of choice for a counter-culture,” he explained via e-mail. “Just like you can’t set out to make a viral video.”

 

Davidson says it is silly for hipsters to think they are “fighting the power” by drinking PBR, which is actually brewed by one of the world’s largest beer companies, but it’s equally silly for any company to try to advertise in a traditional way to this group of consumers, who in their minds “don’t want to bend to the will of corporate masters telling them what to drink.”

 

Davidson isn’t sold on any current beer as a replacement for PBR, nor even on the concept that there will ever be another success story like Pabst over the last decade. “Maybe it’ll never happen again. Maybe the next wave will really be into whole milk and label the people who drink 2% as ‘slaves to the corporate teat,'” he joked.

 

What he does know is that beer drinkers are a “predominantly male” group that tends to “spend more time indoors, are less physically active, play more video games, spend more time on their smart phones, are enamored with smarts over looks and tend to be more cynical about their future and the future of the planet.” And what beer will most appeal to them? “One that hasn’t been invented yet,” said Davidson. “But I bet a room of savvy marketers somewhere is thinking the exact same thing.”

 

 

——

Diageo closer to control of India’s United Spirits

 

Source: FT

By Louise Lucas, Consumer Industries Editor

May 27th

 

Diageo, the world’s biggest distiller by sales, has moved a step closer to securing control of Indian peer United Spirits after paying some £300m for a 10 per cent slice of the group’s enlarged capitalisation from a preferential share allotment on Monday.

Announcing completion of the allotment to the Indian stock exchange, the companies also said that Gilbert Ghostine, Diageo’s Asia-Pacific president, would join the board of United Spirits with immediate effect.

 

The move is the second part of a three-step deal valued at about Rp57.2bn ($1bn), which Diageo chief executive Paul Walsh spent years negotiating in on-again off-again talks with mercurial liquor baron Vijay Mallya.

 

The acquisition will give Diageo, maker of Johnnie Walker Scotch whisky, access to United Spirits’ unrivalled distribution network in India, where the alcoholic beverage market is estimated at $6bn and is growing 15 per cent a year.

 

Diageo hopes the takeover will help it build the market for its premium Scotch brands among India’s increasingly affluent middle class. United Spirits controls nearly 60 per cent of India’s drinks market.

 

In a somewhat back-to-front process, Diageo first made a mandatory tender offer for shares it was not acquiring from United Spirits, Mr Mallya and related parties.

 

That offer, which closed on May 15, saw Diageo secure a mere 0.04 per cent – unsurprisingly, since it stuck with the Rp1,440-a-share price paid to acquire shares directly from United Breweries. That price represented a 35 per cent premium over the close on September 24, the day before the talks were announced, but was sharply below the Rp1,755 close on the Bombay Stock Exchange ahead of the mandatory takeover offer.

 

Failure to scoop up more shares neither scuppered the deal nor represented a setback for Diageo. The distiller faced a similar situation in China when it acquired a controlling stake in baijiu maker Shui Jing Fang at a price well below where the shares were trading at the time of the mandatory takeover bid.

 

Moreover, Diageo has stressed that the structure of the existing deal gives it power to appoint the top two executives of United Spirits, and it will also control voting rights as Mr Mallya’s United Breweries will vote with Diageo for four years.

 

There now remains just one step before Diageo secures the 27 per cent stake it is initially seeking. This may yet prove the toughest, and may not complete before the end of the financial year on June 30.

 

 

——

Diageo hit by weak demand for vodka in India

 

Source: Business Standard

May 24th

 

Diageo, the global spirits major which is best known for Johnnie Walker scotch whiskies and Smirnoff vodka, has said that its performance in India was held back by Smirnoff which is declining 2% in a weak vodka category. However, Diageo has added that they have strong underlying momentum in scotch with Johnnie Walker Red and Black growing in strong double digits.

 

Diageo, which is in the process of acquiring stake in India’s leading spirits player – United Spirits, relies on Smirnoff vodka for its volumes here and it is the largest selling brand for them here. In addition to Smirnoff, Diageo sells Johnnie Walker and VAT69 in good numbers, besides a range of few other brands which sell in small volumes.

 

According to industry observers, Smirnoff, which is present in the premium vodka segment in India, still controls around 80% of the market, but it has been hit by slow growth in the vodka segment as a whole. “Many people are opting for whiskies and that is one of the reason why the vodka segment is seeing sluggish growth,” an industry analyst noted.

 

Gilbert Ghostine, President, Asia Pacific, Diageo in recent discussion with investors said that  they are gaining share of the scotch category in India.  Diageo has said that they are able to gain good market share in the scotch whisky segment through the Johnnie Walker bouquet, which is a result of its continued F1 sponsorship programme and Step Inside the Circuit campaign.

 

The global spirits major is also hoping that there will be some sort of a breakthrough on the ongoing discussions between the Indian government and the EU over FTA which also involves India reducing the high import duties on scotch. “On the EU FTA negotiation with the Indian Government, we keep hearing that things are moving in the right direction and the conversation is progressing positively. But, unfortunately, I cannot put a timeframe on this one because we have been in this place before, but they seem closer than they were in the past,” he detailed.

 

According to Diageo, VAT69 also saw double digit depletion growth and in aggregate they are gaining share of the scotch category year-to-date. “Our emerging middle class scotch brands such as Rowson’s Reserve, Haig and VAT69 together are growing in double digits,” Ghostine  added.

 

Diageo has been growing at a decent clip in India over the past few years but has not been able to muscle up to a strong position and hence as and when it consummates the transaction with United Spirits, they will be getting to ride on the expansive and sturdy network across India through which their brands can ride on.

 

Diageo, post the $2.1 billion transaction announced during November 2012 in which it was supposed to get a controlling stake of 53.4 per in United Spirits, has so far managed 0.44% in USL and is expecting to get an additional 10% through a preferential allotment before end of May.  

 

Said Ghostine: “Post the MTO settlement, it will allow us to subscribe for the preferential allotment by the end of May. We believe that then it could put us in a position where we could complete the share purchase agreement by the end of the fiscal year – which is end of June 2013,” he added.

 

 

——

Mine’s a double: Private equity could get twice £75m it paid for bottle maker

 

Source: The Independent

Sunday 26 May 2013

 

The Yorkshire-based firm which makes the bottles for Smirnoff vodka and Grant’s whisky could be sold for £150m later this year.

 

Private-equity group Equistone has hired advisers at Rothschild to review options for Allied Glass, which traces its history back to the 1870s, including a possible sale.

 

Allied supplies glass containers to Diageo and the eponymous maker of Napolina cooking oil.

 

The company has benefited from soaring demand for these and other premium brands in emerging markets, including China, India and Russia. This helped the glass-container maker recently smash through the £100m annual sales barrier.

 

It has hired a French-speaking business-development manager and a multi-lingual sales officer to capitalise on growth opportunities overseas.

 

Allied Glass, which employs 650 staff, also completed a multi-million pound investment in its manufacturing site in Knottingley, West Yorkshire, including a furnace rebuild, to step up its production last month.

 

Equistone, which used to be part of Barclays, acquired the glass specialist in a secondary buyout deal worth £75m from CBPE Capital in April 2010. But Allied Glass’s recent meteoric growth means that the private-equity firm now hopes to secure a price tag of around double that amount. CBPE had acquired the company from Associated British Foods, the conglomerate behind fashion chain Primark, in 2002.

 

Allied Glass made operating profit of £11.5m over the year to December 2011. All parties declined to comment.

 

 

——

Champagne Gets Recognition in China

 

Source: WSJ

By NADYA MASIDLOVER and JASON CHOW

May 27th

 

The world’s most famous bubbles have gained new recognition in China.

 

Chinese authorities have registered Champagne as an official label, according to the Champagne trade organization representing the French brands and grape growers. The move limits the use of the name to sparkling wine made in France’s Champagne region.

 

Chinese authorities have registered Champagne as an official label, limiting the use of the name to sparkling wine made in France’s Champagne region.

 

The new recognition could boost protection of the celebratory drink in a country that is essential to its growth. The Champagne industry sells half of its annual production to French consumers, but the bottles attract higher prices-and sales growth-abroad. Yet Chinese consumers have been slow to order the drink, preferring spirits such as whiskey, Cognac and red wine.

 

But Champagne isn’t crying victory yet. Other countries such as the U.S. have dragged their feet on enforcing stringent protection of the name. The Comité Interprofessionnel du Vin de Champagne, the Champagne trade group, has been lobbying for years to prevent other makers of bubbly from using the famous fizz’s name on wine made outside of the Champagne region.

 

China’s decision will allow Champagne producers to ensure that, as their business grows in the country, they don’t suffer the same fate as in the U.S., where weak legal protection has undermined the segment. Between 45% and 50% of sparkling wine volumes in the U.S. are mis-sold as Champagne, according to Sam Heitner, director of the U.S. Champagne Bureau, the industry’s representative in the country.

 

The use of the Champagne name for other types of sparkling wines is limited in the U.S., where labels of sparkling wine registered after 2006 are banned from calling themselves Champagne.

 

The controversy over the Chinese labeling of Champagne and sparkling wine is a particularly vexing issue to those in China’s wine business because of how the two terms have been translated. Champagne is known in China as “xiang bing”-which includes the character for the word “fragrant”-while sparkling wine is classified as “qi pao jiu,” a term loathed by producers as it includes the word “blister.”

 

The battle of the name gained importance as Champagne sales in China soared in recent years. In 2012, Champagne exports to China-excluding Hong Kong-jumped 52% to two million bottles, making the country the twelfth-largest export market for the festive drink.

 

Nonetheless, the market remains nascent compared with sales of Champagne in Europe or the U.S. China makes up a meager 0.6% of total exports of Champagne. With over 10% of exports, the U.S. is the drink’s second-largest export market, behind the U.K.

 

Champagne houses have worked hard to promote the beverage in China in recent years amid growing demand for high-end beverages. China’s top clubs and karaoke bars stock the drink, and the major brands have been promoting heavily through advertising and publicity stunts. In 2011, Moët et Chandon brought Scarlett Johansson, its celebrity spokeswoman, to China to promote the brand and even auctioned off a dinner date with the actress at a Christie’s wine auction in Hong Kong.

 

Until now, only 0.5% of the wine consumed in China is sparkling wine as Chinese consumers far prefer still wines-especially red wine-over bubbly ones, according to International Wine & Spirit Research.

 

The registration of the name will provide a boost to the existing protection in China, said Wang Wei, head of the Champagne Office in Beijing, in a statement. He added that abusive uses of the Champagne name are “few, rapidly detected and severely punished.”

 

 

——

Aging cases of wine under the SEA gives better taste than identical ones left ashore

 

Source: Daily Mail

By James Nye

27 May 2013

 

A Napa Valley firm hopes to revolutionize the wine industry in the United States by aging bottles in the ocean – with stunning implications for taste and the cost of the wine.

 

In February, Mira Winery became the first company to lower four cases of their 2009 Cabernet Sauvignon 60-feet down into the Charleston Harbor and they returned last week to check on the results of their experiment.

 

The conclusion of the independent blind tasting was that the wine was ‘extraordinary’ – outstripping the same wine aged on the shore in categories such as aroma, taste and finish and being priced at $1,000 a bottle.

 

‘It’s the first time we’ve ever done it – anybody’s ever done it in the United States,’ Mira Winemaker, Gustavo Gonzalez told Foxnews.com.

 

The aim of the experiment was to test ocean-aged wine against warehouse aged wine and to note the affect the seawater has on aging through temperature, humidity, pressure, motion, light and the lack of oxygen.

 

‘Wine making is an art and a complicated science,’ said Gonzalez.

 

‘With several factors that impact wine production, aging is traditionally done in a very controlled environment to ensure optimum outcome.

 

‘With our experiment, we’re testing the impact of unpredictable tides, waves and temperature on the wine’s taste.’

 

The wine was lifted from the sea bed on May 21st and Gustavo was ecstatic about the results.

 

‘I think it’s a whole other element for adding diversity to the flavors that already exist within wine,’ said Gustavo.

 

Jim ‘Bear’ Dyke Jr., the Charleston resident who owns the winery, says the wine will now be sampled and chemically analyzed.

 

Later this year, he said, more wine will be submerged in the harbor for twice as long as the winery continues to experiment with ocean aging.

 

Wine has been aged in the ocean before by wineries both in Europe and on the West Coast. Mira wants to do a systematic analysis of the effects of such aging, Dyke said.

 

‘There is no better place than in Charleston to make history and that is what we have done today,’ he said. ‘Charleston is known as a food and wine destination for its innovation and we believe our southern roots and Napa grapes are adding another chapter to this story.’

 

Winemakers have long known that wine recovered from sunken ships has a unique taste. The ocean is thought to have something to do with that.

 

‘There are definite differences in temperature and pressure, motion and light that we don’t see on land,’ said Gustavo Gonzalez, the winemaker for Mira Winery.

 

Part of the initial experiment was to test the steel cages to make sure they would survive being in the ocean and also to protect the wine, he said.

 

In the second phase, wine will be put into the water right at the beginning of the aging process. The wine that was submerged in February had already been aged for some time on land.

 

‘The idea is to have an even better comparison with wine that has never seen shore aging and has only had water aging,’ he said.

 

The winery bottles its wine in August and September. The next batch of ocean-aged wine will be submerged as soon as it is bottled and will likely remain in the harbor until May or June of 2014, he said.

 

Gonzalez said he’s hopeful that the average wine drinker, not just the connoisseur, will be able to tell the difference in ocean-aged wine.

 

‘I’m hoping that anyone will be able to tell the difference because my feeling is the aging process will be a little slower offshore. The differences, hopefully, are a little more obvious than an expert would require,’ he added.

 

Read more: http://www.dailymail.co.uk/news/article-2331908/Aging-cases-wine-SEA-gives-better-taste-identical-ones-left-ashore-researchers-planning-industry-revolution.html#ixzz2UZj8hxo8

 

 

——

Chianti Classico econonically unviable for most producers, says Antonini

 

Source: Decanter

by Richard Woodard

Friday 24 May 2013

Chianti Classico’s economic model is unsustainable for many wineries because they cannot recoup the high production costs imposed by its strict rules, according to one of the region’s leading winemakers.

 

Alberto Antonini, the former chief winemaker for Antinori, and whose family estate is Poggiotondo, told Decanter.com the Chianti Classico area – 7,200 hectares (18,000 acres) under vine – is too big to be financially viable for all producers.

 

Antonini, who began his career at Frescobaldi in 1986, was in London to publicise Blends, a collection of wineries from Chianti Classico, Argentina, California and Uruguay overseen by Carlos Pulenta, previously the man behind Trapiche, Peñaflor and Salentein.

 

Antonini welcomed recent changes in the Chianti Classico region, including the introduction of a top tier called ‘Gran Selezione’, which is due to come into force later this year.

 

‘I am not against this,’ he said, ‘but it only makes sense if you are a very successful producer.

 

‘Chianti Classico is in trouble at the moment because I think there are 15-20 producers who are really good, but the whole region is not like that.

 

‘Most of it is sold for peanuts, but the production costs are very high . now you can buy Chianti Classico in bulk for the same price as ordinary bulk Chianti.’

 

Chianti Classico vineyards have a minimum vine density of 4,400 plants per hectare and maximum yields of 7.5 tons/hectare, compared to 4,000 plants and 9t/ha respectively for ordinary Chianti.

 

Blends, the brainchild of Pulenta, Antonini and Argentinian businessman Alejandro Bulgheroni, is aiming to bring premium wines with a strong sense of place to international wine markets.

 

So far, the venture has planted vineyards in a new, cooler, coastal area of Uruguay, and has acquired the Argento brand and Dievole, one of the oldest wine estates in Tuscany, over the past year.

 

Pulenta said he was potentially interested in acquiring wineries in a number of areas in the future, particularly in Europe and especially in France.

 

 

——

Red wines may have premature oxidation problems, say Bordeaux researchers

 

Source: Decanter

by Jane Anson in Bordeaux

Friday 24 May 2013

 

Researchers at Bordeaux university’s faculty of oenology have identified a potential issue with premature oxidation affecting red wines.

 

Denis Dubourdieu, professor at the faculty of oenology (ISVV) in Bordeaux and author of a leading study into premature oxidation in white wines, told Decanter.com, ‘Ten years ago, many people were aware of the premature oxidation problem in white wines, but didn’t want to talk about it. For me, it’s a similar situation now with red wines.’

 

Dubourdieu points to the 2003 vintage as the most obvious example, although any very ripe vintages – such as 2009 – could be at risk. ‘And it is not limited to Bordeaux – any region that makes long-living red wines, from Tuscany to Napa, should be aware of the potential issues.’

 

Red wines have greater natural protection against premature oxidation, as the tannins and phenolics are natural buffers against oxygen. ‘But I have seen issues with a number of classified wines that are potentially storing up trouble for later,’ warns Dubourdieu. ‘The Right Bank is the worst affected because Merlot is so vulnerable.’

 

The warnings signs of premox in reds comes through the appearance of certain aroma markers such as prunes, stewed fruits and dried figs, and is often linked to a rapid evolution in colour, as with whites.

 

Dubourdieu, along with Valérie Lavigne and Alexandre Pons at the ISVV, has found two specific molecules – ZO1 giving the prune aroma and ZO2 giving a stewed fruit smell – that develop rapidly in the presence of oxygen.

 

The causes are numerous, Dubourdieu believes: harvesting later in a bid for riper grapes with low acidity, and winemaking practises including too much new oak barrels, or low doses of sulphur dioxide particularly when coupled with a high pH (over a pH of 4, SO2 loses almost all of its effectiveness).

 

‘These are practices that winemakers are doing with the best intentions,’ Dubourdieu said. ‘Riper grapes, new oak, low sulphur use – these are all things intended to improve the wine and to benefit the consumer. But I would prefer to warn winemakers now that it’s possible to go too far, rather than say nothing simply to be politically correct.

 

 

——

How They Won It: Irell Brings Populism To Koch Wine Fight

 

Source: Law360

By Bill Donahue

May 24, 2013

 

After billionaire William Koch bought some allegedly counterfeit wine at auction, Irell & Manella LLP attorneys won him a $12 million fraud verdict by showing jurors that false labeling is a consumer rights issue that can affect anyone – not just wealthy businessmen.

 

Koch won an auction in 2005 for 24 bottles of purportedly rare Bordeaux, which had been consigned to Zachys Wine Auctions by Internet entrepreneur Eric Greenberg. When Koch discovered two years later what he claimed was proof that the bottles were fakes, he sued Greenberg for fraud, deceptive business practices and false advertising.

 

Following a 13-day trial last month, the members of a New York federal jury sided with Koch. They found that Greenberg had willfully advertised and sold wine that he knew to be counterfeit, handing Koch a combined $12 million in punitive, compensatory and statutory damages.

 

But getting there was an uphill battle for Koch’s attorneys from Irell. Proving fraud in New York requires “clear and convincing evidence,” rather than the normal civil standard for a “preponderance of the evidence.” And goods bought at auctions almost always bear a disclaimer that the buyer is getting them “as is” – a warning that can only be overcome if a plaintiff can show the jury that the seller had some “peculiar knowledge” about the products that it withheld from the purchaser.

 

And, according to Irell’s John Hueston, those hurdles were heightened by how Greenberg’s legal team framed the case: an “imperious billionaire” who had purchased expensive wine from a seller who was unaware that it was fake, who now thought he was “above the law” when it came to disclaimers that are intended shield vendors from liability when they unknowingly resell bad goods.

 

“He was almost laughingly confident in his prospects of prevailing,” Hueston said.

 

The key was to flip that theme on its head. Hueston and his team set out to show that rather than an arrogant billionaire, Koch was a man who could afford to fight a court battle out of principal – the wine only cost $300,000 for a man with an estimated $4 billion in assets – on behalf of consumers everywhere.

 

“No consumers should be bound to these types of disclaimers if the sellers are engaged in fraud or if they have knowledge that there are issues with their merchandise and they’re not informing the consumers of that,” Hueston said of Koch’s basic appeal to the jurors.

 

With that groundwork, Hueston’s team painted a picture of an intentional scheme to sell suspect wine. They argued that Greenberg would push wines on auction houses that he at least knew might pose authenticity issues. If the house accepted it, he’d let them resell it; if not, he would quickly move on to the next house, they said.

 

The team then narrowed the case to the single auction at issue, in which Greenberg had personally helped write up the product description – which Hueston’s team argued contained direct fraudulent representations about the wine’s origins.

 

Other courtroom moves helped along the way. Koch’s attorneys were able to show that a key defense witness had misrepresented his credentials as a college professor, and that a blog post he had written years prior directly contradicted his contention that authenticity can only be tested by actually tasting wines.

 

Hueston also pulled the jurors deeper into the case through the use of interactive presentations. At one point, he and his team handed jury members bottles of wine and a blacklight, allowing them to perform the kind of “sleuth work” that Koch had carried out to show the wine was counterfeit.

 

But the Irell attorneys kept circling back to the central narrative, directly tying what is, admittedly, a hobby of the wealthy to the kind of transactions that could affect any consumers – including the eight New York consumers sitting in the court room getting ready to decide the case.

 

“This is no different than you saving up your money and buying a signed Derek Jeter baseball,” Hueston recalled telling the panel. “You can buy it from a few vendors, but one has knowledge that his ball might be counterfeit. Don’t you have a right to know that information?”

 

On April 12, the jurors agreed. Attorneys for the defendants, who did not return a request for comment on the verdict, have yet to file an appeal of the decision, which has not yet been entered as final judgment.

 

Other than Hueston, Koch was represented by Bruce Wessel, Marshall Camp and Moez Kaba of Irell & Manella LLP.

 

Greenberg was represented by Arthur Joel Shartsis and Frank Albert Cialone of Shartsis Friese LLP and Anthony Paul Coles of DLA Piper.

 

The case is Koch v. Greenberg et al., case number 1:07-cv-09600, in the U.S. District Court for the Southern District of New York.

 

 

——

CHRISTIE’S HONG KONG FINE AND RARE WINES SPRING SALE REALISES HK$48,899,796 / US$6,332,524

 

Source: Christie’s

May 25th

 

On Saturday, May 25, Fine & Rare Wines Sale at Christie’s Hong Kong totaled HK$48,899,796 /US$6,332,524, and was sold 95% by lot and by value.

 

Simon Tam, Head of Wine, China, said: “These results illustrate the wine market’s continuing demand for Bordeaux and investible grades of wines from all over the world. Our auction was well-received by providing in-depth knowledge of this dynamic market and appropriate estimates, which resulted in over 96% of the wine selling within and above its estimate range. In addition, wine collectors enjoyed the added appeal of ‘Perfect Pairings’, pairing recommendations that match a broad range of fine wine to Asian cuisine styles.”

 

Please find the Top Ten Results attached. Related images are available here. http://cshk.myftp.org/2013%20Spring%20Christie%27s%20Hong%20Kong%20Auctions/WINE/Wine%20May%20Sale/Results/Images/

 

——

Austerity whites

 

Source: FT

Jancis Robinson

May 24th

 

There is more cheap red wine than cheap white but here are some whites under £10 worth investigating

 

Only once have I been criticised for the subject matter of my columns on this page. Some years ago a member of the traditional British wine trade ticked me off for stooping to mention some of the bargains then available at mass market retailers. At the risk of riling him, I propose to spend this weekend examining relatively inexpensive wine. Many readers of the FT must be all too aware of the prevailing mood of austerity. And even those who don’t need to save pennies must feel at times that they should.

 

I have been quizzing those who buy large quantities of mass market wine professionally and have enjoyed the euphemisms. “Value wine” is a popular one for wines at the bottom end of the price range. (For the record, I firmly believe there is value at just about every price level apart from the stratospheric.)

 

All are agreed that it is much easier to find – oh, let’s be brave – cheap wine that is red than its white counterpart. For a start, white wine is much more transparent. Any winemaking faults or slight taints tend to be all too obvious, and the main ones in cheap white – apart from the classic old-fashioned faults of oxidation and too much sulphur – are an excess of acidity from underripe grapes, a lack of flavour from excessive yields and, nowadays, occasionally heavy-handed use of oak chips that leaves whites (and some reds) tasting oily and of macerated matchsticks. As Marks and Spencer’s wine buyer Belinda Kleinig admits, they have to look at far more lots when buying or blending suitable whites than of reds.

 

And even after the disastrously short 2012 harvest in so many wine regions outside North America, there is much greater availability of cheap red wine than of cheap white. Prices are keener in Iberia than almost anywhere else and Spanish bodegas are still awash with bargain Garnacha and Tempranillo which, as Laura Jewell, Tesco’s in-house Master of Wine, puts it, have “more character than their equivalent, high-yield Airen white counterparts”. After all, the Garnacha that is still Spain’s most planted grape and of which there is no shortage of old bush vines delivering concentrated flavours in a well-matched warm climate, is the highly respected Grenache of Châteauneuf-du-Pape, hardly a workhorse. But in most Spanish wine regions, other than sherry country and the plains of La Mancha – long planted with the characterless Airen grape, historically destined for distillation into brandy – pale-skinned grapes were always in a minority. Only the far, damp northwest is serious white country, and production costs there are too high to be of interest to a supermarket buyer looking for basic white.

 

France has always been a red wine producer too – and old-vine Grenache in Languedoc and especially Roussillon can also offer some of the best red wine value in wines carrying such names as CôtesCatalanes and Pays d’Oc. There was a brief period when the Languedoc white Picpoul de Pinet looked pretty good value but popularity and the shrunken yields of 2012 have put paid to that.

 

Although it has now been joined by tragically underpriced Muscadet, by far the most important hunting ground for seriously inexpensive white French wine – albeit with fairly high acidity thanks to the Armagnac grapes traditionally planted there – has been Gascony. But even here prices have risen over the past couple of years. There was a time not so long ago that wines labelled Gers or Côtes de Gascogne were retailing for under £4. But that general supermarket base price, for wines of all colours, seems rapidly to have risen to closer to £7, thanks partly to routine increases in UK duty on wine in successive budgets. Initially these Gascon wines, typically based on Colombard and/or Ugni Blanc (called Trebbiano in Italy), were piercingly tart and thin but quality has risen considerably recently. I found Gascon wines the best value of all in a recent tasting of whites under £10 that Tesco has to offer, with a St-Mont blend of local, recently revived, indigenous GrosManseng, Arrufiac and Petit Courbu varieties particularly appealing to the ampelographic archivist in me. But the newish blend of GrosManseng with the Sauvignon Blanc of Bordeaux also works well.

 

I have been trying to find the best white wine value available currently in the UK. This generally but by no means exclusively means hunting on supermarket shelves. Even the specialist importer of natural and nearly-natural wines Les Caves de Pyrène, which specialises in supplying restaurants but will sell to consumers from its base in Artington, Surrey, has some bargains to offer, as you can see from my list of favourites on this page. Ditto adventurous independent importing retailers such as Lea & Sandeman. In France, the Loire is generally underpriced and it is even possible to find the odd bargain white from Alsace co-ops.

 

Italy is rather different from France and Spain. It has long grown oceans of Trebbiano and Sicilian white wine grapes such as Catarratto but, since the worldwide craze for Chardonnay transmogrified into one for Pinot Grigio, it has more recently and mysteriously had oceans of Pinot Grigio available, much of it tasting very cheap indeed. Alas the 2012 harvest has provided an excuse to raise Pinot Grigio prices. M&S buyers (called “winemakers”) have put a lot of work recently into revamping their Italian range and I was particularly impressed by the whites, which seemed free of the vaguely dull and industrial character that can dog cheap white. Each was distinctive and so full of fresh fruit that I had to check these were commercial samples ready for the shelf rather than pre-shipping, untreated tank samples.

 

Buying at this level can be as much about currency as about quality, which is partly why Australia and largely why South America do not feature here. But South Africa, with its extensive plantings of Chenin Blanc and Sauvignon Blanc, can be fertile hunting ground for “value” whites – not least because South Africans themselves have long undervalued their whites.

 

 

——

Alex Guarachi Purchases Sun Chase Vineyard

 

Source: WineBusiness.com

May 24th

 

Alex Guarachi, founder and CEO of Guarachi Family Wines and TGIC Importers, Inc., announced Thursday the purchase of 248-acre vineyard Sun Chase located in the Petaluma Wind Gap area of the Sonoma Coast AVA. The purchase of Sun Chase allows an estate designate for Guarachi Family Wines.

 

“We’re absolutely thrilled and excited. Sun Chase will allow us to take Guarachi Family Wines to the next level,” says Guarachi. “It’s an area proven to produce high-end Pinot Noir and will only further the development of our Pinot Project.”

 

Sun Chase is a state-of-the-art, high density vineyard developed in 2007 situated on the southern side of Sonoma Mountain, an area heavily influenced by cool ocean breezes. There are 24 acres planted to Pinot Noir, with four different clones of grapes, and 18 acres of Chardonnay. These two varietals excel in this region and the quality of fruit is an excellent demonstration of what this vineyard produces.

 

Considered one of the preeminent estates of Sonoma Coast, more than a dozen high-end wineries currently buy grapes from Sun Chase, and Guarachi says he intends to continue supplying these loyal producers.

 

In 2007, after a quarter century of importing and wholesaling wines, judging and assisting in the production and marketing of wines for other wineries, Alex Guarachi established Guarachi Family Wines. Sourced from the most premier appellations – Sonoma Coast and Napa Valley – Guarachi Family Wines focuses on two key varietals, Pinot Noir and Cabernet Sauvignon, offering four distinct hand-selected, luxury wines.

 

TGIC Importers was founded by Alex Guarachi in 1985 to fulfill his vision of introducing South American wine to American consumers. Today TGIC Importers is a national importer representing 18 wineries from around the world, and was recognized by Wine Enthusiast magazine in 2010 as Wine Importer of the Year.

 

 

——

Wine industry optimistic despite labor, import concerns

 

Source: THE PRESS DEMOCRAT

By CATHY BUSSEWITZ

May 23, 2013

 

It’s a time of optimism in the wine industry, with vintners buying vineyards to secure supply, and grape growers and brokers easily selling their crop for hearty prices.

 

But there are issues on the horizon, including a dwindling labor pool and an increase in bulk wine imports from overseas that could ease pricing pressures on domestic grapes and wine.

 

These trends were part of wide-ranging discussions Thursday among 200 vineyard, winery and finance executives at the 18th annual Vineyard Economics Seminar in Napa.

 

Nearly 98 percent of growers and vintners were more profitable last year than the previous year, and 87 percent believe that next year will be even better, according to an annual survey of wine executives.

 

“The winery demand seems to continue unabated,” said conference founder David Freed, chairman of the Silverado Group.

 

Growers in some parts of California are experiencing a shortage of agricultural workers. On the Central Coast, some vineyard owners have been accused of stealing farm workers from other crews, said Steve McIntyre, founder of Monterey Pacific, a vineyard management company in the Central Coast.

 

“The reality is we’re not stealing from any crew. It’s just that people are able to shop around for better wages,” McIntyre said. “If they don’t want to stoop to pick strawberries, they can . pick grapes.”

 

The changing dynamics around immigration and health care policy may reduce the advantage of using labor contractors, McIntyre said. As companies are required to provide health care to legal workers, the costs will be passed along to growers, said Craig Ledbetter, vice president of Vino Farms, a vineyard company based in Lodi.

 

“We really need to think about this as an industry,” Ledbetter said.

 

Despite the tight labor market, the California Association of Winegrape Growers is opposing several bills in the Legislature that would improve conditions for farm workers by increasing the minimum wage and mandating some pay during heat or rest breaks.

 

“Labor remains perhaps the most active and frankly troublesome area in Sacramento,” said John Aguirre, president of CAWG.

 

Meanwhile, imports will likely continue to pose a threat to California grapes and wines, especially if domestic prices remain strong, executives said.

 

“As a group, as an industry, as grape growers, we need to focus on how we’re going to protect our brands,” said Bill Pauli, president of Yokayo Wine Co. in Ukiah. “Collectively we have a lot invested.”

 

 

——

Obituary: Greg “Fretzy” Fretz

 

Source: Alliance Beverage Distributing Co.

May 24th

 

I am very sad to announce the passing of Greg “Fretzy” Fretz, our co-founder and sales manager. Fretzy died unexpectedly early Saturday morning after seeming to be recovering well from his battle with cancer. He was working with his old energy and excitement up until the evening before. Phoenix Ale Brewery and the Arizona beer community have lost one of the great natural beer sales guys.

 

He was energetic, gregarious and entertaining, but also a determined competitor. More importantly, we have lost a great friend and we will all miss him greatly. After working for 15 years selling beer for breweries from elsewhere, Fretzy’s dream was to open a brewery in Arizona. I am glad to say that he realized that dream and his name will live on in an industry he so loved. We send our condolences to Fretzy’s wife, Stacie, his young -family, and the rest of his loving family.

 

Please find time in your day to raise a glass for Fretzy.

 

 

—–

Belgian grocer Delhaize looks to sell two U.S. units – sources

 

Source: Reuters

By Olivia Oran

Thu May 23, 2013

 

Belgian grocer Delhaize is looking to sell two of its U.S. businesses as it continues to cut costs in the region, according to two sources familiar with the matter.

 

The Food Lion parent has hired Lazard Ltd to sell its Harveys and Sweetbay supermarket businesses, the sources said.

 

Chief Executive Officer Pierre-Olivier Beckers said the company was looking at options for the units, but declined to comment directly on whether advisors had been appointed to conduct the sale.

 

“This is a question on the table at the moment,” he told Reuters on the sidelines of the company’s annual shareholders meeting.

 

Lazard could not be reached immediately for comment.

 

Delhaize made about 65 percent of its 2012 revenue of 22.7 billion euros ($29.7 billion) in the United States, mainly through its Food Lion and Hannaford chains.

 

Harveys, which operates 73 supermarkets in Georgia, South Carolina and Florida, focuses on selling regional and fresh products.

 

Sweetbay, which had 105 stores in Florida at the end of 2012, caters to the Hispanic market.

 

In January, Delhaize said it would close 34 Sweetbay stores, most of them money-losing.

 

Beckers, who joined the company as CEO in 1999, announced in early May that he was stepping down.

 

Delhaize and other traditional grocery chains have come under pressure recently, with discounters like Costco Wholesale Corp and mass retailers like Wal-Mart Stores Inc gaining footing as shoppers’ budgets have dwindled.

 

 

——

Club Med to be taken over in ?540m deal

 

Source: FT

By Scheherazade Daneshkhu in Paris

May 27th

 

Club Méditerranée is to be taken over by its biggest shareholders in a friendly deal that values the French holiday resort group at ?540m.

 

Paris-based Axa Private Equity and China’s Fosun International said on Monday they would tender ?17 a share – a 23 per cent premium to Friday night’s close of ?13.85.

 

Shares in Club Med jumped 23 per cent on Monday, reaching ?17.02 in early Paris trading.

 

“The board took note of the friendly character of this offer,” Club Med said in a statement. “The board will meet again after the delivery of the report by the independent expert to provide its reasoned opinion on the terms of the tender offer.”

 

Henri Giscard d’Estaing, chief executive, would remain in post, according to the offer. He has sought to modernise the image of Club Med – founded in 1950 – by taking it upmarket and extending its appeal outside Europe. One target is to make Chinese holiday makers its second-largest customer base within three years.

 

Fosun, which owns almost 10 per cent of the company, and Axa, which has 9 per cent, said they made the offer because Club Med needed “to be free from short-term constraints” to implement its strategy given the “difficult trading environment of the tourism market in Europe, in particular France”.

 

 

——

Spain: Zamora takes on Jose Cuervo – report (Excerpt)

 

Source: Just-Drinks

By Andy Morton

24 May 2013

 

Grupo Zamora is to replace Diageo as the distributor of Jose Cuervo Tequila in Spain, according to reports.

 

The Madrid-based spirits and wine brand owner will take over from July, Alimarket said today (24 May). The news portal said Diageo will continue to distribute its “premium” Tequila Don Julio in Spain.

 

 

——

Chile: Chilean Beverage Company CCU Seeks $694 Million Capital Increase

 

Source: Dow Jones

May 27th

 

Chilean beverage company Compania Cervecerias Unidas SA’s (CCU, CCU.SN) seeks to raise some $694 million through the issue of new shares, the company said in a Monday filing with the local securities regulator.

 

CCU will use the proceeds of the issue to finance its organic and inorganic expansion plans while maintaining a solid financial positions, according to the filing.

 

After Sunday board meeting, the company called for a June 18 shareholder meeting to vote on the capital increase.

 

CCU, which has operations in Chile, Argentina and Uruguay, makes and bottles beer, soft drinks, mineral water and fruit juices. It also distills pisco-grape brandy and rum.

 

It has beverage licenses for products from Heineken NV (HINKY, HEIA.AE), Anheuser-Busch InBev NV (BUD, ABI.BT), PepsiCo Inc. (PEP), Paulaner Brauerei AG, Schweppes Holdings Ltd., Guinness Brewing Worldwide Ltd. and Nestle SA (NSRGY, NESN.VX).

 

The beverage company is controlled by the local Luksic family, which also controls London-listed mining company Antofagasta PLC (ANFGY, ANTO.LN), Banco de Chile (BCH, CHILE.SN) and shipping Compania Sud Americana de Vapores SA (VAPORES.SN).

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