Tuesday June 4th 2013
Today Is A Biodynamic LEAF Morning BUT
A FRUIT Night. Great To Taste Or Drink Wine Tonight
AB InBev, Constellation Brands Seek Dismissal of Lawsuit
By Karen Gullo
Jun 4, 2013
Anheuser-Busch InBev NV (ABI) seeks dismissal of a private antitrust lawsuit alleging its $20 billion acquisition of Grupo Modelo SAB will lead to higher beer prices, while customers who filed the lawsuit asked a judge to postpone the deal.
Budweiser-maker AB InBev, the world’s largest beer company, called claims of nine beer customers that the deal will allow it to control Constellation Brands Inc. (STZ) and conspire to raise beer prices “outlandish and completely unsupportable.” Constellation also asked a judge to dismiss the lawsuit.
AB InBev is acquiring Grupo Modelo in a deal that calls for Constellation to buy the stake that Modelo holds in their joint U.S. distribution venture for $1.85 billion.
In a U.S. Justice Department-supported transaction, AB InBev made binding commitments to turn winemaker Constellation into a competing brewer that will produce and control all Modelo brands in the U.S., including Corona, the country’s biggest import, lawyers for the beermaker said in filings yesterday in federal court in San Francisco.
The antitrust complaint “should be seen for what it is: the latest in a line of shakedown attempts by plaintiff’s counsel premised on baseless assertions of fact,” said Allen Ruby, AB InBev’s attorney.
Attorney Joseph Alioto, representing the nine beer consumers in the antitrust lawsuit, said Constellation has been inclined to follow AB InBev’s price increases before the deal, and AB InBev will be running the brewery and suppling the beer production during the first three years of the transaction.
He asked U.S. District Judge Maxine Chesney to issue a temporary restraining order blocking the companies from finalizing the transaction today and order them to show why the deal shouldn’t be put on hold while the lawsuit proceeds.
“The new Constellation is under-capitalized and highly leveraged, having incurred billions of dollars in additional debt in order to make to acquisition,” Alioto said in a court filing yesterday. “As such it will be in no position to maintain lower prices in the face of ABI constant pressure to increase prices.”
The U.S. said its agreement with AB InBev to turn Constellation into a competing brewer could save beer drinkers almost $1 billion a year because of lower prices.
Alioto has sued to block other deals, including the one that created United Continental Holdings Inc. and the merger of Southwest Airlines Co. (LUV) and AirTran Holdings Inc.
The case is Edstrom v. Anheuser-Busch InBev NV, 13-cv-01309, U.S. District Court, Northern District of California (San Francisco).
Molson Coors – Buy ahead of investor day
June 04, 2013
Stock Rating: Buy
Target Price: USD 61.00
TAP.N (USD 49.41)
Ian Shackleton – NIplc
Investor day a key event
We see the investor day on 12 June as a material catalyst, as we expect firmer indications both on innovation as well as on cost-cutting targets. Our model assumes US 50m pa from cost savings across the business over the next three years. The later timing of the event (June vs usual timing of March) should give confidence that the new CFO has fully worked through the numbers.
Trading overall looks in line
Although industry volume momentum in US and Canada still looks sluggish, we see robust price/mix, esp in US, as well as better market share performance in the US, as positives. Although the UK remains tough, price/mix in C Europe looks strong.
Scope for further rerating
The investor day should support the thesis in our initiation report (dated 11 January 2013) where we expected rerating of the shares over the next 12 months provided the company delivered against consensus expectations. Further out, as the company delevers into 2014, we see scope for using capital to renew the share buy-back programme.
Valuation still low
Although valuation has moved up slightly since our initiation (was at under 10x 2014E P/E, now at c12x but still well below beer average of 16.4x), our target price would still only assume 2014E P/E of under 14x.
CEDC Confirms Effective Date of its Reorganization Plan Expected to Occur within Three Business Days
Source: PR Newswire
Central European Distribution Corporation (CEDC) confirmed that CEDC’s Prepackaged Plan of Reorganization (the “Plan”), which was approved by the U.S. Bankruptcy Court for the District of Delaware on May 13, 2013, is expected to become effective within three business days, by June 5, 2013.
Following the effective date, CEDC will make a cash payment to holders of its 2013 Convertible Notes and certain of its 2016 Senior Secured Notes and issue new notes to holders of its 2016 Senior Secured Notes and new shares to Roust Trading Ltd. (“RTL”). All of the previously issued 2013 Convertible Notes and 2016 Senior Secured Notes and shares of outstanding CEDC common stock will be cancelled. The Plan will result in a reduction of approximately $665.2 million of debt of CEDC. As a result of the cancellation of CEDC’s common stock, as of the effective date CEDC anticipates it will cease to be a public company in Poland and that its common stock will no longer be subject to listing and trading on the Warsaw Stock Exchange. RTL, owned by Mr. Roustam Tariko, will receive 100% of the outstanding stock of the reorganized CEDC in exchange for funding CEDC’s cash payments under the Plan and cancelling CEDC’s existing debt obligations to RTL.
In addition, CEDC announced that on Wednesday, May 28, Alfa Bank, one of CEDC’s significant financial partners in Russia, resumed lending to CEDC by providing access to previously established credit lines with the bank. CEDC was able to draw down 1 billion Russian roubles (approximately $30 million U.S. dollars equivalent) under these credit lines, thereby further enhancing the liquidity position of its operations in advance of the effective date.
Distributions by CEDC to holders of the 2013 Convertible Notes are expected to be made following the effective date of the Plan. Distributions by CEDC to holders of 2016 Senior Secured Notes are expected to be made as soon as practicable after CEDC confirms elections under the Plan’s cash option. CEDC anticipates that the cash option elections will be confirmed five business days following the effective date and that cash distributions to holders of 2016 Senior Secured Notes will be made on or about five business days following the effective date, and that distribution of new notes to holders of 2016 Senior Secured Notes will be made on or about ten business days following the effective date.
CEDC and its U.S. subsidiaries, CEDC Finance Corporation International, Inc. and CEDC Finance Corporation LLC (collectively CEDC FinCo), commenced voluntary proceedings under Chapter 11 of the U.S. Bankruptcy Code on April 7, 2013.
The Chapter 11 filing did not involve CEDC’s operating subsidiaries in Poland, Russia, Ukraine or Hungary. Those operations, which are independently funded and generate their own revenues, have continued normally and without interruption during the U.S. restructuring process.
Copies of documents filed by CEDC in its Chapter 11 proceedings before the U.S. Bankruptcy Court for the District of Delaware, including the Findings of Fact, Conclusions of Law and Order confirming the Second Amended and Restated Joint Prepackaged Chapter 11 Plan of Reorganization of Central European Distribution Corporation, ET. al., are available without charge at: http://gcginc.com/cases/cedc
PANACHE BEVERAGES TO ACQUIRE EMPIRE WINERY AND DISTILLERY
DISTILLERY OPERATIONS AND SALES VETERAN JACOB CALL NAMED PRESIDENT OF NEW PANACHE DISTILLERY
Source: Panache Distillery
Panache Beverages Inc., a premier alcoholic beverage company that produces Wódka vodka and Alibi American Whiskey, has signed an asset purchase agreement to acquire the Empire Winery and Distillery in Hudson, Florida. The move deepens Panache’s commitment to the long-term growth and vertical integration of its business.
The expected acquisition of the facility, which is anticipated to re-open as Panache Distillery before the end of 2013 includes right, title and interest to all assets including the buildings, machinery, inventory and equipment. The Panache Distillery will offer full integration of domestic distillation, bottling and sales operations.
James Dale, CEO of Panache Beverages, Inc. explains, “Moving to manufacturing is a critical step for both Panache and its brands. The distillery will provide us with means to manage the supply of our own brands while also providing the parent company with new and diverse revenue streams.”
Production of top selling national spirits brands, Wódka and Alibi American Whiskey, will transition to the Panache Distillery. The move strengthens Panache’s leadership position within the distilled spirits industry by facilitating control of supply chain and increased margin and cost control.
The distillery acquisition will also diversify the Panache business, adding bulk spirits production and turnkey third-party contract distillation and co-packing as ancillary businesses and additional revenue streams.
Jacob Call, the former Senior Manager of Distillery and Bulk Sales for the largest distillery and spirits bottler in the Southeast United States, has been appointed as the President of Sales and Operations for Panache Distillery.
About Panache Beverages
Panache Beverages, Inc. (OTCQB:WDKA), based in New York, NY is an alcoholic beverage company specializing in the development, global sales and marketing of spirits brands. The Company’s expertise lies in the strategic development and aggressive early growth of its brands establishing its assets as viable and attractive acquisition candidates for the major global spirits companies. Panache intends to build its brands as individual acquisition candidates while continuing to develop its pipeline of new brands in to the Panache portfolio. Panache’s existing portfolio contains three brands: Wódka
Vodka, Alchemia Infused Vodka and Alibi American Whiskey.
Global shock as manufacturing contracts in US and China
Manufacturing has begun to contract in the US and China for the first time since the Lehman crisis, raising fears of a synchronized downturn in the world’s two largest economies.
Source: Daily Telegraph
By Ambrose Evans-Pritchard
03 Jun 2013
The closely-watched ISM index of US factories tumbled through the “boom-bust line” of 50 to 49, far below expectations. It is the lowest since the depths of the crisis in mid-2009 and a clear sign that US budget cuts are starting to squeeze the economy. New orders plunged 3.5 to 48.8 on weak foreign demand and reduced federal contracts.
The news came hours after HSBC said its index for China also fell below 50, a major inflexion point for the world’s industrial workshop.
“This is not a good moment for the world economy,” said David Bloom, currency chief at HSBC. “The manufacturing indices came in weaker than expected in China, Korea, India and Russia, and then we got America’s ISM.
“We thought we had a clear picture that the US was recovering, Japan was printing money and were we’re back to happy days, and now suddenly a huge spanner has been thrown in the works.”
Mr Bloom said a sharp strengthening of the Japanese yen on safe-haven flows and the 16pc fall of the Nikkei index from its peak are disturbing. “People are asking whether the ‘Abenomics’ bubble is bursting.”
The OECD says the US is tightening fiscal policy by 3.2pc of GDP this year, the biggest squeeze in half a century. Consumers spent their way through the initial shock in the first quarter by slashing the national savings rate to 2.5pc.
“People have been living in a psychological bubble,” said Charles Dumas from Lombard Street Research. “They ignored the cuts but now they are starting to feel it.”
The ISM quoted a string of gloomy comments from different sectors, such as “government spending has tightened” (computers), “over the past 20 days we have seen the trend flatten” (furniture), or “downturn in European and Chinese markets is having a negative effect on our business” (machinery).
Wall Street reacted calmly to the ISM shock, betting that the US Federal Reserve will delay plans to taper its monthly bond purchases of $85bn (£55.5bn). Stephen Lewis from Monument Securities said this may be a misjudgement. The latest minutes of the Federal Advisor Council, which advises the Fed on markets, are packed with warnings over the side-effects of quantitative easing.
The council said it is “not clear” that QE is boosting the economy, and warned that zero rates are pushing pension funds underwater on their liabilities, and may be causing firms to defer investment on the grounds that rates will remain low.
They also said Fed purchases of mortgage bonds was depriving banks of “bread and butter” business, pushing them into riskier corporate and emerging market debt, and blowing a “bubble” in fixed income and equity markets.
“Normally the council just goes along with the Fed says but it is clear that they have become more alarmed at aspects of Fed policy, so this is significant,” said Mr Lewis.
Fed chairman Ben Bernanke has since begun to echo some of the concerns, testifying to Congress on May 22 that “very low interest rates, if maintained too long, could undermine financial stability”.
The Boston Fed’s ultra-dovish president Eric Rosengren has also shifted ground, saying the bank may need to start tapering soon. The Fed’s centre of gravity has clearly shifted.
The concern is that the Fed has largely made up its mind to turn off the liquidity spigot and will not be deterred unless the economy deteriorates dramatically. Or as one trader commented, the “Bernanke Put” has become the “Bernanke Call”.
Leadership Lessons from Constellation Brands CEO Rob Sands
Constellation Brands CEO Rob Sands: He listens to his employees and prioritizes the important stuff.
Last June, Constellation Brands STZ +0.75%, the giant wine, beer and spirits producer and marketer based in Victor, N.Y., announced it was buying the 50% of Mexican beer producer and marketer Crown Imports that it didn’t already own, for $1.85 billion, from Anheuser-Busch InBev . The deal grew out of Anheuser-Busch’s takeover of Mexican brewer Grupo Modelo and the Justice Department’s insistence, for anti-trust reasons, that Anheuser-Busch sell some of its U.S. beer interests, including the top-selling Corona brand. Because of the DOJ’s pressure, Anheuser-Busch also agreed to sell Constellation a Mexican brewery and perpetual rights for the Grupo Modelo brands in the U.S., for an additional $2.9 billion, bringing the deal to $4.75 billlion.
Constellation is the biggest wine producer in the world, with brands like Robert Mondavi, Clos du Bois and Manischewitz. It also owns spirits brands including Svedka vodka and it has annual sales of some $2.8 billion. The Crown Imports deal is expected to nearly double revenues to $5 billion. The market loves the deal, driving Constellation shares up from $22 when it was first announced, to $52. The transaction is expected to close in the next week.
Robert Sands has been President and CEO of Constellation since July of 2007. His father Marvin founded the company in 1945, when the American wine industry consisted mainly of desert wine that shipped in bulk and was bottled like milk. The business has transformed since then, as Constellation acquired wine labels around the world and focused on premium brands. After graduating from law school and practicing for two years, Rob joined the company in 1986 as general counsel. Rob’s older brother Richard became CEO in 1993 and held the top job until 2007, when he became Executive Chairman and Rob became CEO. During his tenure as CEO, Rob sold off 200 brands and focused the company on premium labels.
I talked to Rob about what he learned from his father and brother about being the boss, what it was like to step into the CEO’s job just before the Great Recession hit, how he handled the downturn, and his strategy going forward, including how the Crown Imports acquisition plays into Constellation’s plans. Here are excerpts from our interview:
What leadership lessons did you learn from your father?
He really cared about the people who worked for him and he had an open door policy. Regardless of whether the person worked on the bottling line floor or was a senior executive, he treated everyone the same. He was a strong believer in leadership by example and having people emulate what he did as opposed to telling people what to do. He taught my brother and me that the TV version of how senior executives manage, by sitting around, telling people what to do, was not a successful model. He encouraged people to do their best and enjoy what they do. He accomplished things through collaboration, as opposed to command and control.
Can you think of a story about how he collaborated with employees?
He spent a lot of time playing bridge with our head of production and our head of sales and he gave them a lot of latitude. It was one of them who came up with our first brand, Richard’s Wild Irish Rose, named for my brother Richard.
Did you always think you would wind up running the company?
No. In college I was a philosophy major and was considering going to graduate school and getting a Ph.D. But during college I decided that going to law school would be more practical. I practiced law for a couple of years and realized it was a bit of a grind and not very interesting. I thought that being in the family business would be a lot more exciting.
Your older brother became CEO seven years after you joined the company. What leadership lessons did you learn from him?
Though my father was very smart and very analytical, my brother was super analytical. He was much more interested in specific metrics around the performance of the company and whether it was creating shareholder value. He made sure we understood in great detail what the returns were projected to be on our acquisitions.
Tell me about the challenges of becoming CEO.
I had been Chief Operating Officer from 2002-2007 so it was an obvious progression for me. My brother is seven years older than me and he stayed on as Executive Chairman. But 2008 and 2009 were interesting times. When I took over the company we had a significant amount of debt, 5.3 times EBITDA. We had acquired a lot of businesses all over the world. We had a far-flung and decentralized business. I had to shift the focus from being in hyper-acquisitive mode to being more of a world-class consumer goods product company and consolidating our operations.
How bad was the recession for your business and how did you get through it?
It wasn’t particularly severe. We decided to focus on premium products where there was a greater return on capital. We shut off all of our value businesses and centralized the company. We sold our Australian wine business, our Washington state wine business, our U.K. business. We sold off a billion-plus in assets.
How did you decide to focus on premium brands?
It was a collaborative process with people whose job it is to think about strategy and growth with me. Shortly after I became CEO I brought in Boston Consulting Group to do a portfolio analysis on our whole business. We determined what parts of the business were generating return on invested capital. I have a senior management team who all come from big companies. The CFO is from Pepsi. Our chief legal officer is from TD Bank and First Federal Bank. Our chief human resources officer is from Frito Lay, Pepsi and Prudential. We had a lot of diverse ideas. That’s how you know what to do: you listen to other people.
That sounds like the leadership lesson you learned from your father.
It’s not about sitting there and telling people what to do and giving top-down direction. It’s really about hiring great people and then listening to them, taking their ideas and figuring out how to put them into action, making sure you have a lot of diverse points of view so you seize on the best course of action, instead of thinking you’re the guy who knows everything.
Are there any other leadership lessons you’ve learned as CEO?
It’s important to maintain an entrepreneurial spirit throughout the corporation. Also part of leadership is making sure you’ve got a reward system in place so that people want to win and are creating their own wealth through the company’s success. Our people get bonuses, stock options and stock-based long-term incentives. We do that down to the manager and director level. A typical vice president who has been here 12 or 15 years has made $1 million in savings.
How is the Crown Imports deal going to affect your company?
Our market cap went from $4 billion to over $10 billion as a consequence of this deal.
What challenges lie ahead for you?
The wine business is fast-growing but it’s highly fragmented so we have the challenge of continuing to grow and build brands in a fragmented category. On the beer side, we’re the third largest player in the U.S. with a premium portfolio of beers that is fast-growing and takes advantage of favorable demographic trends, in particular the growth of the Hispanic population in the U.S. We have to keep that portfolio relevant and premium and we have to continue to innovate.
Do you have any time management secrets to share?
It’s all about having good people and letting them do what they know how to do so you don’t become overwhelmed with details best left to others. You should really narrow down the things you focus on. We have something called our executive management committee strategic agenda. It’s the six or seven things the senior leadership team needs to focus on. You have to know what’s important and what’s not.
Auction Napa Valley smashes record
by Courtney Humiston in Napa
Monday 3 June 2013
Auction Napa Valley, the annual charity auction, has raised US$16.9m, far exceeding the previous record of US$10.5m set in 2005.
In three-and-a-half hours of intense bidding on Saturday at the Meadowood hotel in St Helena, the 33rd edition of the event raised a record US$14.3m, bringing the total – combined with the online auction and the barrel auction – to US$16.9m.
Exclusive experiences, expensive cars and travel-oriented lots dominated the offerings and drove sales skyward.
The highest-earning single lot was from Korean-owned Dana Estates. When the bidding, fuelled by fist-pumping and pompom-waving, reached US$500,000 Dana doubled the package-which included three double magnums and a seven-day trip for four to South Korea – bringing the total to over US$1m.
Bill and Deborah Harlan, whose lot stayed focused on their wine – a 20-vintage retrospective tasting of Harlan Estate for eight people- came in second at US$800,000 with fellow Napa cult winery Screaming Eagle not far behind, offering a single 12-litre bottle of vintage 2010 that went for US$500k.
Friday’s barrel auction of mostly Cabernet Sauvignon from 2011 and 2012, held at Raymond Vineyards in St Helena, was as competitive. Fans of Shafer proved unwavering, paying US$78,000 for a barrel (10 cases) with the highest bidder offering nearly $8,000 for 12 bottles. Realm Cellars (US$61,350) and Tim Mondavi’s Continuum (US$59,200) were not far behind.
In April, Garen Staglin of Staglin Family Vineyard, who along with his wife Shari and children Shannon and Brandon are this year’s honorary chairs, told Decanter.com that he wanted to get ‘the right people in the room’ in order to raise the most money in the history of the event – a goal that he achieved.
Shari Staglin said, ‘Even after 33 years, Auction Napa Valley still has some surprises up its sleeve. We are grateful to the bidders, the vintners and the 500 community volunteers who, year after year, work together to showcase what makes Napa Valley such a special place – good food, great wine and a community spirit unlike any other.’
Auction Napa Valley, which is organised and run by trade association Napa Valley Vintners, has donated US$110m to health, youth and affordable housing non-profit programs. Founded in 1981, the event takes place over four days in June.
Elysee Palace wine sale fetches nearly triple estimate
by Jane Anson in Bordeaux
Monday 3 June 2013
The public auction of Eylsee Palace wines saw frenzied bidding over two sessions, raising ?718,000 (including auction charges) – a sizeable increase on the estimated ?250,000.
The auction, which took place at the Hôtel Drouot in Paris, saw the sale of 171 lots in an evening sale beginning at 7.30pm on Thursday 30, then a further 380 lots the following afternoon of Friday 31, so 552 in total, accounting for 1200 bottles of wine from the French government cellars.
The highest prices were seen for a Pétrus 1990 for ?7625 (including charges) against an estimate of ?2500. An Angelus 1961, estimated at ?220, sold for ?1100, while a Latour 1982, estimated at ?2200 sold for ?4625. ‘The Elysée Palace effect,’ as the spokesperson for the Drouot auction house confirmed to Decanter.com.
As expected the sale, which was overseen by auctioneer Ghislaine Kapandji, attracted large numbers of Asian buyers, as well as those from the US, Europe and France itself.
Fan Dongxing, an importer from Shanghai, travelled to France for the auction and bought large amounts of Cognac, as well as the Pétrus. ‘The Chinese like French wine,’ he told assembled media at press conference held after the sale on Thursday night, ‘and it is a great honour that these wines came from the Elysée cellar.’ He added that he would be selling them on to professionals back in China.
All bottles had labels stating they came from Elysée Palace cellar with the date of sale. The wines themselves were not present in the room, but displayed on a screen during bidding. They had been available for viewing beforehand.
Not everyone was happy at the sale however. Oliver Poels, editor-in-chief of the Revue du Vin de France had called the wines ‘a national treasure’, and Michel-Jack Chasseuil, one of France’s most important private collectors with a cellar of over 40,000 wines, wrote an open letter to president Francois Hollande, denouncing the sale for selling off the best bottles of France to ‘overseas billionaires’ for a ‘few crumbs of bread’.
The proceeds from the sale are to be reinvested in buying more modest wines for the government cellar, and to fund social projects.
Full speed ahead at LVMH
Source: the drinks business
by Gabriel Savage
3rd June, 2013
Jean-Guillaume Prats, the new head of Moët Hennessy’s Estates & Wines division, has outlined an ambitious timetable for its new Indian and Chinese wine projects.
July is due to see the official investiture of a new winery for Domaine Chandon’s Chinese outpost, while Domaine Chandon in India is set to unveil its inaugural wine in October. 2013 will also mark Moët Hennessy’s first harvest for its red wine project in China.
Turning first to Chandon’s Chinese operation, which is located beside the Yellow River in Ningxia Province, close to the Mongolian border, Prats described this warm, dry area with light, fairly acidic soils as “extremely suitable for our sparkling wine project.”
Having produced its first vintage in 2012, the result will “probably” appear on the market in 2014 after further maturation in bottle, Prats told the drinks business.
Reminding that “Moët was the first to go to the New World,” he noted that 2013 marks the 40th anniversary of the establishment of Domaine Chandon in Napa Valley, California.
Since then, the Chandon name has expanded to wineries in Argentina, Brazil and Australia, with these latest projects in China and India marking the next phase of Moët Hennessy’s pioneering ethos.
“Moët has always been a forward thinker,” emphasised Prats, who joined the luxury drinks subsidiary of LVMH in February from his previous role as managing director of Bordeaux second growth Château Cos D’Estournel. “It’s really part of our DNA that is based on two pillars: long established brands and innovation.”
Prats described one of his priorities in this new role as being to strengthen the Chandon brand across these various sources and its primarily local distribution markets.
“Soon we will have six estates with a common packaging, style and market dedication to feed the young, up and coming consumers who want great bubbles, but maybe don’t want to spend quite the same money as Champagne,” he told db.
Although acknowledging the ?500-a-bottle red wine launched this year by Chandon’s Ningxia neighbour Château Hansen, Prats confirmed that, in this location at least, “we will not go into the still wine business.”
That’s not to suggest that Moët Hennessy is ignoring the huge popularity of red wines in the Chinese market – this autumn it will harvest the first grapes from its other estate, this time 2,600m up in the Shangri-La mountains of Hunan Province, close to Tibet.
Here, at the same latitude at Morocco, on a site founded upon gravel washed down by the Mekong River, the focus is on red wine from Cabernet Sauvignon and Merlot grapes.
With no winemaking facility or brand name yet in place, Prats will not even confirm whether this year’s harvest will even go on sale. “We will only put something onto the market that we are proud of,” he insists, while adding by way of reassurance: “I think we have something exceptional.”
In addition to these two major Chinese projects, construction is already well underway near Nashik, Maharashtra, for Moët Hennessy’s first winery in India.
Having produced its first vintage in 2012 at a separate facility, the initial result is due to launch this October in Mumbai as the sixth piece in the Chandon jigsaw.
Drawing a diplomatic comparison between the challenges of producing wines in India and China, Prats remarked: “Things take more time in India.” However, with India’s federal and state import duty structure proving prohibitive for many foreign wine brands, he balanced this with the observation that “clearly there is an advantage to being a local producer.”
Highlighting a further appeal presented by India for the Chandon brand, Prats noted: “In India today there is a slightly more love for bubbles than there is in China.”
From a broader perspective, Prats pointed to the strategic thinking behind this strengthening and expansion of the Chandon brand. “We’re exactly where the market is going,” he emphasised.
“The market wants great bubbles of two types: celebration wines like Veuve Clicquot or Moët & Chandon and then with Chandon we are just below that for a young, upcoming people who maybe don’t want to spend quite that much.”
A full interview with Jean-Guillaume Prats, including his plans for the rest of the Estates & Wines portfolio, potential gaps to be filled and where Bordeaux is going wrong, will appear in July’s issue of the drinks business.
Shannon Ridge Acquires Historic Lake County Property
Shannon Ridge Family of Wines is growing again with the purchase of 100 acres of the historic Ogulin Estate, located in the cool High Valley Appellation of Lake County.
Shannon Ridge will be rebuilding and preserving the 1870s-era home and winery on the property. Currently there are 18 acres under vine, and Shannon Ridge plans to plant an additional 62 acres to cabernet sauvignon, zinfandel, petite sirah, and chardonnay in 2014.
The property was sold to Shannon Ridge by owners Harold and Grace Ogulin. Harold Ogulin is a third generation descendant of original Lake County pioneers. He and Grace will have a life estate on the property.
The portfolio of award-winning Shannon Ridge wines includes the Single Vineyard Collection and High Elevation Collection, as well as affiliated brands Vigilance Vineyards, Dalliance, and Cross Springs. Shannon Ridge’s vineyards are certified sustainable by Farming for Flavors ®, and are known for their woolly compost machines – a flock of 1,000 sheep, complete with shepherd and a team of highly trained sheepdogs. The sheep do an excellent job of canopy management and leaf removal, and pick the vineyard clean after harvest. They also manage the cover crop in the spring and work hard to reduce fire danger in the surrounding hills the remainder of the year.
French wine ‘has Italian origins’
Source: BBC News
By Jason Palmer
Evidence of the earliest winemaking in France has been described – and it indicates Italian origins.
Shaped vessels called amphoras, known to have been imported from the Etruscan people of Italy around 500 BC, have shown chemical evidence of wine.
A wine press identified in the same region shows that the beverage quickly gained favour and launched a local industry that would conquer the world.
The study appears in Proceedings of the National Academy of Sciences.
There is also evidence that the wines contained herbal and pine resins, which may have helped preserve them for shipping.
The history of wine development is a patchy one, principally because wine leaves behind few chemical markers that archaeologists today can ascribe definitively to wine, rather than other agricultural products.
The earliest known examples of wine-making as we know it are in the regions of modern-day Iran, Georgia, and Armenia – and researchers believe that modern winemaking slowly spread westward from there to Europe.
In 2004, Patrick McGovern of the University of Pennsylvania Museum led a team whose findings suggested that wine based on rice may have been developed in China at the same time or even before efforts in the Middle East.
But details for many parts of the spread from the Middle East, including into France, remained unclear.
Dr McGovern and colleagues have now pinned down another part of the story in the new study.
“You could argue that it comes [into France from] farther north on the continent,” he told BBC News.
“You could have it spreading across Germany, say, from Romania – but this really provides a definite set of evidence that it came from Italy.”
The team was examining what are called amphoras, vessels designed for carrying both liquids and solids and for neat packing into a boat’s hull.
The Etruscans, a pre-Roman civilisation in Italy, are thought to have gained wine culture from the Phoenicians – who spread throughout the Mediterranean from the early Iron Age onward – because they used similarly shaped amphoras.
Further, it is known that the Etruscans shipped goods to southern France in these amphoras – but until now it remained unclear if they held wine or other goods.
Wine pressing platforms were usually found outside of towns, nearer the vineyards themselves Wine pressing platforms were usually found outside of towns, nearer the vineyards themselves
Dr McGovern’s team focused on the coastal site of Lattara, near the town of Lattes south of Montpellier, where the importation of amphoras continued up until the period 525-475 BC.
They used a high-precision analytical tool called gas chromatography/mass spectrometry, which provides a list of the molecules absorbed into the pottery of the amphoras. The results showed that they did once contain wine – as well as pine resin and herbal components.
But more surprising was the find of a wine-pressing platform, where grapes were ground and liquid drained off.
“In a walled town like this, it is unusual to find a wine press from an early period,” Dr McGovern said. “Finding the chemical evidence for the press, that was a surprise.”
The find is consistent with a pattern seen elsewhere – that wine is introduced from abroad, but a local culture eventually seeks to transplant the grapes and grow their own, local wine industry.
“From there, [winemaking] spread up the Rhone River, the domesticated vine gets transplanted, it crosses with the wild grapes and all sorts of interesting cultivars develop – those are the ones that spread around the world.
“Most of the wine we have today is from French cultivars, which ultimately derive from the Near-East cultivar via the Etruscans,” he explained.
“There’s still a lot of blanks to fill in, but I find it very exciting.”
The methods used in the study have pushed the boundaries of what can be gathered chemically from archaeological remains such as those in Lattara.
Regis Gougeon of the University Institute of Vine and Wine at the University of Bourgogne said the work was “undoubtedly a good example of technology and methodology leading the science”.
“It was already acknowledged – in particular thanks to Patrick McGovern’s work – that viniculture might have travelled from the Near East to the Mediterranean Sea area about 3000 BC,” Dr Gougeon told BBC News.
“However, this Etruscan hypothesis is indeed rather new and sheds an interesting light on the possible input of this educated and art-oriented civilisation.”
Restaurant chains expect to raise menu prices
More than 90 percent of respondents to a SpenDifference survey said they plan to hike prices during the remainder of the year
Jun. 3, 2013
A vast majority of restaurant chain operators said they expect to raise menu prices during the balance of the year, according to a new survey by SpenDifference.
Denver-based SpenDifference found that more than 90 percent of respondents said they plan to hike menu prices this year, projecting an average increase of 1.6 percent. One-third of respondents said they plan to raise menu prices 2 percent or more.
The operators’ sentiments contrast with the first quarter of 2013, when restaurant chains largely resisted raising prices. SpenDifference completed the survey the week of May 13 and found that 64 percent of respondents kept prices flat or raised them only 0.5 percent in the first quarter.
SpenDifference said respondents were evenly split among full-service and limited-service brands, and that chains represented in the study were as small as fewer than 100 units or as large as more than 800 locations. The company said just under 50 restaurant chains participated in the survey.
Chain executives polled for the supply chain consulting firm’s survey also projected an average same-store sales increase of 2.2 percent for 2013, which would mark a 25-percent increase over their collective results from SpenDifference’s survey last year. Respondents predicted that sales gains would come mostly from price increases, with stronger traffic accounting for only about 25 percent of the growth.
“From the data and discussions with our members, it appears that they believe consumers may be more willing to accept higher prices, especially with the economy strengthening,” Brad Moore, the firm’s senior vice president, said in a statement. “But even the larger price increases they are planning this year will only cover about 75 percent of expected menu inflation, which they forecast at just under 2 percent.”
Through the first-quarter earnings season, chains have addressed whether they will raise menu prices in 2013, but no real consensus has emerged for the industry as a whole.
McDonald’s disclosed during a conference call for its first-quarter earnings, in which domestic same-store sales decreased 1.2 percent, that it raised menu prices by about 0.6 percent during the first quarter, replacing about half of a 1.2-percent increase from the prior year that was rolling off.
“The reason for that is because consumers are very sensitive to price,” chief executive Don Thompson said during the call. “We don’t have the inflationary environment or the consumer sentiment environment to go out and take the same kind of price increases that historically we did. We do believe that this is not a structural kind of a change; we think that it is based upon the economy at this point.”
Buffalo Wild Wings has dealt with commodity pressures due to volatile chicken wing prices over the last several years. The company’s first-quarter same-store sales rose 1.4 percent at company locations and 2.2 percent at franchised units, despite food and labor costs driving a contraction in margins of more than 3 percent.
The Minneapolis-based chain’s biggest cost control initiative this year is the forthcoming roll-out of a new pricing system that will price wings per portion rather than by individual wings. The brand has yet to determine whether it will raise prices when the new menu goes systemwide in July. Buffalo Wild Wings’ prices were 4.7 percent higher than last year’s menu prices in the first quarter, and that level will roll off to 2 percent higher and 0.2 percent higher in the third and fourth quarters, respectively.
Denver-based Chipotle was similarly noncommittal about raising menu prices this year in its first-quarter earnings call. Higher food costs squeezed Chipotle’s margins more than 1 percent in the first quarter, chief financial officer Jack Hartung said, but commodity costs were stabilizing, and the brand is still considering whether to raise any prices – which would not happen before late summer or fall in any event.
In Krispy Kreme Doughnuts’ first quarter, the chain reported an 11.4-percent increase in same-store sales at company-owned locations. Only 3 percent of that gain came from higher menu prices, officials said.
The 6.6-percent increase in same-store sales for Ruth’s Chris Steakhouse in the first quarter included a 2-percent menu price hike that occurred during the period, officials for parent company Ruth’s Hospitality Group said. Yet they added that Ruth’s Chris would try to mitigate the need for further menu price increases in the near future.
“While we believe we have additional pricing power, we will continue to be thoughtful and prudent, with respect to future increases,” chief executive Michael O’Donnell said. “It is still our strategy to focus on growing sales primarily through traffic to maintain our value orientation.”
Ruth’s also said it had contracted 40 percent of its beef needs for the remainder of 2013, at prices that averaged 4 percent to 6 percent above last year’s prices.
Nearly three-fourths of respondents to SpenDifference’s survey said renegotiating commodities contracts was their preferred cost control strategy, while 60 percent said they would promote limited-time offers or core menu items with more favorable margins.
“To protect or improve their margins, operators need to look beyond menu price increases and contract negotiations and find other ways to save money in their supply chains,” Moore said.
Ahold Remains Cautious For 2013, Ups Share Buyback
Source: Dow Jones
Dutch retailer Royal Ahold NV (AH.AE) Tuesday said first quarter net profit was boosted by the sale of its stake in Swedish retailer ICA and increased its share buyback program, but added it remains cautious about the prospects for the rest of the year.
– Sales 10.1 billion euro, up 4.4% at constant exchange rates.
– At constant exchange rates, net sales increased by 4.4%
– Underlying operating income 416 million euro, up 0.4% at constant exchange rates.
– Underlying operating margin 4.1% compared to 4.3% in the first quarter of 2012
– Operating income 345 million euro, down 68 million euro due to a 63 million euro pension settlement
– Net income 1.951 billion euro, of which 1.748 billion euro related to the sale of Ahold’s stake in ICA
– Share buyback program increased to 2 billion euro, to be completed by end of 2014
– Ahold continued to gain market share in its major markets as a result of identical sales growth, the expansion of its store network, and strong growth in the on-line business.
– “We remain cautious in our outlook for 2013 but we are committed to deliver on our Reshaping Retail strategy,” Chief executive Dick Boer said.
– Ahold remains on target to deliver 600 million euro in cost reductions, to be completed in 2014
Pennsylvania: Liquor privatization issue down to the wire as Lt. Gov. Jim Cawley to testify
Source: Patriot News
June 03, 2013
It has been a very long last call in Pennsylvania. For more than two years, lawmakers have debated the pros and cons of scraping the state’s 80-year-old liquor monopoly.
Will a sale of the state’s 600 wine and liquor stores generate a financial boost to the state’s budget? How will the 4,000 state workers be compensated? Will cases of drunken driving and underage drinking rise or drop in a free market?
So many ‘what if’s” as the clock ticks.
On Tuesday, the Senate Law and Justice Committee will host its third and final hearing targeting liquor privatization. The pressure is mounting.
Lt. Gov. Jim Cawley is scheduled to testify on behalf of the governor’s administration. Gov. Tom Corbett has said he would like to see a proposal on his desk by the June 30 budget deadline.
This is not the first time Pennsylvania has attempted to pass legislation to privatize the state’s liquor stores. Both governors Dick Thornburgh and Tom Ridge unsuccessfully tried.
The latest efforts were spearheaded more than two years ago by House Majority Leader Mike Turzai, an Allegheny Republican. He introduced a bill in June 2012 but it failed to pick up momentum.
Earlier this year, Gov. Corbett energized the push to privatize during a Pittsburgh press conference. The governor proposed funding educational programs through a potential sale of the state-run system.
“Why do we continue to deal with an antiquated liquor system that is 75 years old? The question should be ‘Why don’t we have choice? Why don’t we have convenience like the other 48 states in the union?'” Corbett said.
In March, the House of Representatives passed what was deemed a historic bill designed to dismantle the state-run stores in favor of opening up liquor sales to private business.
The bill allows beer distributors first shot at 1,200 wine and liquor licenses and would allow supermarkets to sell wine.
Turzai called the proposal “A-plus product.” “This is a great opportunity for Pennsylvania. It is a historic opportunity for Pennsylvania,” he said.
But not everyone is in agreement. Some of the most outspoken opponents against privatization include the United Food and Commercial Workers Local 1776 who have stood their ground under leader Wendell Young IV.
Nicknamed “the yellow shirts” for the bright union shirts, members have crowded into hearings and converged at the Capitol to spread their message. Most recently, the union paid for radio and television advertisements touting Corbett’s push to privatize as a “reckless scheme.”
Along with union members, beer distributors have been critical of some elements of the privatization legislation. On one side they would like to sell smaller packages of beer beyond cases but on the other side they say competition from the private sector would create an uneven playing field and hurt business.
“Eighty to 90 percent of our income comes from beer sales. How are we going to be making a living if everyone has it?” asked Mark Tanczos, president of the Malt Beverage Distributors Association of Pennsylvania.
Their biggest competitors would include grocery stores who applaud the idea of selling alcohol, whether it be wine, beer and liquor.
Giant Food Stores, Weis Markets, Target and Walmart have all said they would sell alcohol just as they do in their stores in other states.
Already, more than 150 supermarkets in Pennsylvania sell beer via restaurant liquor licenses. Those licenses require supermarkets to have separate cash registers and sit-down cafes.
And there is room for growth. David McCorkle, president and CEO of the Pennsylvania Food Merchants Association in Camp Hill, said the bill currently would carve out about 820 grocery licenses, not enough to allow the more than 5,000 grocery outlets throughout the state, to sell wine.
The bill also leaves convenience stores out of the equation. McCorkle would like to see more grocery licenses, and licenses for convenience stores.
Then there are the consumers. Everyone says they want to be able to buy wine in the supermarket or a six-pack at the local beer distributor.
But when you boil down the issue, it’s not at the top of most voters’ agendas.
In a recent Franklin & Marshall College poll 47 percent of voters said they support selling off the state-run stores to the private sector, a drop from 53 percent in February. In addition, the number of those who say they strongly oppose privatization is 31 percent, up from 24 percent in February.
“I think in the last couple of months there is less support for liquor privatization. There has been a long debate and it centers around a lot of things,” said poll director G. Terry Madonna.
So will this be the year Pennsylvania uncorks a privatization deal?
Senate Law and Justice Committee chairman Sen. Chuck McIlhinney, a Bucks County Republican, has said he will introduce his own bill this month. But he has left many scratching their heads with his shifting positions and conflicting statements.
“Sen. McIlhinney is trying to navigate the turf wars among a variety of interest groups . all while appeasing his own constituents and hanging onto to his seat,” said Ed Uravic, a Harrisburg University of Science and Technology professor who spent 20 years as a GOP legislative aide in Harrisburg and Washington.
“He could be dragging his feet, or he could be making a political move,” Uravic added.
Washington: Guest – Legislature should reject Costco’s unfair liquor legislation
The Legislature should not support changes to Initiative 1183, proposed by Costco, the main backer of the initiative. The state would lose tens of million dollars in needed revenue.
Source: Seattle Times
By John Guadnola and Rick Hicks
As mandated by Initiative 1183, the state liquor stores and distribution center shut down for good on June 1, 2012. Unfortunately, that has not meant the end of needlessly divisive battles over our state’s liquor policies.
After spending more than $20 million to pass I-1183, Costco, in alliance with the restaurant industry and big grocery chains, is now attempting to rewrite the very rules it put in the initiative. The intent is to game the rules of the new system in a way that gives the big retailers an unfair competitive advantage over licensed distributors.
Costco and its surrogates are pushing legislation, 2SHB 1161, in the special session that would exempt retailers from paying the 17-percent fee required on retailer-to-restaurant sales. Creating a new tax break costing the state millions in revenue, at the same time the state is scrambling to find funding for tougher drunken-driving laws, makes no sense.
The proposed change would allow Costco to act as a liquor distributor, making unlimited sales to bars and restaurants, while exempting it from paying any of the $150 million in fees required of licensed distributors. This would not only unfairly tilt the competitive playing field, it would thwart the voters’ will and cost the state tens of millions in lost revenue.
I-1183 clearly states that retailers must pay the 17-percent fee on all their sales. Costco added this requirement to address the public’s concern that taxpayers could lose hundreds of millions in revenue by privatizing the liquor system. In combination with other fees and taxes, this retailer fee ensures taxpayers get more liquor revenue now than they did before privatization.
Now, Costco and its allies blame the Liquor Control Board for a fee Costco itself included in the initiative, and their proposed legislation eliminates the 17-percent fee on sales to restaurants. If big chains can make unlimited sales without paying the fee, the state loses revenue. But on most liquor brands, prices for restaurants would remain unchanged because suppliers have made it clear they prefer to go through a distributor rather than sell directly to retailers.
Washington’s spirits and wine distributors have been doing business here for many years, and with the imposition of new distributor fees their profit margins here are among the lowest in the country. Nonetheless, they are rooted in communities across the state and they are proud to have built good relationships with their employees.
Over the past 18 months they have invested hundreds of millions of dollars in creating a state-of-the-art private distribution system that reaches every corner of Washington, adding 1,000 well-paid jobs, many of them union jobs represented by the Teamsters. All of that will be put at risk if Costco has its way.
Backers of the Costco approach claim that a bipartisan group of legislators is supportive [“Repeal liquor fee for retailers to supply restaurants,” Opinion, May, 24]. They fail to mention that another bipartisan group of legislators strongly opposes the Costco approach, and instead favors a better alternative where distributors would voluntarily agree to pay more in fees in order to pay for a substantial tax cut for restaurants and other changes to warehousing and other rules to help smaller liquor retailers and independent grocers compete.
The Liquor Control Board is currently initiating a court-mandated small business economic study of the rules implementing I-1183. Legislators should slow down and allow this study to proceed.
With time and careful consideration, elected leaders in Olympia can come to an agreement that treats all market players fairly, rather than rushing through special-interest legislation that benefits one group at the expense of others and undermines the expressed will of the voters in the process.
John Guadnola is the executive director of the Association of Washington Spirits and Wine Distributors. Rick Hicks is president of Teamsters Joint Council 28.
United Kingdom: Alcohol is killing too many of us
It gets ever cheaper and now it’s linked to over a million hospital admissions a year. Minimum unit pricing would be a good start
Source: The Guardian
Monday 3 June 2013
In 2011-12, there were over 1.2m alcohol-related hospital admissions in England, according to figures released last week – more than twice as many as a decade ago. There has been a 500% increase in deaths from liver cirrhosis, mainly due to alcohol, in the past 40 years.
Alcohol costs our country £25bn each year, due to its impact on health, crime and society, the workplace and the family. Alcohol exacerbates health and social inequalities. The most socially and economically deprived have up to 10 times greater alcohol-related mortality and admissions to hospital. Approximately a third of all A&E attendances are alcohol-related, reaching up to 80% at weekends. Something has to be done.
Traditionally, we associate alcohol-related harm with the middle-aged, and it is true that this age group, especially men, have the highest rates of liver disease. However, liver specialists are now caring for teenagers with cirrhosis, or life-threatening necrosis of the pancreas, after just five years of sustained, heavy binge drinking.
Young women are especially vulnerable, since they have less body water than men, resulting in higher blood alcohol concentrations for the same amount of alcohol drunk. I have seen five women in their 20s die from cirrhosis due to alcohol.
Alcohol misuse can lead to high blood pressure, strokes and cancers. Doctors are now caring for increasing numbers of young people in their 30s with permanent alcohol-related brain damage. Many of these people require long-term, supervised care, of which there is a major shortage.
So what has changed in the last decade to cause such a rapid increase in admissions? Availability of alcohol has multiplied far beyond the local pub – most is sold in off-licences and supermarkets, where it is often deeply discounted as a loss leader to entice customers into the store.
Alcohol is often much cheaper than bottled water. It is 45% more affordable than it was in 1980, hence it is the cheap, high-strength lager and cider in particular that is drunk in large quantities – especially by the most socioeconomically deprived, the very people we most need to protect. The government had intended to introduce minimum unit pricing for alcohol, but this now appears to be under threat.
The introduction of a 50p minimum unit price in England could bring a nearly 7% reduction in average alcohol consumption and prevent more than 3,000 alcohol-related deaths and 98,000 hospital admissions each year. In addition, it could reduce annual alcohol-related crimes by more than 40,000, including 10,500 violent crimes.
In British Columbia in Canada, a 10% increase in alcohol prices led to a 32% reduction in alcohol-related deaths and a 22% fall in the consumption of higher strength beers.
The minimum unit price works as it targets the problems caused by cheap, high-strength alcohol but does not adversely impact moderate drinkers, who would spend an average of just 28p extra per week. Its introduction is supported by the medical profession, the police, children’s charities and emergency services. Many parts of the global alcohol production industry are opposed.
David Cameron and the coalition committed to minimum pricing in March last year. However, the absence of this policy from last month’s Queen’s speech clearly reflects that corporate interests have got to other members of the cabinet. In 2010, the House of Commons health select committee concluded in its report on alcohol: “It is time the government listened more to the chief medical officer and the president of the Royal College of Physicians and less to the drinks and retail industry.”
And further action is needed. Currently, treatment services are not adequately equipped to cope with the nation’s alcohol problem. Only one in 18 dependent drinkers access treatment services per year, compared with one in two dependent drug users.
Specialist care can pull people back from the brink of the most devastating consequences of alcohol misuse, especially alcohol-related liver disease, give them back their self-respect and restore them to their families and communities. The development of high-quality, integrated prevention and treatment services for those with alcohol-related disease would be a wise investment for the future health of our nation, especially that of our young people.
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