TV ADVERTISING IS DWINDLING

TV advertising is destined to see major declines in the coming years. According to a survey released by the Association of National Advertisers and Forrester Research, over 78% of the 133 advertisers polled think TV is less effective. Furthermore, 60% said they plan on cutting TV ads once DVR use reaches 30 million. As of now, there are about 10 million DVRs but it will soon increase to 30 million within the next three years.

LEGACY AGREES TO PAY MOST OF THE $5ML TO LOCAL VINTNERS

California wine company Legacy Estate Group has agreed to pay off most of the $5.1 million they owe to vineyard owners in order to assure access to high-end grapes this year. A company lawyer, David Chandler, said, “These wineries make high-end products, and for high-end products you need high-end ingredients.” After filing bankruptcy quickly after last year’s grape harvest, Legacy agreed to pay 25 of its 36 growers in full. The other 11 vineyards were either rejected in court or their contracts were expired. The company got into debt after borrowing heavily to purchase two wineries once owned by the Robert Mondavi Corporation, Arrowood and Byron, last year. The $40 million acquisition came after Legacy bought the historic Freemark Abbey Winery in St. Helena in 2001, putting the company on the map. Over 450 creditors now have claims totaling between $50 million and $100 million. Legacy has 60 days to pay back the vintners “100 cents on the dollar,” or their claims move to the front of the line before any other creditor.

JUDGE EXPECTED TO MAKE A COSTCO DECISION SOON

According to the Seattle Post Intelligencer, U.S. District Judge Marsha Pechman seems to be leaning towards Costco’s side. After hearing closing arguments yesterday, Judge Pechman said she plans to making a ruling in three weeks on whether Washington’s 3-tier system can stand under the 21st Amendment. For those of you who don’t know, the 21st Amendment repealed Prohibition and gave states the right to control their own alcohol distribution system, hence the 3-tier. This three pronged system was designed to help maintain temperance and monitor illegal alcohol purchases, preserve an orderly market and ensure tax collection. It’s an orderly structure that has helped the alcohol industry run smoothly since 1933 and Costco is ready to unhinge it. Do they really understand what they’re getting themselves into? Judge Pechman reportedly stated, “‘You have out-of-state producers shipping directly to retailers, you have someone who is a producer, a distributor and a retailer all at once. Where is your three-tier system now?’” Wow. However, Assistant Attorney General David Hankins defended the Liquor Control Board by pointing out that the system still very much exists because each party must be licensed for additional duties and are responsible for collecting taxes.

THE HOUSE PASSES A DIRECT SHIPPING BILL IN KANSAS

A bill allowing direct wine shipments to consumers and wine sales at the Kansas State Fair was passed yesterday by the House. According to local news sources, the decision came down to a last minute vote change by Rep. Mark Treaster from “no” to “yes” which pushed the vote from 63-62. Lawmakers were apparently worried that minors would have a much easier time accessing alcohol illegally with doorstep deliveries. However, the decision to allow fair vendors to sell strong beer and wine was not a major concern because lawmakers were assured that alcohol would not undercut the family atmosphere. Although the bill has passed through the House and Senate, a conference committee must work out the differences between the two legislative bodies before it is sent to the Governor.

CALIFORNIA COULD SEE ANOTHER SURPLUS IN 2006

According to the Western Farm Press, California isn’t too far from another big surplus and falling grape prices. In fact, it’s only one crop away from last year’s record crush where 4.3 million tons of grapes were crushed. As long as wine sales falter and the ’06 crop comes in with an average yield higher than the historical 10-year average of 6.7 tons per acre, the industry is in trouble. In the past decade, three crape crushes have produced yields that average more than 7 tons per acre. Allied Grape Growers, California’s largest marketing cooperative, says there is a “very small” chance of another huge crop although it is a possibility. Allied president Nat DiBuduo stated that bud dissection and subjective crop measures “point to the likelihood that 2006 will be on the short side for both wine grapes and seedless varieties.” Nevertheless, no one expected 2005 to be as large as it was. “The bottom line is that an average yield this season would produce the third largest crush in California history,” pointed out DiBuduo. Thanks to young, healthy vines that were designed for utmost production, California wine grape crushes could be 3 million tons or more per year for the immediate future. DiBuduo maintains that their mission is not to scare people in the industry, but to warn them of the “need to be careful about being overly optimistic about market trends and looming shortages.”

THE WA IS LOBBYING FOR GOVERNMENT FUNDS TO HELP WITH EXPORTS

The Western Australian wine industry is asking the State Government to denote $600,000 annually for three years to help their presence in the US export market. They claim that in order to be successful in the United States, they need $1.8 million in funding so they may overcome the competitive business climate caused by the grape glut. The Association’s president John Griffiths thinks the project is imperative for the industry’s growth. "We really need to be quite focused. We've got to get over there a lot, we've got to get their people back over here," he said.

KANSAS SOON TO BECOME A DIRECT SHIPPING STATE

Under a measure approved by the House in an initial vote Wednesday, Kansas vintners producing less than 100,000 gallons of wine a year may soon be allowed to ship to out-of-state customers and vice-versa. The proposal was added to a bill that will condone wine sales at the State Fair. After receiving a final vote today, it will then be sent to the Senate where a similar bill was already passed, and then delivered to the Governor for a signature before becoming a law. Although wineries will have to apply for a $100 state license, the proposal does not put a cap on the amount of wine that can be shipped or received. Furthermore, customers’ identification will be checked upon delivery to ensure everything is legal.

OUI OUI TO WOOD CHIPS

The French government announced Wednesday they will soon allow vintners to flavor their wine with wood shavings. Although many “purists” find the change hard to deal with, it will help winemakers save money and pose as a shortcut against ever increasing international competition. French vintners have seen a downward spiral in recent years, and many now welcome the chance to save some cash despite the sharp turn against tradition. In a statement issued by the Agriculture Ministry, the goal is to “open up the range of authorized winemaking practices” since “the use of wood shavings is already authorized by the European Community.” Roland Feredj, director of a Bordeaux wine council known as CIVB, calls the agreement “a remarkable and very realistic advance. France always wants to give lessons to the rest of the world, and in winemaking we are realizing that the Australians and the Americans also have things to teach us about wine regulations.” Wow, you heard it here folks, the French have something to learn. Nevertheless, the government announced a $108 million plan last week to aid the French wine industry, which is currently suffering from overproduction, waning consumption and competition.

BROWN-FORMAN’S FETZER SAYS GOODBYE TO HOSPITALITY

Brown-Forman Wines announced Wednesday the intention to close their Valley Oaks Hospitality site in Hopeland that features the Fetzer Vineyards brand. The closure will take place in late May and will involve a tasting room, market and inn that have been “an icon” in the Mendocino area, according the company’s spokesman Jim Caudill. Fetzer will continue to grow grapes at the Valley Oaks vineyard and ranch but will no longer receive visitors or hold a tasting, overnight-stay or sale their product onsite. Brown-Forman will now use marketing dollars previously spent on the Valley Oaks tasting room towards “regional marketing activities,” which will include increased sales support and advertising to help boost Fetzer’s relevance to consumers. Simultaneously, Fetzer eliminated its Sundial, Echo Ridge and Eagle Peak brands in order to emphasize its Valley Oaks brands.

RETAILERS USING ADVANCED TECHNOLOGY TO GRAB CONSUMER ATTENTION

Advertising continues to change as consumers look more towards the internet and their IPods. So how are retailers dealing with innovation? Well, by jumping on the bandwagon. Vestcom, a company that produces price labels that appear on retail shelves all over the country, has developed a new way to reach shoppers: attaching video monitors to shelves. "You're in the store. You're making a decision and they have the last chance to try to influence you to buy their product," said Tim McKenzie, executive vice president and director of sales and marketing at Vestcom, which produces shelf tags for thousands of stores including Kroger Co., Target Corp. and Walgreen Co. "It is where the industry is going in terms of trying to redirect advertising dollars to what they call the last three feet of the marketing plan," he said. The video monitor is about 4 inches wide and will show 10, 20, or 30 second commercials as well as feature the product’s price. Reportedly, Vestcom is already developing a model for a large national retailer that will make an appearance this time next year; however, they will not state the identity. For companies that are not interested in videotaped commercials, Vestcom has expanded “ad tags,” a combination of shelf price tags and static advertisements that help consumers make a decision.

HOPING FOR REGULATION COMPROMISE IN FLORIDA

Now that direct wine shipments are legal in Florida, Senators are haggling over regulations such as shipping licenses, taxes and those pesky minors. The main difference between the two bills up for approval is that one would not allow wineries that produce over 250,000 gallons a year to sell to Florida consumers. Sen. Steve Geller supports the 250,000 gallon cap arguing that mass-produced wines are more likely to fall into the hands of minors. But the other side argues that a cap would be unconstitutional. Sen. Paul Dockery was quoted in the Miami Herald saying, “The Supreme Court ruling stated that you cannot treat in-state [wineries] differently than out-of-state.” Both bills require wineries to pay an annual fee of between $100-$250, to verify customers’ ages upon delivery, pay a monthly excise and sales tax, and report how much wine they ship every month. If a winery does not follow the specified rules, than the state has the right to revoke their license. Both bills passed the Senate Regulated Industries committee earlier this week and their sponsors are reportedly hoping to reach a compromise before the next committee hearing.

SILVA USA TAKING LENGTHS TO SAVE THE CORK

M.A. Silva Corks USA plans to construct a ground breaking $4 million-plus cork processing facility outside of Santa Rosa. The 30,400 square foot processing plants will be located in Westwind Business Park near Charles M. Schulz – Sonoma County Airport. The plant is expected to be ready by November with 50% more workspace, a linear workflow, air and water purification systems and 2 ½ times more space in the lab for visiting winemakers. The company chose to build instead of rent so they may achieve optimal environmental conditions for production and will not have the problem of not knowing “the evil already there,” said Neil Foster, co-owner and managing director of the cork distributor to The North Bay Business Journal. The building is a part of an industry-wide effort to end cork-taint and therefore halt corks’ sometimes negative reputation in the industry.

KWV SEES A POSITIVE 2ND QUARTER

KWV, one of South Africa’s largest wine and spirits producers, has posted a strong 2nd quarter with an 87.8% rise in earnings. Despite tough market pressure and competitive international trading, sales increased 6.4% driven by a volume growth of 37.9% locally while exports declined 1.2%. "Sales of our wines and brandies in South Africa have exceeded expectations, and we have also performed well in the rest of Africa", CEO Willem Barnard said. Although KWV had difficulty trading in the Far East and the UK, Germany and the Americas continue to see a steady performance. "International trading conditions in the wine industry remain difficult and extremely competitive," he stated. "Consumer spending in general and specifically the demand for wine, remains fairly flat while there remains a huge over-supply of wine globally.” Overall, Barnard concluded that the positive results of the first six months are unlikely to be repeated in the second six month period.

WORKING AGAINST THE GRAPE CRUSH

As a result of Australia’s ever increasing presence in the wine industry, Diageo is launching a new Australian Shiraz entitled Archetype that comes from the Barossa region. "Many consumers have been introduced to wines from Australian under $10. While many of these brands are taking advantage of an oversupply of grapes in Australia, we wanted to introduce wine lovers to a premium offering from Australia that over delivers on quality by focusing on premier Australian wine regions, akin to California's Napa Valley." The rollout began January 2006 and is currently on shelves. "I spent a brief time in Barossa early in my winemaking career and have always been impressed with the quality of the fruit in this historic region," said the head winemaker.

A NEW SPIN ON TWIN FIN

Twin Fin is putting forth a new packaging innovation, The Beach Cruiser, which is a 4-Pack 187 ml bottles with a “fun image” and “exciting new face.” The package will be available in restaurants this April for $9.99. "The Beach Cruiser offers a way to inject a dose of fun into thetraditional 187ml market," says Mandy Roth, Associate Brand Managerfor Twin Fin. "We're riding the momentum of steady growth in thepremium 187ml category, and Twin Fin hopes to up the ante yet again." Evidence shows that consumers continue trading up to brands in 187mlpackaging priced between $7 and $9, especially among Twin Fin's target25- to 35-year-old emerging wine consumers."

MICHIGAN REACHES A SETTLEMENT

The state of Michigan has reportedly settled with a majority of the lawyers that helped overturn the state’s ban on direct wine shipments. The $150,000 agreement went towards former independent counsel Kenneth Starr’s law firm although the firm originally asked for $329,000. On top of settling with Kirkland and Ellis, Michigan is fighting against $1.2 million in legal fees filed by the attorneys that first brought the direct shipping lawsuit.

EUROPEAN WINE SYSTEMS MOVING IN

Shipping companies’ from across the pond are sniffing out opportunities thanks to all the new direct delivery legislation going on at home. Europe’s largest mail order wine company, Mellésima, is making a move to the United States. “The US is undoubtedly the leading market for fine wines, with consumption growing annually,” Patrick Bernard, managing director of Millésima, told decanter.com. “Since the Supreme Court decision, 38 states have already revoked the legislation, so now it's all systems go.” The company is reportedly eager to take the “internet, mail order and print advertising into one of the world’s most exciting markets,” and will open its first shop in New York. Roger Bohmrich, one of the Master of Wines in North American and formerly Sales and Marketing Director for Frederick Wildman, will head up the operation. Millésima will focus on grand cru classé Bordeaux along with a wider range of international wines.

EVAN & TATE SHED ANOTHER WINERY

Australian wine company Evans & Tate has put their Oakridge vineyard up for sale so they may focus on their premium wine business in order to grow sales. John Hopkins, E & T chairman, stated, “Evans & Tate’s roots and competitive strengths are in the premium wine sector. While Oakridge wines are of exceptional quality, its limited capacity does not fit the company’s strategy of competing in the domestic and international markets.” This is the second winery E & T has put up for sale after UK beverage group Neqtar bought Mildura earlier this month for $15.5 million.

OKLAHOMA WINERIES WITHOUT A BILL

Oklahoma’s House Joint Resolution 1055 that proposed to open the state's wine trade to all in-state and out-of-state vineyards recently died on the floor. SJR 41 had a similar fate. As of now, the wholesalers’ lawsuit is still pending and wineries “do not have any live bills to give us consumer shipping,” according to Free the Grapes.com.

NEW BROWNS TO JOIN THE BOARD

Brown-Forman announced today that Sandra Frazier, Martin S. Brown, Jr., and George Garvin Brown IV were elected to join the Board of Directors. All three individuals are fifth generation descendants of George Garvin Brown, the founder of the company, and are the first members of the family’s fifth generation to join the board, effective May 8. As a part of tradition, three members of the family’s fourth generation will soon step down from the Board. "We are truly grateful to each of these directors for the guidance and wisdom they have given Brown-Forman in their years of valuable service and we look forward to continuing to receive their support and advice in less formal ways in the future," stated Brown-Forman Chairman Owsley Brown II in a press release.

DIRECT SHIPPING IN OHIO HAS THE FEDERAL TRADE COMMISSION’S SUPPORT

Ohio wholesalers and winemakers are still bargaining over direct shipment. The staff of the Federal Trade Commission’s three bureaus – Competition, Consumer Protection, and Economics – filed a comment yesterday with the Ohio State Senator Eric Fingerhut, citing their support for SB 179, a proposal that would legalize direct shipping inside and outside of the state to consumers. In the bill, the customer must be of legal age and personally sign for the wine when it is delivered. “Based on our review, we believe that, if enacted, SB 179 would enhance consumer welfare,” wrote the staff. “Consumers benefit from the increased competition that direct shipping proves,” said Maureen Ohlhausen, Director of the FTC’s Office Policy Planning. If so, then how will small Ohio wineries fair against increased competition from California, Oregon and Washington vineyards to name a few? Without wholesalers they will likely have a more difficult time getting their products on retail shelves and creating awareness among wine-drinkers.

DISCUS SPEAKING OUT AGAINST ALCOHOL PROPOSAL IN NEW JERSEY

According to a DISCUS press release, a New Jersey state proposal to raise taxes on distilled spirits, beer and wine will cost the state more than $50 million in lost business and an estimated 850 hospitality jobs. NJ Gov. Jon Corzine’s proposed budget would increase the excise taxes on spirits, wine and beer by 1% and would push the spirits excise tax to $4.50/gallon. “A tax on alcohol is really a tax on New Jersey’s hard-pressed hospitality industry,” said DISCUS president Peter Cressy. “If this misguided tax proposal is enacted, it’s the hospitality industry workers who will bear the brunt – waitresses, busboys and bartenders.” DISCUS believes the proposal will only lead consumers to buy less of the product or purchase their alcohol across state lines.

PLASTIC WINE BOTTLES, THE UNBREAKABLE CONTAINER

Whether it’s true or not, Australia is known for leading the New World wine industry in innovation. And with today’s winemakers moving towards cutesy labels, wacky names and non-traditional bottle closures, nothing seems surprising, so pop your synthetic cork and take a swig because one Australian company is test-marketing plastic wine bottles. Fosters Wine Estates corporate affairs manager, Matt Schmidt, says the company is testing its Wolf Blass wines in 187ml plastic bottles at sporting events in the UK, and a little in the US. The wines will be sold in polyethylene terephthalate (PET) which is unbreakable – so it can be used at sporting events - and lighter than glass. Most important, perhaps, is the company’s reassurance that plastic will not alter the wine’s taste. “There’s no suggestion that we are going to look at moving all of our wines over from glass,” said Matt. “But it’s a good step in the right direction of giving consumers opportunity to drink quality Australian wine.”

VINEYARDS COMBINE TO FORM ONE OF THE LARGEST WINE COMPANIES IN NEW ZEALAND

The New Zealand Wine Fund has acquired Goldwater Estate wine company for $10 million with the deal set for completion in April. Goldwater owners, Kim and Jeanette Goldwater, are set to receive a third of the payment in cash and the remainder in NZWF shares. Mr. Goldwater will join the New Zealand Wine Fund board but will have no direct involvement in overseeing the business. NZWF also owns the Marlborough winery Vavasour Wines which will combine with Goldwater for a production rate of 220,000 cases within the next two to three years.

CONSTELLATION BRANDS LOOKIN' SHARP

In a report conducted by Information Resources, Constellation’s wine and beer brands are ranked among the top labels for 2005. Twin Fin, Monkey Bay and 3 Blind Moose are the top three in the “Table Wine Top Ten Brands” category followed by Four Emus and Kellys revenge in 8th and 10th. Altogether, these five brands accounted for almost 1/3rd of all the new wine growth in U.S. Food and Drug stores according to IRI. Rob Sands, president and CEO of Constellation, found the results “gratifying” as they prove “Constellation’s ability to continue growing strong established brands while capturing a greater share of new product revenue.” All the wines that placed in the “Top 30 Brand Performer” category come from Constellation’s California vineyards. Robert Mondavi Private Selection, Ravenswood Vintners Blend, Blackstone, Estancia and Black Box Wines places 9th, 12th, 14th, 15th, and 23rd while Corona Extra was number 1 in growth among beers. Other leading beers included Corona Light, Negro Modelo, Modelo Especial, Pacifico and St. Pauli Girl.

PERNOD: “SUCCESSFUL INTEGRATION IN LINE WITH EXPECTATIONS.”

Pernod Ricard boasted strong 2nd quarter results “due to the dynamism of its original premium brands and a rapid and successful integration of Allied Domecq.” The first-half net profit rose 51% while organic sales increased 4.5% thanks to Chivas (13%), Jameson (12%), The Glenlivet (10%) and Martell (9%). Gross margin rose to 61.3% from 60.1% and consolidated sales jumped 67% to 3.27 billion euros, mostly due to strong growth in Asia. The company predicts a 10%-15% earnings increase for the year. "Pernod delivered a strong first half, led by outstanding growth in its core premium brands and a stronger-than-expected first-half contribution from Allied-Domecq," said a Morgan Stanley analyst.

DAVID AND GOLIATH: DIAGEO FIGHTING BACK

Diageo plans to “vigorously protect” the use of the word ‘Provenance’ against a small Oregon vineyard. The drinks giant claims their “Provenance Vineyards” brand is a trademark and demands Belle Provenance Vineyard to change their title after the owner said he was trying to register the name. “Trademark law applies to large and small organizations. Its purpose is to prevent consumer confusion. Its application is not adjusted because of the relative size of the trademark owner,” a Diageo North America spokesperson said. As I reported yesterday, Timothy Ramey of Belle Provenance Vineyard is fighting back. He claims to be “amazed” over the controversy pointing out the vineyard’s small size and relative unimportance in relation to Diageo. “Provenance means origin,” said Timothy. “It is in the lexicon of the wine community.”

A NEW LOOK FOR AN OLD WINE

Innovation is all the craze in the wine industry today, even the big boys are making changes to keep up with the pace. By putting forth a fresh face every once in awhile, brands can hope to attract new consumers and perhaps up the price a bit without alienating loyalists. On its 73rd birthday, Gallo is unifying its Gallo of Sonoma and E & J Gallo product lines and putting them under one uniform name, Gallo Family Vineyards. The wines are being renamed and will feature three redwood trees on their label to represent the family’s three generations of winemaking. The $5-$6 E & J Gallo Twin Valley Vineyards line will be called Gallo Family Vineyards Twin Valley, and the Gallo Sonoma line priced at $11-$13 will be called Gallo Family Vineyards Sonoma Reserve, now costing $13-$15.

Kendall-Jackson, another big Sonoma giant, is close to fulfilling a long-term goal of owning or controlling through contract all the vineyards they use to make their wine. Starting this year, the phrase “100% Jackson Estates Grown” will appear on almost all labels, expecting Vintner’s Reserve Riesling and Cabernet which will soon make the transition. The “estate-grown” concept will add stature to their brands and enable the company to charge more. “The more control we have over the grapes, the better the product,” said spokesman George Rose.

CAMPARI HAS ANOTHER GREAT YEAR

Campari showed strong results for 2005 with rising sales of 9.1% in their wine and spirits division. External growth of 2.5% came from sales of other brands that Campari began distributing last year, such as Jack Daniel’s in Italy and Martin Miller’s gin in the U.S. “In 2005, the group once again achieved extremely positive results. We remain confident for a positive performance in 2006 and, more generally, in the medium term,” said Campari’s CEO Enzo Visone. The spirits segment, which makes up 68.1% of total sales, grew 11.9%. Sales of the Campari brand increased 5.8% and SKYY Vodka rose by 8.9% thanks to sales in the U.S. and international markets. The wine division, accounting for 15.5% of total sales, grew 3.6% led by sales of Cinzano vermouth which increased 16%. Sales in the U.S. increased 7.7% total.

A NEW ADDITION TO THE STOLI PORTFOLIO

Pernod Ricard USA has launched their newest flavored vodka, Stoli Blueberi, which will be rolled out nationally in May. Blueberi joins Vanil, Razberi, Cranberi, Strasberi, Citros and Ohranj in Pernod’s fruit filled portfolio. “The flavors category is driven by innovation and Stoli has traditionally lead the field in new flavor introductions,” says Susan Kilgore, Stoli’s brand director. “It’s a natural fit with our portfolio and a logical next step for [our brand].” In effort to help the rollout, Pernod launched “Create a Stoli Blue Cocktail Contest” which is aimed at getting bartenders to create a collection of recipes containing Blueberi. The company suggests serving the vodka close to freezing.

LOUISIANA WINERIES PUSHING FOR NEW LEGISLATURE

After passing legislation last year that requires Louisiana wineries to use a wholesaler, the House is faced with two new bills that readdress direct shipping. Theadvocate.com notes that although “most of the state’s native wineries are thriving, nearly nine months after losing the right to sell their wines directly to grocery stores and eateries. However, owners are concerned about the forced reliance on wholesalers.” HB 71 by Rep. Tom McVea would allow any winemaker to sell their wines direct, while HB 1009 by Rep. Joe Toomy wants the state to allow direct shipping by wineries that produce less than 2,000 cases a year. As it turns out, almost all native wineries in Louisiana fit under that category. Many winery owners in the article expressed uncertainty about their future but also acknowledged the fact that wholesalers are currently distributing their product.

WHAT’S IN A NAME?

According to a press release, Diageo North America is buckling down on a small Oregon winery, Belle Provenance Vineyard, for using the word “provenance” in their title. Diageo owns the Provenance Vineyards brand and believes the public will be confused by the two labels. “We’re amazed that Diageo, the largest spirits company in the world, would claim that the exclusive right to use the word ‘Provenance’ in connection with wine. Provenance means origin,” said Timothy Ramey, co-owner of Belle Provenance Vineyard. “It is in the lexicon of the wine community.”

SCREAMING EAGLE SOARS TO NEW SKIES

Wine Spectator reported yesterday that Screaming Eagle, one of the most popular Napa Valley cult Cabernets, was sold by founder Jean Phillips to Santa Barbara-based money manager Charles Banks and his business partner, entrepreneur and real-estate developer Stanley Kroenke. Banks is the president of CSI Capital Management while Kroenke is the owner of the Denver Nuggets and the Colorado Avalanche hockey franchise. Kroenke’s wife is one of the heirs to the Wal-Mart fortune but reportedly has no ties to the investment. Insiders estimate the deal could be worth $20 million to $30 million although much of the 60-acre property needs to be replanted. Wine-drinkers wait months and years to get on the winery’s mailing list where a 750-ml bottle now costs at least $300 and can sell for much more after it is released.

THE COSTCO COURT CASE SUMMED UP

The Costco court case is getting started today, Tuesday, March 21, in the U.S. District Court in Seattle. The court will take a look at the following provisions in Washington law and determine whether certain elements in Washington State’s alcohol code can be exempted:

The ban on volume discounts.
The mandatory 10% markup from supplier to distributor and distributor to retailer.
The ban on central warehousing at retail.
Wholesaler price posting, where prices are posted and remain in place for 30 days.
The ban on varying prices to different retailers
Mandated freight charges to retailers, even when picked up at the dock.
The cash law: a ban on credit sales

The reason this case is important is because it will set a precedent on whether the above provisions are protected by the 21st Amendment. Costco argues that there is no evidence that the above provisions in Washington’s alcohol code were crafted for the purpose of temperance, tax collection or guaranteeing orderly markets. The Liquor Control Board, the AG, and the wholesalers argue that Costco’s motives in attempting to dismantle the 3-tier system are entirely for financial gain, and would only help Costco at the expense of other smaller retailers. Take a look at Wednesday’s Beer Business Daily for a more in-depth look.

OREGON WINEMAKERS BAND TOGETHER

A new wine association was formed in Oregon and is made up of more than 25 wineries and independent vineyard owners representing 44,000 cases of Dundee Hills wine. The Dundee Hills Winegrowers Association defines itself as “the heart and soil of Oregon wine” and is the “epicenter of Oregon pinot noir” according to the DHWA President, Sean Carlton.

LIONS AND TIGERS AND BEARS, OH MY

As winemakers around the world struggle to make their brand noticeable on shelves, more and more are using “critter labels” to grab consumers’ attention, following in the footsteps of Yellow Tail. Kangaroos, penguins and crocodiles are just a few of the cuddly creatures adorning the hundreds of modern wine labels. According to ACNielsen, 77 – or 18% - of the 438 new Table Wine brands with sustained consumer sales introduced in the past three years have “critter labels.” In combination with existing critter labels, sales of critter-branded wine have reached over $600 million while new critter brands alone accumulated $74 million. The new and existing critter labeled brands already among the Top 125 Table Wines accounts for almost 15% of Table Wine Category Sales in Food Stores and outsell non-critter brands more than 2.5 to 1. Critter wine has greatly helped the already thriving Table Wine industry by accounting for more than 1/3 or $139 million of the $400 million increase in 2005 as compared to 2004. However, the report points out that animal labels are only one aspect of the brand’s image. Critter labels tend to be priced at a slight premium – about 5% - as compared to traditional table wine, but are sold more on promotion and in particular displays than the rest of the category. Danny Brager, vice president of ACNielsen’s Beverage Alcohol Team, said, “While placing a critter on a label doesn’t guarantee success, it is important that wine makers realize that there is a segment of consumer who don’t want to have to take wine too seriously.”

U.S. WINEMAKERS TAKING SHARE FROM IMPORTS

The U.S. wine industry did better at home in 2005 than in the past ten years according to Information Resources Inc. Despite the fact that imports have reached record marketshare by volume, 22 of the top 30 brands in grocery and drug stores are domestic table wines from California. Australia was the number one import with three brands, Italy came in second, and two of the brands were from Washington’s Chateau Ste. The Californian top-performing brands grew doubly as fast in dollar sales as the general wine market in grocery and drugstores, and six times as fast in volume. Overall, California wines accounted for close to a third of dollar sales and a quarter of volume. California vintners are revitalizing brands and no longer allowing upstart foreign companies to lead the road in innovation, style and pricing. Don Sebastiani Jr., marketing director for Don Sebastiani & Sons International, said: “What was most surprising and almost shocking to me is the breadth of the list and how California dominates it with everything from old, established wine brands to bag-in-the-box products and other more contemporary hip brands.”

Some of the top brands included Black Box Wines, E & J Gallo’s Red Bicyclette and Bronco Wine Co.’s Crane Lake with Gallo and Constellation brands dominating the ranks. The Top 30 Table Wine Brand Performers accounted for 29.4% dollar share and 25.5 % volume share of the total wine category in the U.S., while they gained 2.5 dollar share points and 3.3 volume share points. Overall, 88% of the brands are priced premium starting at $5.50 and can chalk up much of their success to an increased merchandising presence.

SWA PUSHING FOR TAX REFORM IN INDIA

The Scottish Whiskey Association is reportedly filing grievances against India if the country does not soon make some changes. According to beveragedaily.com, the Association plans to ask the EU to make an official complaint at the World Trade Organization against India if it does not lift “excessive duty tax on imported spirits drinks.” The association claims the duty tax ranges from 212%-525% and was reportedly disappointed that the Indian government had not already moved towards reform. Peter Wilkinson, SWA international affairs director, hopes for a negotiation but is prepared to push the EU to intervene. “Domestic interests appear to have outweighed international commitments and, as a result, market access continues to be unfairly restricted by a protectionist tariff and tax system. Indian consumers are being denied the opportunity to buy international spirits brands at an affordable price,” Peter was quoted saying. As a result, Indian trade barriers are leading to an increase in fraudulent whiskey. The SWA wants India to halve its duty tax to 75% and replace additional tax on spirits with a charge to encourage more affordable prices and product choices. The European Commission already began investigating India’s import system for EU wine and spirits last autumn.

NEW ITALIAN IMPORT FOR SKYY

Skyy Spirits today announced their newest import, Aperol, a popular, orange-flavored Italian spirit that can be served alone or put with other spirits or mixers. Aperol is the number one light spirit in Italy with only 11% alcohol content and is known for being a “social drink.”

EVANS & TATE STRUGGLE TO MAKE A COMEBACK

With a focus on the premium wine segment and cost management, Evans & Tate continues to implement a turnaround strategy due to the Australian grape glut and a loss of UK market share. The company reported a net loss of $44.4 million in their second half along with decreasing revenue that fell from $49.6 to $45.9 from the previous year’s first half. However, CEO Martin Johnson says the company’s make-up strategy is coming along nicely. "We have rigorously cut costs so we can meet current price pressures and closed loss making operations and finally we have taken steps to reduce our debt," Mr. Johnson told Yahoo Business. “I am pleased that we have been able to announce the sales of our Mildura Winery to Neqtar and a new UK distribution to with HwCg.” HwCg runs a wine import and distribution business that supplies more than 2.5 million cases of wine from around the globe to UK retailers.

NEW ZEALAND: NO GLUT HERE

Although Australia is going through a grape glut, New Zealand is doing just fine according to industry insiders. Yields are slightly down on average but the total volume is expected to be a record 165,000 to 185,000 tonnes thanks to new planting and ideal weather. Last year produced 142,000 tonnes while 2004 generated 165,000. Philip Gregan, chief of New Zealand Winegrowers, reported that 22,000 hectares of grapes were planted this year, up from 1000 ha the previous year. There will be a shortage of some grape varieties, he said, especially sauvignon blanc. “There may be a glut in Australia but there is not one here,” said Philip to a local newspaper. “We still think there will be continuing shortages of New Zealand wine.”

A MOVE TO INCREASE MARKETING IN SONOMA

The Sonoma County Winegrape Commission is holding an election in May on whether the growers want to raise $1.2 million a year to promote the area’s wine region. Currently, Sonoma Country invests only $500,000 in marketing while Napa Valley devotes $4 million, and Washington and Oregon each spend over $1 million a year. Many Sonoma officials feel the need to catch up with other imports and local regions on their ads, tastings and wine promotions, especially since increased marketing could help brand Sonoma County as a wine-and-food region like Tuscany. Average grape prices in Napa are $1,000 a ton higher than Sonoma County’s average prices with the gap widening the past five years. Napa also holds 42 wine events a year while Sonoma does only 29. However, not everyone out of the 1,000 Sonoma growers support the election. Some believe that wineries and growers already do enough to endorse the region and feel promotions should be split equally between the two groups.

BIG INTEREST IN FOSTER’S ASIAN BREWERIES

Rumors are flying around that Foster’s may possibly sell their Asian breweries for up to A$200 million to leave focusing room for the domestic market. Operations in India, Vietnam, China, Fiji and Samoa may soon be on the market, and Scottish & Newcastle or SABMiller are the most likely bidders. S&N already controls Foster’s brands in Europe and Russia, while SABMiller has control in the U.S.

CRUZAN AND ABSOLUT OFFICIALLY UNITE

Rum distributor and producer Cruzan International announced Friday, March 17 that shareholders voted to approve Absolut’s bid to acquire the company. Cruzan reported that 95.9% of shares agreed to support the merger, noting that 88.5% of those shares were not joined with Absolut or its affiliates. Absolut agreed to pay $28.37 in cash for each issued and outstanding share of Cruzan’s common stock not owned by Absolut. According to reports, the deal could be worth close to $69.79 million with a completion date on March 22.

LION NATHAN BACKING OFF

Lion Nathan announced yesterday that they will not extend their $317 million bid for Coopers Brewery past the deadline. Although their bid remained technically open until March 20, Lion Nathan’s hostile takeover attempt was foiled in December. A spokesman said, “Clearly there is still an option for us to revise the offer at some point if any of the legal strands were to be successful.”

DECREASING SELLS IN FRANCE HAVE VINTNERS LOOKING ELSEWHERE

Many French vintners are choosing to sell their wineries due to New World competition and a lack of French wine consumption. Although no one knows for sure how many properties are on the market, it is estimated between 400 and 500. According to the Herald Tribune, many prospective buyers are coming from Britain and the United States. A vineyard’s price depends mainly on the location and types of grapes that are produced but low and medium-end wines are usually the first to go. Since 2004, prices of French vineyards have fallen as much as 50% in some areas including Beaujolais and Bordelais with a 23% drop. Nonetheless, buyers are advised to proceed with caution. Economic and systemic problems along with France’s inheritance laws make it difficult for a vineyard to get passed down the family line.

ANOTHER ONE BITES THE DUST

Financially troubled Australian wine group Evans and Tate sold their Victorian vineyard to repay a bank debt of A$20 million. The UK’s Neqtar pain $22 million for the winery at Mildura where they already own another vineyard. CEO Guy Young said, “This really forms part of our strategy to develop Neqtar as a truly global player and give us a key position in the major producing area within Australia.”

GREEN BEER ANYONE?

I know it’s cheesy but in honor of St. Patrick’s Day I wanted to write a wee compilation of facts and information regarding Irish brews and spirits. Every year at this time approximately 13 million pints of Guinness are consumed worldwide with the United States contributing 3.5 million. But it wasn’t until recently that the Irish were allowed to purchase alcohol or drink at pubs on St. Patty’s, not until 1960 and 1988 to be exact. (On a side note, my only trip to Ireland was in college during Easter weekend, and for the record, they still don’t sell alcohol during that time. So much for living large in the Emerald Isle.) Furthermore, the Guinness brewery in Dublin has a remaining 8,754 years left on their lease which was signed by Arthur Guinness in 1759. Guinness and Smithwick’s Brewmaster, Fergal Murray, has been working for the company since 1995 and acquired his Master Brewer degree from the Institute of Brewing in London.

Bailey’s is introducing two new flavors for St. Patrick’s Day, Baileys Caramel and Baileys Mint Chocolate after their Arizona rollout in December. The flavors will be offered for a limited time at grocery, liquor, club and drug stores in 750 ml bottles for $18.99. Baileys was launched in Ireland in 1974 and is currently the number one selling liqueur worldwide. Furthermore, Baileys is rated 6th among all distilled spirits in the world.

SABMILLER SPREADING ITS PRESENCE

SABMiller was given the okay to purchase a majority stake in Slovakia’s third-largest brewery, Topvar March 14. The brewing giant will soon take control of 67% of Topvar which will provide $15.2 million in assets. With Heineken controlling the largest brewery in the country and SABMiller overseeing the second-largest, Saris, the two companies will control 80% of Slovakia’s beer market. Although monopoly watchdogs feared it was putting too much power in the hands of Heineken and SABMiller, they eventually “found no evidence of collusive activity between the two firms.” The two breweries are in fact very competitive with one another as they race to spread their presence throughout the globe. SABMiller now controls 40% of Slovakia’s beer industry, slightly lower than Heineken’s market share.

The company also announced they have offered $400 million to buy out the remaining shares of Peru’s Union de Cervecerias. They acquired the firm, better known as Backus, after buying a majority interest in Bavaria.

AGRICULTURAL AND LEGISLATIVE ISSUES FOR WINEMAKERS

According to the SFGate.com, many California wineries have fallen susceptible to the so-called “predatory” lawsuits filed against lead in stemware. California’s Safe Drinking Water and Toxic Enforcement Act of 1986 calls for all businesses to provide proper warning signs about chemicals in glassware, such as lead and cadmium, or they can be charged with fines up to $2,500 a day. The state attorney general has 60 days to take action after a party has filed a notice of the supposed violations but defendants usually end up settling. California winemakers are also fighting against a bill passed by the U.S. House of Representatives in December that requires 700 miles of border fences, and would call for employers to verify the legal status of workers. No guest-worker provision was given. According to the American Farm Bureau Federation, agriculture could suffer major production loss as a result. Fruit and vegetables could see a decline between $5 billion and $9 billion annually.

PLACE NAMES AND PRACTICES: WHAT THE WINE ACCORD MEANS FOR PRODUCERS

Now that the U.S. and E.U. wine agreement has been signed, what exactly does it mean for vintners? Well for starters, U.S. winemakers may continue to use 16 specific semi-generic place names, such as Chablis, Burgundy, Champagne and Port, as long as the labels also exhibit a place of origin. However, only existing brands can use these terms under a “grandfather clause” that protects their investment while future labels must abstain. The European Union must now recognize U.S. place names such as names of states, American Viticultural Areas and counties with AVAs.

The E.U. has agreed to recognize certain U.S. winemaking practices, such as adding wood chips in stainless steel tanks, while the U.S. will continue to recognize existing European practices. German wine-makers were not happy about the new rule and reportedly called for the E.U. to draft a “purity law” to prevent European wine-makers from using wood chips. The Italians, on the other hand, are asking the EU to alter regulations to allow the use of wood chips. Germany did not sign the accord.

Negotiations for the second phase of the deal will begin three months after the first phase goes into effect. According to Decanter Magazine, issues such as the creation of a committee on wine issues, the use of other semi-generic terms and other winemaking practices, geographical names, appellations, low-alcohol wine and seals of approval will be reviewed. The agreement is a huge step for U.S. winemakers as $325 million was gained from exports going into the E.U. last year.

DIPPING INTO THE FRENCH RESERVE

Brown-Forman announced today the addition of Chambord Liqueur to their spirits brands. Formerly owned by the French company Charles Jacquin et Cie, Chambord is a super-premium, black raspberry liqueur that is meant to fit into the “cocktail culture.” Chambord “will enable Brown-Forman to take the brand to the next stage of global development,” said N.J. Sky Cooper, CEO of Charles Jacquin et Cie. The $225 million purchase “fits nicely with our approach to brand building. We have admired from afar the healthy, consistent manner in which it has been built,” said Paul Varga, CEO of Brown-Forman. Liqueurs are one of the fastest growing segments in the liquor industry and will only get bigger, according to Paul.

INDIANA’S HB 1016 MAKES ITS WAY TO THE GOVERNOR

After getting approval by the House, the Indiana Senate passed HB 1016 and sent it to the governor for his signature yesterday. Here’s a recap in case you missed it. The legislation gives Indiana’s 32 wineries the right to ship 3,000 cases of wine a year directly to wine-consumers, and individuals may receive up to 24 cases a year in total. I mistakenly reported that customers must show identification in person upon their first shipment, but one loyal reader corrected me. The consumer must in fact first purchase the wine face-to-face at the winery where IDs are checked and an affidavit is signed. Thereafter, the individual may get a direct shipment with identification checks upon delivery.

WASHINGTON SIGNS IN THE FIRST DELIVERY BILL

As expected, Washington State Gov. Chris Gregoire signed a bill allowing out-of-state wineries to ship directly to Washington consumers yesterday, March 14. According to sources, the move is not likely to help local wineries as it is only inviting competition from other states. Washington is the second largest premium wine producer behind California with a $2.5 billion industry, and previously did not allow vintners from other states to ship directly without reciprocity. Gov. Gregoire is soon expected to sign a bill that will allow out-of-state wineries to sell directly to retailers without using a distributor. Although the move is hailed by wineries, it leaves one to wonder if they are up to the task. Even Tim Hightower, president of Washington Wine Institute, expressed uncertainty to komotv.com: “It helped set the precedent for opening up shipments from all states, but on the other hand, there's a regulatory hurdle that you have to jump through, obtaining a permit and paying of additional taxes.” Are wineries jumping the gun? Most wholesalers have had decades of experience dealing with retailers and producers, paperwork and taxes, and they know how to get the job done. Furthermore, states that allow direct shipping are already having efficiency problems between suppliers and consumers with all the legal quandaries and expensive licenses. Let me know what you think. megan@winespiritsdaily.com

VINTAGE POINT GIVES ADVANTAGE POINTS TO WINE-MAKERS

Wine industry veterans, some from Foster’s Group and Beringer Blass, have gotten together and launched a sales, marketing and management-services firm meant to assist small luxury wineries. Vintage Point is hoping to reach customers that sell wine for at least $14 per bottle but more likely in the $20 range, according to the San Francisco Business Times. The new company was launched last week and has over $5 million in capital. David Biggar, formerly VP and general manager of marketing for California brands at Foster’s Wine Estates, serves as Managing Director. David also worked for Beringer Blass from 2000-2003. Tom Peterson will serve as Director of Operations and Teresa Sullivan is working as director of finance. Biggar hopes for Vintage Point to help small wineries in an age of consolidation with a national sales network meant to connect vintners with customers, distributors and retailers. In addition, the company will help with package design, merchandising and advertising.

PERNOD GIVES IT UP TO CAMPARI

Glen Grant, Old Smuggler and Braemars’ brands and inventories were officially handed over to Campari for EUR 115 million and EUR 15 million today as was announced December 22. After selling their minority shareholding in Britvic and Dunkin’ Brands, as well transferring brands like Canadian Club, Courvoisier, Sauza and Maker’s Mark to Fortune Brands, Pernod Ricard is done. Selling these labels will help Pernod further reduce debt and work towards refining their company.

BROWN-FORMAN ADDS A NEW HIGH-END BRAND

Brown-Forman is adding an ultra-premium wine to their Fetzer Vineyards portfolio. Fetzer Coro Mendocino will be introduced next week at the Wine Institute’s tasting in London as a new, ultra-premium line from Mendocino. Fetzer’s Coro Mendocino 2002 was aged for 18 months in French oak barrels and is 41% Zinfandel, 33% Syrah, 21% Petite Sirah and 5% Grenache. And there are no foreign grapes for this batch; only grapes from Mendocino Country and Northern California were used. Eight wineries in total have contributed to the project, including Eaglepoint Ranch, Golden Vineyards and Pacific Star Winery. The bottles go for $34.94.

SOME OTHER WINES FOR “THE OTHER GUYS.”

Don Sebastiani & Sons International are adding two new wines, Plungerhead and Hey Mambo, to The Other Guys portfolio. "These are the first of several new wines we're planning to add to The Other Guys portfolio this year," said August Sebastiani, managing director of the division. "Our flagship wine, le bon vin de la Napa Valley, has been very well received since its introduction just last September and we are very excited about the prospects for this emerging division of our company." Plungerhead is a Zinfandel from the 2004 Dry Creek vintage and sports a closure called Zork from Australia. Hey Mambo, also from 2004 with a Zork closure, is a Cal-Ital wine made in the style of a 21st Century Super Tuscan. Plungerhead is already available in the California market and Hey Mambo is set to be released later this spring, both for $14.

I’LL RAISE YOU SOME OAK CHIPS IN EXCHANGE FOR A SHERRY

As I reported last Friday, the U.S. and E.U. finally signed a wine accord they have been haggling over for the past twenty years. Some experts believe the agreement will set a positive example for future cultural trade issues. After all, a once nasty dispute has ended in compromise and acceptance among men and women who are steadfast in their ways, (and it only took twenty years.) The E.U. agreed to recognize the traditionally forbidden New World practice of adding oak chips to the vats for flavor - it saves time and money, and isn’t that the American way – as long as the U.S. agrees not to use certain European names such as Port, Sherry and Champagne. Obviously there were misgivings on both sides. Four European countries led by Germany voted against the accord complaining that it gave the U.S. too much leeway since they are allowed to use practices that are illegal in many countries across the pond. The settlement was eventually made in order to avoid further bickering in which the E.U. threatened not to accept certain U.S. practices, such as throwing in oak chips, while the U.S. promised to impose huge amounts of paperwork on European imports. Can’t we all just get along? Well appar