FOSTER’S WINES SALES DECLINING

As Foster’s continues to sell winery assets in Australia, wine sales to both Britain and the U.S. are declining.

ACNielsen research shows that Foster’s wine sales were up 3% and 5% by volume over the 13 weeks to July 1, while Australian wine sales rose only 4% by volume and 3% in sales over the period. The overall wine segment increased 11% in sales and 5% in volume, showing that Aussie wines are losing share.

However, while the Rosemount, Lindemans and Penfold's brands all in decline, some analysts believe it might just be temporary.

U.S. DISTRICT JUDGE RECOMMENDS FACE TO FACE WINE SALES

Champions of the 3-tier have reason to celebrate. A U.S. District Judge in Maine recommended that the state opt out of legalizing direct wine sales in favor of face to face transactions, upholding the state’s current winery statutes. In answer to Granholm, Judge Margaret J. Kravchuk wrote that the benefit of enforcing face to face sales as a way to prevent underage access outweighs any burdens posed towards interstate commerce. Said Judge Kravchuk:

Maine’s current law “simply does not impose any cognizable burden on interstate commerce that could possibly outweigh the putative local benefits of regulating minors’ access to alcohol.”

She added that “wine is an alcoholic beverage that is contraband when placed in certain minors’ hands, and the State has concluded that mail order transactions cannot reliably be policed in order to protect certain minors from themselves.”

Although states must take necessary steps to comply with Granholm, Judge Kravchuk’s strong words demonstrate the power that is still left to the states to regulate as they see fit. The recommendation will now go on to a district Judge.

“I do not think this proposition really deserves any protracted discussion. If the requirement of 'face-to-face' or 'on-premises' transactions were applied to an innocuous article of interstate commerce such as clothing, which is not subject to any age restriction or other public health restriction (let alone the Twenty- first Amendment), then it would be difficult to understand what rational basis might exist for prohibiting mail order purchases. But here the patently obvious circumstances are that the subject matter of the statutory scheme is wine, wine is an alcoholic beverage that is contraband when placed in certain minors' hands, and the state has concluded that mail order transactions cannot reliably be policed in order to protect certain minors from themselves. It is not for this court to second-guess that policy determination in favor of the plaintiffs' free market perspective,” she wrote.

WHERE DOES THE WSWA STAND? The Wine and Spirits Wholesalers of American (WSWA) supports the decision because “it exemplifies how a state can comply with last year’s Granholm v. Heald Supreme Court ruling and continue to uphold the safeguards that prevent unaccountable alcohol sales,” said the organization.

“Magistrate Judge Kravchuk clearly understands the risks that Internet, phone and mail order alcohol sales pose to the health of our communities and that wine is alcohol,” said WSWA President and CEO Juanita D. Duggan.

“This decision ought to encourage other state officials to resist attempts by wineries who are demanding to opt out of the regulated system of alcohol safeguards through direct sales, and all those seeking to undermine a state’s broad authority to regulate alcohol.”

NATIONAL PLANNING TO BUY OUT GLAZER’S IN ILLINOIS

National Wine and Spirits of Illinois has offered to buy Glazer’s Distributors of Illinois out of its management services contract in the Illinois market. The press release stated that Glazer’s has until August 17 to respond as specified in the contract, or National will buy them out.

National-Illinois will continue to focus on wine and spirits, said the company. Could this be just the beginning of future endeavors between the two companies?

TTB PROPOSES ALLERGEN LABELING

Alcoholic beverage companies may now have to include fish and other common allergens on their labels, if a government proposal is passed. Anything that a consumer wouldn’t normally expect to find in wine, spirits or beer – such as fish, shellfish, milk, eggs, tree nuts, peanuts and soybeans – would fall under the labeling requirement.

About 4% of the U.S. population has a food allergy according to the Treasury Department. Comments on the proposal will be accepted through Sept. 25 before making the listing requirement mandatory.

LION’S ROB MURRAY: ALLIANCE WITH BEAM WINE ESTATES “CAPS OFF A SOLID 3RD QUARTER.”

Australia’s Lion Nathan reported that while its beer volumes were up 2.6% for the nine months ending June 2006 and 1.8% YTR, the wine division didn’t do quite so well. While core brands continued to drive volume in the segment, the company pointed out that conditions remain difficult due to the grape glut and downward pricing pressure.

It’s not all bad in the wine business, though. Lion announced it has formed an alliance with Beam Wine Estates, a subsidiary of Fortune Brands, for the distribution of its Australian and New Zealand premium wine portfolio in the U.S., effective in September. Beam reported that Lion’s Australian and New Zealand wine imports were up 16% and 96% over the last year – a major triumph for Beam who is already in the top 5 super-premium wine companies.

Lion also announced they are tacking on a new spirits brand to their portfolio, McKenna Kentucky Straight Bourbon. McKenna is the first spirits brand for Lion and will be launched in August.

“Bourbon is the largest RTD segment by value and the second largest full strength spirits segment by value,” said Andrew Reeves, Lion Nathan Australia managing director.

CLOS DU BOIS SPREADING OUT. As the #2 selling chardonnay in California and already one of the largest wineries in Sonoma, Clos du Bois is planning a $28 million expansion that would double its production capacity. The expansion is expected to be completed by 2011.

B-F FISCAL YEAR OUTLOOK: JACK UP 8%

Brown-Forman posted strong results tolday for fiscal 2006 ending April 30. Jack Daniel's led the way with volume up 8% to more than 8.5 million cases. Southern Comfort grew by 5% for the second straight year, and volumes of Finlandia Vodka increased by 15% in fiscal 2006.

FORTUNE UP 27% IN REVENUE FOR Q-2

Fortune Brands reported today that revenue was up 27% for their 2nd-quarter earnings, trumping analysts’ predictions. Boosted by the company’s stable of top-shelf spirits brands, including those acquired from Allied Domecq, Fortune delivered its 20th consecutive quarter of double-digit profit growth that “exceeded the earnings target we provided three months ago," said Fortune Brands chairman and CEO Norm Wesley.” Wesley said the company will reach double digit growth again in the 3rd quarter and for the full year.

Blame it on consumer demand, said Fortune, in addition to Jim Beam bourbon which "fueled sales growth and share gains in key markets."

When asked about the brands acquired from Allied, Norm replied: “When we looked at the aggregate spend on the brands we thought it was adequate, but we need to build them up brand by brand, and shift from promotion and pricing to spending behind the brands for the longer term.”

FREIXENET IMPORTING A NEW FRENCH ROSĖ

Freixenet USA is launching a French wine, Premius Bordeaux Clairet 2005, in the U.S. for $10 as the latest addition to its line.

“The interest in rosé wines in the US market has dramatically increased, driven by an ever-savvier consumer who demands fresh, affordable, food-friendly wines,” said Freixenet’s VP of marketing, David Brown.

VIRGINIA REQUIRES THE USE OF WHOLESALERS

As of July 1, Virginia wineries must use wholesalers to deliver their shipments to restaurants and retail stores. Prior to the new law state wineries were able to ship directly to in-state retailers, while out-of-state wineries had to use distributors. And while Granholm put those laws to rest, Virginia wineries can still sell to states such as Maryland and Pennsylvania that permit self-distribution.

INTERNATIONAL WINE & SPIRITS BOASTS “STRONG RESULTS” AT Q-2

UST, parent company to International Wine & Spirits Ltd., boasted “strong results from the wine operations” at their 2nd-quarter earnings today.

"We are encouraged by the improving fundamentals in our smokeless tobacco operations and continued growth in our wine business," said Vincent A. Gierer, Jr., UST chairman and chief executive officer.

Sales in the wine segment jumped 5.6% on a 7.3% increase in premium case sales for the quarter. Operating profit grew 18.3% from the same period last year and was favorably impacted by the Col Solare joint venture with Antinori.

For the first half of 2006 net sales increased 7.3% on a 7.8% boost in premium case sales, while operating profit jumped 19.2%.

PERNOD SHOWS BOOMING SALES THANKS TO ALLIED

Pernod Ricard has seen sales soar by 68% since its takeover of Allied Domecq brands last year, 61% stemming from the acquisition. For the year ending in June, organic growth was up 4.3% with a 5.1% jump in the 4th quarter.

Pernod’s original key brands continued their rapid growth, jumping 2% in volume and 7% in sales. Jameson grew 12% by volume and 15% in sales, with particularly strong growth in the U.S. Chivas, Martell and Glenlivet also experienced double digit growth, with Chivas achieving record sales by selling just short of 4 million cases.

The company reported that sales more than doubled in the U.S. following the integration of Allied Domecq, especially thanks to the spirits portfolio. Jameson grew 21% in the U.S. where Glenlivet also had a strong presence.

Pernod reported that the integration of Allied had gone more smoothly than originally anticipated, leading a reduction of nearly 40% in debt. Despite the integration, some brands maintained their positive trends, particularly Stolichnaya (16%), Montana (4%) and Malibu (2%). However, Ballantines (-12%), Beefeater (-6%) and Kahlua (-8%), were hurt the worst by destocking.

WSD SPONSORS “A WINE TASTING CELEBRATION.”

Wine and Spirits Daily is pleased to announce our first ever sponsorship in a charity event, dubbed “A Wine Tasting Celebration.” The benefit goes towards Youth Alternatives Meadowland Campus in West, Texas and is hosted at the Scenic Loop Café in Helotes from 6-9 p.m. tonight.

AFTER ILLEGALLY SELLING LIQUOR WITHOUT A LICENSE, TRAVELING VINEYARD FINDS A LOOPHOLE

Several weeks ago WSD reported that Minnesota law-enforcers were cracking down on illegal wine tasting parties hosted by a Massachusetts company called The Traveling Vineyard. The company – the marketing arm of Geerlings and Wade – is accused of selling liquor in Minnesota without a license. Advertised as “wine adventures in your home,” The Traveling Vineyard delivers wine to residents for wine tasting parties in many states, not just Minnesota.

The company will now do business under Minnesota’s new direct shipping law that allows wineries to ship two cases a year to consumers.

"The adjustments in our business model permit us to continue sharing our passion for wine with Minnesotans who might enjoy our products," said Gordon Romer, CEO of Geerlings & Wade and The Traveling Vineyard.

However, Marlene Kjelsberg, with the Alcohol and Gambling Enforcement division of the state Department of Public Safety, wouldn’t comment to local papers on whether The Traveling Vineyard's plan complies with state law.

CHARMER AND PEERLESS GET TOGETHER IN NYC

Charmer Group and Peerless Importers have agreed to merge their operations in the New York metro area, a move that was much anticipated ever since Southern entered the NYC market two years ago. The new company, entitled Empire Merchants, will be owned equally by both parties, and will be a member of The Charmer Sunbelt Group.

The transaction will be completed in the next several months after receiving regulatory clearance and other customary conditions. E. Lloyd Sobel will lead Empire as CEO with Anthony Magliocco as COO, Terrence Arlotta as CFO, and Steve Meresman as Corporate Secretary.

The union reduces the number of major wine and spirits wholesalers in the metro New York market from four to three, according to Wine Spectator, and stands as just another example of wholesaler consolidation around the country. Empire will be a force to reckon with, boasting a lineup that includes Peerless’ Diageo and E&J Gallo’s brands, and Charmer’s portfolio of such key suppliers as Bacardi, Brown-Forman, Foster’s Wine Estates Americas and Sidney Frank Importing Co.

We hear at WSD that Peerless might not be the only wholesaler Charmer is striking deals with –there are rumblings that Glazer’s and Charmer might have something in the works.

BACARDI BEING SUED BY AN ALLEGED BURN VICTIM

Bacardi is being sued by a woman claiming to have suffered horrific burns during a stunt involving flaming rum during a promotional event at a Miami nightclub in August 2002.

The lawsuit, filed on Monday (July 24) states that Danielle Alleyne from Miami was burned after a customer set light to a menu in the club and placed it in the stream of alcohol a bartender was pouring at the time. The alcohol - identified as Bacardi 151 proof rum - turned into a flame thrower, the lawsuit states.

“The burning rum stuck to her skin and continued to burn as she fell to the floor and tried to put herself out,” the lawsuit claims. Alleyne says she suffered second and third degree burns on her face, neck, chest and back and is permanently disabled and disfigured.

The suit alleges that Bacardi 151 proof rum “emits a high volume of combustible and explosive vapour” which makes it “unreasonably dangerous” and defective.

ILLINOIS GOV. OPTS TO RECORK UNFINISHED WINE BOTTLES

Illinois Gov. Rod Blagojevich signed a leftover wine law on Monday that will allow customer to take home unfinished bottles of wine from restaurants – granted the bottle is sealed in a tamper-proof bag. The law goes into effect Jan. 1.

CAPTAIN MORGAN KICKS OFF A NEW TV AD

Diageo’s Captain Morgan Original Spiced Rum is launching a new TV ad entitled “Pizza” that features two of The Captain’s crew members leaving a pub and stopping at a pizza joint for home delivery - of a pie and themselves. The company called it “a witty way to remind consumers that when they are going out to designate a driver,” in a statement.

The spot will air on Comedy Central, Spike, TBS, FX, Fox Regional, TNT, Discovery Channel, A&E and the USA network.

JIM BEAM’S CMO SUDDENLY DEPARTS

Jim Beam’s CMO Beth Bronner bid the company ado yesterday, reportedly to “pursue other interests.” Until a replacement is found, John Muller – Beam’s SVP of strategy and corporate development – will sit in Beth’s spot. The resignation comes two days before parent Fortune Brands announces their 2nd-quarter earnings tomorrow, July 27.

“John will lead this interim transition while continuing to work closely with the company’s business units to implement critical brand strategy initiatives and brand growth,” said Beam’s president and CEO, Tom Flocco.

Beth joined Fortune Brands in 2003 with experience at Revlon and Nabsico, but no previous spirits experience. According to Brew Blog, Beam’s marketing department recently doubled to 160 people from 85 following its acquisition last year of Allied Domecq brands Sauza Tequila and Maker’s Mark whiskey. That being said, the stress involved with marketing a product in an extremely competitive segment could have been a factor in her sudden departure. WSD wishes Beth well in all future endeavors.

WASHINGTON WINE SALES UP 45%

As the second-largest wine producing state, Washington is making waves with a new marketing campaign. From February to April the state’s wine industry conducted a national branding effort that spiked a 45% increase in Washington wine sales in Tampa, Florida. And while it doesn’t sound like much right now, the country could be seeing a lot more of Washington wine in the coming years.

"Tampa was the perfect place to launch our first national integrated marketing effort," said Jeff Gordon in a statement, owner of Gordon Brothers Family Vineyards in Pasco, Wash. and chairman of the Washington Wine Commission. "We saw a huge return on our initial investment this year, and look forward to returning to Florida in 2007 with even greater success."

WINE AND SPIRITS PLACEMENT IN THE MOVIES

Movies have greatly influenced the popularity of wine in this country (think Sideways) with references here and there, but the connection between Hollywood and alcohol endorsements have become increasingly intertwined as of late. More vintners are trying to get their brands in the picture by donating wine cases to showbiz events and parties, or hiring placement agents to scout out opportunities. And while there are no guarantees, many agree it’s worth the effort – especially since no one watches commercials anymore.

Smirnoff vodka, already the number one selling vodka, will get a boost this November when the new Bond movie comes out, “Casino Royale.” Whereas various wines and vintages will likely be named, Diageo’s Smirnoff stands as James Bond’s vodka of choice.

"The James Bond and Smirnoff brands have gone hand in hand formore than 40 years, and throughout our rich history together, we haveboth remained true to our roots -- clearly original," said JamesThompson, President, Smirnoff Global Marketing.

STRONG 1ST-HALF PERFORMANCE FOR LVMH WINE AND SPIRITS

LVMH’s wine and spirits unit recorded an 18% increase in revenue in the first half of 2006. Helped by strong volume growth, improved product mix, and price increases in key markets, Veuve Clicquot made progress in Europe and the U.S. while Hennessy cognac continued its momentum in China and the U.S.

"Over the second half, LVMH will focus on developing market share for its star brands and on the launch of several new products. The first half performance allows LVMH to confirm its objective of achieving a very significant growth in its results for 2006," the company said in a statement.

GLAZER’S MOVES TO A WEB-BASED MANAGEMENT SOLUTION

Need some management and organizational help? Management Dynamic’s Supply Chain Visibility and Event Management solution – currently used first by Glazer’s in the industry – manages their domestic and international supply chain operations. The system replaces manual order and shipment tracking processes which “significantly led to delays and difficulty in determining accurate inventory levels and expected arrival dates for shipments” in the past, according to the company.

Glazer’s reports that since going live in April, the new system has helped with inbound inventory, a better understanding of supply inconsistency (leading to fewer stock-outs), and improved communication and collaboration with global vendors, and eventually suppliers. The solution also provides Glazer’s with complete, real-time order and shipment visibility, and helps analyze the performance of vendors and service providers with scorecards.

"This project is a groundbreaking initiative and will place Glazer's at the forefront of supply chain best practices for our industry," said Gregg Mitchell, Glazer's Vice President for Corporate Logistics.

BRAZIL’S NATIONAL SPIRIT DEBUTS IN THE U.S.

ABB Partners, LLC is launching the first double-distilled Cachaca in the U.S. market, dubbed Cabana Cachaca. Cachaca is rum fermented and distilled in Brazil directly from pressed sugarcane, unlike most rum which is distilled from molasses.

SOME NEW APPOINTMENTS AND PROMOTIONS FOR GLAZER’S TEXAS

Glazer’s Texas promoted four executives and hired two more to help strengthen the Texas division as a whole, the company said today.

Phil Meacham has been promoted to the position of Senior Vice President, Operations & Finance for the State of Texas. He will be responsible for day-to-day operations of all of Glazer’s Texas branches, as well as Finance and Administration for the state.

Dennis Nauslar will assume the responsibilities of Vice President, Malt Beverages for Texas, and will continue reporting to Mike Maxwell, Glazer's Texas State President.

Ken Bardsley has been promoted to the newly created position of Senior Account Manager, Package Stores. Bardsley will be responsible for coordinating sales and marketing efforts all of Glazer’s business with Texas’ Package Store customers, and will report to Randy Golden, Vice President of Trade Development.

Mike Howard joins Glazer’s as General Manager for Cactus Spirits, and Vana Lamont has accepted the position of On-Premise State Manager for Cactus as well.

Mary Terry Hecker has been hired for the position of On-Premise State Manager – Mustang Spirits.

PERNOD RUMORED TO OFFER PREMIUM PRICE FOR TEQUILA HERRADURA

Brown-Forman and Bacardi are the competing forces against Pernod in the quest to take control of Tequila Herradura, one of the largest tequila makers in Mexico. Herradura – which has been on the market since April – has reportedly reached its final bidding days and could go for close to $800 million.

“In the US it's a toss up between whether rum or tequila will be the next "big thing" so Herradura is selling out at the right time in case Rum wins,” said a beverage industry analyst.

THIS COULD GET INTERESTING. Pernod is second only to Diageo as the largest wine and spirits company in the world, and Diageo, as you known, owns Jose Cuervo – the world’s most popular tequila. Herradura would certainly bolster Pernod’s white spirits portfolio, already dominated by Stolichnaya vodka – which the Russian government recently dropped the claims to – and Beefeater gin, and perhaps help the French company become a larger tequila player. If Pernod succeeds in introducing a worthy adversary to Diageo’s Cuervo, well, there could be some share points involved.

Herradura is one of the biggest tequila producers in Mexico, but has a much smaller international business than rival Jose Cuervo. With the right marketing and brand exposure, who knows what could happen. It’s wild thinking, I understand, but just speculation after all. Amassing rumors suggest that Pernod is willing to pay a premium price for the underdog tequila so as to get a foot in the Mexican market.

Bacardi, already a huge fixture in the white spirits scene, would do well to gain another mixing brand since margaritas and mojitos are the most popular cocktails. Brown-Forman already has the brown spirits market cornered with Southern Comfort and Jack Daniels, and is perhaps looking to expand their horizons.

White spirits consumption has been on the rise across the globe with tequila acting as one of the best performing spirits. That being said, all three companies are certainly looking to move up in the industry, but as of press time, WSD is not aware of any frontrunners.

WSWA SUPPORTS GROUNDBREAKING LEGISLATION

In a bold move that signals a new direction for the Wine and Spirits Wholesalers of America, the group passed a resolution Friday, July 21 overwhelmingly to support underage drinking prevention legislation currently pending in the U.S. House and Senate, called the “STOP Underage Drinking Act” (H.R. 864), or the STOP Act on the Hill, which also contains draft language which stresses the “important role of state-based regulation in the fight against underage drinking”.

This proposed legislation, the result of intense negotiations between various interests in the alcohol beverage industry, including anti-alcohol forces, is a rare case of cooperation between distributors and groups which typically have been on the opposite side of most issues. What brings these two groups together? A shared interest in maintaining strong state regulation of alcohol.

The resolution approved by the WSWA includes the following language:

“The WSWA supports all reasonable efforts to reduce underage consumption of alcoholic beverages; and

the WSWA supports balanced legislation designed to create effective programs to reduce underage consumption of alcoholic beverages; and

state-based regulation of alcoholic beverages from production through consumption is central to reducing underage consumption;

Therefore, be it resolved: WSWA supports HR 864 as drafted on July 19, 2006 and directs the staff of WSWA to communicate its support to members of Congress, the administration, its fellow industry members, public interest groups, and the public.”

DUGGAN SAYS: "We applaud the sponsors of The STOP Act for their understanding of how the three-tier system and state-based alcohol controls provide the public policy rationale and framework that are the very essence of programs that promote responsible consumption and prevent underage drinking. This legislation ought to encourage state legislators to resist attempts by wineries who are demanding to opt-out of the regulated system through direct sales and all those seeking to undermine a state's broad authority to regulate alcohol. We encourage the House to pass the legislation and urge the Senate to vote before the August recess,” says president of the WSWA Juanita Duggan.

CRAIG PURSER OF THE NBWA SAYS: “It is our hope that all of our allies in the licensed beverage industry can come together and support this legislation,” said NBWA President Craig Purser in a statement.

A NEW BIG BOX GROCER TO ADD TO THE LIST

The largest British retailer, Tesco, is planning to open 100 stores on the west coast in 2007 as many of you have likely heard. Initially, it looked like Tesco would bring its Express convenience store format to California, but now it seems they plan to launch a much larger “Fresh & Easy” concept with close to 15,000 square feet and a parking lot for 70 cars. According to ACNielsen, the new format will attempt to define its own channel. Los Angeles and Phoenix will be the first markets targeted next year.

ACNielsen data shows that when converted to U.S. dollars, Tesco’s sales came in fourth after Wal-Mart, Home Depot and Kroger. Tesco’s profits and group sales are currently way up with a 17% and 11% increase this year as compared to 2005, with continuing momentum to grow. Their total store count is up 14% this year.

HUNEEUS FAMILY MAKES A BID ON LEGACY

Bill Price and the Huneeus family announced today that they have made an offer to purchase all of the assets of Legacy Estates out of Bankruptcy protection. Legacy Estates owns the Freemark Abbey winery in Napa Valley, the Arrowood winery in Sonoma and the Byron winery in Santa Maria. It is expected that Agustin Francisco Huneeus (jr.) will lead the new j-v.

Legacy will be kept as an “independent company” according to Bill Price, a founding partner of the Texas Pacific Group.

"We are eager to meet and begin to work with all the Legacy employees. We are impressed with what they have been able to achieve in what is a very difficult and constraining environment. Our first priority will be to re-focus the management and employees of the company from this long and arduous sale process and back to making wine," said Agustin. Any potential job losses remain to be seen.

BOXED WINE BEATS THE BOTTLE IN A TASTE TEST

Boxed wine ain’t so bad according to a panel of experts that showed preference for wine in a cask over the exact same wine in a bottle. Held in part to better understand innovative packaging, the experiment took place at the Society of Wine Educators in Oregon.

A comparative blind tasting of Underdog Merchants' Killer Juice Chardonnay and Cabernet Sauvignon – produced by Underdog Wine Merchants, a millennial-targeting subsidiary of The Wine Group – found that the judges chose cask over bottle by a margin of 2 to 1.

Results for Kunde Estate Winery & Vineyards 2005 Estate Series Chardonnay featuring both screwcap and natural cork showed a slight preference for screwcap, mainly due to the convenience factor.

It seems that convenience is the name of the game. All three panelists now use innovative packaging and closures on part or all of their wine production believing that innovative packaging will eventually lead the growth in the U.S. wine market.

"As a winemaker, I'm very excited by the outcome of the blind tasting," said Adam Richardson, International Winemaker at Underdog Wine Merchants. "This once again proves that 3L premium cask wines offer consumers yet another choice without sacrificing quality. The bonus for the consumer is that we pass on the savings in packaging and freight costs directly to them."

MICHAEL GRAHAM HEADS FINANCE AT TWG

Michael J. Graham will take over as CFO of Terlato Wine Group – the group’s flagship company is Paterno Wines International - in Lake Bluff, Illinois.

His appointment will allow John Scribner, senior vice president and general counsel, to focus on managing the company's legal, tax and compliance groups, the company said.

Michael joins TWG from R.R.Donnelley where he worked as senior vice president and controller. Michael holds an M.B.A. in finance from the University of Chicago Graduate School Of Business, a B.S. in accounting from DePaul University and is a certified public accountant.

FLAVORED SPIRITS: GROWTH BUSTER OR GROWTH DRIVER?

Almost every week brings a new flavored vodka or rum it seems like, which has surprisingly helped the category as a whole instead of hurt it. The flavored spirits sector, particularly vodka and rum, has shot through the roof in recent years with consumers more than willing to try new things. AC Nielsen reported that for 2005, flavored spirits (vodka, brand, gin, rum and tequila) were responsible for over 25% of the category volume gains, and while they account for only a small portion of overall spirits sales, they are growth drivers that command premium prices in most segments.

Always the discerning ones, WSD readers agreed. On our survey given in May, 75% of you told us that the increasingly large amount of vodka flavors would NOT dampen overall growth rates.

That’s good news for Heaven Hill that just added its 13th flavored vodka (grape) to its Burnett’s stable, the largest in the flavored category. The product line includes citrus, orange, raspberry, vanilla, sour apple, cheery, watermelon, mango, coconut and the recently added peach. Sounds like a pack of skittles.

DIAMOND ESTATES AND KRISCOTT MERGE TOGETHER

Toronto-based Diamond Estates Wine & Spirits Ltd. Has merged with Halifax-based Kriscott Distributors Limited the companies announced today.

"Strategically, this merger will open many new doors for Diamond Estates and its growing portfolio of wine and spirits brands. The deal is also important for the company as it marks our official entry into the Canadian beer marketplace," said Murray Marshall, president of Diamond Estates.

A NEW, “AUTHENTIC” VODKA CAMPAIGN FROM MOTHER RUSSIA

Russia’s number one vodka company, Russian Standard Company, is launching a “Vodka is Russian” ad campaign in the U.S. for the company’s flagship brand, Imperia vodka. Starting today, the campaign will appear in newspapers and national trade consumer magazines as Imperia’s first ever advertising effort in the U.S.

Zeroing in on trends of consumers’ trading up and choosing imports, the ads will build on the idea that “true vodka is Russian vodka,” conveying a message that Imperia is the only truly authentic Russian vodka sold in the U.S.

RĖMY UP 2.5% IN 1ST-QUARTER PROFITS

French champagne and spirits group Rémy Cointreau posted a 2.5% rise in 1st-quarter profits, reporting sales of $188.1 million for the three months ending June 30. The company’s champagne labels, including Piper-Heidsieck and Charles Heidsieck, jumped almost 15%.

Rémy’s spirits sales rose close to 5%, pushed by higher Cointreau sales in the U.S. and the success of Passoa and St. Rémy brands in Europe. Cognac sales jumped 6% with the company’s flagship Rémy Martin brand surpassing last year’s “strong” 1st-quarter sales, the company said.

Despite some setbacks coming from sales from its partner brands, Rémy claims it is in line with its full-year forecast. “These results for the start of the year are fully in-line with Rémy Cointreau’s value strategy and its objective of double-digit organic growth in current operating profit for the 2006/07 financial year,” the company said.

WINE AND SPIRITS CPI ACCELERATES IN JUNE

Spirits consumer price index (CPI) rose by 1.8% in June, up from May’s growth of 1.5% according to Merrill Lynch research. YTD, spirits CPI average growth is at 1.6%.

Wine especially got a boost with a whopping 3.3% increase, reflecting its strongest performance since Nov. 1997. Wine CPI’s growth of 2.7% YTD is “likely driven by favorable product mix as consumers’ trade up,” which will contribute to Constellation’s top line growth.

AN INTERACTIVE TOOL FOR THE WINE AISLE.

I usually don’t cover these types of things but the Virtual Wine Selector – designed by Kevin Dunleavy – seems like a great tool in helping the average wine consumer make a decision. It’s an interactive kiosk placed in the wine department of grocery stores that offers varietal and regional information, along with suggestions on food pairings.

Kevin was co-founder of Try-Foods International (TFI), an Apopka, Fla.-based company that specializes in promotional and merchandising programs for the supermarket industry. He left to start Super Marketing Promotions and Super Marketing Partners in 2004 – the latter was created to develop the Virtual Wine Selector.

“Many wine buyers find shopping for wine is complex, and they worry about making a mistake. This is a tool for consumers because it demystifies wine and transforms the purchase of wine into an entertaining and informative experience,” said Kevin.

“CHEAP SHORTCUTS” THREATEN ITALY’S TRADITION

Some Italians feel that recently approved measures by the EU are threatening their wines. Italian politicians, farmers and winemakers are fighting against the use of wood chips to speed up the aging process, claiming that it will lower standards and threaten Italy’s lead in the sector – according to local newspapers.

Recently approved by the EU to be an innovative and effective technique, some Italian vintners strongly disagree. Some believe it will damage Italian producers’ ability to differentiate themselves from foreigners using “cheap shortcuts,” since there will be no distinction on labels between wines aged artificially (wood chips) and those produced with traditional techniques.

A cross-party group presented a motion in parliament asking the government to take action.

BROWN-FORMAN AND GIV CONSIDER PARTNERING

Brown-Forman announced it has entered talks with Gruppo Italiano Vini (GIV) to partner in the production of Bolla Italian wines. B-F is considering selling its main Bolla wine facility in Pedemonte, Italy to the Italian firm, which would then sell the wine back to B-F.

GIV will gain the rights to distribute Bolla Wines in Italy under the agreement, but B-F will retain ownership of the Bolla trademark and market and sell the wine in the U.S. along with other markets.

Brown-Forman expects that a decision will be made in 90 days between the two companies.

NAPA SAYS GOODBYE TO WINSTON WILSON.

Winston Wilson died Sunday, July 16 from complications caused by esophageal cancer at his home in St. Helena, California at the age of 63. Winston was one of the founders of Wilson Daniels Ltd. – the Napa Valley wine importing firm that brought in some of the most renowned wines of France and Italy.

After working in the wine business for many years as a salesman and then wholesaler, Winston founded Wilson Daniels Ltd. Along with Jack Daniels in 1978. Mr. Wilson is survived by his wife, Maura Campion Wilson; a sister, Elizabeth Cody; and a stepdaughter and stepson, Kendall and Logan Asmuth.

POMEGRANATE SCHNAPPS, EVEN OPRAH LIKES IT

Last Christmas my mom was practically shoving pomegranate martinis down all the adults’ throats because Oprah had announced it was the next big thing. Well, it looks like Pernod-owned Hiram Walker has caught onto the trend, and is set to release the first pomegranate schnapps to the US market – Hiram Walker Pomegranate Schnapps.

Extensive marketing and both on- and off-premise POS will accompany the launch. The drink will be available in 50ml, 750ml and 1-litre sizes and will be sold - along with other Hiram Walker Schnapps flavours - at a suggested retail price of US$9.99-11.99 for the 750ml

THE SONOMA WINEGRAPE COMMISSION COMES TO PASS

Sonoma County grape growers voted to approve plans to form the Sonoma County Winegrape Commission, essentially opting to tax themselves in order to raise over $1 million a year. The money will be used towards promoting, marketing and researching the county’s wines and vineyards, and hopefully bring Sonoma up to speed with Napa, Australia, and other notable regions.

DON’T SLASH IT, CASH IT

The European wine community is having a difficult time reaching a happy medium in regards to EU wine proposals. Now several winemakers are attacking European Commission proposals to destroy 400,000 hectares of EU vineyards, meant to help ease over-production and dwindling sales.

Instead, the majority of attendees at the European Parliament hearing last week concluded that the EU should work on increasing demand in place of slashing production.
The winemakers argued that the EU must focus on increasing their sales worldwide and at home, which means putting up a fight against New World wines.

QUALITY OVER QUANTITY. One of the problems, I think, lies in the fact that the growers are looking for a shorter-term fix, while the European Commission is looking at the long-term. Winemakers want the cash they’ve come so accustomed to receiving – but if the EU gets their way, those subsidies will soon stop in order to discourage over-planting.

It’s the lower end wineries that will suffer the most. While high end Bordeaux winemakers have never had it so good (and it shows in their pricing), the EU is doing everything it can to put a stop to crappy wine. The EU hopes to discourage the production of low-quality vino in favor of better alternatives, which should eventually reel in consumers.

Through funding and legislation, the EU encourages producers to choose quality over quantity by granting higher subsidies to winemakers that go along with the EU’s proposals. The less pliant vintners won’t be so lucky.

THE GREAT MIGRATION. Tired of centuries-old rules and regulations, more and more French vintners are pouring into the U.S. drawn by change. Some French winemakers are even calling it a national crisis as they continue to lose their fellow counterparts. The freedom that winemakers enjoy in the U.S. – such as experimenting with new techniques – comes as a luxury to French vintners that are often hampered by multiple restrictions and traditions.

Some might suggest that European growers’ lack of openness to new wine practices and trends might be at the root of the problem. Falling sales and plummeting prices are mainly caused by competition with New World wines, which succeeded in introducing less-complicated, innovative products that speak to a larger public. Many consumers might find European wines intimidating as a result, and therefore stick to their trusty Yellow Tail or Twin Valley.

KEVIN FENNESSEY TO HEAD ABSOLUT

Following the retirement of Carl Horton at the end of this year, Absolut Spirits has appointed Kevin Fennessey to takeover as CEO. Kevin will assume his position August 1, and joins the company after holding executive positions at Pernod Ricard and Joseph E. Seagram & Sons.

Most recently Kevin served as Senior VP of Marketing at Pernod, and is credited with executing a global strategy to help build brands such as Seagram’s Gin and Wild Turkey.

UB PLANS TO UNITE OPERATIONS BY AUTUMN

Foster’s isn’t the only alcohol beverage company looking to shrink its operations into one entity. India’s UB Group has confirmed that the merger of its spirits companies – including McDowell & Co., Herbertson and Shaw Wallace Distilleries – should be complete by September.

As the third largest spirits producer by volume behind Diageo and Pernod Ricard, UB reported that 1st quarter earnings at McDowell & Co. more than doubled to $16.6 million with a 20% sales jump.

Going forward, Vijay Mallya said the group will continue focusing on premium liquor brands, like Black Dog and Royal Challenge Whiskey, to drive profitability and higher margins.

FOSTER’S WHITTLES DOWN TO JUST ONE NAME

Foster’s is getting rid of its separate wine and beer operations and will now be known as just plain Foster’s. It’s all a part of a plan to help organize the Southcrop integration, with a “simplified, consumer led, consumer driven” business outline that kicks off August 1.

It’s a bit confusing, so sit tight. Foster’s will combine its separate wine and beer divisions and operate as three new regional businesses covering Australia, Asia and the Pacific (AAP), the Americas, and Europe, Middle East and Africa (EMEA). Each regional company will have its own global supply chain team and marketing and consumer insights team, in addition to a global unit that oversees everything else -finance, strategy, human resources and legal departments.

As a result of the new restructuring, Jamie Odell, currently Managing Director of Foster’s Wine Estates, becomes head of Foster’s AAP unit. Meanwhile, Scott Weiss and Peter Jackson will continue in their roles as Managing Director of Foster’s Americas and EMEA divisions, respectively. As part of the reorganization, Rick Scully, currently Managing Director of Foster’s Brewing International, takes on the tasks of Chief Marketing Officer for Foster’s Group.

“With the integration of Southcorp now largely complete, and after two years of significant transformation, we’re a fundamentally different company” says Trevor O’Hoy, Foster’s CEO.

After the restructuring is complete, the company will go as Foster’s in every market and no longer will refer to its businesses as Foster’s Wine Estates, Foster's Australia and Foster's Brewing International.

BUT WHO WILL BUY THEIR VINEYARDS? Meanwhile, analysts said Foster's would struggle to sell three wineries and a South Australian packaging facility it put up for sale at the end of June.

"I'd be surprised if there was anyone lining up at the door for those," said CommSec beverages analyst Pierre Grobler.

It’s no secret that Foster’s has been a little vendor happy these days. As of late, the company has relinquished its European brands and Chinese assets to Scottish & Newcastle and Japan’s Suntory Ltd.et, and now they’re selling wineries. On July 3 the company sold its Lower Hunter Valley winery and Jamiesons Run winery - which had been on the market for about a year - for an undisclosed sum (possibly $15 million).

Says an analyst in the know: "We knew they were undertaking a footprint review and it was likely some assets would be sold and more rationalization would take place. After the Southcorp acquisition there is a lot of clean up to do. It sounds like they are going a little deeper than we thought but the numbers are so small it’s pretty irrelevant."

However, Foster’s claims they have no more intentions of selling any more wineries. Foster’s will keep the Rothbury Estate and Jamiesons Run brands and switch its grape contracts to other wineries in the Lower Hunter Valley and Coonawarra.

PARTY TIME FOR THE MONDAVIS

The Robert Mondavi Winery, along with Constellation, celebrated the winery’s 40th anniversary with a party that included historic displays, wine tastings, cooking demonstrations, and a tribute to 93-year-old Robert Mondavi last Saturday, July 15.

JULY 4TH: WINE AND SPIRITS ARE ENCROAFHING

Although July 4th is typically known as a “beer holiday,” wine and spirits did surprisingly well and are perhaps making a claim on beer’s territory.

IRI data covering the two weeks to July 10 reveal that wine dollars were way up with spirits growth accelerating. Smirnoff easily led the vodka category, while Jack Daniels, Bacardi and Jose Cuervo had the highest volume in the whiskey, rum and tequila sectors.

A SHINING STAR WITHIN THE COCKTAIL CRAZE

Like the margarita and cosmo before it, mojitos are taking center-stage in restaurants and bars all over the country, and Bacardi is surely benefiting. The traditional Cuban cocktail now appears on menus everywhere from L.A. to Buffalo, and seems to have made quite a name for itself among the hoard of drinks surfacing in our cocktail-crazed culture (try saying that three times fast).

The margarita still reigns as the number one cocktail, but the mojito and cosmo are apparently neck and neck, according to expert mixologists.

A lot of people, however, find the drink too time consuming to make (muddled mint leaves, what?), and so drinks companies are taking the opportunity to present pre-made mixes. By next month, frozen Bacardi mojito concentrate will be in almost all retail outlets from Publix to Wal-Mart, and is already a number one seller at Williams-Sonoma.

FIRST PREDICTIONS FOR 2006 WINE HARVEST

California agricultural officials estimate that the size of the 2006 winegrape crop will fall somewhere around 3.2 million tons, down 16% from last’s years huge harvest. Although the estimate is subject to change, it suggests that this year’s outcome may be “normal” since it comes close to the ten-year average of 6.6 million tons.

The 2006 crop still comes in third after 2005 and 2000 as the largest yields in California history. Overall, Cabernet and Merlot are both expected to have typical yields while Chardonnay and Pinot Noir are lower than last year.

D.A. Davidson & Co. Research stated: “It's important to note that the huge crop of 2005 was driven by yield-per-acre rather than an increase in total acreage. California winegrape acres grew for 20 years, peaking in 2002. Since then, the number of planted acres has been flat to down.”

Wineries will have to start selling off some bulk wine to make room for the 2006 vintage. Many wineries and growers had hoped for an even smaller harvest this year so they would have time to sell off the huge 2005 vintage. However, they’ll have to wait until at least 2007 to achieve stability in the bulk wine sector.

WINE GROUP MAKING HEADWAY WITH MILLENNIALS

The Wine Group has formed a new division, Underdog Wine Merchants, to reach out to millennial wine consumers (21-29 year olds.) The brand portfolio includes "millennial" brands such as Pinot Evil (France), Killer Juice (Central Coast), Silverbirch (New Zealand), Herding Cats (South Africa), Grizzly Flat (Lodi), Tempra Tantrum (Spain), Rhineflur (Germany), Angel Juice (Italy), and Devil's Marbles (Australia).

Fritz Lance will serve as president of the company. He is a 20-year veteran of Gallo, where he was a VP of Sales with a focus on the hotel, restaurant and transportation channels. Adam Richardson was named International Winemaker. Craig Calders and Wes Alexander have been named Directors of Western and Eastern Sales, respectively, while Suzannah Saidy will work as the Marketing Director.

DIRECT SHIPMENTS IN ARKANSAS PUT ON HOLD

In an order Tuesday, District Judge Susan Webber Wright put an Arkansas lawsuit on hold that challenges the legality of the state’s direct shipping compliances. The state currently allows Arkansas wineries to ship directly to consumers and grocery and c-stores, preventing out-of-state wineries from doing the same.

While a suit in federal court is fighting to allow equal direct shipping rights for in-state and out-of-state wineries, the state of Arkansas hopes to end such direct-shipping privileges for Arkansas wines, and stop their sale in grocery stores, too, allowing only package stores to sell them, just as out-of-state wines are treated.

A hearing on the state case is scheduled on August 15.

THERE’S A BLUEBERRY IN YOUR WINE

Already here at WSD, we’re hearing rumors that the next big thing is to mix “other things,” like fruit and sodas, with your favorite wine. More innovation in the wine industry, and it just keeps coming.

Italian wine-maker Ecco Domani is following in the footsteps of spirits companies, such as Bacardi and Diageo, by introducing cocktail recipes for wine. Hoping to make “wines more approachable and fashionable to consumers,” Ecco Domani is introducing Ecco Freddo (made with pinot grigio), Dolce Domani (merlot), and Ecco Sidro (chianti).

"It's the next evolution to the beloved sangria and we see it as an emerging trend that consumers will readily embrace," said David Bowman, director of marketing for Ecco Domani.

Hoping to tap into the cocktail craze, the recipes include such ingredients as pineapple juice, watermelon, lime, and ginger. As other wine companies follow suit, you may soon be hearing “wine and soda, please” at your local bar versus the traditional vodka and rum concoctions.

JUANITA DUGGAN LEAVES WSWA

Juanita Duggan, president and CEO of Wine & Spirits Wholesalers of America (WSWA), put in her resignation today.

“I have accepted an opportunity that was presented at the right moment and under the right circumstances—to lead the American Forest and Paper Association. I have told the Executive Committee that my last day will be August 14, but I will stay as long as I am needed to ensure a smooth transition,” said Juanita in a letter to the board.

“The past eight years were filled with enormous challenges—both professional and personal—and I will be forever grateful for the commitment and support I received from the Executive Committee, the WSWA members, and the staff,” she said. “I am confident that I am leaving the Association in good hands and at the right time.”

Juanita headed up the WSWA for the past 8 years and will be sorely missed in the industry. She was a wonderful asset to the organization, and WSD wishes her well in all future endeavors.

ILLEGAL WINE TASTING PARTIES: DOES IT SPELL GRANHOLM DISCRIMINATION IN MINNESOTA?

Minnesota law-enforcers are cracking down on illegal wine tasting parties hosted by a Massachusetts company called The Traveling Vineyard. The company – the marketing arm of Geerlings and Wade – is accused of selling liquor in Minnesota without a license. Advertised as “wine adventures in your home,” The Traveling Vineyard delivers wine to residents for wine tasting parties in many states, not just Minnesota.

They first send the shipments to a liquor store – apparently to make things appear legal – and the liquor store then delivers the shipment via UPS to the customer. Much like a Tupperware party, hosts get a discount based on how much wine is sold at their event. Sounds like a pretty sweet deal, however, it’s completely illegal to sell wine out of your home without a license.

The company has reportedly racked up about $1 million in Minnesota over the past two years, and was charged with a gross misdemeanor of selling liquor without a license on Wednesday (July 12). Geerlings & Wade, which markets the wine parties through The Traveling Vineyard, was also charged with a misdemeanor involving pricing.

“You can't have a wine party where an unlicensed supplier of wine provides free wine in return for a sales opportunity. And since the state apparently told other retailers they couldn't do their own wine parties, although they are licensed in the state, it's not a Granholm discrimination,” said Drew Jaglom of Tannenbaum Helpern Syracuse & Hirschtritt.

“I suspect this one will stand up. If the 21st Amendment means anything at all, then it does allow a state to regulate when and where consumers can buy alcoholic beverages, so long as the same rules apply to all.”

KENDALL JACKSON SIGNS A TEN-YEAR LEASE WITH VINTAGE WINE

Vintage Wine Trust Inc. has signed a ten-year lease on its Huichica Hills vineyard with Kendall Jackson. Vintage wine originally purchased the vineyard for $30 million and leased the property back to Constellation Wines for a two-year term.

The new lease, effective July 1, replaces the current one which was scheduled to expire at the end of the year.

“We are thrilled to enter into this lease on our Huichica property with such a well respected producer of super premium wines. This transaction demonstrates our ability to enhance our growth strategy through improved leasing opportunities," said Joseph Ciatti, Vintage Wine Trust's chairman and CEO.

UB ACQUIRES BOUVET FOR $18 MILLION

Indian whiskey group McDowell (a division of UB Group) has taken over French winemaker Bouvet Ladubay – based in France’s Loire Valley - for a reported sum of $17.7 million. Bouvet is the wine division of France’s Taittinger champagne group, which UB failed to acquire due to a general feeling that champagne should remain in French hands.

Taking a cut out of traditional beer and liquor consumption, wine has become increasingly popular in India - especially among the upper class. McDowell will put those trends to their advantage by introducing Bouvet to the Indian market, imported and bottled in France as well as sent in bulk to be bottled in India.

Last year, Bouvet sold more than 3 million bottles of wine, earning revenues of more than $14 million.

A NEW PARTNERSHIP IN NEBRASKA

Finocchiaro Wine Co. of Nebraska and Johnson Brothers Liquor Company of St. Paul, Minnesota have formed a new distribution partnership in Nebraska.

“This new partnership allows us to continue to be a major player in the Nebraska market and opens up new growth opportunities,” said John Finocchiaro, president of Finocchiaro Wine.

“We see a tremendous opportunity for growth in this market and will make significant investment in the operation to reach our goals,” added Todd Johnson of Johnson Brothers.

Like I said above, this partnership marks a growing trend of distributors merging together and forming a consolidated company to keep up with the changing alcohol industry.

ALCOHOL INDUSTRY CONSOLIDATION

Is consolidation hurting the liquor industry? With companies all over the alcohol industry merging together – such as Pernod/Allied and Constellation/Vincor as of late – it seems wholesalers are being led to follow. Spirits distributors along with beer and wine wholesalers have shrunken in recent years alongside suppliers, which has led me to wonder what this phenomenon means for the business.

In May WSD conducted a survey in which we asked our readers what they expect of wholesaler consolidation. The following quotes sums up the general consensus:

“3-4 big national players and lots of small innovative wholesalers handling emergi