ARIZONA’S WINE LAW TO BE CHALLENGED IN COURT

An out-of-state winery is challenging Arizona’s new law in a federal court that allows small wineries to ship directly to consumers who order wine via the internet, phone or by mail.

Attorney James Tanford, the Indiana lawyer who has sued a number of states on behalf of wineries, said Arizona's new measure is still discriminatory and he intends to challenge it.

The key provision of the law is that it allows any winery, in-state or out-of-state, that produces fewer than 20,000 gallons a year to ship directly to customers and retailers in Arizona. Tanford says reducing the numbers of gallons from 75,000 to 20,000 and including out-of-state wineries doesn't change intent of the law. "Not by coincidence, every Arizona winery but one produces fewer than 20,000 gallons," Tanford said. He will ask U.S. District Court Judge Mary Murguia to look beyond the new statute's wording and examine its practical effects.

Consumers can still have wine shipped from larger wineries, but it must be shipped to a wholesaler and not directly to their homes.

FORTUNE WELCOMES ITS NEWEST BOARD MEMBER

Fortune Brands has elected Richard A. Goldstein, former chairman and CEO of International Flavors and Fragrances, Inc., to its board of directors. Goldstein also served in key executive positions at Unilever for 25 years. The election is effective December 1 and increases the size of the board to 10 members.

"My fellow directors and I look forward to welcoming Dick to the Board and to benefiting from his valuable insights and wealth of consumer experience," said Norm Wesley, Chairman and Chief Executive Officer of Fortune Brands.

PERNOD SELLS TO SAZERAC CO.

Pernod Ricard USA and the Sazerac Company of New Orleans announced that Pernod Ricard's Rich & Rare and Royal Canadian Whisky brands will be sold to Sazerac, starting today.

Alain Barbet, President and CEO, Pernod Ricard USA, said, "We are sharply focused on the development of our premium brands. The decision to divest these two brands follows a strategic review of our portfolio."

MILLENNIALS DRIVING GROWTH

We’ve heard a lot about the importance of the millennial generation to the wine industry, but how important are they really? Speakers at the Wine Industry Financial Symposium in Napa seem to think millennials are very important indeed, even suggesting that the 21-30 year old group is vital to wine consumption’s shooting trends.

Robert Smiley, professor and director of wine studies in the Graduate School of Management at the University of California, Davis, said on Thursday:

“The wine industry is basically healthy -- despite a record 2005 crop and a worldwide surplus of relatively inexpensive wine -- due largely to growing consumption by young adults.”

TRADING UP IS COOL. Wine’s popularity has grown leaps and bounds since the early days of Robert Mondavi in the late ‘60s where high-quality local wine demand was virtually non-existent. Since then, wine has become much more of a household staple, which has led to an increase in premium and super-premium wines at affordable prices. As it turns out, trading up is cool for youthful hipsters.

In the 2005 Gallup Poll, wine beat out beer for the first time when 39% of people chose wine as the alcoholic beverage of choice, compared with 36% who chose beer – and millennials are driving those trends, according to Smiley. (Editors Note: In Gallup’s 2006 survey, 41% of Americans drinkers claimed they drink beer most often, while 33% and 23% chose wine and spirits.)

Smiley predicts that the surge in popularity will result in higher turnover in brand appeal, which “will likely force producers to become more innovative with their products, labels and wine quality. These shorter brand-life cycles will reduce profit margins for producers.” Wine producers will eventually have to think of something cleverer than cute animals on labels and outlandish brand titles.

INDUSTRY FEELING “GENERALLY OPTIMISTIC.” Smiley also presented a survey of wine professionals that included 176 responding wine producers, wine grape growers, distributors, retailers and lenders. According to the results, industry participants feel that “sales of wines in the mid-teens should grow most rapidly” and that “pinot noir and red zinfandel” are the most suited to today’s average consumers. That being said, I think we can expect an insurgence of brands priced between $10 and $14 per bottle.

Other issues were centered on the involvement of wholesalers and retailers in determining which wines to carry. The survey showed that about 23% of distributors plan to make those decisions based largely on an established relationship with the supplier, followed by the price and value of the new wine. Retailers, on the other hand, said that quality, followed by price and value, of the wines will determine which new products make it onto their shelves.

HOW DOES PERNOD’S PROTEST HOLD UP?

As reported yesterday, Pernod Ricard issued a resignation letter to the Century Council as a protest to the group’s support of spirits sponsorships in NASCAR. Pernod had announced earlier this summer that it disagreed with the practice, calling it “inappropriate” as it “runs the risk of damaging its will-earned credibility and undermining its message of responsibility,” wrote Pernod USA’s CEO Alain Barbet in his letter to the Council.

The resignation does not officially go into effect until November, which could buys time for a possible resolution.

Brown-Forman, who is heavily involved in NASCAR through its top performing brand Jack Daniels, told The Courier-Journal through a spokesman that it is “disappointed with Pernod Ricard’s decision and hopes the company will reconsider,” believing that spirits companies should not be barred from NASCAR because “alcohol is alcohol.”

Jack Daniel’s involvement in NASCAR began in December of 2004 just weeks after NASCAR lifted a ban on sponsorship deals with liquor companies, and remains the most expensive marketing deal in the whiskey brand’s history, according to the article. It’s turned into a huge money maker as well, since the advertising reaches 75 million people who regularly watch the sport. Diageo’s Crown Royal, Fortune Brand’s Jim Beam and Patrón are three other spirits brands at the forefront of NASCAR.

B-F AND BACARDI RENEW UK ALLIANCE. Brown-Forman and Bacardi have agreed to renew their existing distribution agreement in the UK through 2012. Originally formed in August 2002, they share a sales and logistics operation that handles both companies’ portfolios in the UK, while each company oversees their own marketing.

SPEAKING OF BACARDI. Bacardi announced yesterday its takeover agreement with New Zealand regional company “42 Below” will cost close to $91 million. The acquisition will serve as a long-term investment for Bacardi and will not start making money for at least another 5 years as Bacardi increases its current distribution from 25 countries to 130.

Former advertising executive Geoff Ross built the “42 Below” brand through flippant, humorous advertising (check out their website) and is now set to make more than $30 million off the transaction.

DISTRIBUTION ALLIANCE BETWEEN WINE POWERHOUSES. The Wine Group and Les Grands Chais de France (GCF) (the world’s third and fourth largest wine producers) have formed a distribution alliance that covers the U.S. and Europe in which the Wine Group will distribute GCF’s brands throughout the U.S. and vice-versa. GCF’s portfolio includes the leading French wine brand worldwide, J.P. Chenet, along with premium brands such as La Baume and Kiwi Cuvee.

And in case you’re a bit rusty, The Wine Group’s portfolio includes premiums like Gray Fox, Fish Eye and Concannon, and the recently acquired Big House and Cardinal Zin brands from Bonny Doon.

Under the alliance, the combined portfolio will be the second largest on the globe with 60 million cases.

HARDY SAYS BYE TO KAMBERRA

Constellation’s Hardy Wine Company has sold off its $10 million Kamberra Winery Complex and vineyards as a part of Constellation’s new restructuring plan in Australia.

PERNOD RESIGNS FROM THE CENTURY COUNCIL

Pernod Ricard said it’s pulling its membership out of the Century Council (an industry-funded responsible-drinking organization) in a dispute over the group’s support of spirits sponsorships in NASCAR. Pernod’s departure will not be effective until November, which gives the group time to reach a possible compromise.

In the letter, Pernod USA’s CEO Alain Barbet wrote:

“We at Pernod Ricard firmly believe that is inappropriate for the distilled spirits industry to engage in sponsorship of motor sports. We also believe strongly that any involvement of the Century Council in these sponsorship activities runs the risk of damaging its well-earned credibility and undermining its message of responsibility."

Pernod spokesman Jack Shea stated:

"We very much want to continue to be a member of the Century Council but unless we find some way to bridge the gap on this issue, we would be willing to withdraw.”

Ralph Blackman, CEO of the Century Council, remains optimistic, however, claiming, “Everybody is talking and everybody is trying to work it out."

LOOKING TO ADD CALIFORNIA. In other news, Pernod Ricard’s managing director Pierre Pringuet told attendees at a NYC luncheon that adding a California wine to the company’s current wine portfolio may be in the company’s future, according to Reuters. Pernod’s current wine portfolio includes Australian wines Jacob's Creek and Wyndham Estate; Spanish wine Palacio de la Vega; Argentinean brands Etchart and Graffigna; and Montana from New Zealand.

According to the article, however, Alain Barbet pointed out that California wines tend to be expensive, which could serve as a deterrent. The company has made it no secret that they are interested in taking on further acquisitions, but Pernod is still concerned with turning around some of Allied’s weaker brands, such as Kahlua. Buying opportunities, therefore, may be limited, which might take them out of the running for Absolut (if it ever takes place) since it’s likely to be an expensive venture.

BACARDI TAKES ON REGIONAL BRAND

Bacardi announced plans to acquire New Zealand spirits company 42 Below for about $91 million in an all-cash deal. Shareholders and employees have expressed their support of the takeover, which Bacardi is expected to formally launch in the coming weeks in accordance with the New Zealand Stock Exchange rules. Its brands include four flavored vodkas - Manuka Honey, Kiwifruit, Feijoa and Passionfruit – along with the newly developed products South Gin, Stil Vodka, Seven Tiki White Rum, Tahiti Dark Rum and 420 spring water. 42 Below is currently distributed in more than 25 countries, as well as regarded as one of New Zealand’s fastest growing exports.

It’s an interesting tactic to go for regional spirits brands, especially in such a small country as New Zealand. However, in the absence of global spirits brands for sale – other than the anticipated sale of Absolut’s Vin Sprit – we’re likely to see more companies going the regional route.

“Bacardi is acquiring young premium brands in 42 Below,” said Bacardi president and CEO Andreas Gembler. “With substantial investment by our company, 42 Below brands show long-term potential in the global spirits industry with a particular focus on the growing Asia Pacific markets.”

TGIC REVEALS CRESCENDO WINERY

TGIC Wine Importers & Wholesalers has released a line of premium red varietals from Crescendo Hills Vineyards, including a Zinfandel, Cabernet Sauvignon and Virtuoso, a Bordeaux-blend, produced by TGIC founder Alex Guarachi as his first winery project.

STOP ACT BACKED BY ENTIRE INDUSTRY

The alcohol beverage industry came together yesterday in a surprising turn of events where brewers, importers, wholesalers, vintners and distillers put aside difference to pledge their support for the revised STOP bill, or the Sober Truth on Preventing Underage Drinking Act, to combat, you guessed it, illegal underage drinking. The bipartisan House bill also reasserts the Federal government’s belief that the states should have the power to regulate alcohol within their borders.

While the bill has been circled around for years, it never achieved enough industry support due to language in the bill that was considered potentially harmful to the industry without serving any useful purpose in preventing illegal underage drinking. However, with help from the NBWA and other organizations, the co-sponsors of the bill were finally able to produce language that everyone could agree on. Whether the bill can pass both houses of Congress, however, is another story.

DISCUS president and CEO Dr. Peter Cressy stated:

“The Distilled Spirits Council announced today its support of the Stop Act, a federal bill that provides for programs and activities aimed at preventing underage drinking. The spirits industry is vehemently opposed to underage drinking and has worked aggressively to combat this serious and complex problem for decades.

“While progress has been made, any amount of underage drinking is too much. We appreciate the bipartisan effort in the House of Representatives led by Congresswoman Lucille Roybal-Allard and Congressman Tom Osborne to include all interested parties in crafting this important legislation. By working together and focusing on effective, comprehensive solutions, we can continue to make progress.

“We are pleased to join with The Century Council, the Beer Institute, Wine Institute, the Wine and Spirits Wholesalers of America and the National Beer Wholesalers Association in this step in the fight against underage drinking.”


The WSWA emitted a similar tone in its statement:

“The Wine & Spirits Wholesalers of America, Inc. (WSWA) urges Congress to pass The STOP Act (H.R. 864), before it adjourns this week. The STOP Act recognizes that the three-tier system and continued state regulation of the sale and distribution of alcohol are critical to preventing access to alcohol by persons under 21 years of age.

“We applaud the work of Representative Lucille Roybal-Allard (D-Calif.) and her efforts to ensure that this bill included input from coalitions and advocacy groups, as well as concerned members of the alcohol beverage industry. We also salute our industry partners—the National Beer Wholesalers Association, the Distilled Spirits Council of the United States, Inc. and the Beer Institute—for their actions in support of The STOP Act.

We are pleased the alcohol beverage industry has voiced their support for The STOP Act. Now, it's time for Congress to take action.”

WSD commends the industry for knocking down fences and joining together on such an important issue.

OREN LEWIN JOINS CENTERRA WINE

Constellation’s US-based Centerra Wine Company has appointed Oren Lewin as senior vp of marketing for premium wines, making him responsible for wines such as Robert Mondavi, Woodbridge, Ravenswood and Toasted Head. Oren has worked at the vp of marketing on imports for Foster’s, the Clorox Company and Nabisco before joining Centerra, and now reports directly to Centerra president Bill Encherman.

FROM KINGS TO NASCAR: CROWN ROYAL’S NEW PRINT ADS

Crown Royal will release its latest print campaign in the October issues of major men’s magazines, created by Grey Worldwide New York. The new ads mark the first in six years and will be customized for different markets, featuring everything from NASCAR to ads depicting the crowns of Henry VIII of England and Felipe III of Spain.

BACARDI LAUNCHES “DEWARISM” CAMPAIGN

Bacardi USA is unleashing a new advertising campaign for Dewar’s – the number 1 selling Scotch in the U.S. with almost 1.4 million cases sold last year – by targeting younger generations. Sales have been flat for over five years, but Bacardi hopes to change that with the “Dewarism” campaign that will include 22 cable spots, print and a Web site, http://www.dewarism.com/, according to Brandweek’s Kenneth Hein. Spend for the campaign was not disclosed.

With sayings like “It is not a man stands up for that counts, it is what he falls for” and
“We have a great regard for old age when it is bottled,” Bacardi is resurrecting Sir Thomas Dewar’s published sayings in effort to reel in Millennials, who are already reportedly picking up on Scotch’s “grown-up” image. A study released this month by The Zandl Group, New York, a marketing research and trend-spotting firm, showed that young adults are gravitating away from vodka and toward brown spirits.

Dewar’s is also putting it’s super-premium Dewar’s 12 on TV with global television ads kicking off in October via Saatchi & Saatchi, London, with the tag line, “A long story in every drop.”

ANOTHER PROFITABLE MONTH FOR WINE

For the 4-week period ending September 10, IRI reported that table wine sales were up 10.6% and 9.8% YTD, moderating slightly from 11.1% in August. Volume rose 4.5% in September, surpassing last September’s 1.9% rise, but similar to August’s growth of 5%.

The table wine category enjoyed a favorable pricing mix with a 5.9% gain to $5.35/bottle, up $0.03 over August. Low-end brands continue to benefit from trading up from jugs to bottles, while mid-tier brand pricing is flat and super-premium pricing is up slightly. Volumes rose in September for wines priced over $15/bottle by 21.7%, along with a 21.5% increase in the $12-$14.99 segment and a 15.7% gain in the $9-$11.99 segment. Thanks to brands like Woodbridge and Mondavi, Volumes for the $5.50-$8.99 segment rose by 11.2%, while volumes in the $3.00-$5.49 and <$2.99 segments continue to dwindle by 0.2% and 4.3% respectively.

LOW END HURTING THE BIG THREE. Like in other alcohol beverage categories, the big guys are lagging a bit. Gallo, Constellation and the Wine Group experienced September volume growth of 0.4%, 0.8% and 0.2% respectively, trailing the category growth of 4.5%. Including Vincor, STZ's volumes fell by a lesser 0.5%. YTD volumes for Gallo, STZ and the Wine Group rose by 1.7%, 4.8% and 6.1% respectively.

You can chalk up the big boys’ dwindling volume to cheaper pricing, since the company’s average prices are below the rest of the industry where low-end wines are flat or down. Price mix for Gallo, STZ and the Wine Group rose by 4.3%, 8.1% and 2.2% respectively.

The fine wine category, however, was a different story. Constellation’s fine wine portfolio was up 23.7% in volume which exceeded the rest of the category at 18.3%. Woodbridge’s volume was up 9.2% and Robert Mondavi brands grew 9.8% respectively.

Imported wines volumes were up 7%, outpacing domestic brand growth of 3.9% in September.

HOW DOES PERNOD’S PROTEST HOLD UP? As reported yesterday, Pernod Ricard issued a resignation letter to the Century Council as a protest to the group’s support of spirits sponsorships in NASCAR. Pernod had announced earlier this summer that it disagreed with the practice, calling it “inappropriate” as it “runs the risk of damaging its will-earned credibility and undermining its message of responsibility,” wrote Pernod USA’s CEO Alain Barbet in his letter to the Council.

The resignation does not officially go into effect until November, which could buys time for a possible resolution.

Brown-Forman, who is heavily involved in NASCAR through its top performing brand Jack Daniels, told The Courier-Journal through a spokesman that it is “disappointed with Pernod Ricard’s decision and hopes the company will reconsider,” believing that spirits companies should not be barred from NASCAR because “alcohol is alcohol.”

Jack Daniel’s involvement in NASCAR began in December of 2004 just weeks after NASCAR lifted a ban on sponsorship deals with liquor companies, and remains the most expensive marketing deal in the whiskey brand’s history, according to the article. It’s turned into a huge money maker as well, since the advertising reaches 75 million people who regularly watch the sport. Diageo’s Crown Royal, Fortune Brand’s Jim Beam and Patrón are three other spirits brands at the forefront of NASCAR.

B-F AND BACARDI RENEW UK ALLIANCE. Brown-Forman and Bacardi have agreed to renew their existing distribution agreement in the UK through 2012. Originally formed in August 2002, they share a sales and logistics operation that handles both companies’ portfolios in the UK, while each company oversees their own marketing.

SPEAKING OF BACARDI. Bacardi announced yesterday its takeover agreement with New Zealand regional company “42 Below” will cost close to $91 million. The acquisition will serve as a long-term investment for Bacardi and will not start making money for at least another 5 years as Bacardi increases its current distribution from 25 countries to 130.

Former advertising executive Geoff Ross built the “42 Below” brand through flippant, humorous advertising (check out their website) and is now set to make more than $30 million off the transaction.

DISTRIBUTION ALLIANCE BETWEEN WINE POWERHOUSES. The Wine Group and Les Grands Chais de France (GCF) (the world’s third and fourth largest wine producers) have formed a distribution alliance that covers the U.S. and Europe in which the Wine Group will distribute GCF’s brands throughout the U.S. and vice-versa. GCF’s portfolio includes the leading French wine brand worldwide, J.P. Chenet, along with premium brands such as La Baume and Kiwi Cuvee.

And in case you’re a bit rusty, The Wine Group’s portfolio includes premiums like Gray Fox, Fish Eye and Concannon, and the recently acquired Big House and Cardinal Zin brands from Bonny Doon.

Under the alliance, the combined portfolio will be the second largest on the globe with 60 million cases.

It’s been a big week especially in terms of state court cases, so let’s recap and take a look at the week’s events.

WHOLESALERS CHALLENGE DIRECT WINE IN OKLAHOMA. Wholesalers in Oklahoma are challenging a voter-approved law that allows in-state winemakers to sell their products directly to liquor stores and restaurants. The lawsuit asserts that the wine law is unconstitutional according to Granholm because out-of-state wineries must continue using wholesalers to distribute their wines. State officials, however, maintain the validity of the law.

State wine-producers are fighting back, claiming that Oklahoma’s wine industry would greatly suffer if the lawsuit is proved successful. It’s up to U.S. District Judge Stephen Friot to determine whether the current law will be expanded to allow out-of-state winemakers to ship directly to liquor stores and restaurants, or overturn the law completely to require all wineries to use wholesalers.

FWC FILES LAWSUIT IN MASSACHUSETTS. Family Winemakers of California (FWC) filed a suit in the Massachusetts district court to overturn the state’s production cap requirement for direct wine shipments. The lawsuit filed earlier this week seeks to overturn the 30,000-gallon production limit that prevents certain wineries from shipping directly to consumers. FWC says it is highlighting the need for small and medium-sized producers to gain access to the Massachusetts wine market in order to compete and thrive.

Says Paul Kronenberg, FWC president: “The Massachusetts law is blatantly discriminatory. It aims to protect Bay State wineries, but prevents Massachusetts consumers from having unfettered choice."

KENTUCKY APPEALS FOR FACE-TO-FACE SALES. The state of Kentucky is appealing a federal court decision allowing small in-state and out-of-state wineries to ship directly to Kentucky consumers who order via the phone or internet. Last month U.S. District Judge Charles Simpson struck down a face-to-face requirement that called for customers to purchase wine in-person at the winery.

The parent agency for Kentucky’s Office of Alcoholic Beverage Control will offer supporting documents in the coming weeks. If the lawsuit proves successful in the future, it could be another victory for three-tier advocates, much like the recent Virginia court case.

VIRGINIA COURT UPHOLDS THE THREE-TIER. Last week was a cause for celebration for advocates of the three-tier system, and a mixed bag for small wineries. A judge in the Fourth Circuit Court of Appeals used language in Granholm to sustain the three-tier system as opposed to dismantling it. The judge reversed a decision by a lower court which declared that parts of Virginia’s alcohol code were unconstitutional under the Commerce Clause because in-state entities were treated differently from out-of-state entities.

The court sustained the constitutionality of the Virginia law that restricts consumers from bringing more than one gallon of alcoholic beverage into the state for personal consumption, and also authorized state-run ABC wineries to sell only Virginia wine. Both had previously been deemed unconstitutional by a lower court.

This is a victory both for three-tier advocates and control state advocates, as Virginia is a control state, and the appeals court upheld the state’s right to control alcohol imports by consumers. It is also a victory for small wineries.

SOUTHERN MOVES INTO WEST VIRGINIA. WSD has rumors for awhile, but Southern finally made a move in West Virginia. Wayne Chaplin, president and COO, announced the formation of Southern Wine & Spirits of West Virginia earlier this week, making it the 14th Control jurisdiction in which Southern belongs.

WINE AND SPIRITS BRIEFS:

PERNOD SHOWS ABSOLUT INTEREST. At Pernod Ricard’s annual results yesterday, managing director Pierre Pringuet said a reduction in debt now allows the company to look at further acquisitions that could help strengthen Pernod's position in North America.

Asked whether the drinks giant would be interested in Vin & Sprit, the maker of Absolut vodka, if privatised, Pringuet said: "Pernod Ricard will watch very closely what happens in this case."

NO TAINTED LOVE FOR SCREW CAPS. There is some dissention among the new, widespread appreciation for screw caps, praised for their convenience and absence of cork-taint – but unrightfully-so according to some industry insiders. Research conducted for this year’s International Wine Challenge claims that screw caps can leave some wine as tainted as corks sometimes do, giving certain traditionalist groups what they need to feed the fire. Tasters at the Challenge claim cork taint is in decline. Out of the 13,000 wines that were sampled, they claimed a hefty 4% of the wine with corks was tainted, compared with 2% of screw cap bottles.

NO TAINTED LOVE FOR SCREW CAPS

There is some dissention among the new, widespread appreciation for screw caps, praised for their convenience and absence of cork-taint – but unrightfully-so according to some industry insiders. Research conducted for this year’s International Wine Challenge claims that screw caps can leave some wine as tainted as corks sometimes do, giving certain traditionalist groups what they need to feed the fire. Tasters at the Challenge claim cork taint is in decline. Out of the 13,000 wines that were sampled, they claimed a hefty 4% of the wine with corks was tainted, compared with 2% of screw cap bottles.

PERNOD SEES GROWTH IN THE U.S

Jameson Irish whiskey and Chivas Regal Scotch saw double-digit sales growth last year, Pernod announced today in its 2005-2006 annual results. Pernod saw underlying operating profit jump 72% to $1.6 billion for the year to 30 June. Revenues increased 68%, helped by contributions from brands formerly owned by Allied Domecq. Pernod said its “original” brands saw sales rise 4.3% on an organic basis. Chivas volume sales fell, however, in the U.S. to almost 4% despite its popularity worldwide.

Asia and the Americas helped push growth to account for 54% of Pernod’s profits, which was helped by the Allied acquisition. The company says the “successful” integration of Allied – which brought Mumm Champagne and Kahlua liqueur – was done at a lower cost than expected

Pernod seems confident of the future and forecasts organic sales growth of 4-6% and “strong double-digit growth” in net profit.

WHOLESALERS CHALLENGE DIRECT WINE IN OKLAHOMA

Wholesalers in Oklahoma are challenging a voter-approved law that allows in-state and out-of-state winemakers to sell their products directly to liquor stores and restaurants. State wine-producers are fighting back, however, as U.S. District Judge Stephen Friot heard both arguments yesterday.

ABSOLUT COULD GO FOR $4 BILLION

Since the opposition party in Sweden won the election earlier this week, speculation surrounding a possible sale of Vin & Sprit has intensified. As the second ranking premium vodka in the world and second in the U.S. with 10% share, Absolut spawns over half of the company’s sales and sold 9.3 million cases in 2005.

According to UBS, Pernod, Fortune Brands, Brown-Forman, Bacardi, Constellation and Anheuser-Busch are all possible candidates if the company does go for sale. Diageo would likely be prevented because of anti-trust issues due to Smirnoff’s 27% global share. Both Pernod and Fortune Brands remain “relative geared” after the Allied acquisition, but Pernod would probably have to relax its Stolichnaya distribution if it were truly interested.

V&S could go for $3-4 billion according to the Independent Sun.

However, the Maxxium distribution joint-venture remains a key issue for V&S, given exit penalties that could range between €80-160 million. In that respect, Fortune Brands has the advantage as it is among the four jv partners, also including Remy Cointreau and The Edrington Group, in which each party owns a 25% stake in Maxxium. Fortune also distributes Absolut in the U.S. and Europe.

KENTUCKY APPEALS FOR FACE-TO-FACE SALES

Kentucky State has filed a suit in the 6th Circuit Court of Appeals to reinstate a provision requiring customers to make face-to-face wine purchases. Last month U.S. District Judge Charles Simpson struck down a law he deemed unconstitutional under Granholm, which had prevented consumers from order wine over the phone and online by requiring consumers to buy the wine in person at a winery.



The state’s Environmental and Public Protection Cabinet, parent agency for the Office of Alcoholic Beverage Control, is responsible for the appeal.

INDIANA EXERCISING STATES RIGHTS

The Indiana Alcohol and Tobacco Commission is seeking to pass laws that would require alcohol to be separated from other items, such as chips and toys, in grocery stores. If the proposal eventually leads to legislative changes, it could be good for advocates of the 3-tier as it would further demonstrate the power of states to regulate the alcohol industry.

BORDEAUX CAMPAIGN IN 2007

The French are (gasp) launching a $7.6 million ad campaign to promote Bordeaux wines through the end of 2007. The campaign will consist of posters and press advertising throughout the U.K., Belgium and Germany starting in November and December, although it forbids pictures of people drinking wine. North America won’t see the GAD/Saatchi campaign, however, until early next year.

SWEDISH GOVERNMENT TO SELL ABSOLUT?

Absolut may soon be for sale due to a change in government in Sweden. WSJ reported that after a 12-year rule by Prime Minister Göran Persson's Social Democrats, Sweden has elected the more market-friendly Fredrik Reinfeldt of the Alliance group. The new prime minister is committed to selling state assets which could comprise up to 57 companies, including Vin & Sprit, owners of Absolut, Cruzan rum and Plymouth gin. No formal plans have been announced yet.

Who may be in the running to purchase the coveted brand? It’s too early to tell at this point, but more details will likely surface after the new Prime Minister takes office October 6. Adding Absolut would certainly benefit any company’s portfolio since it’s the world’s 5th biggest spirits brand with 9 million case sales. Potential bidders could include A-B, B-F, Constellation, Bacardi, or Pernod.

DIAGEO’S SPIRITED RTDS

Diageo is experiencing successful testing in the Tampa area for its ready-to-drink cocktails packaged in 12 oz. cans, according to Ad Age’s Jeremy Mullman. The four brands include Captain Morgan and Cola, Smirnoff Vodka and Lemon-Lime Soda, George Dickel Whiskey and Cola, and Seagram’s 7 and Lemon-Lime Soda, and are about 5% alcohol by volume. The canned packaging and low alcohol content allow the RTDs to be sold next to beer in c-stores and gas stations, and will likely result in spirits taking away more usage occasions from beer – especially once other spirits companies follow suit.

SOUTHERN MOVES INTO WEST VIRGINIA

WSD has rumors for awhile, but Southern just made a move in West Virginia. Wayne Chaplin, president and COO, announced the formation of Southern Wine & Spirits of West Virginia this morning, making it the 14th Control jurisdiction in which Southern belongs.

CONSTELLATION EUROPE PROMOTES NEW VP

Constellation Europe announced that Simon Thorpe, previously at Western Wines, will serve as the new vp, premium wine sales and wine purchasing of Cellar Door. Simon will also be responsible for all of Constellation Europe’s wine purchasing along with the Cellar Door portfolio.

FWC FILES LAWSUIT IN MASSACHUSETTS

Family Winemakers of California filed a suit in the US District Court of Massachusetts district court yesterday against “certain provisions” of the state’s direct wine shipping law – basically referring to the production cap. In Massachusetts, a winery cannot sell directly to native consumers it they produce more than 30,000 gallons a year and/or sell through a distributor also.

“The Massachusetts law is blatantly discriminatory. It aims to protect Bay State wineries, but prevents Massachusetts consumers from having unfettered choice," said Paul Kronenberg, FWC President.

COSTCO JUDGE ISSUES STAY

On Thursday evening, Judge Marsha Pechman issued a stay in the Costco case through May 1, which is through the end of Washington State's 2007 legislative session. Also, she ruled that no bond will be required (during oral arguments on the motion for a stay, the Judge had discussed the possibility of requiring a bond during the appeal process).

That is rare good news for Washington's three-tier advocates, but just a delay from Costco’s point of view. As Phil Wayt, the Executive Director of the Washington Beer & Wine Wholesalers Association said, "It takes some of the pressure off our continuing legal efforts while we decide how to approach the 9th Circuit for an indefinite stay."

NEW ARIZONA LAW TO BE CHALLENGED

In response to the Supreme Court decision last Spring (Granholm), several states have worked to change their laws to eliminate in-state versus out-of-state discrimination when it comes to direct shipping to consumers. To make their laws flush with Granholm, a few states changed their laws to include winery volume exemptions to ship direct, since most in-state wineries are smaller than the large California wineries. Arizona was one such state.

Although Arizona state legislators re-wrote their alcohol code to be flush with Granholm, the new code which takes effect later this month is going to be challenged in court almost immediately. Attorney James Tanford, the Indiana lawyer who goes around suing states on behalf of wineries, said Arizona's new measure is still discriminatory and he intends to challenge it.

The key provision of the law is that it allows any winery, in-state or out-of-state, that produces fewer than 20,000 gallons a year to ship directly to customers and retailers in Arizona. This law takes effect next week. Tanford says reducing the numbers of gallons from 75,000 to 20,000 and including out-of-state wineries doesn't change intent of the law. "Not by coincidence, every Arizona winery but one produces fewer than 20,000 gallons," Tanford said. He will ask U.S. District Court Judge Mary Murguia to look beyond the new statute's wording and examine its practical effects.

DRINKERS EARN MORE

A study conducted by two economists and published Thursday by the Reason Foundation and in the latest edition of The Journal of Labor Research, says that drinkers earn 10 to 14% more than those who abstain.

"Instead of earning less money than nondrinkers, drinkers earn more," authors of the study, Bethany Peters and Edward Stringham, wrote. More specifically, the study found that workers who drank in a social setting earned more than those who tipped a glass at home. The study contends that social capital, which entails everything from a person's charisma to the size of their social network, can be enhanced by drinking.

Female drinkers earned 14% more than non-drinkers, while males who drank earned 10% more than their teetotaler counterparts. At the same time, men who went to a bar at least once a month earned an additional 7 percent on top of the 10 percent drinking premium. But women who engaged in similar behavior did not experience any effect on their earnings.

The authors said their research came in response to growing efforts to restrict drinking on college campuses, limit alcohol advertising and raise taxes on liquor.

The Reason Foundation said the report was not commissioned by an outside party (like a liquor company).

VIRGINIA COURT UPHOLDS THE THREE-TIER

Yesterday was a cause for celebration for advocates of the three-tier system, and a mixed bag for small wineries. A judge in the Fourth Circuit Court of Appeals used language in Granholm to sustain the three-tier system as opposed to dismantling it. The judge reversed a decision by a lower court which declared that parts of Virginia’s alcohol code were unconstitutional under the Commerce Clause because in-state entities were treated differently from out-of-state entities.

The court sustained the constitutionality of the Virginia law that restricts consumers from bringing more than one gallon of alcoholic beverage into the state for personal consumption, and also authorized state-run ABC wineries to sell only Virginia wine. Both had previously been deemed unconstitutional by a lower court.

This is a victory both for three-tier advocates and control state advocates, as Virginia is a control state, and the appeals court upheld the state’s right to control alcohol imports by consumers. It is also a victory for small wineries.

Furthermore, the judge used Granholm to justify its decision, which may have implications for the retail direct shipping cases pending in Texas and Michigan:

“An argument that compares the status of an in-state retailer with an out-of-state retailer — or that compares the status of any other in-state entity under the three-tier system with its out-of-state counterpart — is nothing different than an argument challenging the three-tier system itself. As already noted, this argument is foreclosed by the Twenty-first Amendment and the Supreme Court’s decision in Granholm, which upheld the three-tier system as ‘unquestionably legitimate.’”

VAN GOGH TAKES ON THE NEW “IT” FLAVOR

Van Gogh Vodka has added a new pomegranate flavor to its super premium vodkas, which the company plans to roll out in October nationwide.

BACARDI APPOINTS NEW BOARD MEMBERS

Bacardi Ltd. has announced the appointment of Robert Corti, Philip Shearer and Toten Comas to its board of directors.

Corti is currently chairman at Avon Products Foundation and served as Avon Products Inc.’s Executive Vice President from 1998 until his retirement as CFO last November and as Executive Vice President in March 2006. Corti is also a member of the board of directors and chairman of the Audit Committee at Activision Inc., a publisher of interactive entertainment software, and serves as a member of the board of the Queens College Foundation and the Valtarese Foundation.

Meanwhile, Shearer, who is currently group president of The Estée Lauder Companies Inc., is responsible for Clinique and Origins on a global basis and leads the cosmetics company’s online activities, including the Gloss.com joint venture with Chanel and Clarins.

Comas has served on Bacardi Ltd.’s Board of Directors as an alternate director from 2000 to 2002, is president of Propiedades Coba S.A., a commercial real estate development firm located in Malaga, Spain. He also worked as director of quality control for Bacardi España and the European Bacardi Bottlers. Comas originally joined Bacardi & Co. as a rum blender in 1969 in Nassau, a position he held until 1977.

OKLAHOMANS FIGHT FOR STRONG BEER

A group of Oklahoma natives have come together in hopes of prompting legislation that will legalize the sale of wine and strong beer in grocery and c-stores. Oklahomans for Modern Laws plans to circulate a petition next spring that would call for a statewide vote on the proposal by 2008. The petition, however, would require 200,000 signatures to get the issue on the ballot, according to local reports.

If passed, the law would prompt higher-end grocery stores to come to the state. Liquor retailers oppose the idea, of course, as it would take away a significant amount of their business.

SOUTHERN LOOKING TO MOVE INTO TEXAS

Southern Wine & Spirits has taken issue with a Texas law that requires owners of distributors (or 51% of the company) to live in the state for at least one year before a license or permit can be granted. As the largest wine and spirits wholesaler in the U.S., Southern is apparently eager to enter the Texas market where Texas-based Glazer’s currently holds the number one spot.

Southern filed a federal lawsuit Monday asking the court to permanently prevent the commission from enforcing the local-ownership rule and to enter a judgment that is unconstitutional under the Constitution’s Commerce Clause.

Ironically, there were reports that Southern was in talks with Glazer’s months ago, but those plans have reportedly stalled according to the Dallas Morning News. Rumors, however, that Glazer’s and Charmer are in talks continue to circulate.

APPEALS COURT IN FAVOR OF VA WINE

A federal appeals court ruling just might bring Virginia wine back into the state-run ABC stores. Laws allowing only Virginia wine to be sold in state-run liquor stores and restricting the amount of alcohol beverages consumers can bring into the state for their personal consumption have been judged constitutional by a three-judge panel of the 4th U.S. Circuit Court of Appeals. According to local papers, the ABC board will choose whether to restock Virginia wine after reviewing the panel’s decision.

The appeals court also overturned a lower court’s ruling that struck down a state law that allows consumers to carry no more than 1 gallon of alcoholic beverages into Virginia for personal consumption. The lower court ruled that the law discriminates against interstate commerce, but the appeals panel disagreed.

A QUICK HISTORY LESSON. Since legislation was passed in the mid-80s, Virginia wine was the only wine ABC stores were allowed to sell. However, District Judge Richard William’s overturned the ruling in April 2005, judging that the state law gave illegal preference to Virginia wineries over out-of-state wineries. The General Assembly also passed legislation that requires wineries to forgo their previous right to self-distribute to retail stores and restaurants, and use wholesalers instead.

While it appears that the state will continue to require the use of wholesalers, in-state wine might soon return to ABC stores. In yesterday’s ruling, the court determined that the state law does not violate the Constitution’s Commerce Clause because it doesn’t apply to state-operated businesses, such as ABC stores.

MONDAVI UPDATES WOODBRIDGE

Woodbridge by Robert Mondavi is rolling out a new label for its Classic Series wines that will attempt to “reconnect with today's wine consumer, while recognizing the rich heritage of the Woodbridge brand,” all in a single picture. Designed by HKA to have a more contemporary look, the label also features a more prominent display of the phrase 'by Robert Mondavi' and a return of the 'RM bullet' at the bottom of the label to enhance recognition.

The label also displays a more pronounced Woodbridge name, easier to read varietals and place of origin, a more visible vineyard scene, and a brighter off-white color.

GEN X MORE LIKELY TO DRIVE CONSUMER PATTERNS

Despite their former “Reality Bites” persona, Generation X men love to spend money according to consumer-trend research commissioned by GQ magazine, entitled “Xoomers: the 10-year Rise from Zeroes to Heroes.” GQ found that men ages 25-39 are a “highly powerful” shopping group and are making a significant impact on the retail marketplace as compared to their predecessors. For example, Gen X men are currently outspending Baby Boomers (40-59 year old men) by 19% across all product categories, and are 15% more likely to pay a premium for luxury goods. Apparently, the “trading-up” trend isn’t stalling anytime soon as some have feared, since GQ also found that Xoomers are 68% more likely than Boomers to increase luxury spending over the next decade. Gen X is also 31% more likely to pay a premium for beer, wine and spirits than Boomers.

WSD believes alcoholic beverages are seen as an affordable luxury and a less-expensive way to essentially show-off without draining too much on the bank account, since buying premium alcohol is a cheaper way to gain an impressive image then, say, buying the latest SUV or $600 handbag. Modern consumers also seem to view premiums and super-premium products as having a much better quality and taste than their cheaper counterparts. (“It must be better if it’s more expensive. So, if I can afford it, why not buy it?”)

"Our research shows that marketers have tremendous incentive to throw away the stereotypes about the Xoomer generation and recognize their strong purchasing power and an increasing appetite for luxury goods," said Peter King Hunsinger, vice president and publisher of GQ, in a statement.

THEY’LL TRY ANYTHING ONCE. Xoomers are 3-times more likely than Boomers to want to be the first among their friends and family to discover the latest trends, and almost twice as likely to try new products before anyone else. (So that’s who’s buying all the blueberry and watermelon flavored vodka.)

Generation X should be a prime target for marketers, and not just the men. As WSD has previously reported, several studies have shown that people in their 30s – particularly single people – make ideal consumers. They have the money to spend, and for most, image is everything.

GQ magazine commissioned TWENTYSOMETHING™ Inc., an independent marketing research firm in Philadelphia, to conduct the study, where a total of 1,204 surveys were completed between February and March 2006.

JACKSON FAMILY ESTATES: ADDING BRANDS FOR ADDED VALUE

When it comes to growing a wine business – or almost any business for that matter – there are two things you can do in terms of building brands. Increase brand production to drive sales or add new brands by taking over other wineries. Jackson Family Estates has chosen the latter during a profitable time when small wineries are looking to sell. While other large wine companies spend money on expansion projects, Jackson Family Estates seems to focus on taking new brands and developing them.

Jess Jackson and family have acquired six wineries in the past 12 months and plan to open two more soon. This month, Jess is set to complete his $97 million bankruptcy purchase of Freemark Abbey near St. Helena, Arrowood in Glen Ellen and Byron near Santa Maria, which collectively produce 76,000 cases annually. In June, he announced the Murphy Goode and the Robert Pecota Winery acquisitions, and reportedly plans to buy the La Jota winery. At this rate, the company will soon have a brand in every winery.

Wineries set to open this year are Pelton House in Sonoma County's Knights Valley and Kinton in Santa Barbara County.

Maintaining a diversified portfolio lends a more individualized image to brands, giving the illusion that a corporation is not involved – especially a 1,000-employee company. Of course, the company continues to grow and grow with every new acquisition, but it manages to shake things up and give a multiple brand offering. It also keeps customers’ interested at a time where the majority of growth is in high-end wine.

VIRAL ADS, YAY OR NAY

Viral advertising, particularly on the internet, may soon come to an end according to an article published today at Advertising Age.com. Nowadays, viral ads tend to go unmarked and come in the form of a funny email or video that gets passed along without most people realizing it’s an advertisement. Anti-viral groups are already investigating the ways in which those marketers violate consumer privacy, and the Federal Trade Commission will host hearings Nov. 6, titled "Protecting Consumers in the Next Tech-ade," which will bring together business, government and technology sectors to explore the impact of viral ads. Watchdog groups such as the Center for Digital Democracy and Commercial Alert feel that viral ads should be labeled as commercials so that consumers know they are being marketed to.

YouTube as been a huge source of viral advertising, (just look at the latest on the “Lonely Girl” phenomenon) but is already making a move towards paid advertising. Collegehumor and Heavy.com also feature videos that are not identified as commercials, making it difficult to uncover who’s responsible.

So what do you think: clever advertising or deceptively ingenuous? WSD feels that while viral advertising can be a fun and intelligent way to market to consumers, there should be some sort of sign that it’s a commercial, like with Smirnoff’s Tea Partay. Otherwise, consumers might just get mad and lose interest once they discover they’ve been misled.

QUESTION ONE: SHOULD MA INCREASE GROCERY WINE SALES?

Will Massachusetts natives vote to make wine in supermarkets legal? Grocery chains in Massachusetts are pushing for the state to allow increased supermarket wine sales by posing a simple question on November’s ballot: can chains expand their in-store wine stock? Currently, Massachusetts law dictates that supermarkets can only sell beer and wine at three of their stores nationwide, but the Yes on One Campaign, backed by the Massachusetts Food Association, is hoping to change that.

A “yes” vote on the ballot’s Question 1 – which applies only to wine, not beer – would create a new category of licenses called ‘‘wine in food stores’’ and grant every town up to five new licenses plus one additional license for every additional 5,000 people. If the proposed law passes, up to 2,800 licenses could be created, which includes c-stores and gas stations. A released study of the Massachusetts Wine at Food Stores Initiative concluded that updating the state law to allow more grocery stores to sell wine would save consumers an estimated $26 million to $36 million each year.

Some people, however, think that convenience should not replace regulatory safety. Small retail shops and package stores have set up an opposing campaign – the Wine Merchants and Concerned Citizens for SAFETY – to defeat the measure. The WMCC believes an increase in supermarket alcohol beverage sales would result in destruction to small businesses and a jump in underage consumption. Supermarket employees would have a much harder time, they believe, in preventing minors from purchasing alcohol illegally.

Both groups have raised a significant amount of money to back their individual campaigns, which will rage on for the next month until voting time. Let us know what you think at megan@winespiritsdaily.com, where you're thoughts and comments are always kept unanimous.

TASTING ROOMS THE BULL OF THE INDUSTRY?

As far as building your brand goes, just how effective are wine-tasting rooms? For many people, that first visit to California or Washington marks a whole new foray into wine-drinking, jump-starting a trend that stays with them forever – and gets passed to neighbors and friends alike. (“You’ve got to go to Napa,” or “this wine is amazing, try some.”) Wine knowledge is a commodity, and an impressive commodity at that. SFGate.com ran an article over this very topic which got me thinking – tasting rooms just could be the crux of the business.

Tasting rooms give small wineries the opportunity to build business and brand awareness, while also giving large wineries the chance to connect with consumers on a more personal level. It’s not just about the wine’s quality anymore. It’s also about reenacting a memory of that particular winery and everything associated. People choose the wine they will drink for years based on things like the personality of the winery, and the people leading the tours and pouring the wine. Most importantly, consumers associate the wine they choose with how they see themselves. Some might like Peju because of the funny guy in the back leading the tastings, while others prefer St. Supery with modern art paintings and sheer, white curtains – something they also enjoy. MFK Research managing director Barbara Insel says that 72% of consumers cited a previous visit to a winery as a factor in why they buy a particular wine – just behind recommendations from friends and sommeliers or wine shop owners.

All in all, wine tastings don’t come cheap. Some wineries in Napa charge as much as $25 for an entry-level tasting, and even more to move up to the “reserve room.” It’s a great marketing move because it’s teaching tourists that wine is valuable, and worth the money. Even for the wineries that don’t charge extra, most people will not leave empty handed. MKF reports that the average tasting room visitor spent $42.54 in 2004. Even more astonishing, wineries that produce less than 5,000 cases per year sell approximately 40% of their product directly to consumers, mainly through tasting rooms.

Wine sales are boosted by word-of-mouth recommendations, plain and simple. Every time people enter a wine tasting room, it delivers a message whether it’s family-owned or backed by a corporation. And once someone decides they like a particular winery, they will often join a wine club and then spread the news to family and friends. It’s almost like the consumer is paying the winery to advertise its product.

MÖET LOOKING YOUNGER

In an attempt to dress up their bottle a bit, LVMH re-launched Moët & Chandon last month as a way to reel in younger, entry-level champagne drinkers. By adding a few eye-popping components, such as a more prominent crown and stars, Moët will keep its trademark foil and black necktie. According to Wine Spectator, Moët & Chandon has a leading 36% share in the U.S. market and commands nearly 11% share of global champagne shipments.

DAVE EICKHOLT STEPS DOWN FROM DIAGEO-GUINNESS USA

DAVE EICKHOLT STEPS DOWN FROM GUINNESS. Ivan Menezes, president and CEO of Diageo North America announced today that Jim Young has been appointed president, Diageo-Guinness USA. He takes over for Dave Eickholt who has decided to retire effective December 31, 2006 after 28 years with the company.

Young, currently acting Joint Managing Director for Diageo Great Britain, will transition to his new position effective September 15th reporting directly to Menezes. In this role, he will have full responsibility for the growth and development of Diageo's beer and Flavored Malt Beverage portfolio in the United States. Young will also serve on the Diageo North America Executive team.

It looks like Diageo is planning to hold on to its beer business. “Total beverage alcohol is important and it’s here to stay,” said chief Paul Walsh to investors who are, and have always been, wondering when or where Diageo is selling off its beer business (Guinness, Red Stripe, among others). Diageo is committed to bringing a comprehensive portfolio to retailers that includes spirits, more wine, and even beer, so don’t look for a sale anytime soon. Guinness sales are up 7% in the first half in the US. In fact, look for Diageo to acquire more wine brands if and when they become available, and maybe even a beer brand.

SPEAKING OF WINE. Anheuser-Busch president August A. Busch again alluded to rumors that A-B will soon be in the wine and spirits segment during a talk at the Prudential Consumer Conference on Wednesday. “We will not be constrained by alcohol source, or alcohol concentration,” he said. Spykes distribution and Jekyll & Hyde tests are being expanded.

STRAIGHT UP GLAZERS

Straight Up Brands has appointed Glazer’s to distribute Bracco Wine in Ohio, Indiana, Missouri and Kansas.

CLOS LACHANCE APPOINTS KEVIN PIACENTINI

Kevin Piacentini was appointed to serve as the northeastern regional sales manager of Clos LaChance Winery. Kevin will oversee the growing New England markets and report directly to vp of sales & marketing, Cheryl Murphy Durzy. Kevin comes to Clos LaChance after 17 years with Winery Associates.

REAWAKEN KAHLÚA WITH COFFEE FLAVOR

After taking control of Kahlúa from Allied Domecq last year, Pernod Ricard has struggled with the brand whose full-year sales fell 8% ending in June. Perhaps as a way to spice things up, Pernod Ricard is now offering a new Chocolate Latte flavor to its Kahlúa brand in the U.S.

“In the past year, flavored coffee trends have exploded in the marketplace," said Dolores Concepcion-Daniels, brand manager for cordials and prepared cocktails at Pernod Ricard USA.

The addition will be offered in a party size RTD and drinks-to-go single-serve formats, Pernod said yesterday.

CONSTELLATION GAINS EX-GALLO STRATEGIST

The wine division of Constellation Brands, Constellation Wines U.S., hired Dale Stratton, formerly a top strategy officer from competitor E&J Gallo, to serve as vp of strategic insights. He will represent Constellation’s portfolio of wine brands to major national on- and off-trade accounts.

Dale formerly worked as a “deployment champion” for Gallo’s Six Sigma continuous improvement program, and was accountable for strategic direction, training and development.

SOUTHERN WINE TO PUSH INDIA’S TIGER HILL

Indian-produced wine anyone? It might seem a little crazy but another Indian import is coming soon to the U.S., and the strangest part is that it’s not produced by UB Group’s Vijay Mallay who famously has his eye out for global expansion. Champagne Indage Ltd (CIL), the largest wine maker in the country, is all set to launch its new brand, Tiger Hill, in the US, according to local newspapers. Southern Wine & Spirits will distribute Tiger Hill through its Shaw-Ross division, first in California and later in other states. Three of CIL’s other brands – Soma, Omar Khayam and Mist of Sahyadri – are currently being distributed by Shirazi Wines.

Ranjit S Chougule, managing director, Champagne Indage, told DNA Money, “We are planning to sell 25,000 cases of Tiger Hill in the first year in the US. The products will be shipped within two months and the marketing will be started by the year-end.”

Tiger Hill, mainly aimed at the Indian community in the US, will be sold at $12 per bottle. But who knows, maybe Indian wine will be the next big thing – you never know with the way consumers are today.

Wine is growing domestically in India as the middle to upper classes continuously shows more interest. Vijay exhibited just how strong consumer interest actually is by purchasing French winemaker Bouvet Ladubay – based in France’s Loire Valley – for a reported sum of $17.7 million. As you may recall, 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.

WHAT OPPORTUNITIES DOES YOUTUBE OFFER?

YouTube has found a way to conspicuously sale ads on their website without too much in your face action by introducing “brand channels.” The concept seemed a little confusing to me at first since the channels often advertise for more than one product at a time (for example, Fox’s “Prison Break” sponsoring the Paris Hilton channel), but they’re actually a clever way to push ads without turning-off loyal YouTube fans with shameless media. YouTube will, however, help drive traffic to the channels.

Blah, blah, blah, you know the drill. Not only does this offer more ways to advertise online and reach out to a younger audience, it’s a way to advertise without really advertising. Confident brands that are prepared for this type of exposure can build more of an authentic connection with its audience instead of coming across as just another commercial on TV. Brands also have a significant amount of control over their message.

Some alcohol beverage brands have already done related forms of advertising, such as Crown Royal Television, that have been separate from YouTube. Anheuser-Busch is also doing a similar thing with its own web entertainment network, Bud TV. Among the themed channels is Bud Tube, which will be consumer-generated video in the nature of YouTube.com.

PARTAY OVER? Diageo’s “Tea Partay” ad for Smirnoff Raw Tea was a hit on YouTube with over a million viewings. It wasn’t a brand channel, granted, but made a similar impact by leaving out obvious brand references. The spot entertained viewers and therefore created a connection. However, Diageo announced yesterday that Smirnoff Ice is leaving the ad agency Bartle Bogle Hegarty that designed the “Tea Partay” campaign for another firm, JWT. Diageo reportedly felt that BBH had a conflict of interest because it also has InBev as a client. JWT already handles global creative duties for Smirnoff vodka, and will now advertise for the entire Smirnoff trademark.