BROWN-FORMAN: 2ND-QUARTER EARNINGS DRIVE FIRST HALF

Continued volume growth in Jack Daniel's and other top-shelf liquor brands, along with an asset sale, helped Brown-Forman push its fiscal 2nd-quarter profit up 14%, while total sales were up 10%.

Jack Daniels made a bit of a comeback during Brown-Forman’s 2nd-quarter, rising to the mid-single digits (6%) in the U.S. from the previous quarter’s low-single digit numbers. Once again, Jack helped to drive the company’s growth amid restructuring and high gas prices, while Finlandia also showed improvement and Southern Comfort continued its growth.

“The 1st-quarter was influenced by the high gas prices in the U.S., and also fell during the very height of our U.S. organization, which made a disruptive impact as people moved cities and made changes,” said Paul Varga, president and ceo.

Southern Comfort posted depletions of mid-single digit growth in the U.S., just a few points below its high-single digit six-month trend, while Finlandia remained flat (up double-digits internationally).

Brown-Forman’s EPS fell short of Wall Street’s expectations, so what was the culprit? An increase in distributor inventory, according to the company.

Said Phoebe Wood, executive vp and cfo:

“We had a number of distributor changes last year, and we think they built an inventory during that transitional time to a level that was higher than the customers were taking them away. But distributor inventories are going to come down in the next quarter.”

“Some brands are up while some are moderating a bit. We’re growing very healthfully, but these factors do influence us and have changed our guidance, as you can see, along with increased grain costs.”

One of the major themes in the financial results is future costs reductions in Brown-Forman’s wine segment. Already B-F has helped increase efficiency and flexibility for the Bolla wine brand, which it continues to own and distribute around the world, by selling the production facility to Italy’s GIV.

“The transaction we did in Italy has generated a gain, but just because we sold the winery,” said Phoebe.

Phased reductions in wine costs will begin in 2008, but will really take effect in 2009 and 2010 as Brown-Forman begins the termination of “high-priced” grape contracts in the U.S., made back in 1997.

SO WHAT ABOUT PRICING? When asked to comment on the role of competition and pricing in the U.S. market, Paul reflected on the deep discounting this past summer, remarking: “The trade can still make good money even when there’s discounting taking place, so I know it’s a tendency.”

Amid all the talk of premium brand growth, Paul expressed the importance of sub-premium brands as well, highlighting the category’s ability to drive volume. That’s not to say that premium brands aren’t the fastest growing sector, however.

“The largest majority of the industry still exists at the sub-premium level, because those brands fill a role for the consumption needs of people that don’t want to pay or can’t afford to pay the premium prices. I expect that to go on for a very, very long time.”

“Premium brands provide a great opportunity as you see more middle class development in the world, prompting people to trade up, but I still think the largest amount of volume is predominately non-premium.”

Paul seemed hopeful about holiday trends, pointing out that the spirits industry has risen a whole share point in the U.S. over the past 3 or 4 months, which is a good sign going into the holidays.

“Momentum for the wine and spirits industry in the U.S. going into the holiday season is good. Our brands, particularly, have good investments behind them which we are really excited about. The consumers are there, so as long as we execute well we are optimistic this holiday season.”

JON MORAMARCO: U.K. WINE INDUSTRY A “COMMODITY MARKET.”

Alcohol beverage companies, particularly wine, are having a difficult time with pricing in the U.K. – so much to the point that Constellation’s European head spoke openly against the discounts at a seminar last week.

Jon Moramarco, chief of Constellation’s European arm, said that the U.K.’s tendency towards deep discounting is causing the country to turn into a “commodity market” for wine. But it could partly be the wine producers fault for going along with the system for so long.

Moramarco cited the importance of establishing brands both on-premise and off-premise, but said companies must push away from the deep cut price promotions at the same time. It’s going to take hard work, though – primarily changing the entire British attitude towards discounts.

“The UK consumer is very discount-driven, but we have to change that mentality. To do that, we have to get restaurateurs thinking about brands, and we have to convince the multi-specialists that big is not ugly,” he said.

He admitted, however, that it would take a long time to shift the mindset of the consumers, retailers and restaurant-owners, pointing out that innovation in the wine industry should replace the pricing game in significance.

NEW YORK, ORDER YOUR WINE ONLINE

New York licensed retailers and restaurants are now open to buy directly from out-of-state wine producers via the internet, according to Decanter. Thomas Donohue, the lawyer for New York’s State Liquor Authority, has given the okay to allow on-premise accounts the use of a newly-developed system.

The California-based Inertia Beverage Group grants stores and restaurants the ability to purchase wine directly from wineries online. After completing the transaction, the order goes to a prearranged wholesaler who sets aside taxes, bills the retailer, deducts its margin and pays the winery. The producer then sends the shipment directly to the buyer.

If the program proves successful, Inertia will eventually enter California, Arizona, Washington, Texas and Florida in 2007.

CHARMER TAKING INITIATIVE ON HOLIDAY SAFETY

The Charmer Sunbelt Group and its affiliated companies are airing a public service announcement on radio stations in 11 markets during the holiday season. The message will urge holiday party attendees to abstain from drinking and driving, while reinforcing adherence to all beverage alcohol laws – particularly the legal drinking age.

FOSTER’S WINE BUSINESS FEELING THE HEAT

ACNielsen data shows an upward trend in beer sales for Foster’s in October, up 5.7% for the year. Wine sales were down 9.8%, however, reflecting the difficult sales conditions for the Australian wine industry.

SWEDISH GOVERNMENT: FOREIGN INVESTORS WELCOME

The newly elected Swedish premier Fredrik Reinfeldt said foreign investors were welcome to take part in the country’s imminent disposal of multi-billion dollar state holdings.

“I am not ruling anyone out,” Reinfeldt told the Financial Times.

His statements were made as his center-right alliance prepares their initial phase of sell-offs of stakes in banking, telecommunications and airlines. Reinfeldt has made it clear each sale will be treated differently according to its needs, and that no Swedish jobs will be lost unnecessarily.

Of course, the sell of V&S, maker of Absolut vodka, has been one of the major issues plaguing the alcohol beverage industry this year. Who will get it? Constellation, A-B, Pernod Ricard and Beam Global Spirits & Wine have all expressed interest, with Beam showing the closest ties to V&S. Not only are Beam and V&S members of the Maxxium alliance in Europe and Asia, but Beam also distributes Absolut in the U.S. through their joint-venture, Future Brands.

UP AND COMER PASO ROBLES TAKES THE VOTE

In a recent survey conducted by The California Wine Club, Paso Robles, American Viticultural Area (AVA) was selected as the next up-and-coming California wine region.

Paso Robles, AVA received the highest number of votes, with more than 28% of the votes cast for the region.

MINNESOTA GROCERS FIGHT TO SELL WINE

Minnesota grocery stores are pushing once again to gain permission to sell wine, pitting them directly against liquor stores.

Much like the lobbying campaign in Massachusetts earlier this year, some Minnesota stores owners are waging public efforts to win the side of consumers – including internet surveys and written proposals.

According to research, auditors say wine prices are 5% to 7% higher in Minnesota than in Wisconsin, which allows grocers to sell wine alongside beer and spirits.

RUMORS SWIRLING THAT BLAVOD’S FOR SALE

Blavod Extreme Spirits (BES) announces it has received and signed a "Letter of Intent" from an unnamed listed company that may or may not lead to an offer being made for the company. Who could it be?

The approach, which is subject to a number of pre-conditions, is an all share offer of shares in the listed company. At the close of business on November 24, 2006, the indicative offer valued Blavod at approximately $12.83 million.

Blavod’s brands include Blavod Black Vodka, Players Extreme, El Diamante del Cielo and Baroncini wine.

ITALY KEEPS THE NEW WORLD AT BAY

Australian imports are huge and growing. (Yes, we know.) Yellow Tail is huge. (Right, we knew that too.) So it’s quite surprising that Australia hasn’t yet taken over Italy’s number one spot as importer to the U.S. In fact, according to M. Shanken Trade News, Italy has widened its lead to about a million cases over its new world rival.

Each of the five top-selling Italian brands (Cavit, Bella Sera, Riunite, Ecco Domani and Casarsa) grew by at least 2.5% last year. Comparatively, of the largest Australian brands in the market (Black Swan, Little Penguin, Alice White and Yellow Tail) only Yellow Tail and Black Swan increased in volume.

Moral of the story? Perhaps old world wines aren’t struggling near as much as we had thought.

BUT STILL TROUBLE IN FRANCE. The Chicago Sun-Times reported that some of France’s most celebrated vineyards are now turning their vintage wine into alcohol for disinfectants or gasoline additives. The crisis-distillation process was once reserved only for the cheapest table wines, but now even the most respected wineries are taking advantage of the practice that may not be around for much longer.

Chronic overproduction, dipping domestic consumption and fierce overseas competition have converged to create a European wine crisis of unprecedented scale. With lakes of unsold wine threatening to undermine prices, the European Union has resorted to paying vintners to destroy some of their stock each year, distilling billions of bottles of perfectly drinkable wine into pure alcohol.

A contested new EU plan aims to fix at least the production side by downsizing Europe's wine industry. The proposal would shift away from distillation in favor of ripping out huge amounts of vineyards. Some 40,000 hectares (100,000 acres) of vines, more than 10% of Europe's total, could be pulled up over the next five years. Across Spain, France and Italy, Europe's vintners are putting up a united front against the proposal, which they see as fatalistic.

BULK WINE IMPORTS THREATENING DOMESTIC GROWERS

Some California winegrape growers are expressing concern that a considerable portion of wineries are blending foreign wine with California grapes, and then selling them under an “American” appellation label. If their fears prove true, than California grape growers run the risk of being replaced by foreign competitors – especially since the foreign source of the wine usually remains unidentified.

According to Rich Cartiere’s Wine Market Report, wines labeled with an American appellation can contain up to 25% of wine from another state or country while still maintaining the appellation label.

Many critics claim the practice isn’t near as widespread as growers fear, and that it may actually be a good thing for the California grape industry. In their opinion, at least wine companies are opting to use some or most of California and/or American winegrapes rather than none at all.

As you can imagine, Australia is currently the leading source of imported bulk wine and accounts for 58% of total bulk wine shipments from overseas.

Lets face it. Not only are bulk imports cheap, but they allow domestic wineries to do things they couldn’t (or wouldn’t) do before. Domestic wineries often use bulk after moving their foreign brands to local bottling operations, while continuing to use a foreign appellation on the label. Importing bulk wine also allows wineries to include rarer varietals, such as Riesling or Pinot Noir, to their line.

SONOMA-CUTRER: FROM UPSCALE RESTAURANTS TO RETAIL STORES

After 25 years of mainly being available in high profile restaurants, Brown-Forman owned Sonoma-Cutrer winery will release a newer version, Sonoma Coast chardonnay, in retail stores this December.

The Sonoma-Cutrer brand has been critically acclaimed by wine publications and restaurant managers throughout the country. But could its Sonoma Coast version hurt the brand’s perception once it’s released in stores? Often, when high level brands become available on a large scale, they lose their exalted position among high-end consumers.

The new retail brand, Sonoma Coast, is from 2005 and is estate bottled. It will sell for $24.99, about $20 less than was Sonoma-Cutrer costs in restaurants

FRED FRANZIA: “UNRAVELING OF THE MYTH.”

Bronco Wine Company (owned by Fred Franzia) has released its latest $4.99 installment from the Santa Barbara County appellation, entitled Santa Barbara Landing. The brand coincides with Bronco’s Napa Valley appellation Napa River brand, which is also available at the same price. Both wines are available through Trader Joe’s.

"We're seeing the unraveling of the myth that wine has to be costly to be good," said Bronco president Fred Franzia in Wine Business. "Enormous availability of good wine, efficient production programs and the willingness to narrow margins to make these wines available to the American public are all factors in these great bargains."

WEALTHY CONSUMERS RANK TOP CHAMPAGNE BRANDS

If someone were to ask which brand of champagne and sparkling wine you’d consider the most prestigious, what would you say?

It may come somewhat as a surprise, but the Luxury Institute's Luxury Brand Status Index (LBSI) survey of champagnes and sparkling wines named LVMH’s Dom Perignon as the clear winner.

The brand ranked first overall, along with ranking in three out of the four critical metrics: “uniqueness and exclusivity,” “used by people who are admired and respected,” and “making those who consume it feel special across the entire experience.”

Cristal was the second-highest ranking brand, followed by La Grande Dame by Veuve Clicquot (another LVMH brand). La Grande was voted as the brand “most perceived as worthy of a significant price premium,” and the brand wealthy consumers are “most willing to recommend.”

The twenty leading brands included: Cristal (Louis Roederer), Dom Perignon, Domaine Chandon, Domaine Ste. Michelle, Etoile, Freixenet, J, Korbel, Krug, La Grande Dame by Veuve Clicquot, Laurent-Perrier, Moet & Chandon, Mumm, Nicolas Feuillate, Perrier-Jouet, Piper Sonoma, Piper-Heidsieck, Schramsberg, Taittinger, and Veuve Clicquot Ponsardin.

FOSTER’S GROUP, HAVEN’T A CLUE

Australian drinks company Foster's Group said Friday it can't explain the recent rise in its share price following a query from the Australian Stock Exchange.

"The company is not aware of any information concerning it that explains the recent trading in the company's securities," Foster's said in a statement.

Foster's shares were up 4% Thursday and have risen more than 17% since late August, when takeover speculation first surfaced.

EXCISE DUTIES TO REMAIN IN THE EU

The EU's Court of Justice ruled Thursday, November 23 that consumers must pay excise duties when they order alcohol or cigarettes from other EU countries.

The court said "only products acquired and transported personally by private individuals are exempt from excise duty in the member state of importation." The ruling is a setback for Internet companies and other cross-border importers, which had hoped to start selling lower-priced alcohol and cigarettes across the European Union.

Alcohol is taxed at very different rates across Europe and many people in high-tax countries such as Britain, Sweden and Denmark travel abroad to buy cheaper wine and beer for their own use. This practice is allowed under an EU law that says alcohol should be taxed at the rate charged in the country where it is on sale if the goods are for personal use and transported by the purchaser.

EU spokeswoman Maria Assimakopoulou said the European Commission was disappointed with the ruling:

"We believe the court gave a rather restricted interpretation.”

"The Wine and Spirit Trade Association welcomed the decision," said Jeremy Beadles, head of the Wine and Spirits Trade Association. "Any other outcome could potentially have put UK businesses at a serious disadvantage compared to their European counterparts."

PATRON SPIRITS: “NO IMMEDIATE INTEREST IN GIN.”

Despite reports of an increased interest in white spirits, Patron Spirits Company has no immediate plans to acquire a gin brand in the near future.

With the rum category already conquered, vodka is likely the next step for Patron.

COO John McDonnell told WSD:

“We have an ultra-premium rum, Pyrat, that is very successful and arguably the second or third most successful rum in the category.”

Vodka is next. But as far as gin is concerned, “it would have to be the right kind of brand.”

“If it’s a (gin) brand that fits our ultra premium mindset we would certainly consider that, but we’d have to find the perfect fit for us,” John continued.

REMY COINTREAU SAYS GOODBYE TO MAXXIUM J-V

Remy Cointreau (maker of Remy Martin cognac and Cointreau liqueur) announced plans last week to terminate its agreement with the Maxxium distribution joint-venture as of March 30, 2009, prompting shares to rise as much as 9% on Thanksgiving Day. Could the company be for sale?

Maxxium Worldwide is a distribution joint venture that operates in 34 countries outside the U.S., mostly in Europe and Asia. Partners include Beam Global Spirits & Wines, Edrington Group and V&S Group

In a brief statement, Remy said it hopes to find “alternative distribution options in priority markets such as Asia.”

A financial penalty for withdrawing from the alliance is likely to incur, with estimates as high as $320 million.

While the announcement has renewed takeover speculation (Brown-Forman, Fortune Brands, Bacardi and Constellation Brands are possible buyers), it could be quite possible that Remy is simply looking for partners more focused on premium and super-premium brands. Some analysts even pointed out that Remy’s departure could be a defense mechanism in case Fortune Brands acquires Absolut in the future.

But if there was ever a time to pull out, the time would be now. Cognac and other brown spirits are rapidly growing in Asia, and Remy accounts for a third of China's cognac market. The company may prefer to take advantage of this alone or at least with new partners.

Whatever the reason, Remy leaving Maxxium is not expected to significantly hurt the joint-venture. Tom Flocco, ceo of Beam Global Spirits & Wine, reassured the industry in a statement:

"We do not expect Remy Cointreau's eventual departure from Maxxium to have a material adverse impact on our results or those of our parent company, Fortune Brands. As Maxxium has indicated, the Maxxium partners have plenty of time to successfully manage the transition.”

It is also important to make note of the fact that Remy brands account for only about 15% of Maxxium’s case volume.

A spokesman for Edrington also agreed: "There will be no financial impact on us."

VIZEUM WINS FOSTER’S ACCOUNT

Ad Age reported that San Francisco-based Aegis Group’s Vizeum won the domestic planning and buying account of Foster’s Wine Estates. Vizeum is not well established beyond its European base.

AVF REVEALS WHATS CRITICAL TO WINE GROWERS

The American Vineyard Foundation (AVF) has released its semiannual survey that lists the research priorities among vintners and grape growers – including vine mealybug, Pierce’s disease and the impact of viticultural practices on wine consumption and flavor.

Says AVF Executive Committee Member Andy Hoxsey:

“While the list contained many old issues that continue to carry over from previous surveys, it underscores the fact there are many other challenges facing our industry. Identifying them is just the first step,” according to Wine Business.

Every third year since 1997 the AVF has sent survey forms to people through the wine and grape industry as a way to collect information on the critical issues facing the industry. The AVF then ranks them, enabling the list to serve as a guide to where limited research funds could best be spent.

The AVF was established in 1978 to raise funds for research in viticulture and enology, and is a wine-industry sponsored non-profit organization funded by growers and vintners. In that time, the AVF has funded over $17 million in wine and grape related research.

TABLE WINE SALES UP 6.7%

Table wine sales were up 6.7% in the four weeks to October 21 according to ACNielsen food/drug/liquor scan data. Blush wine was up 2.4%, while red and white rose 7.9% and 7.1% respectively.

Domestic wine showed considerable growth, rising 7.5%, whereas imported wine grew 4.8%. New Zealand showed the most growth at 28.9%, while Argentina and Germany posted a close second and third ranking at 22.8% and 22.5%.

COSENTINO WINES SLIDES INTO FURTHER DEBT

Luxury wine producer Cosentino Signature Wines has reached the limit of its current debt facilities after achieving lower than anticipated sales and further delays to debt refinancing talks.

According to Cosentino, the company has experienced slow sales since September 26 due to high levels of distributor inventory (which are currently on the road to being cleared.) As a result, the group’s revenue is expected to be limited to around $8 million for 2006.

Current debt has now risen to $22.5m, the limit of the company's existing available facilities, and is expected to rise by around a further $1 million over the next two months. Cosentino is currently in talks to extend its loan arrangements.

Non-executive directors Michael Forman and Larry Soldinger, who today stepped down as chairman, have agreed to give a $1 million subordinated loan to help the firm conclude a refinancing deal. Keith Smith will become chairman in addition to his current duties as CEO until a new chairman is found.

PATRON IN ACQUISITION MODE

The Patrón Spirits Company has expressed interest in acquiring a vodka and gin brand to add to its already hugely popular premium tequila. According to reports, the company is hoping to land something big in the coming months – even as soon as January 1.

Although specific names were left out, there’s a whole host of small gin and vodka companies for the taking – but why gin? We find it a little hard to believe that Patron would be interested in acquiring a gin brand. It’s is a dwindling category that everyone seems to have a hard time resurrecting (unless your Bombay Sapphire or Tanqueray). Rum would make more sense, it seems, based on the category’s recent successes. But Patron did wonders with its flagship tequila brand, and can perhaps work the same magic in the future.

FIREFLY VODKA SPREADS ITS WINGS TO GEORGIA

South Carolina’s newly created FireFly Vodka, introduced last April, is available at liquor stores and restaurants in South Carolina with distribution now beginning in Georgia. As the world’s only muscadine wine flavored vodka, it was rated 89 points by the Beverage Testing Institute outscoring Absolut, Finlandia, Fris and Ketel One, according to the company.

Scott Newitt of Coastal Wine, a South Carolina Distributor, developed the idea of the vodka. “FireFly falls into the premium category,” said Newitt, “It is becoming one of the most fashionable and popular spirits in the South Carolina.”

HEADLINE: EU DRAGS INDIA TO WTO OVER WINES

Based on this Indian news headline, we’re guessing the government isn’t too happy although not too surprised. The European Union has finally asked the World Trade Organization to get involved in its duty row with India after lodging complaints for years. After India failed to meet last Friday’s deadline, given by the EU, to relax its strict tax structure on wine and spirits, the EU is taking it to the next level. (Earlier this year, the European Commission concluded an eight-month investigation after hearing complaints given by EU wine and spirits producers.)

The key issues for EU wine and spirits producers are the Additional Duty of 25% to 150% and an Extra Additional Duty of 4% for both wines and spirits. These two duties, in combination with the basic customs duty of 150% for spirits and 100% for wines, leads to an overall duty burden of up to 550% for spirits and 264% for wines.

The EU considers the Indian taxes on imports of wines and spirits illegal under international law and believes they unfairly protects Indian rum, whiskey and gin distillers. The Indian government says that these taxes on imports are designed to even out competition between domestic and foreign producers.

The WTO’s procedures include a 60-day dialogue between the two parties – but if it does not resolve the disagreement, a Dispute Settlement Panel will make recommendations on how to solve the issue.

SMOOTH SAILING PREMIUM WINES

Premium and super-premium brands continued to carry the wine sector into the four-week period ending November 5, according to IRI supermarket scanner data covered by Merrill Lynch’s Christine Farkas.

Table wine category dollar sales rose 10.5%, similar to an 11.5% jump in September and 10% YTD, despite tough comps (9.5%). Table wine volumes rose 5.2% during the same period, accelerating slightly from last month's increase of 5%, thanks to growth in premium and super-premium brands. The growth was, however, partially offset by declines in low-end brands as consumers continue to trade up.

The table wine category enjoyed a 5% price/mix gain to $5.35 per bottle but was down a slight $0.03/bottle as compared to September. Sub-premium pricing continue to benefit from a trade up from jugs to bottles, while mid-tier pricing remains modest and super-premium pricing is up (likely because of mix). Volumes of wines priced >$15 /bottle rose by 26.2% in Oct., along with a 16.7% gain in the $12-$15 segment and a 10.7% rise in the $9-$12 segment. Volumes in the $5.50-$9 segment grew by 10.2% (boosted by Woodbridge & imports); while volumes in the $3-$5.49 and <$3 segments rose by 2.3% & (2.2%) respectively.

The big three continue trailing category growth. While category volume was up 5.2%, Gallo, Constellation and the Wine Group experienced volume increases of 1.3%, 2.4% and 6.1% respectively. (Including Vincor, Constellation’s pro forma volumes fell by 2%.) Their declining growth is a result of the companies’ average prices falling below the rest of the industry, reflecting the sliding trends of sub-premium brands which are flat and/or down. Price/mix for Gallo, Constellation and the Wine Group rose by 4.6%, 6.4% and (0.5%) respectively.

As far as Constellation is concerned, Woodbridge’s favorable volume trends helped boost the company’s “somewhat overweight low-end and declining brands in supermarkets,” according to Merrill Lynch. While total company volumes declined 2%, which was below September (-0.5%), Woodbridge enjoyed a good volume growth of 8.4%.

Volume declines were notable in low-end Almaden (-14.3%) and Inglenook (-12.9%) which hurt overall growth. STZ's fine wine portfolio grew 18.4% in volume, moderating from September but importantly lapping a large 36.8% rise in October '05. Vincor's brands rose by 32.4% in October, led by strong gains for Kim Crawford (+85%) and Hogue Cellars (+17.7%). Vincor's higher price point YTD ($8.08/bottle) versus STZ's pre-Vincor average of $4.60/bottle should continue to favorably impact the company's overall mix.

BEAM WINE ESTATES WELCOMES NEW CHIEF MARKETER

Christopher Lynch has been appointed chief marketing office for the Sonoma-based Beam Wine Estates, effective January. Lynch, a 20-year vet of the wine industry, will report directly to Bill Newlands, president of Beam Wine Estates (BWE), and will sit on the company’s executive committee.

Lynch will oversee development and implementation of global marketing strategies for BWE’s domestic portfolio, along with its fine sherry and port wines.

Directly before joining BWE, Lynch served as managing director for Pernod Ricard’s New Zealand business. Prior to that, he held various senior marketing roles at Allied Domecq, Chandon Estates and Kendall-Jackson Winery, including vp of sales and managing director.

NEW ZEALAND MAKES IT OFFICIAL

The New Zealand Winegrowers association will have to draw up official boundaries for wine-producing regions after the passing of the Geographical Indications (Wine & Spirits) Act this week.

As well as being a World Trade Organization (WTO) requirement, it will provide a level of protection for local wine and spirits makers. They will be able to register their products as coming from a specific region (like Napa or Burgundy) with the characteristic associated with that region.

The regulations won’t take effect for at least another year as the industry determines what to pass.

LIQUOR WHOLESALER WINS SUIT IN NY

Victory for liquor wholesalers in New York yesterday when Craig Allen, owner of All Star Wine & Spirits in Latham, lost a lawsuit against liquor wholesaler Service-Universal Distributors, Inc. over price fixing. Allen claims that wholesalers were not selling their products to all retailers at the same price, which is illegal under the State Liquor Authority. He also charges that a select group of retailers received gifts, trips and other benefits from wholesalers in exchange for carrying certain brands that other retailers were not getting.

It was a no-go, however, in the Court of Appeals. In an unsigned ruling, the judges in Albany voted unanimously in favor of Service-Universal Distributors. Since the State Liquor Authority and state Attorney General Eliot Spitzer signed an agreement with major liquor wholesalers in September to end the practices to which Allen refers, the lawsuit no longer stands.

The court also said that Allen failed to prove in his lawsuit that consumers had been harmed by the pricing practices.

RED WINE, GREAT FOR ATHLETES?

Red wine might turn you into an athlete, or at least a daily resveratrol supplement. Scientists found that not only does resveratrol (a component founds in red wine) reverse the effects of obesity in mice and make them live longer, but it also increases their endurance as well. According to a report in the New York Times, experts say the finding may open up a new field of research on similar drugs that may be relevant to the prevention of diabetes and other diseases.

Says Nicholas Wade at the Times:

“An ordinary laboratory mouse will run one kilometer on a treadmill before collapsing from exhaustion. But mice given resveratrol, a minor component of red wine and other foods, run twice as far. They also have energy-charged muscles and a reduced heart rate, just as trained athletes do, according to an article published online in Cell by Johan Auwerx and colleagues at the Institute of Genetics and Molecular and Cellular Biology in Illkirch, France.”

Dr. Auwerx and his colleagues believe the same mechanism is likely to work in humans, based on an analysis in a group of Finnish subjects of the gene that is influenced by the drug. His study goes hand in hand with the one published earlier this month by Dr. David Sinclair of the Harvard Medical School, who found that much moderate doses of resveratrol protected mice from the negative effects of a high-calorie diet. The mice didn’t lose weight, but they lived far longer than the mice not given resveratrol that were fed the same fatty diet. (The two studies were started and performed independently.)

Keep in mind, however, that no one could drink enough red wine to maintain the level of resveratrol dosage given to the mice – no matter how much you like the stuff. It would have to be given in supplement form. So as scientists continue to study the possible effects of resveratrol, drink up, spread the news and enjoy your favorite glass of red wine.

ADMIRAL IMPORTS PUTS THE ICE IN GIN

Iceberg London Gin is the latest offering from Admiral Imports, produced and bottled by Canadian Iceberg Vodka Corp. It comes available in 1.75liter, Liter, 750ml 375ml and 50ml sizes, complete with a white and green ice-textured transparent front label featuring an iceberg.

BRITISH CONSUMERS COULD SAVE THOUSANDS

The European Court of Justice is about to hand down a tax ruling that could change Britain's alcohol-buying habits forever. On November 23, the ECJ is expected to rule that goods bought in other EU states and sent across borders may only be taxed in their country of origin. At present, buyers have to physically accompany their purchases in order to avoid being taxed in their destination country.

In other words, cases of wine bought on the internet and sent from France to Britain would only be taxed at the French rate – less than 2p per bottle. Currently a bottle of wine sent to Britain is taxed at £1.29 per 75cl bottle. And while the new law would apply to all members of the EU, British consumers would benefit the most since Britain’s rates on wine and spirits – and tobacco – are some of the highest in Europe.

PEAR FLAVORED COCKTAILS THE NEW HYPE

Wondering what’s hot for consumers in the upcoming year? Apparently, pear-flavored cocktails are the next big thing, especially if Absolut has anything to say about it.

Kathy Casey, owned of Kathy Casey Food Studios in Seattle, Washington claims pear usage in cocktails is the one of the up-and-coming trends for 2007.

"The popularity of pears has a lot to do with their crisp flavor, and the fact that they're not overly potent. For example, the mellow sweetness of pears adds a fantastic flavor counterpoint to the mojito, one of today's most popular cocktails."

That’s good news for Absolut Spirits Co. which recently launched its new pear-flavored vodka.

"We constantly have flavorists on the hunt for all the new scents, flavors and tastes, and pear was 'ripe' for us, as we say," said Jeffrey Moran, spokesperson for Absolut.

Nowadays, more bar menus are featuring cocktails blended with real fruit, allowing them to charge a premium while providing customers with a little something out of the ordinary.

WHICH REMINDS US, HOW ARE FLAVORED SPIRITS IN ALL? The ever increasing popularity of cocktails and mixed drinks in the U.S. has helped launch a growing assortment of flavored spirits brands. Spirits consumption rose 2.8% in 2005, marking the eighth consecutive year of such an increase, according to Adams Handbook. Mixable spirits, such as vodka, rum and tequila, continue to grow and take market share from traditional whiskies, probably with help from the cocktail culture. Total non-whiskies gained 3.8% in 2005, while vodka and tequila jumped 4.4% and 9%.

It seems as though a new flavored vodka or rum is introduced almost every week, 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. During a survey given in May, 75% of you told us that the increasingly large amount of vodka flavors would NOT dampen overall growth rates.

REMY MARTIN LAUNCHES FIRST U.S. CAMPAIGN

When you hear the phrase, “When Things Start to Get Interesting,” what do you think of? Does Remy Martin come to mind? .

Remy Cointreau USA has launched the first U.S. advertising campaign for it Remy Martin Fine Champagne V.S.O.P. Cognac in almost a decade. The catchy tagline was developed by the La Comunidad agency and is meant to bring out the attitude behind the brand.

Beginning in late October, radio advertisements were set to air in major metropolitan markets such as Atlanta, Baltimore, Chicago, Detroit, LA, Miami, New York, Tampa and Washington D.C. In addition, Spanish-language radio spots are running in Los Angeles and Chicago and online ads will debut on ESPN.com later this month. The December issues of GQ and King magazines will feature print executions.

LUXURY CONSUMERS ESSENTIAL TO HOLIDAY SHOPPING

A study released yesterday shows that luxury consumers will spend nearly twice as much as middle-income consumers on gifts this holiday season. Unity Marketing’s latest survey revealed that luxury consumers – the top 25% of U.S. households that average $149,100 a year – plan to spend an average of $1,903 on holiday gift purchases.

Trading up among consumers seems to be the central theme here, so affluent marketing will get you everywhere this December. Providing shoppers with an enjoyable shopping experience is key.

“This year wealthy men, especially those of the baby-boomer generation, will spend the most buying holiday gifts,” says Pam Danziger, president of Unity Marketing.

Luxury consumers are also more willing to go above and beyond your typical holiday gift by putting in a little extra thought. They’re much more likely to choose gifts of clothing and fashion accessories, consumables (gourmet food, wine and spirits, gift baskets) and experiential gifts (dining, entertainment tickets, spa packages) than the typical consumer is.

Up to 45% of luxury consumers say they are very likely to shop for gifts in department stores (Nordstrom, Neiman Marcus, Saks and Macy’s) while 44% plan to gift shop through a non-store or online retailer.

“While luxury consumers comprise only one-fourth of the population, their high incomes make them a particularly powerful segment for the nation’s retailers. The key to capturing their shopping dollars is not so much to offer deep discounts on merchandise, but to entice them with engaging shopping experiences,” continued Danziger.

HOUSE BRAND WINES, JUST LIKE TOOTHPASTE?

Prompted by the huge success of Trader Joe’s Charles Shaw wines (“Two-Buck Chuck” by Bronco Wine Co.), almost every major retailer has one by now. Everyone including 7-Eleven, Costco, and Target has joined the race to bring in the next big “Two-Buck Chuck” and all of the six million cases it produces annually. Even SF Gate thinks Frank Franzia’s brainchild should have been christened the official state wine of California. Wine negociants in France have been doing it for years, so what does that mean for the U.S. industry?

Has wine become just another commodity that retailers can privatize - like toilet paper, toothpaste, and pain reliever? Private-label wine sales at food and drug stores have increased five times in as many years and risen 25% at food stores in the past year, according to IRI and ACNielsen. And last year’s huge grape crop will only prompt the trend to grow, making loads of cheap wine available to big chain stores.

Sales of private label wine brands are growing, and the category looks to be a significant portion of the market in the future. According to ACNielsen, private label brand sales have grown 30% in the 52 weeks ending September 23, 2006, as compared to the 18% growth over the same period in 2005. By contrast, branded wines have grown 10% in the 52 weeks ending in 2006, and 9% in the preceding year.

To be fair, we have to point out that private label sales currently account for about 1.4% of the grocery store wine market, roughly the same size of the Chilean wine or Chianti segments. So it’s easy to see high growth rates off of such a small base.

Most house brands are generally made by large players like Wine Group, E & J Gallo, and even Foster’s, along with middle men companies that buy wines from vineyards and sell it to supermarket chains as private labels. However, much like house-brand napkins and mouthwash, the private labels rarely identifies the actual producer. So while the big boys are eager to make a profit, they don’t want their names associated with the product.

Private labels also generally sell at lower price points, although they are available at all price levels. According to the ACNielsen data, private label brands sell at an average price point of $4.64, 15% lower than the average branded wine price of $5.47.

It’s a way to get rid of extra grape juice – sure, I understand. It gives wine companies an outlet for excess product, and expands itself to the general population. By 2008, the U.S. will be the largest wine-drinking nation (which isn’t necessarily saying much since our population is much larger than any of the contenders), which marks a huge culture shift. Wine is losing that specialness, that snootiness that it has always been associated with, which can be a good or bad thing depending on who you’re talking to.

Assuming that private label wines will become a much larger part of the American wine landscape, traditional, branded winemakers are going to have to decide how to private labeling fits into their business model. The increase of globalization and the effect of grape surpluses around the world will have an impact on private label wines. It’s important to keep in mind that there will always be a region in the world experiencing a glut.

VICTORY AT CAPITOL HILL: CRUCIAL BILL CLEARS THE HOUSE

The controversial Stop Act passed the US House of Representatives yesterday late afternoon by a margin of 373 to 23, indicating that it clearly has bipartisan support. The Bill, which still has to pass the Senate and a presidential signature to become law, contains language which reinforces the states’ rights to regulate alcohol within their borders, as prescribed by the 21st Amendment of the Constitution.

To refresh your memory, here’s what the Stop Act entails: It combats illegal underage drinking and re-asserts the Federal government’s wishes that the states have the power to regulate alcohol within their borders.

The WSWA released a statement reinforcing their support of the Stop Act late yesterday afternoon and encouraging the Senate to follow suit.

“WSWA encourages the Senate to follow the leadership of champion Representative Lucille Roybal-Allard (D-Calif.) and her colleagues in the House and pass this legislation,” said the Association.

Wrote newly elected president and CEO Craig Wolf:

“Our members are a part of an essential state-based regulatory system that serves as a vital line of defense safeguarding our communities, and The STOP Act recognizes that system’s importance and relevancy in the prevention of underage drinking.”

“There has been an unprecedented, unified effort behind The STOP Act that includes support from the National Beer Wholesalers, The Beer Institute, The Distilled Spirits Council of the United States and The Wine Institute, along side advocacy groups and members of the community. This wide-spread support indicates the importance of this legislation, and should prompt the Senate to take action,” he continued

The big question is whether the Stop Bill will pass the Senate. It could pass later today, next week or never, so until then we wait.

EFFECTIVE IMMEDIATELY: CRAIG WOLF STAYS PUT

Congratulations to Craig Wolf who was named the new president and CEO of Wine and Spirits Wholesalers of America (WSWA) after serving in an interim capacity. Previously Craig worked as general counsel for the trade group, but took over as a temporary replacement following the July resignation of former president and CEO Juanita D. Duggan.

Craig has worked diligently throughout the country to ensure that the three-tier system remains in tact, stressing that wine and spirits distributors bring “local control and regulation to a socially-sensitive product.”

Craig said the WSWA will work to bring about “new ways to communicate the value of our role in the distribution process--thousands of well-paying American jobs, sophisticated, consumer-oriented business services and other important contributions to communities throughout the nation."

Prior to joining the WSWA, he served as counsel to the Senate Judiciary Committee, specifically to the Chairman, Sen. Orrin Hatch, and before that served as both a federal and state prosecutor.

EFRD FAILS TO GAIN SPONSORSHIP

Although spirits companies have come together in the U.S. and agree on self-regulatory guidelines in advertising, things have not gone so smoothly across the Atlantic. The European Forum for Responsible Drinking (EFRD) has had to postpone its plans to publish self-regulatory guidelines on drinks sponsorship because of a failure to find consensus on the subject.

Pernod Ricard chairman and CEO Patrick Ricard reportedly declined to back the proposals because he believed they weren’t stringent enough. Ricard has made it known that he disapproves of alcohol beverage companies sponsoring motor racing in the past, especially after Pernod resigned from The Century Council in September over the issue of NASCAR sponsorship. Coincidentally, motor racing sponsorship was not outlawed in the EFRD regulations, but a Pernod spokesman denies that was the reason for their failure to support the proposals.

NEW ENERGY VODKA TO HIT SHELVES

Sovereign Brands LLC’s soy-based 3 Vodka is one of the first energy vodkas to reach the U.S. market, slated for December 1. Also partly owned by hip-hop producer Jermaine Dupri, 3 Vodka will be marketed on-premise to the late-night crowd, running at $25 per 750-ml.

SV VODKA LAUNCHES SILK RADIO

Ukrainian vodka producer Soyuz-Victan (SV) has launched Silk Radio, its very own internet radio station that went live on November 1, 2006. In a partnership with AccuRadio (the first multi-channel internet radio station), the fully branded station will allow SV to better interact with its key consumers.

"Silk Radio provides us with another innovative way to bring the SV Supreme brand personality and proposition to our target consumer," said Mark McKethan, president and general director of SV USA.

WOOD CHIPS BANNED IN FRENCH AOC

Despite the support of the French government, the use of wood chips in French AOC winemaking has been banned. The Institut National des Appellations d’Origine (INAO), who regulates France’s AOC wines, announced the ruling late last week which was made in spite of the fact that wood chips are legal in the EU.

The INAO feels that wood chips could harm the spirit of “appellations” and the wine’s link with “terroir.”

DWINDLING GRAPE HARVESTS TO HELP PRICING

Declining grape harvests are expected to help improve pricing across the board, particularly for Australian exports.

In last week’s investor’s meeting, Constellation announced its expectations for the U.S. and Australian grape harvests to each decline 25%.

“This could help clear excess supply, though supply/demand balance will likely take more than a year to achieve. Global retail wine pricing should also face less pressure, though grape costs could creep higher,” said UBS analyst Kaumil Gajrawala.

NBWA PRAISES STATE-BASED ALCOHOL REGULATIONS

In regards to Election Day 2006, the National Beer Wholesalers Association (NBWA) released a statement last week in support of state-based regulations for the sale and distribution of alcohol.

“In numerous areas throughout the country, voters were presented with ballot questions regarding alcohol regulation. The outcomes of the proposals varied from locality to locality, showing that people feel very differently about alcohol from one place to the next and thus confirming the need for effective state-based control,” said the organization.

NBWA president Craig Purser agreed, pointing out that voters in different states reached opposing conclusions to how alcoholic beverages should be regulated.

“This just goes to show that a one-size-fits-all approach to alcohol regulation simply does not work. The time-tested regulatory system as it relates to alcohol sales is successful because it allows states the flexibility to deal with local circumstances,” said Craig.

“As society addresses problems like underage drinking and drunk driving, the importance of maintaining effective state alcohol regulation is critical."

RICHARD SANDS ON THE LOOKOUT FOR “ADDITIONAL ACQUISITIONS.”

Yesterday at Constellation’s shareholder meeting, Richard Sands confirmed the company is keeping a close eye on Vin & Sprit’s Absolut vodka in case it ever goes for sale.

“Brands like Absolut that are produced in Sweden certainly have an interest to us," said Constellation CEO Richard Sands.

"But that's just one out of many potential opportunities," Sands added. "The other ones aren't as public.”

While some have felt that Constellation may not have the means for another major consolidation after the recent Vincor acquisition, Richard put those rumors to rest yesterday.

“We have the financial capacity to make additional acquisitions and we believe because of our decentralized structure we have the management capacity to make additional acquisitions, so we’re not concerned in any way about our capacity,” he said. “But is the acquisition going to be strategic? Is the price going to be reasonable and will it create shareholder value?”

INTERVIEW WITH SCOTT MCWILLIAM, AUSTRALIAN WINEMAKER

Last week WSD has the chance to sit down with Australian winemaker Scott McWilliam of McWilliam’s Winery. Scott earned a Bachelor of Science degree at the Australian National University in 1998 and a postgraduate degree in Oenology at the University of Adelaide in 2000. Following his postgraduate studies, Scott joined the McWilliam’s winemaking team, based in the Riverina, in New South Wales where Scott helped craft the highly acclaimed McWilliam’s Hanwood Estate range of wines.

McWilliam’s Winery has vineyards in Coonawarra (SA), Hunter Valley and Hilltops in New South Wales, Yarra Valley in Victoria and the Riverina (SA). Its flagship line, McWilliam’s Hanwood Estate, includes a shiraz, reisling, cabernet sauvignon, merlot and chardonnay available for around $11 per bottle.

One of the first topics we touched on was the grape surplus in Australia and the toll it has taken on McWilliam’s Winery. Scott remarked that while the winery has not replanted vines as of now, he’s not worried.

“It’s not that people aren’t buying our wines,” he said. “The problem is that when sales started to surge years ago, wineries began over planting. But research shows the glut will not last much longer, and that we’ll need to plant more vines eventually.”

European winemakers are dealing with a glut of their own, but more as a result from lower sales combined with over planting. Since it’s common knowledge that New World wines have been encroaching on the Old World for quite some time, particularly Australian exports, I asked Scott whether he thought the New World was taking over. His reply:

“It could be New World taking over Old World, or it may just be that we created a new market for wine drinkers by providing easier to drink wines, clearer labels and easier to pronounce titles.”

His argument is certainly noteworthy as the European Commission has taken steps as of late to ensure less-imposing restrictions over wine labels and production practices. But what about corks?

I noticed that all of his wines, except for the reisling, use the traditional cork enclosure. Scott claims this is because it’s much harder to introduce screw caps in the $10 range because consumers tend to be less educated about wine. Using screw caps at higher price points are much more warmly received.

“Cork is old technology in my opinion,” he said.

One important on-premise category for McWilliam’s Winery is by-the-glass purchases at restaurants. It’s a good opportunity for consumers to try McWilliam’s wines without having to spend so much – so far, the shiraz is the most popular.

Says Scott: “We realize that consumers don’t pay much attention to the brand when they order wine by the glass while dining out. So, we know that if the consumer goes back for a second glass, than we’ve made some good wine.”

Research shows that many U.S. consumers are either unaware of Australian wine, or know only of its sub-premium offerings. McWilliam’s Winery is trying to battle that stigma

“We’re trying to show consumers that Australia has more to offer, so we’re trying to stay in the premium range.”

“We think there is a real market for premium Australian wines. It’s not just about the Yellow Tails and the critter label brands. It’s about quality. It’s about what’s inside the bottle, not necessarily outside – although packaging is a part of marketing,” said Scott.

He pointed out that nowadays, going into the wine aisle is like going to the zoo, and called critter labels “roadkill.” Instead, McWilliam’s wines offer a neat, easy-to-read label.

“We don’t need too much marketing because the wine is so great,” he added.

SCOTT SHARP TO DRIVE NO. 8 PATRÓN

Rahal Letterman Racing (RLR) announced today the signing of veteran IndyCar Series driver Scott Sharp who will pilot the No. 8 Patrón Spirits car, joining teammate Jeff Simmons who will drive No. 17 Ethanol/Dallara.

“The partnership between Patrón tequila, Rahal Letterman Racing, and Scott Sharp brings together the top names in racing with the top name in ultra-premium tequila, and we’re honored to be a part of this incredible team,” says Matt Carroll, vp of marketing at the Patrón Spirits Company.

ENGLISH DISTILLERS LAUNCH FIRST SPARKLING VODKA

As rumors circle over the possibility of Diageo launching a sparkling spirit brand sometime in the near future, it looks like someone has already beaten them to the punch. International English Distillers released the world’s first sparkling vodka, entitled Vodka O2, recently after enduring an 18 month development process that puts oxygen bubbles into the vodka.

Vodka O2 is produced predominately from wheat and a small amount of malted barley, and distilled and filtered three times in 100-year-old copper pot stills. The makers have created a range of over 20 original vodka-based cocktails they call Tapastini, inspired by Spanish tapas.

Already available in Europe, O2 will be launched in the U.S. and Canada at the start of 2007.

CONSTELLATION LOOKING TO SPREAD ITS WINGS

At Constellation Brands Annual Investor meeting today, chairman and ceo Richard Sands made it apparent that Constellation is looking to expand its operations in Europe, and is interested in partnering with local distributors.

He said that the company plans to bring its Australian, South African and American wines to 14 countries in Europe, including Denmark, Sweden, Germany, Ireland, the Netherlands, and Switzerland and also looking at France, Poland, Norway, Finland, Belgium, Austria, Russia and the Czech Republic.

Spreading its wings as a global company is a major part of Constellation’s growth strategy.

“To succeed in today’s alcohol beverage industry one needs the distribution scale to ensure these products are available at the right places to consumers around the world,” said Richard Sands. “The combination of the distribution scale and portfolio breadth gives Constellation a competitive edge.”

Constellation’s recent acquisitions have certainly helped improve product mix as well as contributing more premium products. Richard stated that “acquisitions that will enhance value are key to strategy.”

When asked about future plans for consolidation, Richard said this:

“We have the financial capacity to make additional acquisitions and we believe because of our decentralized structure we have the management capacity to make additional acquisitions, so we’re not concerned in any way about our capacity,” he said. “But is the acquisition going to be strategic? Is the price going to be reasonable and will it create shareholder value?”

Premium products, particularly in the spirits segments, are another huge focus for Constellation, accounting for a large portion of sales. “We are focused on gaining in the premium and mid-premium sector,” said Richard, especially since retailers are “devoting more space to premium products.”

The key growth segments in spirits are tequila (9%), rum (6%) and vodka (4%). Although much of the focus is being shift to the premium category, the value segment makes up 42% of Constellation’s spirits products, while premium is at 34%, high end 18% and super 6% the value segment

He also pointed out that “wine is very powerful in terms of growth” and announced plans to enhance the premium wine portfolio, particularly fine wines.

When asked about direct to consumer wine sales, Rob Sands replied, “The direct to consumer market is pretty small. We will participate in the direct to consumer market to some degree but the issue isn’t really alienating retailers, but since it’s such a small channel, it hasn’t been much of a focus for us. If it becomes a larger channel than we will take a closer look.”

“Direct to consumer is more lucrative for smaller companies, but for us it’s not critically important. Because we’re large and important to our wholesale customers, we’re able to achieve most of our goals through the distribution channel. As we’re said before, we are big supporters of the distribution channel.”

Constellation has “increased national accounts across the board, wine spirits and beer,” continued Rob.

Stay tuned for more tomorrow.

MIKE DITKA TEAMS WITH MENDOCINO WINE CO

Mike Ditka, former Chicago Bears coach, is teaming up with Mendocino Wine Company to produce five new wines including the Mike Ditka Pinot Grigio and Mike Ditka Kick Ass Red, a combination of Zinfandel, Syrah and Petite Sirah.

The wines cost from $10 to $50 with the Kick Ass Red being the most expensive. The wines will be sold at Costco as well as at wine shops.

BULK SHIPMENTS CONTINUE HURTING AUSTRALIAN WINES

Things aren’t looking up much in Australian wine country, according to the latest figures released by the Australian Wine and Brand Corp. for the month of October. While total exports were up slightly (0.7%) from last month’s small decline, exports to both the U.S. and Britain were down in terms of volume and value.

On top of that, an increasing amount of the export market is run by bulk shipments as opposed to branded bottles, which is not good news for companies like Foster's and McGuigan Simeon who are hoping to recover in 2007-2008 with "value-added" brands.

Australian wine-producers worry that the decline in sales might be a possible indicator that Australian wines are viewed as “cheap wine” in the eyes of the consumer in the U.K. and U.S. According to local news sources, nearly 80% of the volume being shipped abroad is at the lower end of the price range, $2.50-$4.99 segment, which is currently losing share in the U.S. market.

Wine exports from Australia grew 6% in the twelve months to October, but the average price per liter dropped 8%.

"This was an expected result, given the continued growth in bulk wine shipments in response to the current oversupply of wine," said the Australian Wine and Brandy Corp.’s information and analysis manager, Lawrie Stanford, to The Age.

The United Kingdom (265m liters) and United States (211m liters) remained Australia's largest export markets, followed by Canada (53m liters), Germany (35m liters) and New Zealand (30m liters).

Australia exported some $927 million worth of wine to the UK, with exports to the US valued at $883m.

INTERVIEW WITH SCOTT MCWILLIAM. WSD recently had the chance to sit down with Australian winemaker Scott McWilliam of McWilliam’s Winery. More on the interview later this week.

WINE AND SPIRITS SUMMER SALES

Newly released IRI data shows that the non-sparkling wine