EXPERTS GIVE STOLI THUMBS UP

Pernod’s Stolichnaya ultra-luxury vodka was awarded a 97 point rating and a platinum medal by The Beverage Testing Institute (BTI). Congrats!

CHILE’S LARGEST WINERY LOSES PROFIT

Chilean winery Vina Concha Y Toro, the country’s largest wine exporter, was down $30 million in 2006 net profit according to its securities filing with local securities regulator SVS. Sales were up 5%, while operating profit was down 4.4%. Apparently, the company is suffering at the hands of a relatively strong peso exchange rate.

According to Dow Jones, analysts said they had expected earnings to pick up in the fourth quarter in the wake of a more benign exchange rate. In the quarter, net profit was up 0.6% from the previous year while sales grew 14.1%.

NOT TO BE OUTDONE,

Diageo is launching a new advertising campaign for $200-a-bottle Johnnie Walker Blue Label. And who will be its first target? People who attend New York City galleries in search of the latest and hottest drink, averaging around 30 years old and making over $75,000 a year. The company currently sponsors about 100 gallery openings and events in New York, as well as private gallery parties in Chicago and Los Angeles.

The Blue Label is at the top of the Johnnie Walker range, which also includes Red, Green, Black and Gold labeled bottles, costing between $20 and $200. And, since we can’t stress it enough, the sales of super-premium spirits costing $150 or more a bottle were the fastest growing category in the U.S., with revenue rising 18% to $2.19 billion, according to data from DISCUS. However, that number is mainly reserved for vodka, and Diageo is hoping to make some more room for scotch.

GENTLEMAN JACK ENTERS THE MARKET

In our opinion, wine and spirits have led the alcohol industry in packaging innovation, and some may even go so far as to say that spirits in particular were the pioneers. In this case, Jack Daniels is no exception. The Jack Daniel Distillery has unveiled its new Gentleman Jack Rare Tennessee Whiskey bottle that the company is hoping will “bring a new ‘refinement’ to the brand's outward appearance.

The new “Gentleman Jack” glass bottle is slimmer from the side and fatter at the front, and is available in 1.75 liter, 1 liter, 750 ml, 375 ml and 50 ml. The new bottle will be available in March along with a campaign that includes a redesigned website (www.gentlemanjack.com), national magazine and outdoor advertising, POS and featured drink recipes.

SCREW KAPPA NAPA VIES FOR AN ACRONYM

The infamously innovative Sonoma-based Don Sebastiani & Sons are introducing a new package for their hit Screw Kappa Napa brand, which has jumped double digits in sales growth since its introduction in 2001.

The new label is clean, sleek, and yes, orange. But the change in title may be the biggest image modifier of all. Instead of Screw Kappa Napa, the brand will now be known as “s k n.”

RUMORS OF TESCO ENTERING COLORADO

As we’ve already heard, Tesco is planning to develop its Fresh & Easy Neighborhood Markets in California, Arizona and Nevada. The latest development? Colorado. Based on a story in Fortune magazine, CSN reports that while plans to enter Colorado appear in the works, the company is currently denying them. But, now, why would they tell us?

EVANS & TATE REVEALS LATEST TAKEOVER BID

In a statement to the Australian Stock Exchange yesterday, Evans & Tate outlined the latest takeover bid from U.S.-based Yarraman winery, to which the Australian wine group has given a "tentative" agreement.

[Ed. note: Both wineries were adversely affected by the Australian and U.S. grape gluts, respectively, and are now trying to piece together their respective companies.]

According to the Sydney Morning Herald, Yarraman winery’s proposed merger with Evans & Tate will see shareholders for E&T end up with 15% of the combined group. And if E&T shareholders accept the proposal, existing shareholders in the much smaller Hunter Valley winery will end up owning a 23% stake.

In other words, under Yarraman's proposal E&T shareholders would be given one Yarraman share for every 6.75 of their shares. Yarraman said it has secured financial backing from U.S. conglomerate GE to cover E&T’s $70.9 million debt with ANZ Bank, which includes A$80m in cash and A$17.3m in Yarraman preference shares.

Yarraman is currently in independent talks with ANZ over E&T's debt, which the bank has supposedly approved its takeover plan "in principle". In all, Yarraman's proposal values E&T at about $192.4 million.

Yarraman, which will not crush grapes this year in order to clear the oversupply of wine in its cellars, reported a $1.9 million loss for the six months to December. It also suffered an 18% in wine sales to only $836,543. The debt-laden company conceded in its latest filing to the U.S. Securities and Exchange Commission that it may struggle to survive if the deal does not proceed.

At the same time, Yarraman plans to make many more acquisitions in new world wine territories if and when the E&T merger is completed.

Evans & Tate, Australia’s fourth largest winery, has also found itself in a mountain of debt. In the past year and a half, E&T has announced a series of losses, write-downs and winery sales as the business was negatively effected by the Australian wine glut.

FRENCH WINE MAKES AN ASTOUNDING COMEBACK

The old world is making a comeback after years of new world success, with France benefiting the most. Already, Italy was named as the United State’s top importer, with France coming in at number three and Australia sandwiched between.

Last year’s surge in French global wine and spirits sales indicated a recovery of post 9/11 anti-French sentiment, while marking a loss of market share for Australia.

French wine and spirit exports to America, struggling in recent years due to New World competition and anti-French sentiment, rose 22% in 2006 according to the Federation des Exportateurs de vins et spiritueux de France (FEVS).

The United States was the top importer for France, taking 2.4 billion euro of French wine and spirits, a 22.2% increase on 2005.

So while France was gaining back share, Australia fell back (if only a little bit). The 2006 figures show France creeping up to 14%, and Australia falling to 29%.

Driving the wine exports to the U.S. in 2006 was Bordeaux, which showed a 50% increase due to sales of the 2003 vintage.

Spirits exports to the U.S., France’s number one market, were just over one billion euro, up 26%, with Cognac accounting for half.

U.K. INDUSTRY ALARMED AT SHRINKING WINE CONUMPTION

Traditionally, the United Kingdom has been one of the largest export markets for all wine-producing countries, namely because (1.) They love wine, and (2.) They can’t really grow any vines. However, ACNielsen figures reveal that wine sales grew just 2.1% last year in the U.K., but remained static in volumes sales.

The average bottle of wine sold in the UK now costs £3.90 (about $7.80) and the quality of whites and reds sold for under £5 ($10) has generally improved over the past 10 years. While these prices are still higher than many other western countries (such as France), industry experts are reportedly worried about the effects of anti-binge drinking campaigns on alcohol sales in general, and wine sales inparticular.

Growers and wineries alike have blamed U.K. grocery stores (like Tesco and Sainsbury) for over-promoting inexpensive, private label wines and forcing all companies to sell their wines for next to nothing. And it looks like U.K. consumers have gotten used to it.

Although wine has become an everyday drink in the UK over the past 25 years or so, there are now real worries about it growing further. The solution? Either get more people to drink wine, or encourage people to trade up to more expensive bottles.

WHYTE & MACKAY MOVES INTO THE U.S.

Despite continued speculation surrounding a possible acquisition of U.K. distiller Whyte & Mackay by India’s UB Group, the British distiller is making deeper inroads into the U.S. Gemini Spirits & Wine announced a distribution deal earlier this week with Whyte & Mackay despite their somewhat irregular presence in the U.S. in the past.

Owned by U.S. spirits group Sazerac, Gemini will handle Whyte & Mackay’s namesake blended scotch and Jura single malt, which the company hopes to give a more premium positioning. Whyte & Mackay also reportedly plans to make the U.S. a much higher priority among its markets.

The deal with Gemini does not cover Dalmore, a third flagship Scotch whisky in the Whyte & Mackay stable, because Beam Global currently holds the U.S. license and distribution right to the brand.

DIAGEO TEST MARKETS HUNGARIAN LIQUEUR

Diageo North America is rolling out Hungarian liqueur Zwack to Ohio following last year’s successful test launch in Buffalo, NY. Ohio will be the first state to have full distribution, slated for March 1, 2007, and will be distributed locally by Glazers of Ohio.

Zwack, known as Unicum in Europe, is a super-premium herbal liqueur made from more than 40 natural herbs and spices and has been made by the Zwack family in Hungary since 1790. Currently, Zwack, which is produced by Unicom Co. Ltd., is exported to nearly 40 countries.

In other news, Diageo Chateau & Estate Wines company has announced it will sponsor the Elton John Aids Foundation. As a result, the company will provide wines for all EJAF annual fundraising events in the U.S. and a financial donation to the organization's global efforts to support HIV/AIDS prevention and service programs.

BEAM GLOBAL APPOINTS NEW VP

Future Brands announces the appointment of Mike Glennon to vp, customer management. Mike will oversee all strategies and operations relating to services for on-premise and off-premise national accounts and category management, including research/consumer insights. Glennon reports directly to Steve Bellini, president and CEO, Future Brands LLC.

HEAVEN HILL EXPANDS DISTILLERY

Heaven Hill Distilleries of Kentucky received approval to fund a planned expansion of its historic Bernheim Distillery located in Louisville.

THREE THIEVES GOES PREMIUM

Three Thieves, known for its inventive packaging and low-priced wines, has launched a higher-end product (suggest retail $15) with its latest release. “The Show” is a cabernet sauvignon blend from the central and north coast AVAs, featuring Wild West labels designed by Hatch Show Print.

WHOLE FOOD MARKET,

the trendy growing supermarket chain based in Austin, has agreed to buy its prime organic competitor, Wild Oats Markets of Boulder, in a cash tender offer of $565 million and assumption of $106 mil in debt.

SOUTH AFRICAN WINE

and brandy group, KWV, has brought about a number of changes under the newly appointed chief, Thys Loubser. Thys has flattened the company’s senior management structure and eliminated its KWV International and KWV South Africa units, which is apparently the first phase in the realignment of KWV.

SPIRITS CPI FLAT

Christine Farkas of Merrill Lynch reports that wine consumer price index (CPI) of 2% in January was up slightly from December’s growth, driven by favorable product mix as consumers continue to trade up. Wine CPI was up 2.3% for 2006.

By contrast, spirits CPI growth was flat in January, “showing the slowest year on year monthly gain since at least January 1993.” Spirits CPI in Jan of last year grew by 1.8% and was up 1.3% for the year.

STATES STRUGGLE TO DEFINE GRANHOLM

With the Costco appeals case approaching in March, let’s take a look at some of the direct wine shipping issues that are stirring the pot in other states.

GEORGIA. Georgia is inching closer to becoming a direct wine shipping state. Under a bill approved by the House Regulated Industries Committee earlier this week, consumers would be able to have up to 20 cases of wine a year shipped to them directly from farm wineries, which implies the bill would implement a production cap. But here’s the kicker. If passed, the law would require a one time face-to-face sell, and even then, limit the sell to smaller wineries. So if the bill does eventually pass into a law, we wouldn’t doubt it if James Tanford, a professor at Indiana University School of Law who has brought 21 suits on behalf of wineries, soon filed a suit as a representative of a larger, out-of-state winery.

[Ed. note: Tanford has said that in-person purchasing requirements discriminates against out-of-state wineries because a large majority of wine is grown on the West Coast, which makes it much for difficult for consumers to make a face-to-face purchase, and therefore put a barrier on trade.]

Fred Kitchens, executive director of the Wine & Spirits Wholesales of Georgia, was quoted in local papers as saying: "Everyone is in agreement on this. There is no opposition.”

The bill has yet to pass the state assembly. A similar proposal, along with legislation that would allow residents to vote on Sunday sales, is stalled in Georgia’s Senate Regulated Industries Committee.

MAINE. In Maine, a magistrate judge issued a decision in July to uphold the face-to-face requirement in Maine's law. Both sides await a district court judge's opinion. Sen. Lynn Bromley, sponsor of a bill that would allow wine to be shipped directly, has asked a house committee to hold off on consideration of her bill until another case pending at the U.S. District Court is heard.

To what case do they refer? Cherry Hill Vineyards, represented by James Tanford, challenges the Maine law that requires face-to-face sales, calling the law discriminatory against out-of-state wineries.

VIRGINIA. Meanwhile, a state bill to create a state government run nonprofit wine distributor within the Virginia Department of Agriculture and Consumer Services to serve Virginia farm wineries passed the state assembly this month. The bill is designed to help replace the wineries' loss of self-distribution rights after Granholm.

Under the new system, which will go into effect as soon as the governor signs the bills, the state-owned wholesaler will be allowed to distribute up to 3,000 cases of wine each year from each state winery.

ALASKA. Who knew there was wine in Alaska? Well there is, and they are currently waiting on the state senate to approve a bill that has already made it through the house. Currently, Alaska law says consumers must be on-premise of the winery to place any orders. The new proposed law, however, would allow licensed wineries to ship orders under 5 gallons of wine to any resident living in an area that allows mail-order wine.

So many different states and so many different interpretations of Granholm. It almost seems like an endless revolving door of lawsuits and appeals. It’s up to the Supreme Court to get involved in the Costco case once again and clear up questions concerning its ruling in 2005. Will wholesalers win their appeal, or will wineries get their way in direct shipping?

HEAVEN HILL MAKES A BERRY NEW LAUNCH

Heaven Hill Distilleries has added Blueberry as the 14th flavor in the industry’s largest portfolio of flavored vodka. Burnett’s Blueberry is the latest addition to the brand’s flavor portfolio which includes: Cherry, Citrus, Coconut, Cranberry, Grape, Lime, Mango, Orange, Peach, Raspberry, Sour Apple, Vanilla and Watermelon.

THE DAYS OF FREEDOM FRIES ARE OVER

Exports of French wine and spirits swelled by 13% last year, the export federation said Tuesday, pointing out especially good progress in the U.S. market.

The United States was the largest importer, spending more than $2.63 billion on French wine and spirits last year — an increase of 22% from 2005, the federation said.

MILLENNIALS PREFER IMPORTS

Young adults in the U.S. (aka millennials) are apparently more likely to buy imported wines than domestics, according to research conducted by the Wine Market Council. In 2006, domestic wine consumption for millennials plunged to a daunting 37%, well below that of Baby Boomers and Generation X. The Council chalked up the trend to globalization and the desire of young people to “explore” new things. Dang kids.

SPIRITS FLYING OFF THE SHELVES

Spirits posted another solid term of growth into the fourth quarter of 2006 where almost all its sub categories increased in dollar sales, according to IRI scan data for total U.S. food and drug stores

The spirits category was up 4% in dollar sales ending December 2006 from the previous year, with vodka continuing to gain the greatest share and driving overall industry growth. How much of the pie does each sub category take? Vodka holds the highest dollar share at 28%, followed by whiskey (25.2%), rum (13%), cordials (12.8%), tequila (7.3%), gin (4.5%), prepared cocktails (4.2%), Brandy (3.5%), and cognac (1.7%).

All categories, except brandy (down 3.1%) and gin (down 0.2%), reported dollar growth in the last quarter of 2006, and were primarily fueled by the tequila, vodka, and prepared cocktail categories. Dollar sales for cognac, cordials and rum grew 2%, 3% and 4%, while tequila, prepared cocktails and vodka took the cake at 10%, 7% and 7%. Whiskey remained relatively flat at 0.1%.

The top five spirits brands based on dollar sales were Smirnoff (up 8.2%), Bacardi (1.7%), Captain Morgan (9%), Jack Daniels 6%), and Absolut (7%). Jose Cuervo Prepared Cocktails fell at the bottom of the top 15 list, but grew at the fastest rate (up 28.2%).

What about all those different flavors on the shelves? Flavored rum continues to fuel the rum category, while regular vodka shows a higher increase in sales than flavored vodka. In the vodka category it’s not that big of a difference: dollar sales of flavored vodka grew 6.6% and regular vodka increased 7%. Regular rum, on the other hand, grew just 1.6% while flavored rum jumped 5.6%.

Sales of Bacardi and Diageo grew above category growth at 5% and 5.3%, respectively. Brown-Forman saw sales rise 2%, while Fortune grew 0.6% and Pernod declined a little (-0.9%). Diageo held the highest share (28%) in December 2006, followed by Fortune (13%), Bacardi (10%), Pernod (8%) and B-F (7%).

As far as retail goes, spirits saw a sales decline in drug stores during the fourth quarter.
Liquor stores saw the highest increase in dollar sales, up 13.4%, while food stores were second with 5.8% dollar growth.

Cognac took the largest price increase at $0.75 average base price per 750ml, followed by cordial and tequila at $0.62 and $0.56, respectively. Super-premium segments for rum, tequila, vodka and whiskey showed the most growth in the fourth quarter of 2006.

Packaging, as we know, has become more of a focus in the industry, resulting in all types of innovative new bottles. However, the 750ml bottle size still dominates with 50% share of the category (up 5% in sales), while the 1.75L bottle comes in second.
Speaking of innovations, new spirits products accounted for close to $21million in sales in the fourth quarter, with the majority being classified as private labels. Vitali Domestic Vodka, followed by Bacardi Grand Melon rum and Stolichnaya Bluebird Flavored vodka, led the pack as the best selling.

CHARMER CREATES NEW POSITION

Charmer Sunbelt has promoted Arlyn Miller to the newly created position of vp, assistant general counsel, effective Feb. 1, 2007. Arlyn joined the organization in 1998.

FETZER VINEYARDS LAUNCHES FRENCH PINOT NOIR

Fetzer Vineyards, based in California and owned by Brown-Forman, is introducing a new Valley Oaks Pinot Noir sourced principally from the Languedoc-Roussillon growing region in France, priced at $8.99 per 750ml and available now in national release.

WINE, BETTER THAN YOUR VITAMINS

The Sixth International Wine and Heart Health Symposium revealed that doctors at Kaiser Permanente have found that not only does moderate consumption of wine reduce the risk for deaths from coronary and vascular disease, but it also reduces the risk for ischemic strokes, diabetes and even gallstones.

BEAM INITIATES NEW MARKETING CODE

Beam Global has launched its own marketing and advertising code, entitled Beam Global Spirits & Wine Marketing Code of Practice. The code will apply to all the company’s global marketing and advertising activities, and will complement existing national marketing codes and laws.

The code has been implemented immediately in markets where Beam is present.

In other news, Canadian Club whiskey, owned by Beam Global, announced today that it will continue its sponsorship with Andretti Green Racing (AGR) for the 2007 IndyCar Series season.

Canadian Club will be the major sponsor of the No. 27 car driven by Dario Franchitti in its second season of partnership with AGR, will also be an associate sponsor on AGR’s IndyCar Series entries driven by Tony Kanaan and Danica Patrick and an associate sponsor of the #26 XM Satellite Radio American Le Mans Series car.

PERNOD TAKES U.S. OFFICIALS TO COURT

U.S. trade officials will appear before the WTO's Dispute Settlement Body to explain why they are forbidding Pernod Ricard from registering Havana Club rum as a trademark in the U.S.

In 2001 the WTO ordered Washington to suspend a law banning joint ventures with Fidel Castro's government from registering trademarks in the U.S., which includes Pernod’s Havana Club rum. But last summer, the U.S. denied Pernod a permit, and instead gave it to Bermuda-based Bacardi.

FOSTER’S: ABSOLUTELY NO TAKEOVER BIDS

Foster’s Group posted a slight rise in both sales (3.5%) and income (90%) for the first half of its financial year, with global wine volume up 3.3% in the Americas.

Global wine volumes for the company were up by 3.1%, although flagship brand Rosemount dragged the company down 15% in volume and 20% in value, hurting more positive numbers from Wolf Blass and Lindemans.

As you may remember, Foster’s relaunched Rosemount in the U.K. during the first half “with encouraging consumer response,” according to Trevor O’Hoy. The brand will be reintroduced in Australia, the Americas and Europe during the second half.

So while it’s apparent Rosemount has held Foster’s back a bit, Australian and U.S. wine packaging facilities, along with wine export logistics, were behind and increased first half costs as a result. Trevor noted that while first half performance, particularly in wine, was inversely affected by the multi-beverage route to market model, the company has made it a “major priority” to address the problem and eventually transition to a global supply beverage model.

“While not everything is going exactly as planned, the majority of our initiatives and strategy remains intact,” said Trevor. One example is the Southcorp integration, which is now substantially complete 18 months after the acquisition.

Beringer, Lindemans, Penfolds and Wolf Blass are all doing well, according to the company, as global wine premium continues to show attractive top-line growth opportunities. Currently, the premium Australian, Italian, New Zealand and California wines are the key growth drivers for the company, with Lindemans volume up 14.2% on a global scale.

Favorable mix and selective price increases contributed to Foster’s California and imported wine share gains in the $6-8 and $10 and above price points in the Americas, said Pete Scott, CFO. Product innovation contributed about 1% to wine volume growth

Regarding this year’s Australian wine harvest, Foster’s relayed recent industry estimates that production is down 40% from 2006 thanks to adverse climate conditions. For the company, this is good news as Foster’s looks forward to a more balanced wine market in Australia.

“Grape and bulk supply is in good shape as 2007 begins to move the Australian wine industry to a more balanced place,” said Trevor.

Currently, Australian wines make up the majority of Foster’s brands, about three quarters, but Trevor expressed he would eventually “like to see 50% Australian and 50% other wines, but it’s a very long-term goal.”

Moving forward, Trevor said: “Sustained brand investment, improving route-to-market models and operating efficiencies will drive accelerating earnings growth in the second half, and for the full-year.”

Foster's also said today that it has not received any takeover approaches.

"People are well aware of our disclosure requirements and obligations, and I think we have cleared that up two or three times in the last three months,” said Trevor.

"The answer is no." N-O.

With that in mind, Foster’s chief told reporters he was "quietly confident" of meeting analysts' forecasts for annual profit to rise by 19% to $735 million for the full financial year. Only time will tell.

Commentary: State AGs Posture Against A-B

In what I can only describe as typical political posturing, twenty-three state attorneys general, drunk on tobacco money and casting about for the next scapegoat, have written a tough letter to Anheuser-Busch, asking the brewer to step up its policing of consumers gaining access to Bud.TV, their $30 million content-driven website which already has the toughest standards for preventing underage access than any other alcohol website.

The state AGs are proposing several additional safeguards, like sending a postcard to the home or making a phone call to verify age.

Give me a break. What strikes me as eminently ridiculous and disingenuous about this letter is that the state AG’s have hardly lifted a finger to prevent underage access to web sites WHICH ACTUALLY SELL ALCOHOL, which have absolutely no or very little age-verification tools. But they will posture and strike a sanctimonious tone, saving our children from the evils of Bud.TV, a website which doesn’t sell alcohol, but merely has some funny G-rated vignettes which are only benignly tied to beer at all.

THE EXPERIMENT: A TRUE STORY. To prove my point, yesterday afternoon I sat my thirteen year-old son at a computer and asked him to attempt to gain access to Bud.TV. After several tries, he could not gain access to the site. Finally, he figured out he could use my birthday (which he had to ask me) and my name. But again it rejected him because I had already signed up. So, yes, with some conniving he probably eventually would have gained access to, gasp, videos of chimps doing people's jobs.

Then, I asked him to purchase a bottle of Everclear 190 Proof grain alcohol. After a quick Google search, he found a vendor called InternetWines.com. With his debit card (which he has as a part of his checking account) he purchased a 750ml bottle to be shipped to our house via UPS Ground, and the only age verification was a box that instructed him to “Enter Your Age at your Last Birthday”, to which he entered, 21. Where, I ask, are the Attorneys General now?

But I can rest easy at night knowing that my son will be saved from Vince Vaughn’s bad jokes on Bud.TV thanks to our country’s diligent AGs, but can easily purchase a $25 bottle of grain alcohol (not to mention call up any variety of deviant pornography you could possibly conceive, and some you can't). No call for postcards sent to the house, no phone calls verifying age. Just the honor system. And yet this is happening with nary a wimper from politicians or judges on access control.

The 23 attorneys general who sent the letter are from Maine, Louisiana, Alaska, Arizona, Connecticut, Delaware, the District of Columbia, Illinois, Iowa, Kansas, Maryland, Nevada, New Mexico, New York, North Carolina, Ohio, Oregon, Puerto Rico, South Carolina, Tennessee, Vermont, West Virginia and Wyoming, and they should all be ashamed of themselves for going after A-B to make an easy political score, because A-B apparently has deeper pockets and a higher profile than InternetWines.com. Oh, deliver me please from the perfidy, the hypocrisy.

This commentary contributed by WSD publisher Harry Schuhmacher

TWISTED RTD COMES TO AMERICA

Twistee Shots, which sell in excess of 20 million units per year globally, are now available in the U.S. market via Smart Beverage Group.

The imported ready-to-drink Twistee Shots feature a unique twisted shot glass containing two flavored vodkas, such as Butterscotch/Vanilla and Strawberry/Vanilla, in separate compartments. The consumer enjoys two flavors in one shot.

Twistee Shots come in 200ml 8-packs and 100ml 4-packs. New flavors include the B52 shot and Irish Coffee and Cream shot that will be introduced later this year to Maryland, Texas, Delaware, Connecticut, Tennessee, Colorado and Oklahoma.

CALIFORNIA BRUNTON VINEYARDS SOLD

Communications group New Paradigm Strategic Communications has completed its acquisition of Brunton Vineyards, the company said in a statement. Upon completion, the combined companies will change their name to Brunton Vineyards Holdings, Inc.

Brunton Vineyards is a producer and marketer of several wine brands, and reportedly plans to launch at least 20 new brands within the next two years. The company is also launching retail wine lounges in over 60 major markets throughout the country.

Brunton also announced plans to sponsor the #87 NEMCO Motorsports car in this year’s NASCAR Busch Series. Financial details of the sponsorship were not disclosed.

DIAGEO HALTS PRODUCTION OF BUSHMILLS

Diageo said it will stop production of Bushmills Irish cream liqueur before Christmas and run down its stock to deal with the limited success of the new brand. Diageo bought the Bushmills whiskey business in 2005 from Pernod Ricard, but has sold limited case volume of Bushmill Irish cream in the last year.

Luckily, there will be no impact on jobs as Diageo plans to focus on the core Bushmills Irish whiskey product.

EUROPEAN PARLIAMENT REJECTS LIBERAL WINE PROPOSAL

A European Commission proposal to increase the profitability of the wine industry by paying farmers to rip out 400,000ha of vines and reduce unsold surplus was rejected by the European Parliament last week.

The parliament accepted Greek socialist member Katerina Batzeli’s call for maintaining distillation subsidies and limiting digging up vines, although the ultimate decision still lies with EU ministers.

The parliament also moved to protect traditional EU winemaking practices (no oak chips, ect.) by calling for oenological practices not approved in the EU to be “clearly labeled” on imported wines.

VIJAY MALLYA: IS HE OR ISN’T HE

According to reports, Vijay Mallya, the chairman of United Breweries Group in India, is thisclose to closing a deal with Britain’s Whyte & Mackay spirits group. U.K. newspaper The Daily Telegraph said last weekend that Mallya supposedly agreed to pay around $1.1 billion for the Glasgow-based Whyte & Mackay after several months of talks.

The deal has yet to be finalized, but people close to the agreement say they are edging closer to the end, which it could be wrapped up in the next three weeks.

If Mallya is successful, he will gain W&M Scotch whiskey, Vladivar vodka and Jura single-malt whisky to add to his Kingfisher lager, Bagpiper and McDowell’s whiskies.

Other reports have indicated that Vivian Imerman, chairman and chief at Whyte & Mackay, is denying rumors that he has agreed to a deal to sell his company to UB Group.

“We remain the owners of Whyte and Mackay and are still considering all of our options,” Imerman said this weekend.

Talks, which began last October, have stalled on more than one occasion due to Vivian Imerman, chairman and chief at Whyte & Mackay, holding out for more money while Mallya refused to purchase the company at all costs.

PERNOD SELLS SEAGRAMS DISTILLERY

Pernod Ricard has agreed to sell its historic Seagrams distillery located in Lawrenceburg, Indiana to CL Financial, a Trinidad and Tobago-based company whose holdings include spirits and ethanol. Financial details were not disclosed.

BELVEDERE ACQUIRES V&S BUSINESS

V&S Group has sold its Florida Distillers business to French spirits group Belvédère to focus on its branded spirits.

V&S bought the unit as part of its acquisition of rum group Cruzan International in 2005. Florida Distillers produces bulk and branded spirits, and is the leading producer of citrus brandy and citrus spirits in the U.S.

BEAM GLOBAL SNAGS EX-COLA EXEC

Beam Global Spirits & Wines (BGSW) has grabbed Coca-Cola GB senior brand manager Paula Jordan to head up the new position of marketing director, international. Beam also plans to appoint a second person to fill a similar international role.

The two international marketing roles will work alongside each other and both will report to Nick Garland, BGSW's vice-president of marketing, international.

LOW END WINE IMPROVES IN JANUARY

Domestic wine sales topped 10.4% in January, according to IRI supermarket scanner data for the 4-week period ending January 2007, as reported by Merrill Lynch’s Christine Farkas. January sales improved from December’s growth of only 8%, and trumped the 6.6% increase in January 2006.

Specifically, table wine sales rose 10.7%, improving from 8.6% in Dec. Domestic dollar sales climbed by 11.4%, driven by volume growth of 6.8% and price/mix growth of 4.3%. Import dollar sales increased by 8.7%, including 0.5% price/mix gains and strong 8.2% volume growth.

Altogether table wine volumes rose 7.1%, above Dec.'s growth of only 4.7%, and once again lapped a -2.5% decline in Jan 2006. All price categories above the $2.99 per bottle range experience volume gains.

Good news for the big wine companies (I’m talking to you Constellation.) Low end wine volumes improved in January in the U.S. while high end wines remained strong. Category price/mix was up 3.4% in January to $5.39/btl, but represented the slowest growth in the last thirteen 4-wk periods (peaking at 9.4% in Jan 2006). Price/mix for low end brands saw more moderate declines, with the $3-$5.50 per bottle segment showing particularly good trends. Pricing for wines <$5.50/btl was essentially flat, while mid-tier brand pricing rose by 2% and super-premium pricing was flat to slightly up.

Volumes of wines priced >$15 per bottle rose by 22.8% in January, along with a 17% gain in the $12-$15 segment and a 10.6% rise in the $9-$12 segment. Volumes in the $5.50-$9 segment grew by 12.2%, and volumes in the $3-$5.49 and <$3 segments grew by 6.5%and 0.3% respectively.

The major players (Gallo, Constellation and The Wine Group) are still trailing industry gains with a reported dollar sales growth of 8.4%, 4.5% and 5.2% respectively, as compared to overall table wine gains of 10.7%. Gallo and STZ enjoyed above average wine price/mix growth of 3.5% and 6.5% respectively, while the Wine Group saw its price/mix fall by 2%. Collectively, the three boys suffered volume and dollar share declines while imports gained volume share in January, driven by Australia.

RISQUE SVEDKA COULD COST CONSTELLATION ITS DISCUS MEMBERSHIP

Constellation’s acquisition of Svedka vodka has been viewed as an unpopular choice among analysts and other industry leaders. Why is that? An article in Advertising Age by Jeremy Mullman earlier this week zeroed in on the issue, so let’s take a look at some of the highlights.

Bascically, Svedka comes dangerously close (and is already there in some peoples’ opinion) to violating the self-regulated marketing code of ethics drafted by DISCUS, a powerful liquor lobby that Constellation is a big part of. It is largely due to DISCUS’ dedication to this code that its members enjoy access to cable TV advertising, but it was just a matter of time before a member company ran afoul through acquisitions.

While Svedka vodka is a non-member brand, it pretty much got to where it is today by flouting the very DISCUS code that others so carefully adhere to. Promiscuous fem-bots, shot glasses in cleavage, and other gratuitous hanky-panky are what made Svedka break through the crowded high end vodka market.

Constellation CEO Richard Sands said, “Svedka's phenomenal success is largely due to the eye-catching and effective marketing and advertising campaigns that reach a key segment of the young-adult market.”

Now, having been bought by Constellation, Svedka becomes a DISCUS member by default – and is as defiant as ever.

As published in Ad Age: "Constellation bought us for who we are," said Marina Hahn, Svedka's chief marketing officer, whose marketing team will be left intact after the purchase. "We're an edgy, smart brand that's broken through, and we expect to keep doing what has worked well."

According to the article, a Constellation spokesman said no decision had been made to change the existing ads or to instruct Svedka to adhere to the Discus marketing code. However, it’s very likely that Svedka will be forced to clean up its act under new management, simply because Constellation has too much at stake just to blow it on one brand. Being a member of DISCUS has helped put Constellation on cable TV, and we seriously doubt they’d compromise that position.

Tim Ramey of D.A. Davidson Research pointed out in his research note that Andy Berk, President and CEO of Barton, Inc. (the spirits division of Constellation), is also chairman of DISCUS.

Says Tim: “Richard Sands assured us that the current ad campaign is not in violation of DISCUS policy and that they hoped to remain on "this side of the line," while remaining pretty close to the edge.”

In our opinion, the ads can remain edgy, but still fall within the DISCUSS guidelines – but since no one ever listens to us, we’ll just have to wait and see.

JIM BEAM KICKS OFF NATIONAL TV ADS

Beam Global Spirits & Wine plans to launch four new cable network ads to promote Jim Beam in the U.S. The ads are an extension of Jim Beam’s first national television campaign (Sept. 2005), featuring ‘The Stuff Inside Matters Most’ tagline.

The ads will air on various cable networks such as Spike TV, Discovery, Country Music Television and ESPN.

LVMH: DIAGEO ISN’T GOING ANYWHERE

Amid rumors that Diageo plans to sever its ties with LVMH in order to acquire Remy Cointreau, LVMH wine and spirits division head Christophe Navarre is singing another tune. At the company’s annual presentation yesterday, Navarre said he feels “confident” about the LVMH’s future association with Diageo, and that “relations have never been so strong.”

DIAGEO’S FIRST HALF SAVED BY NORTH AMERICA

Diageo delivered its first half results today, reporting first half organic sales growth of 6% and operating profit up 8%. In all, the results were mixed as U.S. and International sales plunged upwards, while Europe remained quite a bit weaker. But since the U.S. and North America is our main concern at WSD, things were looking pretty good from our end.

Paul Walsh (chief of Diageo) said, “North America was created to outperform a growing market, and it’s exactly what we’re doing. Our core strengths are superior route to market, our brands, and the level and quality of our marketing.”

Despite differing results, Diageo raised its full year guidance from 7% organic operating profit to 8% growth. However, the company reported that it does not expect any significant changes in the second half.

The group was bolstered by strong sales of spirits, in particular from Johnnie Walker, where North American sales rose by 8% overall. Spirits volume in North America grew 3% for the first half. Increase demand for Baileys, Smirnoff and Johnnie Walker, along with a price increase for Captain Morgan, played a big hand in the growth.

Paul told analysts that the company plans to increase marketing spend on Johnnie Walker by 25% as a part of its increased “focus on premium brands and our ability to deliver top-line price and mix benefits.”

Spirits overall sales grew 2% driven by Smirnoff and Johnnie Walker which grew 6%.

“Both strong brands that have benefited from our effective advertising campaigns,” said Nick Rose, CFO.

He continued:

“Focus on premium brands and superior route to market in the U.S. delivered strong topline growth. Volume and sales growth in the U.S. was driven by priority brands and our August price increases on Johnnie Walker, Guinness, Baileys, Captain Morgan, and Crown Royal.”

Spirits gained strong momentum in the U.S. with volume rising 3% and sales up 5%. The company attributed the growth to an increase in consumer confidence; growth in the legal drinking age population; changing demographics; and the growing level of acceptance of spirits in the alcohol beverage category. The company also confirmed that major changes to the distribution network in the U.S. are now over.

All the priority brands in the U.S. gained share expect for Jose Cuervo. As Diageo said, its share of tequila has declined in the U.S. because the company refused to lower prices to match its competitors.

Commenting on the U.S. spirits market, Paul stated that “we may have lost half a point of momentum volume in the category, but let’s be clear, this is still a very attractive category. The structural dynamics here will continue to favor spirits and imported beer. I don’t see any fundamental shift in that market taking place.”

Net sales were up 9% in the U.S., although ready-to-drink products were down overall 4%. Nick stated that while Smirnoff RTDs were down 13% due to competition and declines in the category, strong growth in other RTD products, like Cuervo Margaritas, offset Smirnoff.

“We do expect to continue the downward trend in RTDs, maybe not quite at this level, but we do expect it to follow.”

Wine sales grew 6% for North America. California wine brands, led by Sterling, had another good half where net sales were up 11%, said Nick.

Hurricanes in the U.S. at the half had adverse impact on trading, bringing net sales and operating profit down as a consequence, said the company.

When asked about past problems with the Allied sales force, Paul Walsh stated, “We have not seen anything materially different in the way the brands have been promoted or marketed than before. We think the industry overall will benefit from having a strong second half.”

One account Diageo is looking to for help? Wal-Mart.

“We’re already are seeing very good performance with Wal-Mart in the U.S. as their appetite has increased around the share of spirits. Currently, we do enjoy category captainship in the account, and we expect to perform even better,” said Paul.

"We do see Wal-mart as a positive and we do think it will drive incrementability because it will simply improve the accessibility to consumers. Couple that with our market share, and yes, we expect it to be very positive.”

Repeatedly during the conference, Diageo management attributed growth in the U.S. to innovation. When asked to specify what the innovation actually entails, Diageo North America president Ivan Menezes stated:

“Innovation is broad based across spirits, RTD and beer, where $70M of revenue will be used on innovations in North America. This will include driving more premiumization in spirits, such as Oronoco premium rum. There will also be a couple of new products and extensions in the RTD sector to drive business.”

However, Ivan declined to comment on specific upcoming product launches in North America during the second half.

CHILEAN BOX WINE ENTERS THE U.S.

Taborga Chilean wines are offering the 3L Bag-in-Box to the U.S. market as one of the first entrants from Chile in this segment. Offered by Viña by Lomas de Cauquenes and C&C Imports, Taborga is available in the $5 retail range.

CAPITAL WINE & SPIRITS EMERGES FROM CHARMER

The Charmer Sunbelt Group (CSG) has formed an agreement to merge its two Pennsylvania brokers, Capital Wine & Spirits and Bartolomeo Pio Inc., effective this spring. The new operation, Capital Wine & Spirits LLC, will continue as a member of NYC-based CSG.

REPUBLIC ARIZONA PROMOTES NEW PRESIDENT

Mark Moser of Republic Beverage Co. has been promoted to president of the Arizona market, effective February 13. Mark has been with Republic for 17 years, most recently serving as executive vp of the Southeast Texas area covering the Houston market. Prior to Republic, Mark worked as a field marketing manager for E & J Gallo for 5 years.

In his new position Mark will oversee the entire Arizona market. A search for his replacement in Texas has begun.

FISHEYE WINES KICKS OF $4.5M AD CAMPAIGN

Fisheye Wines of California is planning to launch a $4.5 million national television ad campaign that premiers Oscar Week. It’s Pinot Grigio, Chardonnay and Shiraz 3L cask wines will be promoted during E! Channel’s Live from the 2007 Academy Awards Red Carpet Show, Desperate Housewives, Lost, Grey’s Anatomy, Brother and Sisters and Boston Legal throughout the first half of 2007. Described as “hip” by the company, the 30-second spots target 25-40 year old wine drinkers

LION NATHAN TO SELL WINE ASSETS?

Australian brewer Lion Nathan may sell a part of its wine business, valued at about $185 million in total, according to Credit Suisse analysts.

What was the tip off? Lion Nathan said last week it would not reactivate a A$200 million share buyback plan, which seems a little strange to industry observers. One option for Lion Nathan is to retain the Australian and NZ selling divisions, but sell the brands and hard assets, said CS analyst Larry Gandler.

"We conclude that Lion Nathan is considering divesting part of its wine division," he said.

Japan’s Kirin Brewery Co. owns 46% of Lion Nathan, whose brands include Petaluma, St. Hallett’s, Wither Hills and Argyle. Its shares have gained 4.8% in the past month and 18.5% over the past year.

SIDNEY FRANK AIMS TO START A NEW TREND

Sidney Frank is poised to launch its new super-premium rum, Tommy Bahama White Sand and Tommy Bahama Golden Sun, in the U.S. later this month. Hailing from Barbados, Las Vegas will be the first city to sell Tommy Bahama, followed by launches in California and New York.

The brand will go for around $29.99 per 750ml bottle, backed by mega-advertising to the effect of Grey Goose before it was sold to Bacardi. Will super-premium rum take hold like vodka did in the past? If so, cocktails will play an important role in its growth.

LVMH POSTS “OUTSTANDING GROWTH IN WINE AND SPIRITS.”

LVMH Moet Hennessy wines and spirits sector reported a strong increase in volume and improvement in product mix for 2006. Organic revenue was up 14% with growth accelerating in the last quarter of the year, and profit from recurring operations increasing 11% to 962 million euros.

The champagne business saw a continuous growth in volume over the period, while Veuve Clicquot recorded especial growth in the U.S. and the U.K.

Hennessy cognac recorded the highest growth in 2006, notably the U.S.

The repositioning of Glenmorangie whisky continued successfully in all of its markets, said the company, and helped strengthen its position in the U.S and Europe. Belvedere vodka also saw growth.

AUSTRALIAN GLUT TO DRY BY 2008

After taking a look at the 2006 California crush yesterday, let’s see how things are going in other notable regions:

AUSTRALIA

WINE SHORTAGE. The Wine Grape Growers of Australia predicts that 2007’s overall vintage volume will be 40% or 800,000 tons lower than last year due to the drought. Wine Grape Growers Australia is forecasting a harvest of 1.2 million tons, down 800,000 from the 2006 vintage, which could bring an end to the current grape glut as early as 2008.

Kaumil Gajrawala of UBS, says, “As the lower harvests lead to supply/demand becoming more balanced over the next few years, we expect global wine pricing to firm up."

Could this mean an end to insanely cheap bulk wine? Already, oversupply concerns are easing in the U.S. after the California Agricultural Statistics Service said the grape crush decreased by 16% in 2006.

“This further confirms our expectations for strong U.S. retail pricing,” said Kaumil.

Britain and the U.S. remained the biggest export markets for Australian wine in 2006, while volume to the U.S. grew 6% to a record 221 million liters, while value declined marginally to $927 million.

WASHINGTON

As the U.S.’s second largest wine state, Washington State sold the equivalent of 6.4 million cases of wine in 2006, including 937,000 case equivalents of bulk wine. They crushed 120,500 tons of grapes, and paid an average of $984 per ton, according to the first-ever Preliminary Washington Winery Report.

Washington currently contains 427 wineries, where Chardonnay remains king and Riesling’s not far behind. Among the top 10 varieties in volume, Cabernet Sauvignon reeled in the highest average price at $1,261, followed closely by its parent variety, Cabernet Franc, at $1,243.

COLORADO LANDS TRUMP VODKA

Trump Super Premium Vodka, owned by Drinks Americas, is now available in the Colorado market and will be distributed by National Distributing Co.

Colorado marks the 27th state for Trump vodka, which eventually hopes to expand to all 50 states over the next several months.

CALIFORNIA COOLER RESURFACES FROM THE EIGHTIES

After first establishing the brand in 1981, Majestic Brands will be launching the new California Cooler in March of 2007. Made with real wine and infused with natural flavor, four varieties will be offered this spring; Coastal Citrus, Pomegranate Berry, Cranberry Grapefruit and White Peach.

The line will be available for retailer orders in late March.

WINE INDUSTRY ICONS JOIN THE VINTNERS HALL OF FAME

The Culinary Institute of America (CIA) announced that Andre Tchelistcheff, Georges de Latour, Charles Krug, Agoston Haraszthy, Gustave Niebaum, Maynard Amerine, Harold Olmo, and Brother Timothy will be inducted into the Vintners Hall of Fame, alongside Robert Mondavi.

The honorees were determined by ballots sent to 70 top American wine journalists, and will be officially inducted into the Vintners Hall of Fame next month. The above mentioned individuals are either credited as “founders” or “icons.”

SIDNEY FRANK ANNOUNCES NEW EXECUTIVE APPOINTMENTS

Sidney Frank Importing Co. made several executive promotions earlier this month. Stuart Moselman, formerly executive vp of administration and finance and a partner since 1985, was named COO.

Meanwhile, Matthew Frank, one of the company’s founding fathers, was appointed corporate vp of strategic planning. Previously, he served as senior economic strategist.

Thomas Bruno, Jr. was named executive vp of sales. Bruno was most recently senior vp/national sales manager and has been with Sidney Frank for 15 years.

COSENTINO CHIEF STEPS DOWN

The chief executive of Cosentino Signature Wines, Kevin Smith and Michael Forman, has resigned from the company as a condition for the Napa Valley-based wine group securing a $3 million loan.

Company director Larry Soldinger has taken over the roles of chief and chairman after MCOZ Preferred LLC, a private entity controlled by Soldinger, provided the funds.

Cosentino said today that it has signed a non-binding letter of intent with its lenders on a refinancing package, which may or may not include the sale of certain wine assets.

RED WINE FOUND TO PREVENT COLON CANCER

According to topcancernews.com, a new study has found that drinking more than three glasses of red wine a week can prevent colon cancer. The compound resveratrol reduces the incidence of abnormal growths and cancers of the intestinal tract by two-thirds.

Dr. Joseph C. Anderson, an assistant professor of medicine at the State University of New York at Stony Brook, was quoted in the article as saying: "If you’re going to drink, drink red wine".

The incidence of cancers and polyps that can become cancerous was 9.9% in those that abstained from alcohol, 8.8% in those who drank three glasses or more of white wine a week and 3.4% in those that drank three glasses of red wine a week (a 68% reduction).

TESCO ANNOUNCES AZ PLANS

Big UK grocery chain (the Wal-Mart of Europe, as many call it), Tesco, is going to open up 20 stores in Phoenix under the “Fresh and Easy Neighborhood Market” name. Ironically, the chain is creating smaller format stores to compete with Wal-Mart Supercenters.

A Tesco exec said: "The Fresh & Easy Neighborhood Market format is designed to draw customers back to their local neighborhoods.”

Tesco tailored the format according to findings from extensive customer research in local U.S. markets, combined with learnings from the more than 1,000 existing Express stores it operates in seven countries.

But beating Wal-Mart is tough. Same-store sales at Wal-Mart, including Sam’s, were up 2.2% for the five-week period ended Feb. 2. Wal-Mart had been experiencing declines in foot traffic, but the chain said those declines are now slowing.

SOUTHERN WINE & SPIRITS EXPANDS IN NY

The Southern Wine & Spirits New York division has announced it will acquire certain assets of Eber Bros. Wine & Liquor Corporation, including the House of Burgundy and the Liberty Wine Company divisions, all based in the state of New York. The transaction is anticipated to close on March 31, 2007.

LETTER TO CONGRESS: “NOW IS THE TIME TO REDUCE ALCOHOL TAXES.”

Last week several industry trade groups, including DISCUS (Distilled Spirits Council of The United States), WSWA (Wine and Spirits Wholesalers of America) and ABL (America Beverage Licensees) sent a letter urging Congress to reduce excise taxes on alcohol. Here are some snippets of the letter:

"In the last several sessions of Congress, hundreds of Members of Congress have co-sponsored bipartisan legislation to reduce excise taxes on alcohol. Now is the time to consider a reduction and dismiss any consideration of an increase.”

“A key measure of the fairness of a tax system is its p