CHOPIN VODKA FACES FALSE ADVERTISING CLAIMS

Zodiac Spirits filed a suit against Moet Hennessy earlier this month in a Michigan district court claiming false and misleading advertising of their Chopin Vodka brand.

Zodiac has been marketed as a “Luxury Potato Vodka” since 1999, and finds fault with Chopin’s tagline that claims it is “The World’s Only Luxury Potato Vodka.”

In connection with the filing, Zodiac Spirits released the following statement:

“Moet Hennessy is a major force in the distilled spirits marketing industry. They have aggressively marketed their Chopin Vodka brand, and in doing so continue to falsely make the claim that Chopin is ‘The World’s Only Luxury Potato Vodka’. Zodiac directly competes with Chopin both at retail and in licensed establishments in a number of markets.”

“After Chopin’s refusal to honor Zodiac’s request that it cease making this false claim, we feel that our only alternative now is to turn to the courts to prevent Chopin from further benefiting and causing additional confusion through these misleading advertising and marketing tactics.”

Distilled in Idaho, Zodiac is positioned as an ultra-premium vodka available throughout Illinois, Michigan and in selected markets in Texas.

Moet Hennessy had not responded to a request for comment by press time.

FAT BASTARD SHOOTS FOR PREMIUM UPSWING

Bloomberg reports that Click Wine Group (which gave us Fat Bastard) is releasing a new super-premium line called the Global Wine Collection. In the article, founder Peter Click said that the new brands were geared toward millennials’ and their ever-expanding taste for premium, imported wines.

“The Millennials are traveling more and experimenting more with food and wine,” said Peter to Bloomberg writer John Mariani, “so they drink a lot more wines from other countries. We're aiming at them.”

The new line includes Flying Fish from the Pacific Northwest, 2up from Australia, Clean Slate from Germany and Mad Dogs & Englishmen from Spain. The bottles retail, on average, for $10 a pop.

FALSE REPORT LEAVES PERNOD SCRATCHING ITS HEAD

A local Indiana newspaper incorrectly reported that Pernod Ricard USA will lay off 405 employees at the former Seagram Distillery in Lawrenceberg, a Pernod spokesperson told WSD.

Pending the asset sale of Pernod‘s Lawrenceburg facility (originally scheduled for complete shutdown) to the CL Financial Group at the end of June, CL plans to continue to operate the facility and recruit a yet-to-be-determined number of existing employees.

Pernod’s filing of a WARN notice with the State of Indiana last week was done to comply with the legal requirements regarding workforce notification for shutdown or sale of a single facility, and is not indicative of CL's hiring plans.

All in all, Pernod’s filing, which was done in compliance with the WARN act, was misinterpreted as a newly announced layoff.

As you may remember, Pernod announced a pending agreement with CL Financial Group, the parent company to CL World Brands earlier this year. CL’s brands include Angostura, Hine Cognac, Burn Stewart Scotch and an investment in Belvedere.

The tentative list of assets to be sold includes the Lawrenceburg distillery, bulk warehouse, bottling plant and finished goods warehouse, as well as the Rushville Grain Elevator. Terms of the proposed sale would mean that a yet-to-be-determined number of jobs would be upheld at the aforementioned facilities.

The agreement provides for the continuation of Seagram’s Gin distilling and mellowing at the Lawrenceburg facility under the supervision of Angostura. As previously planned, all bottling for Seagram’s Gin and Wild Turkey would move to Pernod Ricard USA’s facility in Fort Smith, Arkansas.

BEER DISTRIBUTORS TAKE ON WINE & SPIRITS

In response to Diageo’s investor conference last week, wholesalers are preparing for increased execution and marketing standards as Diageo starts the process of re-negotiating their contracts. Could the negotiations result in further consolidation like in years past? We have no choice but to wait and see. Meanwhile, our colleague Harry at Beer Business Daily reports that:

“Beer distributors are telling BBD from several parts of the country that small independent wine and spirits producers are calling them as word is getting out that beer guys can execute (even on Saturdays).”

His remark was in response to a quote by Ivan Menezes, Diageo North America president that read: “I'd say that US wholesalers are still notoriously weak on customer service. If you walk into a supermarket in California on a Monday morning you'll still find many stores out of Cuervo, out of Smirnoff because wine and spirits distributors for the most part do not deliver on Saturdays.”

We’ve already heard from several sources that beer distributors are starting to take on artisan vodkas and other spirits to help beef up their portfolio.

REPUBLIC NATIONAL FINALIZE MAY 1

It’s official: Republic and National are now a unified company. Republic National Distributing Company (RNDC), the nation’s second largest wine and spirits distributor has completed the merger in 17 states and the District of Colombia as of May 1, 2007

HEAVEN HILL LAUNCHES LUXURY CACHACA

WSD has heard many insiders claim that caipirinha is the next “big” cocktail and will resonate with consumers much like the mojito and margarita. Heaven Hill Distilleries plans to jump on the bandwagon and become the first major supplier to import and distribute luxury cachaça to the U.S. marketplace. After forming a j-v with Excelsior Imports to import Água Luca Brazilian Rum Cachaça, the brand will be available in upscale on-premise accounts such as Wynn Las Vegas and Prime 112.

“Cachaça is best known for the distinctive caipirinha cocktail – Brazil’s signature cocktail – featuring sugar and muddled limes. The emerging popularity of the distinctive caipirinha is growing nationwide beyond Latin accounts to national accounts, clubs, pubs and ultra-lounges alike. The cocktail is poised for approach the magnitude of the mojito. The unique spirit also has additional uses in daiquiris and other rum-based drinks,” says the company.

MOJITO GUM HITS MARKETS

This has been out for awhile so it’s not exactly breaking news, but Orbit gum (owned by Wrigley) has come out with a mojito flavor called “mint mojito.” Correct us if we’re wrong, but this is the first time since “pina colada” that a flavor of gum has been named after a cocktail – marking it as an exciting inroad for the industry.

As you would expect, Wrigley has taken some heat from industry watchdogs (Marin Institute) but the flavor has reportedly taken off with consumers.

RUMOR ALERT: BROWN-FORMAN/BACARDI MERGER

Once again, rumors are surfacing that Brown-Forman and Bacardi may form a possible merger. This rumor has been going around for sometime, but is gaining some steam in the press (as rumors so often do) and has landed itself in the April edition of Forbes. In an article by Matthew Swibel, the author points out that B-F has gone down in share price as of late due to the Herradura acquisition and would benefit greatly from a merger with Bacardi.

“Two years ago Brown-Forman seemed poised to benefit from a weakening U.S. dollar by expanding brands like Jack Daniels and Finlandia overseas...but the company's recent purchase of Mexico's Grupo Industrial Herradura, a tequila maker, for $766 million, soured investors. Shares are down to a recent $64.”

“Rumors are swirling about a possible merger with rum maker Bacardi, which already distributes Brown-Forman bourbon and other liquors in the U.K. Such a deal may help Brown compete with Diageo and Pernod Ricard, the two largest spirits companies. It’s more likely that 37-year old board chairman George Garvin Brown IV, the steward of the Jack Daniel’s brand in Europe, Africa, and Eurasia, will continue his clan’s independent streak and relish the greenback’s prolonged misery,” wrote Matthew.

DANNY DEVITO UNVEILS LIMONCELLO

Actor/Producer Danny DeVito plans to personally unveil Danny DeVito’s Premium Limoncello – an imported Italian liqueur made from Sorrento lemons – at a news conference in Orlando, Florida, in conjunction with the Wine and Spirits Wholesalers Association Convention next week.

BELVEDERE COMPLETES FLORIDA PURCHASE

Belvédère confirmed it has completed its purchase of the Florida Distillers Company (the leading producer of citrus spirits in the US) from V&S Group yesterday. Belvédère now owns two distilleries in the US with a total annual production capacity of around 5m nine-liter cases. Price details were not disclosed.

BACARDI APPOINTS EX-ALLIED EXEC

Bacardi has named Graham Hetherington as cfo. Graham succeeds Ralph Morera, 62, May 1 and will be based in Bacardi’s global headquarters in Hamilton, Bermuda.

Graham joins Bacardi from Allied Domecq PLC where he served as Chief Financial Officer for six years, up until that company was acquired in 2005.

NORM WESLEY: “MOST CHALLENGING QUARTER” IS OVER

Fortune’s wine and spirits business helped make up for an overall sales loss due to its home and hardware section. But since we’re in the alcohol business, let’s zone in on Beam Global. All in all it was a profitable quarter for wine and spirits although down a little more than expected on Wall Street. But as chief Norm Wesley repeatedly mentioned, the first quarter is not a big money maker in the alcohol beverage business, which managed to grow 8.6% in net sales (if you don’t include a few one time costs).

“Fortune brands will progressively get better and our most challenging quarter of the year is now behind us,” said Norm. “Solid profit growth for our spirits and wine brands partly offset lower results from our home product brands."

“In spirits and wine, our largest profit contributor, we drove mid-single digit growth in both global depletion case volumes and operating income on strong consumer demand for our premium and super-premium brands.”

So, since wine and spirits were responsible for much of Fortune’s growth, the company plans to work on its “ability to grow our major premium brands” in 2007. Are you starting to see a trend? All the wine and spirits companies are aiming to grow their luxury portfolio.

THE YEAR OF BOURBON. As president and coo Bruce Carbonari put it, “With the successful integration of the major acquisition behind and a high performance organization in place, we’re now focused on building brands people want to talk about.”

How is the company going to manage that? By spending more money of course. Beam plans to increase its wine and spirits spend by double digits this year. This includes the launch of four new Jim Beam TV ads, and a 5 year, $70 million investment in Jim Beam and Maker’s Mark. The company also plans to leverage Sauza for its largest Cinco de Mayo presence ever.

In addition, Bruce declared 2007 “the year of bourbon.” He reiterated that bourbon is a hot market and that Beam “has the all-star team of bourbons, especially high-end bourbons which grew 6% in the U.S. last year.”

ABSOLUT STANDING. Before the conference call really got to a head start, Norm went ahead and made some comments on the privatization of V&S and Absolut.

“Since 2001 we’ve had a partnership with V&S on three levels: distribution in the U.S., the Maxxium joint-venture, and a 10% equity stake that V&S has in our wine and spirits business.”

“As a business partner with V&S we have a natural interest in its privatization,” continued Norm. “Our close relationship has further built our respective brands.”

“We will obviously take a close look on the opportunity to build our relationship with V&S if and when the Swedish government completes the privatization process.”

When asked to comment further on V&S during the question and answer portion, Norm said Beam’s relationship with the Swedish company “was a very attractive deal going in so there would be a short term hit. We’re obviously in a much better position than would have been before we did the Allied brands deal, so we would work our way through it and it’s not something right now that we’re losing sleep over.”
ONE TIME FACTORS HURT SALES. Craig Omtvedt, cfo, reported that a decline in reported sales were the reflection of a few onetime factors:

1. Last year’s distribution transition in Spain
2. Transitional bottling contract with Pernod Ricard
3. Challenging comparisons for shipments in the US due to the pipeline filling with new distributors

According to Craig, net sales for spirits and wine would have been up low-single digits if it hadn’t been for the one time costs. But as he pointed out, case volume was quite a bit better than that, up a “very healthy” mid-single digit rate. In addition, premium and super-premium volumes grew twice as fast as Beam’s national and regional brand growth.

International global volumes for Jim Beam and Maker’s Mark are up mid-single digits ytd, while Canadian Club has high single-digit volume growth. Sauza, Courvoisier and Knob Creek exemplify double digit volume growth. Teacher’s Scotch had a double digit volume growth ytd, mainly due to a surge of popularity in India.

As for wine brands, Geyser Peak, Wild Horse and Clos Du Bois grew at the mid-single digit rate.

“We feel excellent momentum and spirits and wine and feel well positioned to deliver strong results,” said Craig. “We believe we’re on track to achieve our 2007 target of the mid to high single digit range for wine and spirits, which includes the double digit spend increase that Norm mentioned earlier.”

Some industry insiders, however, warn that the spirits category is headed for a brick wall. When asked whether he thought the U.S. spirits industry was going through a marginal slowdown, Norm replied: “On the depletion side, this is the softest quarter in spirits so I think it’s hard to read the market and say there’s an appreciable change in the market… I’ve heard some competitors are commenting on that, but I can tell you that our organization has not told us that they’ve seen a slowdown in the market.”

One thing that is affecting Beam, according to Craig, is rising corn costs. “Obviously the most important item for us right now is corn. We’re seeing the price of corn go up but that’s a manageable item for us. We obviously are aging the spirits for 4 years, so the impact is four years out.”

SPANISH COURT REJECTS BACARDI

The Spanish Provincial Court of Madrid has reportedly rejected Bacardi’s claims of ownership of the Havana Club rum brand in favor of Pernod Ricard. Could this be a foreshadowing of what’s to come in the U.S.?

TESCO: THE BRITISH ARE COMING FEB. ’08

Tesco's U.S. division, which plans to open a chain of Fresh & Easy Neighborhood Markets on the West Coast later this year, revealed plans to have 100 locations up and running in the nation by February 2008, according to Reuters.

The Las Vegas area will gain 14 stores, while Phoenix. Los Angeles and San Diego will see 20 stores. Reportedly, there are other markets that Tesco is looking into (such as Sacramento according to earlier news).

PROMOTIONS AT MOET HENNESSY

Mark Cornell, president and chief of Moet Hennessy USA, has promoted Brad Gietter to vp of the western region, covering the states of California, Nevada, Arizona and Hawaii. Tim Norris has also been promoted to vp of the central region and will assume responsibility for the states of Illinois, Minnesota, Indiana, South Dakota, North Dakota, Wisconsin, Missouri and Kansas. Congratulations to both.

BEAM GLOBAL PRONOUNCES “NATURAL INTEREST” IN ABSOLUT

We will take a closer look at Beam Global’s first quarter conference call tomorrow, where chief Norm Wesley reportedly said that the company has a “natural interest” in Absolut. Norm pointed out that Beam Global and V&S’s Maxxium j-v has “benefited both partners, and our close relationship has helped further build our respective brands.”

"We've said for a long time that we're interested in enhancing our spirits business if attractive opportunities were available, so we will obviously take a close look at the opportunity,” continued Norm.

Wine and spirits revenue comparisons were lower due to certain one-time factors, underlying sales were up low-single digits and operating income grew at a mid-single-digit rate. In the marketplace, strong global consumer demand for Beam’s premium and super-premium spirits and wine brands drove mid-single-digit growth in distributor case volume shipments, led by double-digit growth for Sauza, Courvoisier and Teacher’s.

DIAGEO INVESTOR CONFERENCE: DISTRIBUTOR CHANGES AND UPSCALE AIMS

Diageo held its annual investor conference today in which the company gives a not-so-brief overview of its inner workings and plans. As cfo Nick Rose put it, “Our aim is quite simple, that you will learn a bit more about Diageo and particularly the opportunities that we see for further growth.”

The five success-driving themes that Diageo claims is apparent throughout its entire business are the following:

1. Brand innovation
2. Premiumization around those brands
3. Leadership and marketing to support our brands
4. Building the best routes to market in each of our regions
5. Improving sales capability to a level comparable to the very best consumer goods businesses around the world.

ALCOHOL + WATER = SMIRNOFF SOURCE. Diageo’s wide range of brands (which currently make up 9 of the top 20 alcohol beverage brands) has helped drive growth the most in all markets, said Nick. But wait, what about RTDs? Clearly, the RTD business has seen some declining numbers as of late but Nick claimed it “is still a profitable business for us globally and we are doing some exciting things with it.”

Furthermore, lines of pre-mixed cocktails have helped to premiumize the category, while Diageo has also developed a number of RTDs, including Smirnoff Mojito and Jose Cuervo Margaritas, to “address consumers’ busy lives.”

“Innovation is key in the RTD segments and this summer we will see the regional launch of Smirnoff Source, which is alcohol plus spring water and the national rollout of Smirnoff Raw Tea,” said Diageo North America president Ivan Menezes.

Other growing trends include flavored spirits and the ever-present premiumization. According to Diageo, the flavored segment has opened up a wide opportunity, especially for Smirnoff Twist. At the same time, premiumization trends are apparent throughout the world and are evident in brands like Oronoco. Diageo has also expanded some of its franchises into the more premium territory, including Tanqueray No. Ten, Crown Royal XR and Johnnie Walker Blue Label. Reportedly, the Tony Sinclair campaign is turning the Tanqueray brand around in the U.S.

“As you know, Scotch is one of our most profitable and fastest growing categories,” said Nick, “especially for premium Scotch which led us to announced increased investment in Scotch during our interim.”

IRONING OUT ROUTE TO MARKET. Diageo has increasingly put more emphasis on improving its distribution network in the United States which now consists of a consolidated network of wholesalers in forty markets and over 2,000 sales people. Currently, the spirits giant is in the process of renewing contracts with its distributors. Let’s take a look at what the executives have to say on the subject.

“We are in the process of renewing our contracts with our distributors. The main issue is improving the game, which Jeff talked about, and moving forward in improving our relationship with our wholesalers. It’s about really building the muscle and capability to drive sustained top line growth. I’ll give you an example. In New York where we’re restructuring our arrangements right now, we are going to have a significantly stepped up presence on the on-premise in New York City. We have about 28 people building our luxury brands in New York and that’s the type of arrangements we are driving for,” said Diageo North American president Ivan Menezes.

However, later in the question and answer portion of the conference, Ivan expressed some blatant dissatisfaction with Diageo’s wholesalers:

“We have not set a specific goal to de-stock inventory levels right now but we are working through the efficiencies in the system to improve customer service first. I’d say that US wholesalers are still notoriously weak on customer service . If you walk into a supermarket in California on a Monday morning you’ll still find many stores out of Cuervo, out of Smirnoff because wine and spirits distributors for the most part do not deliver on Saturdays.”

“We have negotiated terms that are set at inventory levels and managing those down slightly every year, but our core goal here is to keep high customer service right through the system. We’re also working on much more collaborative planning.”

As far as inventory goes, Ivan remarked that “45 days is fairly typical.”

DIAGEO “DELIGHTED” WITH WINE BUSINESS. Ivan said the company’s wine business is on a roll showing 11% growth last fiscal year as the U.S. wine market continues to enjoy growing popularity, especially at the premium end of the market at over $10 a bottle. “In that segment of over $10 we are now the number two supplier in value,” he said.

“Our portfolio includes the two leading Napa wine brands, B.V. and Sterling, and a collection of other strong brands from California and Washington State, including Charlone Vineyards and Acacia. We are also the leading U.S. importer for high-end French wines, mainly Bordeaux and Burgundy. In addition, we have premium brands from Argentina, Australia and New Zealand.”
The company said those brands have helped drive growth in the critical on-premise market.

MOVING TOWARDS UPSCALE SPIRITS. In the past 52 weeks, Diageo’s spirits volume grew 4% with value up almost 6% in the U.S. Currently, Diageo’s spirits business is heavily focused on the premium, super-premium and ultra-premium segments which makes up 81% of its volume and 92% of its net value.

“Premium alcohol remains an affordable luxury that consumers are not willing to give up,” stated Ivan.

Consequently, Diageo’s portfolio allows it to compete on various pricing tiers, not just high-end. The various pricing segments “give us a great edge on our competitors as our brands can reach a range of consumers and eventually have them trade up to other Diageo products.”

Ivan feels confident that “our consumers are willing to pay more for our brands,” which has allowed Diageo to continue in price increases. The company claimed it is increasing and sustaining price premiums next to its most significant competitor. For example, one slide demonstrated the pricing increase Diageo has over its most significant competitor: Scotch +12%, Rum +14%, Gin +11%, Liqueur +3%, Tequila +21%.

In its quest for premiumization, Diageo named four core trends that will affect consumer trends in the U.S.

1. Premium Experiences
2. Experiential Leisure
3. Individual Expression
4. Celebrating Roots
5. Busy Lives

MILLENNIALS AND BABY BOOMERS. “Premium spirits represent the ultimate affordable luxury. In addition, the growth of 21-29 year olds and the baby boomer demographic is leading to an increase in the number of consumers who are most influenced by this desire to have it all.”

“21-29 yr. olds are seeking the hip, the cool and variety, and whatever is the latest and greatest out there.”

“There is evidence that the 25-29 year olds have grown up quicker than previous generations as a result of 9/11, terrorist threats and two wars. As a result they have adopted so-called ‘mature products,’ such as premium scotch whiskey, earlier than usual. Additionally, 25-29 year olds are switching from quantity to quality further fueling premiumization and further benefiting our brands.”

“Boomers are seeking complexity and character in addition to variety. This is leading them not only to brown spirits but to cocktails that remind them of their parent’s generation updated to reflect their contemporary taste and styles.”

A new campaign for Don Julio, along with the new Tanqueray Rangpur and Johnnie Walker Blue labels are just some of the ways Diageo is tapping into this “premium” opportunity. Ivan did recognize, however, that Diageo needs a higher share of luxury vodka.

“Consumers will not longer compromise because of their busy schedules,” said Ivan. “They won’t sacrifice taste for speed because they’ve learned they don’t have to. ‘If you don’t have what I want, I’ll go somewhere else.’”

UNDERWEIGHT IN ULTRA-PREMIUM SPIRITS. Although Diageo is working to grow in the ultra-premium category, it remains underweight in the U.S. with only 20% share. During the question and answer section, Ivan was asked further about their strategy, which includes a shift to luxury, organic growth and future acquisitions.

“Our goal is to grow faster than the category, so overtime we are going to grow share there."

“It’s going to happen in a combination of three things. One is the “big shift” in which we are significantly changing to end focus on luxury. We are stepping up our resources in PR, we are stepping up the ambassador and on-premise support, and in our distributors, again, we are carving our dedicated focus.”

“We will have much more feet on the street focused on building luxury.”

“It’s a combination of three things. First, organic growth of our luxury brands – some of which are hugely underdeveloped but we are optimistically hopefully about, like Don Julio, Johnny Walker Blue, Ciroc (growing at 25%). Second will be innovation. I think Nuvo will play in that space. And the third, we selectively and clearly look at acquisitions when the opportunities arise . Our strategic focus is on winning in reserve and winning in luxury.”

LVMH REVENUE UP 15%

LVMH posted its first quarter results today in which its wine and spirits sector saw organic revenue growth of 15%. The champagne division, where volumes increased by 8%, had a good start to the year with rosé champagnes making “remarkable progress” in the US, according to the company. Hennessy cognac showed strong momentum with volumes up by 18% and the higher quality ranges recording the strongest growth.

WTO OPENS DISPUTE WITH INDIA

The WTO announced it will establish a dispute settlement panel to decide whether India’s excise tariffs (which can go has high as 550%) on alcohol imports are illegal. The panel is in response to a request from the EU that was also supported by the US. A ruling from the panel is expected to be made within the next 12 months.

"The U.S. continues to share the (EU's) concern that India's additional and extra additional duties appear to be inconsistent with India's WTO obligations," U.S. trade diplomat David Shark said.

INTERPRETING GRANHOLM: RETAILERS OR WINERIES

Yesterday we reported that Illinois bill (HB 429) is currently feeling some heat from the Specialty Wine Retailers Association in context to out-of-state retailers and their shipping rights. The bill (announced Monday) provides that in-state and out-of-state wineries can ship 12 cases a year directly to an individual and restaurant, while small wineries (producing less than 25,000 gallons a year) would be able to deliver up to 5,000 gallons of wine annually to retailers. In-state retailers would also retain the ability to ship directly to consumers, but out-of-state retailers would lose that privilege under the bill. Since then, Representative Julie Hamos has presented an amendment that would allow out-of-state retailers to ship directly to Illinois consumers.

According to the Beverage Retailer’s Alliance of Illinois, out-of-state retailers are putting in-state retailers at a competitive disadvantage by incorrectly using Granholm as a way to fight for direct shipping rights. WSD had the chance to speak with Jerry Rosen, executive director of the Alliance, to see where his organization stands on the issue. Jerry played a key part in drafting the bill and feels strongly that out-of-state retailers do not have a valid argument. Firstly, Jerry claims Granholm is directed specifically towards wineries, not retailers, and that it grants states the right to determine their own alcohol laws. He also maintains that Illinois does not have a legal license for out-of-state retailers to ship directly to consumers. Let’s take a closer look at what he had to say:

Megan Haverkorn: What basis do the out-of-state retailers have for shipping directly to Illinois residents?

Jerry Rosen: “If you read Granholm vs. Heald it said several things, one of which is that everything refers to wineries. There is no mention and no discussion of retailers. They are not covered under Granholm.”

“Granholm also reiterates the 21st amendment that gives states the right to make alcohol laws for their particular state. It only deals with wineries and the fact that you cannot create laws for an individual state and discriminate against wineries from out of the state. It has nothing to do with retailers.”

“They’re [out-of-state retailers] trying to legalize what they’ve been doing for years illegally, which is shipping to consumers in Illinois without a license.”

MH: But in-state retailers are allowed to ship directly to residents, correct?

JR: “Illinois is a local option state. The state of Illinois cannot issue a license without the approval of the local municipality or county.”

“The out-of-state retailers want to buy up a shippers’ license for $50, thinking that they’ll settle up the sales tax once or twice a year and that should make everything okay. Well, it doesn’t make everything okay because the shippers’ license for $50 bucks doesn’t cover 20% of the licensing cost.”

“The whole thing is erroneous. The entire argument has no bearing whatsoever. Illinois retailers can have the right to ship in Illinois. They’ve always had that right. In the first paragraph of the bill we specifically say that Illinois retailers can ship anywhere in Illinois where it’s legal. That’s their license.”

MH: What about the recent amendment that would allow out-of-state retailers to ship directly?

JR: “The amendment was followed up by Tom Wark’s [president of the Specialty Wine Retailers Association] people with a letter to all of the members of the house of representatives, and I might add that last night a counter debunking their entire argument line by line, item by item was also sent out to every member of the house of representatives because not one statement in there holds water.”

KENWOOD VINEYARDS MAKES A ROSEY RELEASE

Kenwood Vineyards of Sonoma has released a 2006 rose to join its Table Wine Series. The wines are available nationally and are priced between $7 and $9 dollars.

DIAGEO INVESTS IN VODKA/WINE BLEND

Diageo has made a minority investment in a new vodka/wine drink targeted towards women, entitled Nuvo. The blend includes a French vodka, French sparkling wine and exotic fruit nectar created by Raphael Yakoby of The London Group. The drink comes in a pink perfume-shaped bottle and will hit New York and Miami shelves in May. The price falls in the $20 and $33 range.

“Diageo is always looking for ways to grow its business through breakthrough ideas and innovation in beverage alcohol. This investment builds on Diageo’s innovation strategy of taking a stake in small and nimble companies like The London Group that can deliver new ideas,” said Diageo North America's president and chief Ivan Menezes.

BROWN-FORMAN SELLS LUGGAGE UNIT

Brown-Forman announced intentions to sell Hartmann Inc. yesterday, April 23. The unit sells leather good and luggage and will be sold to private equity firm Clarion Capital Partners LLC. Terms of the deal were not disclosed.

Hartman was the last B-F unit not focused entirely on alcoholic beverages. Last year,
B-F also sold its Lenox crystal subsidiary to Eden Prairie for nearly $200 million.

The sell will allow the company to "concentrate its energies even further on our successful and growing global alcoholic beverage business," said chief Paul Varga in a press release issued by the company.

WASHINGTON STATE BOOSTS SPIRITS INDUSTRY

The Washington State Legislature passed a budget yesterday that expands Sunday liquor sales by an additional 29 stores to its current 20 stores and eliminates the 2005 spirits surcharge—two moves that DISCUS claims “signals Washington’s effort to create a more consumer-friendly marketplace.”

The budget will let the $0.42/liter spirits surcharge enacted in 2005 expire without renewal. DISCUS says the move will help reduce Washington’s current burdensome excise tax rate from $21.30/gallon to $19.39/gallon.

GOLDEN KAAN SPREADS ITS WINGS

South African wine brand Golden Kaan has released a chenin blanc varietal in the U.S. As one of the fastest growing South African brands in the U.S., Golden Kaan is a j-v between KWV and Racke GmbH.

OUT-OF-STATE RETAILERS SLAM ILLINOIS BILL

There’s a heated issue fermenting in Illinois over HB 429, which can be argued is good for wineries and wholesalers but bad for out-of-state retailers. The bill is as follows: in-state and out-of-state wineries can ship 12 cases a year directly to an individual and restaurant, while small wineries (producing less than 25,000 gallons a year) would be able to deliver up to 5,000 gallons of wine annually to retailers. In-state retailers would also retain the ability to ship directly to consumers, but out-of-state retailers would lose that privilege under the bill.

This is where Tom Wark, president of the Specialty Wine Retailers steps in. We had a chance to catch up with Tom earlier today, and as he told WSD, “For the most part the wineries have won the overall battle and now the wholesalers are going after retailers for no good reason.” The organization feels HB 429 is a good bill, other than the fact it excludes out-of-state retailers who have been able to ship to Illinois consumers since 1992.

On Monday, April 23 multiple organizations, including beer, wine and spirits wholesalers and The Wine Institute, issued a press release in favor of the bill. The announcement noted that the “agreement was reached when the Illinois Retail Merchants Association (IRMA) dropped its objections after language was included in the compromise reaffirming that in-state retailers would be able to continue to operate as permitted under current Illinois law.” However, out-of-state retailers do not want to lose their ability to make direct shipments either.

“The odd thing is the alcohol wholesalers and the bill itself gives no reason at all for stripping consumers of a right they’ve held for 15 years,” said Tom in an earlier press release. “The really odd thing is that wholesalers wrote a bill that allows out-of-state wineries to ship to consumers. We applaud them for that.”

Since then, a representative in Illinois has offered an amendment for HB 429 that would allow Illinois consumers to continue purchasing wine from both in-state and out-of-state retailers.

The fate of HB 429 will be decided in the House Consumer Protection Committee before being sent to the full Assembly.

No word from the Associated Beer Distributors of Illinois by press time.

STRONG NZ DOLLAR THREATENS EXPORTS.

A strong dollar has New Zealand exporters worrying about the continued success of their brands, particularly in the U.S. which consumes about 25% of New Zealand wine. Many local publications report that winegrowers are already feeling the pain which could endure long-term if the New Zealand dollar stays at “the extreme levels.”

"The short term impact of the dollar at US74 cents is reduced profitability for exporters to the USA. A number of wineries have already contacted us about this, and it is clear some are experiencing real financial pain," said Winegrowers chief Philip Gregan to scoop.com.

Industry officials say they are keeping an eye on the problem with the hopes it will not continue long-term.

"If the dollar stays at current levels for any period of time, this will inevitably lead to reduced investment in market development, and growth will not meet our forecast targets," he said.

WILSON DANIELS TO IMPORT TUSCANY CHIANTI

Wilson Daniels Ltd. has signed an exclusive U.S. importing partnership with Castello di Volpaia, a winery located in Tuscany’s Chianti Classico region. Under the agreement, Wilson Daniels will import six Castello di Volpaia wines into the U.S., including Chianti Classico, Chianti Classico Riserva, Coltassala Chianti Classico Riserva, Balifico, Borgianni and Vin Santo.

CASTLE BRANDS STRIKES A DEAL

Castle Brands said yesterday that it has begun negotiations with unnamed investors for the ownership of around $21 million of common stock and warrants. The company said it intends to use the proceeds for further brand development and acquisitions, but didn't give any further details. The deal is expected to be finalized by May 4, according to a statement issued by Castle.

"This transaction will substantially improve the financial position of the company and at the same time significantly enhanced our shareholder base," said Castle's chief Mark Andrews.

The terms include the sale of 3.5 million shares of unregistered common stock at a price of $5.97 per share and the issuance of 1.4 million warrants with a price of $6.57 per share. The warrants will expire five years from the date they are issued.

THE TRADING UP PHENOMENON REVEALED

One trend we’re seeing time and time again – can you guess? – is trading up. It affects every avenue of the alcohol beverage industry as premium and super-premium sales shoot through the roof. Why is that, do you think?

What are consumers looking for when they trade up in wine and/or spirits? Will the trading up trend last? Understanding this phenomenon is key. Terms like “quality,” “prestige” and “image” popped up the most in our survey, but here’s a closer look at what you had to say:

“We all trade up. My first car was a vw bug and now I drive an Audi. My first wine was blue nun, now I am one (couldn’t resist). The trade up trend will be with us for a long time, particularly since there is an interest by young wine drinkers. They will get older but they will never want to go back to the bottom.”

“Consumers are looking to expand their own personal "taste" portfolio. It will always be present in the wine business but will ebb and flow.”

“Image...this will maintain as long as the economy does.”

“Barring economic downturn, it'll continue. When you can buy prestige for $2 a glass, why would you not do so? Marginal utility has gone way up for those dollars in consumers’ minds, and you'd have to redefine everything or shake the budget to have change.”

“Trading up is The American Way.”

“Something that isn't readily available to the masses. If it is hip or rare and friends see them consuming a "hot" or boutique item, it will create a buzz. In this region, like in Asia, it's all about "face".”

“I believe that the trade up is here to stay --- but what is trade up?? There are many brands that are out there, that are premium tasting goods at very good prices --- rums for examples, many rums are premium tasting products and produced with fine qualities, but they do not spend millions on advertising.”

“Trading up will continue to grow as more and more gen x'ers mature and want to show their "status" by drinking more expensive brands. Consumers are looking for packing, taste, and status appeal. For example, who is drinking this, is it hot in NYC or LA, what is the brand image of this product, etc.”

“Consumers either want approval of peers or the self-satisfaction of drinking a better product (at least a perceived better product).”

“Consumers are trading up in the on premise locations due to societal pressures. The same person ordering Grey Goose in a club setting is buying Smirnoff for home consumption.”

COCKTAILS AND SPIRITS: THE NEXT BIG THING

The alcohol business, or any business for that matter, is all about trends. So we asked, what’s the next big trend in the spirits industry? Will people be drinking vodka or rum, margaritas or mojitos, strawberry martinis or Jack and coke in the near future? Since cocktails and mixed drinks are largely responsible for surging spirits sales as of late, we wanted to get an idea of the “next big thing.” This is of course an important issue because as one subscriber put it, “if I knew I would be rich.”

Our exact question was, “what do you predict will be the next big spirits brand/category/cocktail?” Most would argue that vodka has been the most popular spirits category in recent years, and we’ve got the Nielsen/IRI numbers to prove it. But after awhile people will likely tire of the category as consumers so often do. So, what’s next?

By far, rum popped up the most in our crystal ball survey, with premium and super-premium rum mentioned specifically. Actual brands that were named included Tommy Bahama and Tortuga Rums 5 & 12 years old. Here’s what some of you had to say:

“Rums, flavored rums and premium flavored rums. Again, the consumers are looking for fun cocktails that taste good and look good. Rums offer both because they are good tasting and offer appealing drink selections,” said one survey-taker.

“Nothing will impact vodka. Tequila will continue to grow, but I don't believe the rum hype.”

The next largest chunk of people cast a vote for tequila – particularly premium and super-premium tequila, and anything flavored. One reader pointed out, however, that “suppliers think gin and tequila are the next big thing, but we're not seeing significant case increases.”

Next in line was vodka, followed by whiskey, cachaca, gin and cordials. Several people mentioned bourbon specifically.

“Bourbon is already huge but small labels are on their way in and up. Look for large distillers making the equivalent of ‘single vineyard’ small production bourbons.”

“Specialty/artisan whisky.”

“Like all things, consumer tastes are cyclical and I think for that reason gin could become faster moving.”

“Unknown. It looks like there is no limit to the possibilities as long as it is not brown spirits.”

Respondents seemed to think that cachaca specifically holds a lot of promise in the U.S. as it is already huge in Brazil (its origin). Could caipirinhas (a cocktail made with cachaca) be the next mojito?

“Cachaca will finally become mainstream - watch for the strong launch in 2007 from a new brand.”

This leads us into cocktails and cocktail flavors. We’ve heard for some time now that traditional mixers, like strawberry and watermelon, are on their way out – at least for the time being. They will instead be replaced by more exotic mixers such as ginger, ginseng, lychee, passion fruit, caffeine, tarine and anything herbal, according to the respondents. Could this really be the end for sour apple martinis?

“Luxury cocktails are still on an upswing. Gins and brown whiskeys are coming on strong. The neon vodka drinks will fade out and leave the martini crowd sipping without flavors.”

“Softer, more complex spirits to support the making of smaller, alcohol-forward cocktails Savory, food-inspired spirits and cocktails that pair well with small plates.”

“Mojito or cachacas. Something different, something sweet, easy to drink.”

“Flavored manhattans.”

“Vodka and cocktails will continue to grow - pre-mixed just do not do it today and so a better higher alcohol solution needs to be found.”

MICHAEL MONDAVI OPENS WINEMAKERS’ STUDIO

The Michael Mondavi family has opened the Folio Winemakers’ Studio in Napa – a place where “our family, along with other small producers, can create beautifully crafted wines," said Micahel. Visitors are welcome to visit the "Taste Gallery" at the studio, where all the wines produced at the winery (Folio Fine Wine) can be sampled and purchased, including I'M (Isabel Mondavi) Wines, Oberon, Hangtime, Spellbound, Medusa and Mahoney Vineyards.

FRED FRANZIA FIGHTS GLASS IMPORTS

Speaking of the environment, Fred Franzia of Bronco Wine Company announced plans to build a glass production facility in Napa at a luncheon celebrating the fifth anniversary of Charles Shaw Wine (“Two Buck Chuck”). Fred claims the facility would be an eco-sensitive establishment because it would reduce over 62,000 truckloads of glass per year, and therefore eliminate over 32,000 tons of carbons released in the air.

By building a glass production facility, Fred claims it will help battle the “imported wine bottles from China and Mexico” and therefore cutout pending price increases. Though final plans have yet to be made, news of the glass facility is nothing new. Bronco Wine Company reportedly purchased the property in 1998 and has planned for a glass factory for many years.

FOSTER’S SELLS WINDSOR VINEYARDS

Wine veteran Patrick Roney announced yesterday he has completed the purchase of Windsor Vineyards from Foster’s Group. Windsor currently produces over 100,000 cases of wine a year, mainly for private labels. Terms of the transaction were not disclosed.

Patrick’s plans for Windsor include reintroducing it as an “ultra-premium Sonoma-based brand.” His investors have also purchased property in the Russian River Valley where they plan to build an estate winery that will use the Windsor Vineyards brand name. Patrick currently owns Girard, an upscale winery based in Napa.

THREE THIEVES GOES ORGANIC

The Three Thieves are entering the organic wine business with a new brand called True Earth, made from organically grown grapes.

Both True Earth wines, a red blend of Cabernet Sauvignon, Merlot and Petite Sirah, and a varietal Chardonnay, are made from California Certified Organic Farmers (CCOF) vineyards in Mendocino County, using no pesticides, herbicides, or conventional synthetic fertilizers.

True Earth wines will retail for $12.99. The initial release will be 5,000 cases each of True Earth Red and True Earth Chardonnay. According to Nielsen statistics, sales of organic wines have grown 35% in the last 52 weeks.

DIAGEO RTDS MAKE A FLAVORFUL TWIST

Diageo is launching a host of ready-to-drink (dubbed “progressive adult beverages”) line extensions this spring nationwide. Remember the catchy “Tea Partay” viral ad that hit computer screens nationwide? Beginning in May, Smirnoff Raw Tea will now be available nationwide after only being accessible in the Northeast. The flavors include lemon, raspberry and green tea. In addition, Smirnoff Ice Pomegranate Fusion will join the Smirnoff Ice line, and Captain Morgan Parrot Bay will welcome its latest flavor, Pineapple Colada.

MILLENNIALS NAME WINE THE “HEALTHIEST” DRINK

A new study by Vinexpo reveals that adults aged 21-25 think wine is the “healthiest alcohol beverage.” But while they view wine as healthy, millennials don’t seem to know much about it. Young people in the U.S. report they are “not very familiar with wine" and it is only "occasionally served in their families." They went on to describe wine as a component of “European culture." What’s going on here?

According to the Americans and Japanese interviewed, wine is frequently associated with "sophistication" and is somewhat "a little snobbish and pompous." Well, at least they got the health message.

All countries agreed that wine doesn't have a "young image," saying "the classic wine drinker is older, 30 or 35-40 with experience, comfortable income and married." However, this makes wine "more attractive," as they defined a wine drinker as "refined, educated and cultivated."

Young people also commented on how "difficult it is to select a wine" and that there is "too much diversity," which makes things confusing and therefore intimidating.

There is some good news, though. Everyone surveyed thought that wine's image is "evolving" and "getting more popular." The survey-takers suggested making wine’s image “younger” and “more accessible” (which we think is definitely happening in the industry with companies like White Rocket and Underdog Wine Merchants).

Something else worth noting was the fact that Americans are more “open to something new” when it comes to packaging, such as “individual serving sizes” and “different bottle shapes and colors.” Do we hear boxed wine? “Cool advertising” is also a plus, according to the study.

Launching young and exciting advertising campaigns may just be the best way to attract this millennial group. Vibrant, easy-to-read labels and perhaps even tasting instructions could also help dispel some of the confusion for the 21-25 year olds.

BORU VODKA RECLAIMS “NOBLE SPIRIT.”

Castle Brands announced that its flagship brand, Boru Vodka, kicked off its “Reclaim the Spirit” US marketing campaign with the launch of its website, www.boru.com. Trade advertising for the campaign began in March.

The campaign centers around the idea that vodka should be pure. According to the company, “Boru believes that this noble spirit has been tainted over the years by trendy brands posing pretty people with pretty drinks in pretty places. This new campaign announces the return of vodka, straightforward and true.”

“RUSSIAN STANDARD ORIGINAL” HITS MARKETS.

Russian Standard launched its flagship Russian Standard Original vodka brand in the U.S. April 11, retailing for about $21 per 750-ml bottle. The launch follows the release of the ultra-premium Imperia vodka last year. All Russian Standard brands are imported by Remy Cointreau USA.

“For years we have watched other vodka brands pretend to be Russian, so we are proud to bring a truly authentic premium vodka to the U.S. and meet a long-standing demand from American consumers,” said Roustam Tariko, founder of the Russian Standard Group.

The company is currently suing Pernod Ricard in a New York Federal Court for “false advertising,” claiming Stolichnaya is produced in Latvia, not Russia. Pernod denies the allegations.

OREGON CONSIDERS LOOSER LABELING

Later this week (Friday, April 20) the Oregon Liquor Control Commission is expected to rule on a petition that would allow more leeway with blending, according to local newspapers. Under the petition, for an Oregon wine to be labeled a certain varietal it would only have to use 75% of the varietal’s grapes instead of the standard 90% used today. Only seven varieties of traditionally blended wines from Bordeaux are currently permitted the 75% rule in Oregon, but the petition would extend that privilege to 32 others. Pinot Noir and Pinot Gris, however, would remain at 90%.

Keep in mind, though, it’s only a petition. Only if it is accepted would it jumpstart a public hearing process. Critics worry, however, that widening the barrier would compromise the purity of Oregon wines.

DIRECT SHIPPING: KENTUCKY WHOLESALERS APPEAL

The WSWA, along with other industry groups, has filed an amicus brief with the U.S. 6th Circuit Court of Appeals that argues a lower court was wrong to throw out Kentucky’s requirement that all alcohol sales be sold face-to-face (purchased at the winery).

In December, a district court judge ruled that the face-to-face requirement discriminated against out-of-state wineries, but upheld the volume cap (50,000 gallons or less) to self-distribute. A separate state law limiting purchases to two cases per visit was also upheld as constitutional. Afterwards, the state decided not to appeal since the judge upheld the volume cap, leaving the Wine and Spirits Wholesalers of Kentucky to do the deed.

“Any notion that a State violates the dormant Commerce Clause merely by passing an even-handed law that does not allow any business to operate in the State in the manner that some out-of-state businesses prefer or find most profitable was rejected by the Supreme Court long ago,” according to the WSWA amicus brief filed today (Wednesday, April 18).

The WSWA goes on to cite a similar court cases in Maine where a district court said that Maine’s requirement of face-to-face sales is “meant to recognize that ‘wine is an alcoholic beverage that is contraband when placed in certain minors’ hands, and the State has concluded that mail order transactions cannot reliably be policed in order to protect certain minors from themselves.’”

A decision from the 6th Circuit is not expected until sometime later this year. You can find a copy of the amicus brief on www.wswa.org.

FLAVORED VODKAS: NAY OR HERE TO STAY

Are flavored vodkas on their way out? In our latest survey, WSD readers responded overwhelmingly (58%) that “no, vodka flavors aren’t going anywhere.” About 31% of respondents said, “yes, flavored vodkas have seen their day,” while 13% answered “maybe.” We were especially curious about the subject since we’d heard from multiple insiders that the large proliferation of flavored vodkas was actually turning consumers off from the segment – so many choices, so little time. However, most of you seem to think that the pending denunciation won’t happen anytime soon, or maybe never.

So why did the majority of readers choose “no, flavored vodkas are not on their way out?” It seems that premium brands (i.e. Grey Goose La Poire, according to one subscriber) have a much better future when it comes to the flavor subcategory. But whether or not a label falls under the “premium” category, “the strongest brands will survive.” At the same time, many survey-takers pointed out that flavored brands serve as an “entry vehicle to newcomers to the category, same as critter brands,” particularly when it comes to the younger drinkers. Let’s take a look.

“Quality is here to stay- though Smirnoff/Absolut and others are trying to monopolize the marketplace which ultimately hurts everyone else,” said one reader.

“Flavored vodkas will stick around as long as young drinkers keep trying different things.”

“The younger consumers like to taste and will continue to gravitate to flavor vodka.”

“Not in Ohio.”

“People love to mix, and love the sweet flavors.”

“The junk will wash out, replaced by high quality -- just like in every other segment.”

“They could be on their way out, but some new herbal flavors will be forthcoming.”

This all sounds very convincing, but clearly some people think flavored vodkas have very little chance, if any, of surviving in the foreseeable future. For those who answered “yes, vodka flavors are on their way out,” the central argument was “industry overkill.” Here’s what respondents had to say:

“Hopefully, retailers roll their eyes at the proliferation of too many brands and flavors,” noted one reader.

“Yes, but I'm a purist.”

"‘Absolut’ely.”

“Flavored vodkas are already out the door.”

“They are generating very little sales.”

“God I hope so.”

“The tequila category is exploding.”

So, even though a lot of you feel rather strongly about the subject, we feel that flavored vodkas are here to stay, at least for the next couple of years. Flavored tequilas and rums are also doing very well, which further widens the chasm of choices for consumers. But what can we say? People continue to love Starbucks which offers nothing but options for everyone.

CONSTELLATION APPOINTS NEW VP

In other Constellation news, the company announced it has named Patty Yahn-Urlaub vp of investor relations, effective immediately. She succeeds Lisa Schnorr who was recently named vice president of finance in the company's worldwide wine group.

Patty will report to Tom Summer, cfo of Constellation.

TESCO: “RECRUITMENT BEGINS SOON.”

Tesco plans to increase its share buyback program by about $3 billion, the company announced today, after reporting record profits of about $5.2 billion. With so much success, Tesco is eager and ready to enter the U.S.

“Recruitment and training of staff for the stores will begin soon. We expect to be able to open a significant number at launch across the LA, Phoenix, Las Vegas and San Diego markets," said the company in its stock exchange announcement.

TIN ROOF GETS A ‘RETRO’ MAKEOVER

Kendall Jackson’s millennial wine company, White Rocket, is launching a new face for the Tin Roof Cellars brand.

The label now features an illustration of a small, tin-roofed winery meant to simultaneously appear “retro and modern,” according to the company.

“We wanted a look and feel that was simultaneously retro and modern, that speaks of old-fashioned quality yet appeals to Millennial generation consumers who increasingly comprise the market for premium and super-premium wines,” says Mark Feinberg, White Rocket Wine Company vp of marketing.

Available for around $13, Tin Roof packaging was designed to appear super-premium in everything from its cork top to its brand logo (“Under the Roof – It’s The Place To Be”). The portfolio includes Chardonnay, Sauvignon Blanc, Merlot, Cabernet Sauvignon, a Syrah-Cabernet Sauvignon, and a Rosé.

“Tin Roof fits squarely within the burgeoning ‘adventure brand’ category, which between 2002 and 2006 grew from less than $70 million in sales to nearly $500 million and in volume from 660,000 cases to nearly 5.7 million cases.,” said the company in a statement.

CONSTELLATION ENTERS BRITISH J-V

Constellation announced today it has sold half of its Matthew Clark wholesale business by entering into a joint-venture with English-based Punch Taverns. Under the agreement, Constellation Europe and Punch Taverns are both 50% owners of Matthew Clark, the UK’s largest alcoholic beverage wholesaler.

Matthew Clark will supply wines and spirits to some Punch Taverns pubs, while also becoming the preferred supplier to the remaining Punch pubs.

"Given the importance of the U.K. on-premise drinks business, this joint venture helps assure that Matthew Clark, its customers and, most important, consumers can benefit from distribution efficiency gains and expanded beverage offerings. We believe this collaboration will establish a new benchmark for wholesale drinks distribution in the U.K. and it should result in additional long-term growth for Matthew Clark," said Rob Sands, president and coo of Constellation.

Although terms of the agreement were not disclosed, STZ expects to receive about $168 million of cash proceeds from the j-v.

REMY COINTREAU GETS A BOOST FROM COGNAC

In the 12-months ending March 31 Remy Cointreau posted a 0.6% rise in comparable revenue, with sales of the group’s own brands increasing 4% helped mainly by cognac and champagne. However, success of the company’s own brands was hurt by declining sales of its partner brands, down a whopping 17.3%. Organic sales growth was 3.7%.

"Sales of the group's own brands increased by 6.9%. This performance, mainly due to cognac and champagne, reinforces the relevance of Remy Cointreau's premium strategy," the company said in a statement.

Cognac grew 12% for the 2007 fiscal year, witnessing its highest increase of the year during the fourth quarter. Remy Martin cognac grew 30% in the fourth quarter with its premium brands showing the most growth. The U.S., China and Russia were its most popular markets.

In addition to cognac, the company’s high-end Champagne brands helped boost overall profits although below analysts’ estimates. Champange organic growth was 4.7%. Sales growth of Piper-Heidsieck and Charles Heidsieck (up high single digits), against a background of sustained price increases and an improvement in product mix and markets, compensated for the planned decline in secondary brands.

The Cointreau spirits brand did particularly well in the U.S., although growth in divisional sales were slightly penalized by reductions in transfer prices to Maxxium (the j-v also includes V&S, Beam Global and the Edrington Group.) Liqueurs and spirits grew organically 0.4% overall.

Remy’s partner brands (including California wines, The Famous Grouse and The Macallan) did not fare so well due to several distribution contracts being terminated . Says the company: “The cessation of various distribution contracts since the end of last year - in the US (wines) and in Europe (duty-free in Germany) -accounted for the overall decline in sales in this division. In the US, Scotch whiskies (The Famous Grouse and The Macallan) and Californian wines continued to grow while the initial success of Imperia vodka was encouraging.”

LATEST ADDITION TO BRUNTON VINEYARDS

Brunton Vineyards announced it has hired Mr. Don Pacholec as its new cfo. Don officially starts his position May 1.

WSWA WELCOMES NEW GOV. DIRECTOR

The Wine & Spirits Wholesalers of America (WSWA) announced today that Catherine McDaniel has been appointed as the organization’s new Director of Government Affairs.

Catherine’s primary responsibility will be directing WSWA’s political action committee (WSWA-PAC), as well as helping manage relationships with Congress, legislative fly-ins and WSWA’s branding events.

TESCO SNIFFS OUT SACRAMENTO

According to the Sacramento Business Journal, UK retailer Tesco has hired a local real estate broker to find locations in Sacramento.

REMY HIRES NEW CONTROL STATE DIRECTOR

Rémy Cointreau USA announced last week that John Byrne will immediately join the company in the newly created role of Control State D