BACARDI ANNOUNCES $250 MILLION EXPANSION OF DEWAR’S

Bacardi announced it will spend over $250 million in the next decade to expand its Scotch whisky production in response to the “growing global demand” for Dewar’s Scotch. Chief Andreas Gembler says the $250 million will go towards creating a new infrastructure to support higher inventories and increased blending, bottling and packing capabilities.

The plan includes comprehensive redevelopment of an existing site in Parkhead, Glasgow, where Bacardi will construct new maturation warehouses and a new blend center, as well as install new bottling lines and packing equipment. The company is also close to purchasing a 100 acre spot in central Scotland to develop a second maturation and blending facility.

Many in the industry are saying that Bacardi’s investment is a surefire sign that Scotch is headed for a reawakening. Rising demands in new markets such as Asia and Latin America have helped Scotch grow, while much of the Western world continues to migrate towards white spirits.

Diageo announced earlier this year plans to invest over $200 million to build a new malt distillery in Scotland. Chivas Brothers (owned by Pernod) also spent millions of dollars in expanding bottling operations in Scotland this year.

IN A BIG WIN FOR SPIRITS, TTB PROPOSES NEW LABEL STANDARD

The TTB has proposed a new rule that would require all alcoholic beverages to include alcohol content, serving sizes and nutritional information on all labels. The rule was published today (July 31) and will gather comments through October 29. The TTB will then review the comments and decide whether to make the rule official, after which it would allow three years before the rule becomes mandatory.

If passed, it will require labels on all alcoholic beverages to feature the drink's percentage of alcohol by volume. Furthermore, the labels would include a "serving facts" panel, which would list the number of calories, carbohydrates, fat and protein for a standard serving size.

Currently, spirits and wine labels must include at least the percentage of alcohol by volume, but that information is not allowed on beer labels except in states that require it. However, if the beer is “light,” the label must show its caloric content and the percent of alcohol per volume.

This is a sure victory for the spirits industry. Diageo says it applauds the decision after joining with several consumer groups in 2003 in asking the TTB to allow the company to put serving facts on its spirits, beer and wine bottles and cans.

“Today marks a major victory for consumers and a win for our industry,” said Diageo vp Guy Smith. “This information will ultimately assist consumers to make informed choices about what they drink.”

The view the actual proposal, click here.

OHIO GOV. SIGNS LIMITED SHIPPING BILL INTO LAW

Ohio Gov. Ted Strickland signed HB 199 into law yesterday (July 30). Created as an amendment to the 2008-09 budget bill, the law allows in-state and out-of-state wineries that produce less than 150,000 gallons of wine a year to ship directly to Ohio residents and retailers.

Wineries are only allowed to ship up to 24 cases of nine-liter wine bottles per year to households, however, which could create some controversy along with the 150,000 gallon cap.

The law is expected to go into effect in early fall.

SWRA: MOST RETAILERS CHOOSE NOT TO SHIP DIRECT

The Specialty Wine Retailers Association (SWRA) says that regulators and legislators should not be concerned about an influx of wine retailers obtaining direct shipping licenses because, as it turns out, most of them choose not to ship at all. According to a SWRA survey of state regulatory bodies that issue both retailer and winery licenses for direct wine shipments, wine retailers represent only a small portion of license holders.

The survey of permits issued in New Hampshire, Nevada, North Dakota, Nebraska, Oregon and Wyoming found retailers hold only 15-20% of the permits issued.

Director Tom Wark says that state legislators often ban retailers from shipping directly to consumers because they assume the large number of retailers will overwhelm the system as compared to a smaller amount of wineries. However, the survey shows this is not the case, says Tom.

“States worried about regulating out-of-state wine shippers should not be focused on retailers since they represent the minority. The facts show that the vast majority of wine retailers are concerned with their brick and mortar store, not the Internet,” said Tom.

It’s an interesting food for thought, but it remains to be seen if this argument will help the SWRA in its various court cases throughout the country.

J-V ACQUIRES STAG’S LEAP FOR $185 MILLION

The famous Stag’s Leap Wine Cellars announced it is being acquired by a joint-venture between UST’s Ste. Michelle Wine Estates and Marchese Piero Antinori of Italy. The sale includes the estate’s brand, its Napa winery and its Napa estate vineyards, S.L.V. and Fay. Founding winemaker Warren Winiarski will remain in an advisory role for three years.

Ste. Michelle will own 85% of the j-v with privately held Marchesi Antinori, which UST already distributes in the United States.

As most of you are probably familiar, Warren’s 1973 Cabernet Sauvignon, produced from Stag’s Leap’s first commercial crop, stunned the wine world during the 1976 Paris Tasting when it beat four top-ranked Bordeaux wines. Warren also worked as one of the first winemakers at a then upstart winery called Robert Mondavi prior to the infamous tasting.

Warren told decanter.com that “it became clear after a while that we needed to make a transition, because of (issues with) operating roles and ownership roles with the second generation. We all decided this; it was a deliberation by the family rather than a single decision.”

The Winiarski family will retain its Arcadia property to provide grapes for the Antinori-Ste Michelle partnership.

The deal is expected to be closed in September, says UST.

J. ALEXANDER’S WARNS OF FUTURE DWINDLING SALES

J. Alexander's reported a 34% rise in net income and a 4.2% growth in revenues for the second quarter, but warned of softer sales at the beginning of the third quarter. The casual chain restaurant raised its menu prices by 1% during the first half of 2007, bringing prices about 4% above July 2006. Prices will not be raised again for awhile, said the company, due to rising costs for consumers, although restaurant margins continue to be squeezed by its own rising costs.

GALLO PURCHASES WILLIAM HILL ESTATE FROM BEAM GLOBAL

E&J Gallo announced yesterday they have agreed to purchase Napa-based William Hill Estate from Beam Wine Estates (a division of Beam Global), which specializes in Cabernet and Chardonnay. The acquisition includes the Silverado Trail winery and its 145-acre Silverado Bench vineyard just east of the Napa River.

In addition, Gallo also purchased the Canyon Road wine brand and related assets from Beam Wine. The transaction is expected to close in the next few weeks. Terms of the deal were not disclosed.

WHITE ROCKET DEBUTS ON-PREMISE CABERNET

White Rocket Wine Co. (owned by Jess Jackson) has launched a new super-premium Cabernet Sauvignon for the on-premise. Silver Palm Cabernet Sauvignon, from the 2005 vintage, begins shipping in late July with a target by-the-glass and wine list bottle prices of $10 and $30, respectively.

“The bottle wows consumers from the moment it hits the table...designed to appeal both to older, established wine drinkers and to younger, more experimentally inclined consumers,” said Mark Feinberg, vp of marketing.

As a unit of Jackson Family Farms, White Rocket develops brands that targets the millennial generation. In addition to Silver Palm, the company currently markets three established brands: Camelot, Dog House and Tin Roof Cellars.

REPORT SAYS MINORS WHO DRINK USUALLY CHOOSE SPIRITS

As we reported last week, the recent issue of Morbidity and Mortality Weekly Report (MMWR) showcased a study that found spirits are consumed more than beer by 40% of high school student who drink, no matter the gender or racial group.

As DISCUS pointed out, however, aspects of the Center of Disease Control (CDC) study are misleading . The report only covered four small states, Wyoming, New Mexico, Arkansas and Nebraska, which is less than 3% of the US population, and leaves out wider national data.

Further, they separate malt-based products, beer, FMBs and wine-coolers, into separate categories. If aggregated they are equal or greater than spirits, said the trade group.

STEVEN SPURRIER THREATENS TO SUE HOLLYWOOD RIVALS

Steven Spurrier, a British wine authority and the organizer of the 1976 Paris Tasting, is reportedly threatening to sue the producers of “Bottle Shock,” the rival to upcoming film “Judgment of Paris.” Decanter.com says that Spurrier is accusing “Bottle Shock” of defamation of character by portraying “some, if not all” Spurrier Parties in a “false, defamatory and disparaging” light.

The “Judgment of Paris” is deemed the “official” version of the infamous tasting and is sanctioned by Spurrier and journalist George Taber, who covered the event and later wrote the book, Judgment of Paris .

“Bottle Shock” is being filmed at Chateau Montelena in Napa and stars Alan Rickman as Spurrier and Danny DeVito as Mike Grgich. After reading the script, Spurrier found the portrayal of his character “deeply insulting,” according to Decanter.

Meanwhile, a spokesperson for “Bottle Shock” says “nobody owns the rights” to the historic event and will continue filming.

DISNEY SHEDS RATATOUILLE WINE BEFORE HITTING SHELVES

Disney has reportedly done away with plans to launch a “Ratatouille Chardonnay” in Costco after several California winemakers and watchdogs groups voiced concerns. The Wine Institute informed Disney that the Ratatouille label violated the Institute’s code of advertising by appealing to minors through the use of a cartoon.

The 2004 white Burgundy was set to promote the Disney hit Ratatouille, but a spokesperson told the LA Times “we thought it would be best not to proceed with it.”

BEER TOPS 2007 GALLUP POLL, WHILE OVERALL CONSUMPTION RISES

This year’s Gallup Poll reports that once again beer is the number one alcoholic beverage of choice among adults, ahead of wine and spirits. According to the poll, 64% of Americans drink alcohol and of that percentage, 40% prefer beer, while 34% prefer wine, and 22% prefer spirits. As you’ll remember, the 2005 Gallup Poll had wine ahead of beer, but since then beer has resumed its leading spot. Meanwhile, wine continues to narrow the gap between the two categories, while spirits has remained relatively steady in the 22-23% range.

Broken down into categories, men and younger adult drinkers prefer beer while females and older consumers prefer wine. Spirits consumption remains close to the same among reported demographics.

The poll also confirms what many spirits and wine companies are already saying: alcohol consumption among Americans is on the rise. The percentage that says they consumed alcohol in the past week has grown from a little over 50% in the early 1990’s, to 65% and above since 2002.

To read last year’s coverage, click here.

EVANS & TATE REJECTS YARRAMAN IN FAVOR OF MCWILLIAM’S WINES

Once again, Evans & Tate has rejected the latest bid from US-based Yarraman on the grounds that it did not present “a sufficiently compelling proposition for Evans & Tate's business or stakeholders.” E&T confirmed to the Australian Stock Exchange on Friday (July 27) that it would not agree to the Yarraman offer which was made earlier last week.

Meanwhile, Australia’s eighth largest winemaker, McWilliam’s Wines, has agreed to help fund a restructuring for E&T. The Margaret River company announced on Friday night it had agreed to a bail-out package proposed by investment group Pendulum Capital that includes McWilliam’s taking a 25% stake in the group. The agreement gives McWilliam’s a chance to enter Western Australia for the first time.

Under the deal, which is subject to shareholder approval, McWilliam's will become the global distributor of Evans & Tate's wines. McWilliam’s is partly owned by E&J Gallo.

CHARMER SUNBELT COMPLETES ACQUISITION

Capital Wine & Spirits, a member of The Charmer Sunbelt Group, says it completed the acquisition of Bartolomeo Pio Inc. in the state of Pennsylvania last week. Capital will continue to be led by president & chief Kevin Karcher. Bart Pio has been appointed chairman.

YELLOW TAIL DEBUTS SPARKLING WINE

Yellow tail announced plans to launch a sparkling white wine in the US, effective September 1. [yellow tail] Sparkling Wine is a blend of 72% Semillon with small amounts each of Traminer, Vigonier and Trebbiano. Suggested retail is $10.99.

K-J TO BECOME DOMINANT PLAYER IN BLENDED RED WINES

Kendall-Jackson issued a press release announcing its intentions to “become the dominant player in the premium category of blended red wines.” The announcement comes on the heels of the successful launch of K-J Vintner’s Reserve Meritage blended red wine.

“In a category crowded with imports at the low end, and more than a dozen well-known Meritage-style wines in the market at the high end, Kendall-Jackson is perfectly situated to take the lead in the above-$12 price range for premium Meritage blended red wines,” said Rick Tigner, executive vp at Majestic Fine Wines, sales arm for K-J.

PAUL WALSH TALKS CONSOLIDATION

As reported in The Scotsman, Diageo chief Paul Walsh confirmed that Diageo will continue to acquire new brands as a leader in the “march on consolidation.”

"Consolidation is going to continue, and we will be participating. The consolidation game is not over."

Paul also told the Scotsman that Diageo is very much interested in acquiring Absolut, and they have hired advisers to investigate a sale or flotation. The main thing that stands in their way is regulatory challenges.

“Acquiring a company that brings a collection of brands with it is going to be more of a [regulatory] challenge.”

In other news, there is a report in the Financial Times that Diageo might soon fully acquire Stirrings, a high-end mixer company. Diageo purchased a 20% investment in the company last April.

WILD TURKEY PROMOTES NEW ASSOCIATE DISTILLER

Pernod’s Wild Turkey has promoted Edward Russel to Associate Distiller after 27 years at the Austin Nichols Distillery in Kentucky.

GLENLIVENT RELEASES 2007 CELLAR COLLECTION VINTAGE

Glenlivet announced this year’s Cellar Collection Release - The Glenlivet Cellar Collection 1969, valued at $750 a bottle. Only one new vintage is added to the Cellar collection each year.

NORM WESLEY: “WE’RE INTERESTED IN BUYING ABSOLUT, NO MATTER WHAT PROCESS.”

Fortune Brands chief Norm Wesley said the 2nd quarter was much better for the company, thanks to strong wine and spirits growth that helped make up for the downturn in the U.S. housing market. The company’s continued focus on building its premium wine and spirits helped increase consumer demand for Jim Beam, Sauza, Maker’s Mark, Teacher’s and Clos du Bois, along with a successful integration of Allied Domecq brands. Year-to-date spirits and wine case volumes are up at a mid-single-digit rate overall.

BOURBON AND TEQUILA HELP DRIVE GROWTH. Again, president Bruce Carbonari highlighted the importance of growing premium spirits. Beam Global’s bourbon and tequila brands led growth, which includes Jim Beam, Makers Mark and Sauza. Bruce said that not only is the bourbon category continuing to grow, but Sauza’s new super-premium version, Tres Generaciones, in the US has dramatically helped the brand’s overall success. Beam plans to launch new marketing campaigns in the second half with a double-digit increase in brand spending and new, updated packaging.

Fine wine brands continue to gain momentum thanks to an increased focus on distribution and a double-digit increase in store counts for Clos du Bois, Geyser Peak, and Wild Horse.

Spirits and wine overall sales reached a new record, up 6%, while YTD global case volume grew mid-single digits. Strong volumes and favorable mix/shift reflected consumers trading up, while case volume for major premium and super-premium brands continue to grow twice as fast as national and regional brands.

The wine and spirits brands got a majority of their volume growth from the international market, perhaps as the spirits category continues to dwindle in the US. Internationally, YTD volumes were up high single-digits led by Jim Beam, Sauza, Courvoisier and Teachers.

In the US, YTD spirits and wine volume grew low single-digits led by mid single-digit growth by major premium brands and favorable depletion trends.

Jim Beam increased mid-single digits worldwide benefiting from growth in the US, Australia and Germany. Sauza grew at a double-digit rate, while Makers Mark and Courvoisier rose at a high single-digit range. Meanwhile, volumes for Canadian Club were also up high single-digits.

Wine volume jumped high single-digits led by strong demand for Geyser Peak, Wild Horse and Clos du Bois.

ANALYSTS “SIGNIFICANTLY UNDERESTIMATE” FORTUNE AND V&S. In his closing remarks, Norm included a strong statement on V&S claiming that Fortune has a much better chance of acquiring Absolut than many analysts are letting on. It remained the focus of much of the Q/A as well, so here’s a peak at what took place.

“They [Swedish government] have not yet announced a time table for the sales process...we believe Fortune Brands is the most suitable long-term partner for the company. We believe the success of our six year partnership demonstrates that our companies are an excellent fit...a natural step forward that would create value for the Swedish government, for the V&S workforce and importantly for our shareholders.”

“We’ve seen some analysts’ estimates...that we believe significantly underestimate our ability to create value for shareholders in this potential transaction. We see this as a very attractive opportunity and we look forward to participating in the process.”

During the question and answer portion, Norm was asked to expand on his comment regarding V&S. This is what he said:

“Several analysts have estimates out there that have us diluted in the range of $0.50 per dollar and we just don’t see that...its very early in the process, they haven’t really started the process...but we just think those estimates underestimates how we’d deliver value. But we don’t want to be real specific now how we’d approach it and finance it.”

Norm also said he doesn’t know when they’ll see an IPO from V&S.

“They’ve not declared if they’re going to conduct a sale, if there going to do an IPO or sale, or if they do if they’re going to sell in one piece or in separate pieces. We’ve expressed that we’re interested in buying, no matter what process, the whole or the premium brands which we’re most interested in .”

“It’s very difficult for the people not engaged in the details that we are to understand it...we’ve always been dedicated to increasing shareholder value so if it was that diluted we wouldn’t do it.”

NOT WORRIED ABOUT SPIRITS. Furthermore, Norm claimed, as he did in the last conference call, that as far as he’s concerned, spirits are doing just fine in the U.S.

“There’s been comments about the market slowing and quite frankly we’ve not seen it. It hasn’t had an appreciable change one way or the other on the market.”

UPDATE: ONBOARD BREATHALYZERS

In response to our coverage yesterday that Nissan is testing a new on-board breathalyzer system that the driver would have to pass in order to start the car, DISCUS said the following:

“We would support [the system] for hardcore drunk drivers (repeat offenders and high BAC) only.”

Take note, though, that the system is currently only being tested for use in Japan. Our comments yesterday were simply a “what if” exercise in regards to the US.

US CONTINUES TO SHOW PROMISE FOR MOET HENNESSY

Moet Hennessy’s wines & spirits segment achieved an overall organic revenue growth of 13% in the first half, while revenue grew 31% in the US. The increase was due to volume growth with product mix improvement and to a price increase in most regions.

Champagne volumes increased by 9%, driven notably by sales of rosé, while Hennessy cognac volume grew 8%.

US wine and spirits sales rose 4%, excluding Belvedere, which the company lost for about two months this summer over a trademark dispute. The brief suspension caused overall vodka volume to drop -23%. Christophe Navarre says the company re-purchased Belvedere for 62 million euros because “this category is extremely dynamic in the US.”

Christophe went on to say that 10 Cane Rum is emerging in the US alongside a rise in popularity of super-premium rum. [Ed. Note: According to IRI data, ultra-premium rum sales rose 45% in June.] Meanwhile, estate and sparkling wines “are doing really well.”

In the outlook, Christophe said that Moet Hennessy will continue to develop its brands in the US.

B-F RELEASES FIRST CORP. RESPONSIBILITY REPORT

Brown-Forman announces it has issued its first Corporate Responsibility Report that includes examples of how B-F promotes its brands responsibly and works to reduce alcohol abuse. It also addresses the company’s energy and greenhouse gas management, along with an overview of B-F’s relationship with employees and community.

To view a copy, click here.

PERNOD FEELS THE PAIN OF A DECLINING MARKET

In Pernod’s overall fiscal year ending June 30, sales rose 6.2% year on year, while organic growth was up 9.1%. The French company experienced a -2.8% negative foreign exchange effect, primarily due to the loss in value of the US dollar. The spirits business and wine business grew 11% and 1.3% organically for the full fiscal year. In the second half, spirits increased 9.4% and wine grew 4.5%. Favorable comparisons in both halves were related to the reduction in inventory following the Allied acquisition and an increase in brand investment. Fourth quarter consolidated sales rose 5.5% organically.

BEEFEATER AND KAHLUA REMAIN DIFFICULT. North American organic sales jumped 9.6%, with growth remaining “very strong” in the US, particularly in the fourth quarter. Jameson, The Glenlivet, Stolichnaya, Wild Turkey and Seagram’s Gin continued to expand. The US benefited from price increases, new A&P campaigns and expanded Kahlua and Malibu ranges. However, the overall situation remains difficult for Beefeater and Kahlua.

Chivas Regal registered modest growth with 12-month depletions up 2%. Pierre Pringuet, managing director, noted that the US market “is in slight decline,” so Chivas was still above industry growth (-3% Nielsen, 1% NABCA).

Jameson met with particular success in the US where 12-month depletions rose 21%. Meanwhile, Glenlivet depletions rose 9% in the US where Pierre says it currently gets about 90% of its volume.

Twelve-month depletions of Martell grew 4% in the US. Pernod says it plans to “significantly” increase the price of Martell, where sales volume is expected to decline.

Malibu depletions rose 9% in the US thanks to the launch of a new range of Tropical Banana. Kahlua, meanwhile, “remains difficult” in the US but saw some improvement in the 4th quarter thanks to the launch of Kahlua Hazelnut and French Vanilla. Twelve month depletions for Kahlua at the end of June were “stable” compared to -4% at the end of March.

Beefeater depletions were down -1%, which Pierre maintains was above the market. Stolichnaya, at the same time, saw depletions rise 6%, with a sharp increase in all other key markets.

Wine brands such as Jacob’s Creek, Campo Viejo, Montana, Perrier Jouët and Mumm Napa enjoyed very strong growth, especially from the 2nd half-year. Pierre mentioned that the drought in Australia is helping to rid some of its over-supply, and that Australian wines will soon return to more favorable pricing in the UK.

Mumm champagne depletions rose 1% in the US, while Perrier-Jouet saw a 14% increase.

QUESTIONS OF ABSOLUT, STOLI AND KAHLUA. During the question and answer section, Pierre was asked (once again) if Pernod plans on going after Absolut. [Ed. Note: They must get really tired of hearing this questions since they’ve confirmed multiple times that yes, indeed, they plan to go after Absolut.] Here’s what Pierre had to say:

“A lot of rumors, a lot of talks and not a day without some new quote from whomever. At the end of the day we will have to listen to the Swedish government, the owner of the brand. They did confirm the privatization would take place at the end of June from the treasurer, but he did say he will consider all options.”

“It’s been confirmed that the day the process starts, we’ll be there.”

When asked if Pernod could afford both Absolut and Stolichnaya, or would regulatory issues allow them to acquire both, Pierre answered, “no, and that’s why we’d be happy to have either one of them.”

Finally, why is Kahlua such a difficult brand? Pierre says the brand is appealing to the wrong demographic and should instead aim for a younger audience.

“Kahlua was a very trendy brand consumed by young adults, but unfortunately that was 20 years ago. And it seems Allied Domecq followed that group of consumers year after year which means today they are in their 50s instead of their 20s. Unfortunately, when you’re in your 50s you consume less alcohol and party less than when you are in your 50s. We need to make a complete shift in the strategy of the brand...we really need to rejuvenate the brand...we are in the process of developing new advertising.”

YARRAMAN WINERY BIDS AGAIN ON EVANS & TATE

US company Yarraman Winery Inc. has offered yet another merger proposal to troubled winemaker Evans & Tate through its Australian arm, Yarraman wine group. The proposal comes after another bidder, Ferngrove Vineyards, withdrew its offer for the West Australian company.

E&T received a merger proposal from Yarraman in December 2006, then again in February 2007. The proposal was terminated in March after the E&T board said it did not believe Yarraman had secured sufficient debt and equity to complete the transaction.

E&T says it will request “firm evidence” of funding (covered by GE Finance) while considering the latest offer.

Under the plan, Yarraman proposes that E&T’s $100 million debt to ANZ Banking Group be settled with a $65 million cash payment and $20 million in E&T shares issued at 11 cents each.

DIAGEO LOSES SHARE IN CONTROL STATES, WHILE PERNOD, REMY AND CAMPARI GAIN

NABCA volumes fell by -1.5% in June after experiencing a strong increase in May of 9.1%, according to a report by Melissa Earlam of UBS. Melissa says the difference in numbers is due to the fact that June 2006 included five weeks for Michigan and Utah compared to only four weeks this year. YTD growth in Control States volumes is 3.4%, improving slightly from April YTD growth of 3.3%.

Diageo saw a -2% volume decline in June and a slight loss of volume share for the first time since August 2004. YTD for Diageo is 3.8%. Diageo lost volume share in the vodka (-1.5%), rum (-1.65%) and tequila (-3.3%) categories. The vodka, rum and tequila categories as a whole were up 1.3%, down -0.8% and up 2.3%.

Pernod gained share in June with a -0.9% decline and a 3.1% increase YTD. Pernod was helped by share gains in Scotch, rum (11%), Cognac and cordials, like Kahlua. As we reported yesterday, IRI numbers show that high-end rum sales are growing like weeds.

Campari grew 4% in June and 6% YTD. Remy, meanwhile, increased 0.4% and 7.1% YTD.

ILLINOIS GOV. APPROVES STATEWIDE SMOKING BAN

Illinois Gov. Rod Blagojevich has signed into law a smoking ban effective January 1, making Illinois the 19th state to prohibit smoking in bars and restaurants. Chicago had already implemented a ban to start July 1, 2008, but the state ruling will move up its deadline.

SMITH & WOLLENSKY SALES DROP 6%

Smith & Wollensky Restaurant Group’s 2nd quarter same store sales dropped 1.3% to $24.5 million from $24.8 million last year. June same-store sales fell 2.8%, while total restaurant sales declined 5.8% to $28.5 million.

VRANKEN-POMMERY BEGINS DIRECT DISTRIBUTION IN U.S.

Champagne group Vranken-Pommery says it has taken over direct distribution of Pommery in the US as of June 30, along with plans to open up a subsidiary in Japan during the second half. The company reported flat sales (0.1%) for the first six months, but confirmed a revenue growth target between 6% and 7% for the full year.

CHILEAN EXPORTS TO U.S. JUMP 14%

In addition to announcing a new, unified trade group earlier this week, the Chilean Agriculture Ministry’s Office says wine export value have risen 34% in the six months to June compared to the same period last year. Volume jumped 27% from 115 million liters to 147 million. The UK and US remain the top two importers for Chilean wine, receiving 20% and 14% of total annual exports, respectively.

NISSAN TESTS ON-BOARD BREATHALYZER SYSTEM

Nissan says it is testing a new on-board breathalyzer system to prevent drunk driving in cooperation with local Japanese authorities. If the system detects alcohol above the legal limit on the driver’s breath, the ignition will be disabled through an “interlock” mechanism.

In a statement, Nissan said it is “actively engaged in developing a wide range of technologies to improve road safety through the prevention of drunk-driving.” In June, the company introduced a new message alert against drunk-driving through its
Carwings navigation system.

The system is installed on daily-operating vehicles where the drivers will monitor various factors such as functionality and alcohol-detection reliability. Nissan will use these test results to further its research and development in preventive drunk-driving technology.

Although the system is only being considered in Japan, we feel it’s a matter of time before it reaches the US – if only through debate. Alcohol beverage companies are against interlock devices, but do you think some activists could someday seek to make the device mandatory? Let us know what you think at megan@winespiritsdaily.com

IRI NUMBERS FOR JUNE

IRI reports that in the four weeks ending June 17, total spirits dollar sales rose 1.5% while volume declined -1.7% from the same period a year ago. In the prior four week period ending May 20, spirits dollar sales were up slightly at 2.1% and volume was down -1.1%, performing a little better than in June.

Sales in the vodka, tequila and rum categories grew 4.4%, 3% and 4%, respectively, while volume was another story. Vodka and rum volumes grew 0.4% and 2.1%, but tequila was down -2.4%. Not only was May a better month for spirits overall, but it proved much more profitable for tequila in particular. In the four week period ending May 20, sales of tequila jumped 8.3% as compared to June’s 3%, likely having something to do with Cinco de Mayo. In June, whiskey sales grew 0.2%, while volumes decreased -3% in June. This is good news considering whiskey value was down -1.1% in May and volume declined -4.4%. Sales of gin, cordials, brandy and cognac were all slightly down in June.

Ultra-premium vodka sales (priced $26 and above) rose 12%, but was not to be outdone by ultra-premium rum ($25 and above) which grew a whopping 45% and ultra-premium tequila ($30 and above), up 26%. Sales for similarly priced ultra-premium whiskey grew 5.4% and gin was up 12%. Super-premium vodka ($21-$26) showed the most sales growth overall, rising 85%.

Sales of Smirnoff in June rose 7% as compared to May’s sales which grew 5%. Bacardi was up 0.7% in value, followed by Captain Morgan (8%), Jose Cuervo (-6%) and Jack Daniels (2.3%). Bacardi was slightly improved in June, but Jose Cuervo was down considerably. In May, Jose’s sales were up 2.6%, once again likely due to Cinco de Mayo.

WINEBOW ADDS WINES FROM SPAIN, ITALY AND CHILE

Winebow, an importer of Italian wines, has added five new properties to its portfolio from Italy, Spain and Chile, the company announced today. The wineries include Livernano and Valdipiatta of Tuscany, Guitian and Bodegas Enrique Mendoza of Spain, and Leyda of Chile.

BILL TO EXPAND WINE CHARITY AWAITS SCHWARZENEGGER

After three Napa wineries were ticketed last year for unlawfully pouring wine at a charity event, a bill approved by the California state assembly that would allow more vintners to donate and pour their wines at non-profit fundraisers awaits the Governor’s approval. AB 323 allows wineries operating under license “17” (beer and wine wholesaler) and “20” (off-sale beer and wine retailer) to donate and pour at charity events. Under current law, only wineries with a “02” license has that privilege.

TESCO TO OPEN 12 LOCATIONS IN LA

Tesco announced it is opening 12 “Fresh and Easy” locations in Los Angeles “from Hollywood to Compton,” said ceo Tim Mason, with an additional seven sites being researched. Other Fresh & Easy formats will open in San Diego and Phoenix, along with LA, later this year. Not only will the stores be smaller than traditional supermarkets, but employees reportedly will receive higher benefits including “generous” paid time-off, 401K plan and health insurance.

LVMH INCHES CLOSER TO BUYING FRENCH NEWSPAPER

As some of you are probably aware, LVMH is in exclusive talks with Pearson to purchase its French business daily, Les Echos, for 240 million euros. Yesterday, the two sides moved a step closer to making a deal once they agreed on principles designed to protect quality, independence and jobs at the newspaper. Journalists at Les Echos maintain they are still opposed to the deal despite “great improvements” in LVMH’s offer, according to Dow Jones Newswire. LVMH already owns rival French daily La Tribune and is ranked in the top dozen biggest French companies.

GROCERY WORKERS MAKE PEACE IN SOUTHERN CALI

Peace at last between grocery workers in Southern California and the area’s three largest grocery chains. Workers approved the new four-year contract by a margin of more than 87% on Sunday (July 22), union officials said. The agreement includes wage increases, improved benefits and the elimination of a two-tier system that divided workers into separate wage and benefits classes.

NATIONAL MINIMUM WAGE RISES TO $5.85

The minimum wage rose $0.70 today (July 24) from $5.15 to $5.85 an hour, the first of three scheduled increases that will ultimately raise the wage to $7.25 in two years. Thirty states and the District of Columbia have minimum wages higher than the federal standard, so today’s increase actually only effects 20 states and is extended only to covered, non-exempt employees. The last wage increase was a two-step increase in 1996 and 1997.

While the increase is supported by low-income activists, the director of labor law policy at the U.S. Chamber of Commerce says it could mean fewer hours for employees, fewer pay increases for other employees, benefits reductions, job losses and waning job creation.

FOLIO FINE WINE PARTNERS WITH VILLA SANDI

Michael Mondavi-owned Folio Fine Wine Partners has signed an agreement to distribute Villa Sandi, a major winery in Italy known for its Prosecco, in the US.

DIAGEO VS. PERNOD: THE PROS AND CONS OF THE INDUSTRY GIANTS

There was an interesting article in the Financial Times on Friday that discusses Diageo’s consistency vs. Pernod’s long term growth potential. In the article, author Jenny Wiggins asserts that Diageo has “an image of stolidity” and that it’s “a little too respectable for its own good.” Seems like a nice problem to have, doesn’t it?

However, Jenny suggests that analysts are shifting their interest from Diageo to Pernod because they believe Pernod’s profit margins have great potential for growth. For example, after Diageo reaffirmed a respectful 8% guidance for underlying profit growth last month, its share price dropped 2.5%.

Here are some facts she includes in the article that support her claim:

1. Pernod has expanded more quickly in emerging markets
2. Pernod has been more aggressive in recent years on acquisitions

Analysts say that Pernod has more room to make quick decision because of its smaller size and decentralized management structure. Diageo, meanwhile, makes most of its big decisions out of the London head office.

Pernod does have a downside. For one thing, it lacks a big name vodka and profit margins on its mainstream brands are lower than Diageo’s. Nonetheless, Pernod is planning to make a bid on Absolut while it simultaneously strives to buy the international distribution rights to Stoli vodka from SPI. Diageo’s size makes it much harder to make acquisitions.

The title of the article is “Mixing its drinks could be wrong policy for Diageo,” which touches on – you guessed it – the troubled Guinness brand. Falling Guinness sales in Ireland and the UK has hurt Diageo’s overall beer business, which many speculate could lead to Diageo selling the brand. Analysts have recommended that Diageo leave the beer business, but we don’t see that happening anytime soon. We believe it’s important to Diageo, as they’ve said many times, to have a toe (or a leg) in each alcohol beverage sector.

We tried to provide a link to the article, but it was no longer on FT’s website.

CHILEAN WINE INDUSTRY ALIGNS IN NEW TRADE GROUP

In hopes to further strengthen its export market, Chile has created a new wine association called “Vinos de Chile A.G.” The group covers 95 wineries and 95% of the total exported wine market. Until recently, the Chilean wine industry was divided into two main groups, one made up of large wineries and the other consisting of boutique wineries. Could this have positive implications for the future of the Chilean wine industry in other countries?

After a closed voting, René Merino, General Manager of Casa Tamaya winery was named president and Javier Bitar from San Pedro Winery as vp.

E&J GALLO AND JACOB’S CREEK RATED MOST RECOGNIZABLE BRANDS

A survey taken by 11,000 consumers across 11 major wine markets show that Jacob’s Creek and E&J Gallo wine brands hold the most awareness. Wine Intelligence’s Vinitrac research shows that Jacob’s Creek was the most well known in Australia, Ireland and the UK, while E&J Gallo did the best in the US, Canada and Germany. France's JP Chenet was number two in Germany, but made top marks in Denmark and the Netherlands.

MAXXIUM GAINS NEW CHAIRMAN AND OTHER PERSONNEL CHANGES

The global distribution joint-venture, Maxxium, has announced that Beam Global’s managing director, Donard Gaynor, will serve as chairman. Donard is replacing current chairman, Ketil Eriksen, president of V&S, after he completes the two-year position.

Other board changes are also taking place. Edrington's Richard Hunter will be the new chairman of Maxxium's finance committee, while Jean-Marie Laborde from Remy Cointreau will be chairman of the Human Resources Committee. V&S' Andreas Berggren, meanwhile, will be chairman of the Maxxium operating committee and Edrington's Bill Farrar will take the role of chairman of the Maxxium transition committee, set up late last year following Rémy’s departure announcement.

All changes were effective at the beginning of July.

AUSSIE WINE INDUSTRY WARNS AGAINST OVER-INVESTMENT

Reportedly, a number of investors are getting overly excited about profit opportunities in Australia on the heels of a recent drought. Figures show that MIS investment in the wine grape sector has grown 24% in the past year, but the industry down under is warning investors not to get too carried away. While figures are showing a drop in grape supply, many in the industry believe the glut could return to an all time high as soon as 2010. The Australian Wine Grape Growers president Mark Mackenzie says, “It is certainly not a time to be looking at additional plantings.”

AGED RUM GAINS TRACTION IN THE US

In the July 16 issue of Time Magazine, an article featured under “Global Business” highlights the increasing popularity of aged rum vs. other aged spirits, such as Scotch. Sales of high-end rums have grown 45% to $287 million in the US, according to data issued by DISCUS. Good news for Puerto Rican rum producers, who provide 70% of all rum sold in the US. Puerto Rican law states that rum (distilled from molasses) must be aged a minimum of one year before it can be sold but is typically aged anywhere to 15 years.

PERNOD REVIEWS CURRENT AD ACCOUNT.

Pernod is opening a global media review of its $200 million ad account in order to reduce media costs, according to Adage.com. Aegis Group’s Carat currently heads the North American side of the account, valued at $66 million. The review was announced last week and takes place two years after Carat won the U.S.

ABSOLUT LAUNCHES NEW ORLEANS-INSPIRED VODKA

Absolut Vodka is reintroducing its 1980s “Cities” campaign with the launch of a limited-edition flavored vodka inspired by the “Big Easy.” With tastes of mango and black pepper, Absolut New Orleans will be available nationwide on August 1.

The vodka will be accompanied by a minimum charitable donation, the company says, of $2 million to organizations benefiting New Orleans and cities along the Gulf Coast. Absolut will donate 100% of its Absolut New Orleans profits to Gulf Coast charities.

INERTIA LAUNCHES FREE COMPLIANCE TOOL

Inertia Beverage Group, based in Napa, CA, has development a new, comprehensive web-based compliance tool for the wine industry that will be offered to everyone at no cost.

“The burden of complying with different wine shipping regulations and rules in 50 different states has created a barrier wineries must overcome to engage in direct shipping,” said Paul Mabray, ceo. “With the development of Inertia Beverage Group Rethink Compliance Tool, that deterrent to direct sales has been eliminated.”

Inertia’s program will be available to the public at the end of Q3 2007. When launched, the Rethink Compliance Tool will be available at rethinkcompliance.com.

MISSOURI PASSES LIMITED DIRECT SHIPPING LAW

Last week Missouri Gov. Matt Blunt signed SB 299 into law, making Missouri a limited direct shipping state, according to Ship Compliant. In-state and out-of-state wineries will be able to ship up to two cases per month to consumers. Also, SB 299 will allow in-state retailers and retailers from reciprocal states to ship directly to consumers at 2 cases per year.

EPA AWARDS FETZER VINEYARDS

Fetzer Vineyards leadership in sustainable environmental practices landed it two awards this week, including Best-of-the-Best Stratospheric Ozone Protection awarded by the EPA (Environmental Protection Agency) and the company’s 12th WRAP (Waste Reduction Award Program).

The awards recognize Fetzer's phasing out of methyl bromide, organic farming, integrated pest management, waste reduction and other environmentally friendly practices.

DIAGEO: NEW CHAIRMAN TO REPLACE JAMES BLYTH

Diageo said yesterday that Franz Humer will serve as the next chairman, succeeding James Blyth. The succession will take place July 1, 2008 after Humer retires from his current role as ceo of F. Hoffmann-La Roche.

WSWA ANNOUNCED IT HAS HIRED

Chris Kennedy to serve as the new communications and public affairs manager.

HOLLYWOOD BATTLE OVER “JUDGMENT OF PARIS.”

Alan Rickman has been slated to portray Steven Spurrier in upcoming film Bottle Shock, rival to the Judgment of Paris about the legendary 1976 tasting. According to Decanter, the producers of Judgment of Paris are considering suing their competitors who they feel are mounting unfair competition.

Meanwhile, Judgment of Paris has considered casting several different stars for the part of Spurrier, including Hugh Grant and Jude Law, while George Clooney was considered to play Warren Winiarski and Keanu Reeves to portray Mike Grgich.

NEW ZEALAND GROWERS STRUGGLE TO MEET DEMAND

In the case of New Zealand, demand is higher than supply. Despite an 11% increase in this year’s grape harvest, growers are reportedly struggling to meet export demand thanks to a rise in popularity for the country’s sauvignon blanc and pinot noir.

Such a different story in its neighboring country, Australia, where growers have suffered through recent grape gluts and now a production-threatening drought.

REMY COINTREAU SEES STRONG COGNAC GROWTH

In its first-quarter earnings, Remy Cointreau said revenue ending June 30 grew 6% yoy, supported by growth in all divisions and beating analysts’ estimates. Organic sales increased 11%, helped especially by Remy Martin Cognac, Metaxa and Passoa, and increased growth in China and Russia.

Liqueurs and spirits organic sales increased 5.3%, champagne sales rose 5.6% and cognac sales jumped a whopping 16.7%. Double digit growth was recorded by Piper-Heidsieck and Charles Heidsieck.

Meanwhile, partner brands grew 10.5% where “the growth of Scotch whiskies in the US and the development of Imperia vodka contributed to the sales growth in this division.”

CAMPARI ACQUIRES “X-RATED” VODKA CO

Milan-based Gruppo Campari announced it has purchased US spirits company X-Rated for the sum of $40 million. The portfolio includes X-Rated Fusion Liqueur, Jean-Marc XO luxury vodka and X-Rated ultra premium vodka, formerly owned by Jean-Marc Daucourt and Todd Martin (former president of Allied Domecq North America). X-rated is currently distributed by Daucourt Martin Imports.

As part of the deal, a price adjustment will be paid in the next three years based on the incremental sales volume performance over the same period. The transaction is anticipated to close next month and be paid in cash.

In a statement, Campari said the X-Rated brands have grown rapidly since their launch in 2004, selling a total of 70,000 cases last year.

Campari most recently bought an 80% stake in Sammy Hager’s Cabo Wabo Tequila, expected to close Jan. 2008.

TREVOR O’HOY FIGHTS FOR FOSTER’S

There’s a great article in The Sydney Morning Herald outlining the struggles surrounding Trevor O’Hoy, Foster’s president and ceo, and the troubled company. To check it out, click here. We included an excerpt below.

“Since then, everything outside his control that could go wrong, has. An international wine glut, overproduction in Australia, and a rapid lift in the Australian dollar has crimped revenue.

Things under his control haven't fared much better. Key executives have quit, integration of the beer and wine businesses has been more painful than anticipated and the big cost savings have failed to materialise.”

WHOLE FOODS CHIEF ISSUES APOLOGY TO SHAREHOLDERS

In the latest development in this wacky turn of events, Whole Foods chairman and chief exec John Mackey issued an apology to shareholders Tuesday (July 17) for posting questionable messages on a financial message board under the pseudonym “Rahodeb,” an anagram of his wife's name, Deborah. Furthermore, the company says it will conduct an internal investigation into the postings to comply with the Securities and Exchange Commission (SEC) who is conducting a similar inquiry.

In a statement, Whole Foods said that the board, which has seven members, "will refrain from comment until the internal investigation is completed."

All of John’s blog posts were taken off the company website, along with a note from John that says there is a “temporary hold” on the blog.

"I sincerely apologize to all Whole Foods Market stakeholders for my error in judgment in anonymously participating on online financial message boards," John said. "I am very sorry, and I ask our stakeholders to please forgive me."

Whole Foods has an independent board of directors with the power to reprimand and even fire a CEO, so there’s always the possibility that Mackey has seen his day.

There’s no doubt John made some mistakes in posting under a pseudonym and issuing a personal blog, but there’s also no question about his success in the company. As somewhat of a local “celebrity” in Austin, TX, it seems like his goal is to be the anti-CEO, just-another-hippy-practicing-free-speech kind of guy. However, that might not be the best route for a leader of a major company. Let us know what you think at megan@winespiritsdaily.com.

JACUZZI FAMILY VINEYARDS IS OPENING ITS DOORS

to visitors, effective July 13. The winery is located along Highway 121 and is one of the first vineyards people will pass when entering Sonoma Valley.

PENN. GOVN SIGNS PRO-WINERY BILL

House bill 896 was reportedly signed by the governor earlier this week, giving state wineries the right to sell their products at farmer markets. Wine cannot be sold for more than five consecutive days at one event and not for more than 40 days total within one year. Also, wineries and vineyards will need a permit to sell at farmer markets.

DIAGEO NORTH AMERICA APPOINTS NEW CFO

Catherine Jessup has agreed to serve as CFO for Diageo North America, effective August 14th. Jessup succeeds Deirdre Mahlan who was promoted to a global position within Diageo Plc.