VOLUME LOSS INEVITABLE FOR AUSSIE EXPORTS

After attending the 2007 Australian Wine Industry Outlook conference, analyst Andy Kovacs of Macquarie Research said the Australian wine industry is “hazy at best” in a research note. Let’s take a look at the highlights.

Andy notes that Lawrie Stanford from the AWBC is predicting a 2008 crush of 1.22mt, which is supported by other industry participants. The 2009 crush is likely to be smaller at 1.16mt, while 2010–2012 is expected to be constrained (just 1.8mt by 2012). Water reserves in the warm inland regions are at critically low levels and are likely to take 4–5 years to recover.

As Andy puts it, volume shortfalls will impact sales. It’s true that the current surplus from past harvests will help make up for a lower 2008 yield, but the Australian wine industry still expects to move into under-supply during fiscal 2009. Imports will help fill the gap domestically, but some export sales are likely to be lost.

Faced with volume shortage (and related grape price inflation) selling price increases will be necessary to protect profits, says Andy. Australian wine export prices are increasing for the first time in five years, although he notes that some local industry participants are showing a reluctance to take price increases.

But the question remains, how will international consumers react to more expensive Australian imports? As Andy points out, Australian wine gained popularity globally because of its perceived value, including quality, approachability and affordability.

“The challenge of lifting export prices therefore shouldn’t be under-estimated,” said Andy.

At the conference, Dan Jago, Tesco’s director of beer, wines and spirits, suggested that while Australian wineries may want to implement price increases, consumers will ultimately decide whether to accept them. As a solution, Australian wineries need to strengthen their equity in order to support price increases.

FRESH & EASY A TOP TEN CONTENDER

Tesco could be a top U.S. contender in the next several years, according to TNS Retail Forward. They project that Tesco’s new Fresh & Easy concept will be among the top 10 supermarket retailers in the country by 2015 and worth about $10 billion. By 2011, TNS Retail estimates that Tesco could be a $4 billion retailer in the U.S. with 500 stores. Fresh & Easy’s small size gives it the advantage to rapidly expand across the U.S. – a key sales driver for the retailer, says TNS.

“The combination of Fresh & Easy’s smaller stores, self service tills and ready-to-cook meals has direct appeal among U.S. shoppers whose primary concern is convenience,” said Jennifer Halterman, senior consultant at TNS. “There is demand for this type of concept, and we expect other U.S. retailers to be watching Tesco closely for ideas on how to tap into this buoyant market.”

BOTTLE SHOCK TO APPEAR AT SUNDANCE

Sundance Film Festival has picked up “Bottle Shock,” the controversial movie that depicts the Judgment of Paris wine tasting in 1976. Created by Sonoma residents Marc and Brenda Lhormer, the movie was filmed in Sonoma and stars Bill Pullman and Alan Rickman among others. The movie falls in the American Spectrum category at Sundance, which runs from Jan. 17 through Jan. 27 in Park City, Utah.

Bottle Shock was seeped in controversy this summer when its movie rival Judgment of Paris threatened to sue. Steven Spurrier, a British wine authority and the organizer of the 1976 Paris Tasting, also reportedly threatened to sue.

To read more about Bottle Shock, click here.

To read more about the Judgment of Paris, click here.

CHEFS RATE ALCOHOL HOT, HOT, HOT

A survey released yesterday by the National Restaurant Association shows that alcohol is among the hottest culinary trends in restaurants. More than 1,000 American Culinary Federation member chefs ranked craft beer, energy drink cocktails, martinis, mojitos, artisan liquors, organic wine and specialty beer in the top 20 trends. In addition to cocktails and other drinks, they noted that alcohol is also important as a cooking ingredient and with food pairings.

"Specialty alcohol is increasingly popular right now," said Dawn Sweeney, president and ceo of the association. "As American diners are growing increasingly sophisticated, adult beverages can be an important part of both recipes and meals.”

"Specialty alcohol, craft and specialty beer in particular, is a very hot trend," said Chef John Kinsella, CMC, CCE, AAC, president of the American Culinary Federation and senior chef instructor at Midwest Culinary Institute in Cincinnati. "Organic wine is also very popular now...I'm also seeing additional, innovative culinary uses of alcohol now, including flavoring items with alcohol essence, like we currently are developing with chardonnay-, cabernet- and merlot-flavored iced teas for example."

The overall top trends in culinary uses of alcohol are signature cocktails, closely followed by deglazing/reductions/sauces, food-beer parings and beer sommeliers, as well as food-wine pairings and wine sommeliers, according to the survey.

JACK DANIEL’S DISAPPOINTS IN THE U.S.

In all, it looks like Brown-Forman did well internationally but felt a squeeze in the U.S. during the second quarter for a number of reasons. The problem is two fold, the company said. One, growth of the U.S. spirits market is slowing, and two, B-F and Jack Daniel’s in particular are feeling the burn from mounting cost pressures and consumers trading down to cheaper spirits, beer and wine. Rising grain prices and other factors made costs for Jack Daniel’s grow in the mid-single digits in fiscal 2007, the company said. Not good.

Chairman and ceo Paul Varga summed it up by saying, “the spirits industry growth rate is down a little from where it was just 12 months and within the spirits industry Brown-Forman is disproportionately down due to a combination of consumer dynamics, competitive efforts and company specific factors.”

CONSUMERS DRINKING OFF-PREMISE. He estimates that growth of the U.S. spirits industry is down about 1.5%-2% versus last year. Meanwhile, wine and beer is growing at the same or improved rate and therefore recapturing share back from spirits, which Paul thinks is a function of consumers feeling short on cash. As a result, consumers are shifting occasions from on-premise to off-premise and making price more important, he said.

“When people move their consumption from on-premise to off-premise spirits suffers a little bit because they’re not as easy to prepare. Beer and wine is actually easier for consumers to prepare in their homes then making a Cosmo or a mixed drink at home,” said Paul.

Volume of Jack Daniel’s is down 4% versus the same period last year, while sales dollars are down less than 2% due to higher prices. He said half of that is attributable to a drop in the US spirits industry and the other half to B-F and Jack Daniel’s. These two factors have led to a combination of trading down, trading over and trading up.

“When times are challenging as we’re seeing today it’s more difficult for some of our consumers to pay the premium price for Jack Daniel’s with the regularity they normally do.”

PRICE INCREASES TAKE A TOLL. In addition and as a result of consumers feeling tight on money, Paul said B-F is having trouble competing with Diageo’s and Fortune’s deep discounting as a way to gain volume.

“In this more challenging consumer environment our largest competitors are increasingly focused on gaining market share, occasionally with little regard for short term cost or longer term brand equity. At a time where the consumer is somewhat cash challenged and our competition is discounting at deeper levels, we’ve been continuing on with our regular price increase and discount activity...These factors related to competitive pricing have contributed to lower short term growth rates for several of our brands in the United States.”

In a research note, Kaumil Gajrawala of UBS wrote, “We view B-F’s pricing discipline favorably (especially in light of the COGS environment) and believe consumers will adjust to the new price points.”

B-F will continue with its moderate price increases and regular discount activity although it has contributed to lower short term growth. To help make up for things, Paul said the company will work on making promotions more relevant to the current consumer and trade environments.

“We’re going to have to step up our pricing execution and looking closely at pricing from market to market...I just think during these harder times we’ve really got to be on top of the promotional price points...but it doesn’t make us feel like we can’t continue with the moderate price increases that we’ve been doing for some time,” Paul continued.

B-F FOCUSED ON INTERNAL ISSUES. Another issue for B-F? Paul said internal issues at B-F have taken the focus away from its distributors, the trade and consumers in the U.S. He also hinted that since Diageo is currently renegotiating its contract with distributors, it’s getting more attention from wholesalers.

“For the last year and a half our U.S. team has been more focused on internal organizational matters such as roles, responsibilities and trending. This has come as some sacrifice and focus on our distributors, the trade and our consumers.”

The company said it has stepped up its game in the past couple of weeks with distributor programming, pricing execution, in-store merchandizing and consumer value added programs. One example is that Jack Daniel’s has significantly increased its gift packages during the holiday season.

“We believe we’ve diagnosed what’s going on in the US and we believe it’s fixable to getting back on track.”

“We’ve had these short challenging periods in the US and each time we’ve bounced back...we believe the US market continues to hold potential for Brown-Forman,” said Paul.

INTERNATIONAL SCOPE. It’s clear that B-F is keen on becoming a larger international company. Its growth in the global marketplace largely helped to make up for its underperformance in the US market. Volume of Jack Daniel’s grew 10% internationally on a 12 months rolling basis through October 2007, while Finlandia’s volume grew at a double-digit rate internationally.

Globally, Southern Comfort volumes grew at a low-single digit rate in the quarter, as double-digit increases in the U.K. and South Africa offset a low-single digit decline in the U.S. Paul said a key thing for SoCo long-term is to get the brand firmly entrenched in the premium set

HERRADURA BODES WELL. Meanwhile, cfo Phoebe Wood said B-F’s Herradura and El Jimador brands have made excellent progress in the US in increasing distribution.

“With what we’ve seen so far, we’re very pleased with this acquisition,” she continued.


BEAM GLOBAL LAUNCHES 100 ANOS VERDE TEQUILA. Beam Global today announced the U.S. launch of 100 Años Verde Tequila. 100 Años Verde is the most recent addition to the 100 Años family to join the portfolio in the United States, the company said, and is now available on retail shelves.

A 100% blue agave reposado, 100 Años Verde is geared towards 24-40 year old male tequila aficionados. It is available nationwide with a suggested retail price of $21.99, which varies by market.


B-F BOARD APPROVES $200M SHARE REPURCHASE. In other Brown-Forman news, the company said its board of directors has approved a $200 million share-repurchase program. The plan authorizes the purchase of outstanding class A and B shares over the next 12 months.

B-F BOARD APPROVES $200M SHARE REPURCHASE

In other Brown-Forman news, the company said its board of directors has approved a $200 million share-repurchase program. The plan authorizes the purchase of outstanding class A and B shares over the next 12 months.

BEAM GLOBAL LAUNCHES 100 ANOS VERDE TEQUILA

Beam Global today announced the U.S. launch of 100 Años Verde Tequila. 100 Años Verde is the most recent addition to the 100 Años family to join the portfolio in the United States, the company said, and is now available on retail shelves.

A 100% blue agave reposado, 100 Años Verde is geared towards 24-40 year old male tequila aficionados. It is available nationwide with a suggested retail price of $21.99, which varies by market.

CHRISTIE’S TO HOLD FIRST LIQUOR AUCTION IN NY

Following a change of regulation for the State of New York in August of this year, Christie’s announced plans to hold the first liquor auction in New York since Prohibition began in 1920. Christie's says it will conduct the sale as part of its December 8 Fine Wines and Spirits offering at its Rockefeller Galleries in midtown New York.

“Over 100 lots of spirits will be offered, sourced from the best collections in America, and include 1811 cognacs named for Napoléon...Estimates for the spirits section range from $300 to $100,000, and in its entirety, the spirits selection is expected to realize in the region of $250,000,” the company said in a statement.

ANGOSTURA AIMS AT BECOMING A SPIRITS POWERHOUSE

After promising that new alcohol beverage acquisitions were on the horizon, Caribbean producer Angostura and its parent company CL Financial has offered to acquire an almost 50% stake in Lascelles de Mercado for just under $1 billion.

In a statement last week, CL Financial and Angostura Holdings chairman Lawrence Duprey said the venture would facilitate the listing of Angostura on the London Stock Exchange.

“The combination of two major brands with global access through the CL World Brands distribution platform gives the English-speaking Caribbean a major spirits and wine company owned by the people of the Caribbean,” he said.

Lascelles de Mercado is the largest publicly listed Jamaican conglomerate and specializes in spirits, including the Appleton and Wray & Nephew rums.

REMY COINTREAU TALKS CHAMPAGNE AND SPIRIT ACQUISITIONS

Putting numbers aside, a few interesting things came out of Remy Cointreau’s first half results yesterday. The company’s managing director Jean-Marie Laborde said rising grape prices could lead to the disappearance of artisan champagne brands in the coming years as a result of grape shortages.

"It's clear there will be consolidation among the brands," he told reporters after the conference call, according to Reuters.

But when it comes to new acquisitions, Laborde said the company will focus on spirits. He stressed that while it was not a priority, the company would consider buying another spirits brand if one came along. Perhaps some brands will be made available once Absolut is acquired next year.

"I could afford a brand today but am not looking," he said. "I would prefer to wait until we have our own (distribution) network, which is working well."

As you’ll recall, Remy announced plans last year to pull out of its Maxxium j-v with Vin & Sprit, Fortune and the Edrington Group, effective 2009.

UPDATE: EU MINISTERS STRUGGLE FOR COMPROMISE

The EU isn’t much closer to making a decision on the proposed wine sector reforms under EU Agriculture Commissioner Mariann Fischer Boel. Her plan includes major changes for the European wine industry, mainly to help drain its surplus wine lake and increase competition with the New World. As you can imagine, her proposals have been met with loads of criticism and resistance. Although some sort of a decision was expected yesterday (Nov. 27), EU government representatives were unable to agree on wine subsidies and the use of adding sugar to wine.

As you’ll recall, many northern EU countries, including Germany, regularly add sugar to their wines as a way to boost alcohol content – a practice that would be banned under the current proposals. Fischer Boel’s plan offers big cash incentives to producers to dig up their vines, particularly lower-quality vineyards. In addition, the reform plan would give EU countries “national envelopes” based on their wine production in the past, which is another sensitive subject under the negotiations. Why the big deal? Mainly because the government will dictate how the money is used, such as marketing, converting vineyards and insuring harvests against natural disasters. Fischer Boel also wants to extend the current ban on new vine plantings from 2010 to 2013.

So as you can see, diplomats are not having an easy time coming to a conclusion. Final negotiations will be held in December, but several insiders say it will be a long time before a final decision is made.

For a more detailed account of the reforms, click here.

DOOLEY’S NEW IMAGE SPEAKS TO MILLENNIALS

Dooley’s Original Toffee Cream Liqueur is debuting a new label, bottle design and marketing message in the U.S. aimed at younger generations (Millennials). The Dooley’s bottle is now sleeker, said the company, and the label has been replaced with “rich hues” of navy, red and gold.

“We believe this new packaging correctly expresses the upscale image of the brand,” said Timothy Rose, a national brand development manager for Behn of North America, the importer and marketers for Dooley’s. “Almost all other creams are in dark bottles, but the bright Dooley’s bottle still stands out among the rest.”

Dooley’s will be entering new U.S. markets in 2008 while continuing to gain sales in existing markets.

B-F APPOINTS FIRST EVER CHIEF DIVERSITY OFFICER

Brown-Forman has appointed Ralph de Chabert as the company’s first chief diversity officer, effective December 18, 2007. As chief diversity officer, Ralph will be responsible for developing and implementing a global diversity and inclusion strategy initially in the U.S. In all, he will focus on B-F’s marketing efforts with diverse consumer groups, the company’s workforce, community involvement and the diversity of its suppliers.

MORGAN STANLEY REDUCES STAKE IN PERNOD

After WSD reported yesterday that Morgan Stanley and several of its subsidiaries acquired a 6.5% stake in Pernod Ricard, the bank has reduced its stake in Pernod below the 5% threshold. The bank now holds a 4.94% of the capital and 4.47% of the voting rights of the group. Morgan Stanley remains Pernod’s second largest shareholder behind the Ricard family, who holds a 10.7% stake.

CONSTELLATION MOVES HQ TO FINGER LAKES REGION

Constellation is moving its headquarters from Woodcliff Office Park in Perinton, NY to Victor, NY in the state’s Finger Lakes wine region. The company says it has simply outgrown its current office and needs more room to accommodate its ever expanding staff.

The three-story building in Victor, located 20 miles southeast of Rochester, is expected to be completed by early 2009, according to local reports. Since leasing the building in Perinton, Constellation’s corporate staff has expanded from 70 employees to over 150. The new building is expected to hold more than 200 people.

PIONEER WINE COMPANY

of Texas says it has acquired Houston-based Calice Wine Company. The transaction is scheduled to close November 30, 2007. Financial terms were not disclosed.

SCREW CAPS BLAMED FOR HIGH COPPER LEVEL

In an interesting note, a 4000-case shipment from New Zealand winery Te Kairanga was rejected by a German company due to a high level of copper. The customer claimed the level of copper in Te Kairanga’s pinot noir (3.6 parts per million) was well over the European recommended limit (1ppm).

As you’ll recall, copper is typically added to eliminate smelly agents in wine but then drained before the wine is bottled. Some people blame the shift from corks to screw caps for the increase in copper, claiming too much copper is added when screwcaps are used. Others claim the practice is no longer taking place.

Apparently, New Zealand doesn’t routinely check copper levels in exported or imported wines. Could this pose problems for New Zealand’s ever-growing $700 million export wine business?

Apparently not. Te Kairanga’s chief executive Ian Frame says this is an isolated incident. “The product is not branded Te Kairanga, and in all the other countries we deal with this is not a problem.”

New Zealand Wine chief executive Philip Gregan went so far as to say that Germany is known as a “stickler for technical points” when it comes to wine.

“If there's an issue that comes out of a customer in Germany, it never surprises me,” he continued.

BUSH ADMINISTRATION TO FORM NEW ILLEGAL IMMIGRATION POLICY

The U.S. Department of Homeland Security says it plans to develop a new program to stop employers from hiring illegal immigrants by March 24. The agency issued a legal brief last week in response to U.S. District Judge Charles Breyer’s decision to indefinitely delay the Buch administration’s first immigration policy. As you’ll recall, the Bush administration’s initial plan was to force employers to fire suspected illegal immigrants or face a $10,000 fine. Vineyards and restaurants adamantly opposed the plan.

For more background on the issue, click here.

TESCO LOOKS TO THE EAST

A report in Convenience Store News says Tesco is looking at expanding its U.S. Fresh & Easy concept to New York, Florida and opening a distribution center in Chicago after generating buzz on the West Coast. Tesco’s strategy centers on opening new stores quickly before it is copied by other retailers.

However, a source told Retail Week that the retailer’s primary focus is on the West Coast where it recently opened stores in L.A. and Las Vegas.

“For the moment, we are focused on opening more Fresh & Easy stores in these cities, along with Phoenix and San Diego,” the source told Retail Week

UB GROUP ENTERS WINE BIZ HEAD FIRST

Vijay Mallya’s UB Group says it will launch close to 30 international wine labels by January 2008. The imports hail from France, Italy and South Africa. The Group (based in India) already has launched 13 labels from France, 7 from New Zealand and two from Australia. Where are the U.S. wines?

“We are market leaders in spirits and beer. Obviously, we want to become leaders in wines as well. The idea is to offer an entire range of wines from various regions and countries across the world. We will also be launching our Indian-made wines, Zinzi and Four Seasons in the next two months,” said Sanjay Roy, head of marketing and sales of UB’s wines division.

Interestingly, many rumors have popped up this month that Diageo might acquire UB Group.

DIAGEO ON THE PROWL FOR WINE

Based on a report released today by analysts CTI Investment Research, UK publication Harper’s is reporting that Diageo is looking for beer, spirits and wine acquisitions. In particular, Diageo is considering both small and larger scale wineries. As you’ll recall, Diageo, along with E&J Gallo, was reportedly in talks to acquire Fortune’s wine assets before it struck a deal with Constellation.

CTI believes Diageo runs “risks to top line growth...especially in emerging markets and the U.S.” To read more, click here.

MORGAN STANLEY BUYS 2ND LARGEST STAKE IN PERNOD

Morgan Stanley has become the second largest shareholder in Pernod Ricard after upping its stake in the French company to 6.5% over the last couple of months. With an average price of 155 euros per share, the stake cost about $1.48 billion. The Ricard family remains Pernod’s top shareholder with a 10.7% stake.

REMY COINTREAU: U.S. PARTNER BRANDS ACHIEVE “REMARKABLE” GROWTH

In Remy Cointreau’s first half results, the company reported organic operating profit growth of 12.7% overall and organic growth in turnover up 9.8%.

Cognac sales grew 13% organically, while liqueurs and spirits recorded organic growth in turnover of 5%. Champagne, meanwhile, grew 15% in organic growth turnover. The company said Piper-Heidsieck achieved sustained growth and Charles Heidsieck grew significantly in the US and Europe. Meanwhile, partner brands in the U.S. increased with “remarkable growth” in Imperia vodka as well as growth in Scotch whiskies and California wines.

A CRASH COURSE IN HOW MILLENNIALS DRINK

A new study from the Nielsen Company confirms important themes in Millennial drinking, including the generation’s willingness to experiment with new products and pay a premium for alcohol. It’s all about the image, right?

Also known as “The Next Great Generation,” which is news to us, the 70 million Millennials outnumber Generation Xers (31 – 44 years old) by nearly 25 million and are nearly as large as the approximately 77 million Baby Boomers (45 – 65 years old) in the U.S.

“At the beginning of their careers, Millennials are discovering the world and have control over their money and time in ways their predecessors never did,” said Richard Hurst, senior vp of Beverage Alcohol at ACNielsen.

BEER REIGNS SUPREME. Surprisingly, Millennials still show a preference for beer despite a drop of 12 percentage points in the past ten years from 59% in 1997 to 47% in 2007. Wine and spirits, meanwhile, have gained only six percentage points during the last ten years. On a dollar basis, beer represents the majority (47%) of Millennial consumers’ spending, compared to spirits (27%) and wine (26%). On a volume basis, beer accounts for 83% of Millennials’ purchases, compared to 11% for wine and 6% for spirits.

When it comes to beer, Millennials are much more inclined than older consumers to purchase imported beers (particularly Mexican) or craft beers, hence the recent surge in both categories.

HIGH SPIRITS ON THE TOWN. As with beer, Millennials are more than willing to trade up to more expensive spirit brands. Premium and ultra-premium spirits rank highest among Millennials, while value-priced spirits dominate consumers over the age of 50. This might have something to do with the fact that Millennials are more inclined to consume spirits drinks with friends, in a bar or nightclub than Gen Xers and Baby Boomers.

“As a group, Millennials grew up with more beverage options -- premium coffees, flavored waters, sweetened drink options -- than their older counterparts,” said Hurst.

Nielsen found that Millennials perceive spirits to be “fun,” “modern” and “popular.” Baby Boomers, on the other hand, are less likely to consider spirits “fun” and more likely to perceive spirits as “relaxing” and “suiting their lifestyle.”

RED WINE RULES. In line with recent trends, Millennials tend to prefer red wine (51% of volume). Popular varietals include cabernet and pinot noir, while chardonnay remains the most popular white wine across all ages. Pinot grigio, sauvignon blanc and rieslings account for a higher share of Millennials’ wine purchases compared to the over 30 population.

Are you starting to see a recurring theme? Millennials like to experiment. They are much more likely to try new flavors, varietals brands and drinks recipes than older generations.

Says Gary Glass, president of White Rocket Wine Company (Millennial division of Kendall-Jacson): “The Millennial focus is not on learning about wine to avoid ‘making mistakes’ but on having fun with wine. Quality certainly needs to be in the bottle, but to sell that first bottle, the brand name and packaging are critical as this is the key driver of Millennials’ wine shopping decisions.”

ROBERTO CAVALLI ENTERS THE WINE BIZ

For all you wine-loving fashionistas, Roberto Cavalli’s new line of wines, including blends of Merlot, Cabernet Franc, Cabernet Sauvignon, Petit Verdot and Alicante Bouchet, will reach U.S. shores in the spring of 2008. Headed by his son Tommaso, the wines were all extracted from grapes grown in the family’s 70-acre Tenuta degli Dei in Tuscany.

WEST VIRGINIA LAWMAKERS CONSIDER WINERY TAX BREAK

West Virginia legislators are considering a tax break for farm wineries, according to the Associated Press. During interim sessions this week, legislators will consider ways to aid West Virginia’s wine industry, which includes a tax break as long as it doesn’t conflict with existing state laws. A draft on the resolution is expected this week.

ABSOLUT PRODUCES 10 MILLIONTH CASE

In a press release today, Vin & Sprit announced it has produced the 10 millionth 9-liter case of Absolut, which, coincidentally, is destined for Canada. The company said that after “a very strong third quarter,” sales volume for Absolut grew 14%. Furthermore, production for 2007 has already surpassed the previous annual record from 2006 (9,900,000 9-liter cases).

ANHEUSER-BUSCH LAUNCHES NEW VODKA

Anheuser-Busch has launched a new vodka brand, entitled Purus, under its Long Tail Libations spirits arm. The company says Purus is the world’s first 100% organic Italian wheat vodka and is now available in the “Northeast’s most exclusive high-end lounges, restaurants and specialty grocery and liquor stores.” Purus will be distributed through A-B wholesalers.

WHOLESALERS APPEAL DIRECT SHIPPING LOSS IN INDIANA

The Wine & Spirits Wholesalers of America (WSWA) and other groups filed an amicus brief in support of an appeal on a lower court decision in Indiana that struck down face-to-face requirements in August. WSWA has filed similar briefs in four other federal appeals since that time.

“We’re saying in Indiana what we’ve consistently said everywhere else: that alcohol is a sensitive product that demands special efforts by the states to control who sells it, where they sell it, and how,” WSWA president and chief Craig Wolf said. “Those who say alcohol products should be treated just like jeans and CDs are overlooking the stake all communities have in safe, responsible commerce.”

The lower court said the face-to-face requirement “discriminates” against out-of-state wineries. As you’ll recall, most wineries think face-to-face requirements are protectionist because it requires consumers to visit a winery first before placing internet and phone orders for direct to consumer shipments. They argue that it’s easier for Indiana residents to visit an in-state winery than an out-of-state winery. We’ll keep you posted on the federal court decision.

USA TODAY’S VIEW ON LOWERING THE DRINKING AGE

Should the drinking age be lowered? Apparently not, according to an editorial in Monday’s USA Today. The author argues that while lower drinking age advocates – who generally agree 18 should be the legal age – have good points, the social consequences outweigh the positives.

“The pro-18 argument goes like this: If 18-year-olds are allowed to vote and serve in the military, they ought to be able to drink. The age 21 minimum simply undermines respect for the law and prevents young people from learning to drink responsibly at home before they get to college,” says the article.

Contrarily, the author claims that “about 50 major studies point to the same conclusion: On average, traffic deaths drop by 16% when the drinking age goes from 18 to 21. Since 1984, about 25,000 lives have been saved, federal highway authorities estimate.”

To read more about the pro-18 vs. the pro-21 argument, click here. They both make some interesting points.

HOLIDAY SALES EXPECTED TO DISAPPOINT

According to an article in Bloomberg, U.S. retailers are poised for a sales slowdown that could last through the holidays and into 2008. Why the slowdown? Retailers are blaming less foot traffic on rising gas prices and the current housing recession.

To read the full article, click here.

A TALK WITH PATRICK MOORE, PRESIDENT OF GLAZER’S TEXAS

The times they are a’changing as wholesalers, retailers and suppliers strive to keep pace with the ever shifting landscape of the wine and spirits business. WSD had the chance to talk with Glazer’s newly appointed president of Texas, Patrick Moore, earlier this week and gain his perspective on his new position and the future of the biz. Let’s take a look at what he had to say.

WSD: Overall, how is Glazer’s relationship with Diageo?

Patrick: For the last several years, Glazer's has been one of Diageo's best performing distributors. Our states are perennial nominees and winners of Diageo's Golden Bar awards, and our business with Diageo is strong.

WSD: Does it worry you that Southern Wine & Spirits might enter the Texas market?

Patrick: Glazer's is the acknowledged market leader in Texas for both customer service and brand building. We focus only on what we can control, which is our execution in the market, building brands, building our people, and building great customer relationships.

WSD: Do you believe trading up trends in the wine and spirits business will continue? If so, how long?

Patrick: We believe that we are witnessing a fantastic time for our industry. We expect the premium sectors of our business to continue to grow faster than the market, and that's where we are investing our resources and infrastructure. We believe that what we are seeing today is a permanent trend.

WSD: What will you do differently as president of Glazer’s Texas?

Patrick: Glazer's has evolved over the years into the market leader in Texas because of the way we drive execution and accountability, the way we have structured ourselves to be flexible and responsive to market conditions, and the way we have executed our corporate strategy. My role as President of Texas will be to continue to execute on our strategy, and to position Glazer's as being indispensable to our suppliers and to our customers.

WINES SALES DWINDLE SLIGHTLY IN EARLY FALL

Wine sales growth dwindled slightly in early autumn, with overall sales growing 7.3% in the 13 weeks ending October 20 and case volume sales up 3.7 %, according to Nielsen scan data. In the 52 weeks ending October 20, dollar sales rose 6.7% and volume increased 3.4%.

IMPORTS GAIN IN SUPERS. Domestic table wine sales were up an impressive 6.8% in the 13 weeks, compared to imported sales which grew 8.5% in the period. Domestics lost -0.3% of dollar market share, while imports gained 0.3%. Volume of domestic table wine increased only 3.3% from the previous year and imports grew 5.2% - a considerable drop from the summer. With that said, imports gained 0.3% of volume share, while domestics lost -0.3% in the 13 weeks to October 20. It looks like consumers are continuing to buy more imported wine brands at higher prices.

As a rule, 52-week numbers are slower to show trends and these are no different. In the 52 weeks ended Oct. 20, dollar share of both domestic and imported wines were flat. Domestic volume share, however, was down -0.3% while imports were up 0.3%.

Once again, South African wines led imports in dollar growth in the 13 week period, followed by New Zealand, Portugal and Argentina. The top three importers by dollar was Italy (10% share), Australia (9.5%) and France (3%). Australia lost -0.4% share pts. in the period while Italy and France were flat. Dollar sales for Italy grew 7.8% in the 13 weeks to October 20, while Australia was up 3.1% and France jumped 5.6%.

While Australia lost its top spot in the dollar category, it remains ahead of Italy and France in terms of case volume. Australia held an 8.5% market share in the 13 weeks, compared to Italy’s 7.6% and France’s 1.9% claim.

RED WINE BARRELS FORWARD. As usual, red wine out sold white in the 13 weeks to October 20. Red wine dollar sales rose 9.3% in the 13 weeks, while white wine increased a respectable 6.6%. Meanwhile, red wine volume was up 6.4% and white grew 3.2%. In the 52 weeks ending October 20, red wine gained 1.1% of dollar share and white wine lost -0.4%.

The red varietals grew like weeds, leaving Riesling as the white wine champion. Dollar sales of Cabernet Sauvignon grew 11.4 % in the 13 weeks to Oct. 20, while volume was up 10.5%. Pinot Noir was the true winner with dollar growth of 24.4%, followed by Zin at 15.9%, Chianti at 6.3%, Merlot at 2.3% and Syrah/Shiraz at 1.1%.

Now, on to our lighter colored friends. Riesling blew the white wine category out of the water with dollar sales growth of 24.1% and volume growth of 23.6%. Pinot Grigio sales grew 12.9% in the early fall followed by Fume/Sauvignon Blanc, up 11.9%. Old faithful Chardonnay increased 3.3% by dollar sales and 2% by volume.

PREMIUM AND ABOVE MAKES PERFECT. Wines priced in the $12-$15 range grew the most in dollar sales, up 17.9% and 16% by volume. Meanwhile, wines in the $15 and above category followed suit at 16.4% and 15.2%, respectively. Lower end wines showed some growth, but at a much smaller rate than the premium and super-premium wines.

FETZER VINEYARDS ENVIRONMENTAL LEADER DIES

We regret to inform you that long-time Fetzer Vineyards environmental leader, Patrick Healy, passed away November 10 after fighting a long battle with cancer. Patrick has been one of the most recognizable faces of Fetzer Vineyards, first as the manager of Fetzer’s Hopland Tasting Room, and later as one of the earliest advocates for Fetzer’s sustainable business practices, said the company.

“We were blessed to have Patrick with us at Fetzer,” said Cindy DeVries, Fetzer’s General Manager. “His leadership, service and passion is reflected in every green thing we do at the winery.”

He is survived by his wife Charlotte, son Aran and close family friend Elisja Wilhite. A memorial service will be held at St. Mary’s Church Hall in Ukiah on Sunday, Dec. 2 from 1-4 p.m. The family asks that memorial contributions be made to the American Cancer Society, the Ukiah Volunteer Hospice, PO Box 763, Ukiah, CA 95482 or the Phoenix Hospice Center, 1 Madrone Street, Willits, CA 95490.

V&S DISTILLERS

recently sold its Grenaa’s yeast and molasses alcohol factory in Denmark to Lallemand.

VIRTUAL WINERY LAUNCHES NEW MALBEC

Virtual Winery Pannotia Vineyards, is launching Pannotia Malbec 2005 from Lujan de Cuyo, said the company. Pannotia wines are priced between $10 - $15 per bottle.

COSTCO CFO EXERCISES OPTIONS FOR 50,000 SHARES

The executive vp and cfo of Costco, Richard Galanti, exercised options for 50,000 shares of common stock, according to a Securities and Exchange Commission filing. Richard made a quick $1.5 million after buying the shares at $36.91 and selling them the same day for $66.61 to $67.14 apiece.

JIM BEAM TO CONTINUE PARTNERSHIP WITH ROBBY GORDON MOTORPORTS

Jim Beam, The Official Spirit Of Racing, said it will continue its partnership with Robby Gordon Motorsports as a primary sponsor of the No. 7 Ford Fusion driven by team owner and veteran driver Robby Gordon during the 2008 Sprint Cup Series and Nationwide Series seasons. Overall, Jim Beam will sponsor 13 Sprint Cup Series and two Nationwide Series races in 2008, the fourth year of the company's partnership with RGM.

With one race to go this season, the No. 7 team sits in its highest position in the Nextel Cup Series owner points standings since forming prior to the 2005 season.

To read more about the sponsorship, click here.

QUINTESSENTIAL INTRODUCES VINO DEI FRATELLI TO THE U.S.

Quintessential, the Napa-based and family-owned wine import, sales and marketing company is introducing Vino dei Fratelli (“wine of the brothers”) to the U.S. There are four varieties under the label – Pinot Grigio, Montepulciano d’Abruzzo DOCG, Chianti DOCG and Moscato d’Asti DOCG. All the wines come from Italy and have suggested retail prices ranging from $6.99 to $16.99.

Vino dei Fratelli is owned by the Kreps family, which introduced Two Angels wines from the High Valley appellation in California’s Lake County two years ago.

CONSTELLATION CREATES NEW POSITION IN WAKE OF FORTUNE ACQUISITION

So far, it’s been a busy month for Constellation. After acquiring Fortune’s wine operations last week, Constellation announced today that Dave Moynihan will assume the position of senior vp, chief production and supply officer with global responsibilities.

Moynihan formerly served as senior vp for Constellation's supply chain, and will report to Keith Wilson, executive vp and chief administrative officer. He joined the company in 1996 and has held a number of production and operations positions.

ITALIAN EXPORTS REACH NEW HIGH

Italian exports to the U.S. rose 12% yoy in the first nine months of 2007, according to the Italian Farmers’ Confederation. Shipments to the EU rose 8%, while overall exports abroad were up 10.5% between January and September as compared to the previous year.

The Italian Wine Union predicted that the value of wine exports in 2007 will exceed the record $4.54 billion registered last year, while the Italian National Statistics Institute showed that the value of wine exports in the first six months of the year grew 12%.

According to Nielsen data, Italian imports held 7.7% of U.S. table wine share in the 52 weeks to October 20, second only to Australia at 8.8%. Chilean and French wine came in third and fourth at 2.1% and 2%, respectively.

MAISONS MARQUES & DOMAINES TO IMPORT LEGENDARY RIOJA WINE

The U.S. subsidiary of Champagne Louis Roederer, Maisons Marques & Domaines USA, says it will be the sole U.S. distributor of legendary Rioja's wine estate Marques de Murrieta and Galicia's Pazo Barantes beginning January 1st, 2008. Financial details were not included.

Marques de Murrieta is named after Luciano de Murrieta, who established the estate in 1852 in the world renowned Rioja region of Spain and was a founding father of modern Rioja winemaking. Today V. Dalmau Cebrian-Sagarriga Suarez-Llanos, Count of Creixell, leads the family-owned company, which has undertaken an approximately $50 million renovation and upgrade of its vineyards and historical landmark facilities in both Rioja and Galicia. The major reconstruction will namely include installation of state-of-the-art winemaking equipment, revamping the historical cellars and hospitality areas.

REMY COINTREAU STRIKES DEAL WITH TUSCAN WINEMAKER

Remy Cointreau USA has entered an agreement with Barone Ricasoli to become the exclusive importer of its Tuscan wines to the U.S. Barone’s portfolio includes Castello di Brolio Chianti Classico, Brolio Chianti Classico, Rocca Guicciarda Chianti Classico Riserva, Chianti del Barone, Casalferro, Campo Ceni, Torricella Chardonnay and Vin Santo. Prior to the deal, Remy’s Italian portfolio consisted of Masi, Vietti and Jacopo Biondi Santi. Financial details were not disclosed.

UC DAVIS ACCEPTS $12.5 MILLION GIFT

UC Davis says it has accepted a gift of more than $12.5 million from Louise Rossi’s estate to the campus’s winemaking and grape growing program. The “landmark” gift was one of the largest donations ever made to UC Davis and represents the Rossi family's proceeds from the sale of their 52-acre ranch earlier this year, according to a press release.

The money will be used to establish a continuous source of funding for high-priority research projects focused on improving sustainable production practices and enhancing the flavor of grapes and wine.

To accomplish those goals in the near term, the gift will finance the purchase of equipment in the Robert Mondavi Institute for Wine and Food Science. The first phase of the Robert Mondavi Institute is scheduled for completion in June 2008. The Department of Viticulture and Enology also plans to establish one or more endowed chairs, named in honor of Louise Rossi and her brother Ray Rossi, to support faculty positions focused on winemaking and grape growing.

"Louise Rossi and her family so typified the sprit of California agriculture," said Chancellor Larry Vanderhoef. "We at UC Davis are quite humbled to be the recipients of their quiet generosity and the beneficiaries of their many decades of hard work."

Louise Rossi oversaw the Rossi family vineyard operations and its accounts until her death in February at age 99. She and her brother Ray, a UC Davis alumnus who died in 1997 at age 91, have been longtime supporters of UC Davis through the Rossi Prize. They established the prize in 1979 to benefit viticulture and enology students from the Napa Valley, and to honor the memories of their parents, Fred and Rachel Rossi, and their brother, Arthur Rossi.

Before her death, Louise Rossi had made plans for the family ranch to be sold to Frog's Leap Winery. John Williams, owner and winemaker of Frog's Leap nearby in Rutherford, and a UC Davis alumnus, was a longtime friend. Frog's Leap, established in 1981, uses only organically grown grapes and traditional winemaking techniques.

To read more background on the donation and the Rossi family, click here.

WSWA APPOINTS NEW VP, GOVERNMENT AFFAIRS

The Wine and Spirits Wholesalers of America (WSWA) welcomed political veteran Reilly O’Connor this week as its new vice president for government affairs. Reilly joins WSWA after two and a half years at the Generic Pharmaceutical Association (GPhA), where he had risen to become director of government affairs.

CASTLE BRANDS APPOINTS REGIONAL MANAGER

Castle Brands has appointed John Milstead to the position of West Coast regional manager for its US division. Milstead most recently served as regional sales manager for White Rock Distilleries.

SVEDKA LAUNCHES “THE FUTURE YOU.”

Svedka has launched a new interactive website campaign that will allow users to upload a personal photo and answer a series of tongue in cheek multiple choice questions to identify who they will become in 2033. So why the year 2033? Svedka says that’s the year it becomes the world's #1 vodka.

To check out the new website, click here.

A&P ACQUIRES BEST CELLARS WINE RETAILER

Great Atlantic & Pacific Tea Co. (A&P) said yesterday (Nov. 15) it has acquired New York City-based wine retailer, Best Cellars. A&P is a N.J.-based supermarket chain operator and posted 2007 revenue of $6.85 billion. Financial terms weren't disclosed.

BP TO SELL OVER 700 C-STORES

Oil giant BP plans to sell more than 700 owned-and-operated US convenience stores to franchise holders and the rest to dealers and large distributors, said new ceo Tony Hayward. More than 10,000 employees are expected to lose their jobs as a result of the sales.

“By tapping into the entrepreneurial experience and knowledge of local station owners, we will build a strong franchise network that will help us grow our business,” said Fiona MacLeod, president of BP US Convenience Retail.

SKYY SPIRITS STRIKES DEAL WITH MORRISON BOWMORE AND COMPAÑÍA LICORERA

Skyy Spirits (owned by Gruppo Campari) has entered a distribution deal with Scottish distiller Morrison Bowmore and Compañía Licorera de Nicaragua. Beginning January 1, 2008, Skyy Spirits will serve as the sole US importer, distributor and marketer for Bowmore Islay Single Malt Scotch Whisky, Auchentoshan Lowland Single Malt Scotch Whisky, Glen Garioch Highland Single Malt Scotch Whisky and all Flor de Caña Rum products. Financial details were not disclosed.

ABSOLUT UPDATE: THREE MONTHS TO GO?

While the Swedish government has refused to put a timeframe on the privatization process of V&S, it is expected to be finished within the next 3 to 6 months, according to Thomson Financial. Credit Suisse estimates V&S could sell for over $7 billion and values Absolut (10 million cases) at around $6 billion. The cost of exiting V&S distribution arrangements could be as much as $980 million, which brings the total cost to approximately $8.4 billion for the lucky winner. Of course, if Beam Global succeeds in acquiring Absolut, it would not have to pay exit costs for V&S’s international distribution agreements with Maxxium, of which Beam is a member of, and Future Brands, which is a j-v between Bean and V&S. Some analysts, however, fear Fortune would have a harder time financing the deal.

“They've got a billion dollar head start,” said Credit Suisse analyst Michael Bleakley to Thomson Financial. “But if the auction goes to the highest bidder -- which I think one has to read the Swedish Government would like to see -- then Fortune have got a point at which they have to leave the negotiation table in terms of not having quite as deep a pocket as some of the European players.”

As you’ll recall, Beam Global is generally considered the front-runner among analysts, particularly after striking a deal to sell its wine biz to Constellation this week. Other contenders include Pernod, Bacardi, Diageo, Swedish private equity firm EQT and possibly Anheuser-Busch.

The main problem for other bidders hinges around competition. Pernod has said it would have to choose between acquiring Absolut and Stoli, while Diageo would likely face competition hurdles due to Smirnoff. We’ve also heard several industry insiders say Bacardi is already too heavy with white spirits and should perhaps look at acquiring a whiskey instead.

The Swedish authorities say a trade sale is the most likely means of achieving the highest value, but they are also open to considering a possible stock market flotation of V&S.

To read more background on the Absolut bidders, click here.

AUSTRALIAN GROWERS THIRST FOR GRAPES

Until recently, the Australian wine industry’s biggest problem was getting rid of the excess grape surplus, reducing bulk export shipments and driving up prices. Now, worsening drought conditions and a surging Australian dollar are dramatically reducing wine exports and threatening growers.

To put things in perspective, Australia's 2008 crush will likely hit 900,000 tons as compared to 2 million tons in previous years. How will growers manage? One solution is to blend bulk imports with Australian wines for at-home consumption, which ironically is what the U.S. and other countries have done in the past with cheap Australian exports. In fact, wine companies have faced major competition problems in the U.K. as a result of retailers selling private label wines made from cheap Australian grapes for next to nothing. Grape-growers in the U.S. have also had trouble competing against cheap Aussie grapes when it came to striking deals with wineries.

Wineries that depend on the Murray Darling Basin in Australia are in particular danger of drying up. The Basin accounts for some 65% of the country’s winegrape production, with most growers operating on 16% of their water entitlements. The Wine Grape Growers Australia (WGGA) said the drought could force 1,000 winegrape growers to leave the industry. Already, many growers have sold their water rights and pruned their vines in an attempt to wait out the drought, according to ABC News. A majority plan to wait and see what the incoming federal government's attitude might be towards the water market, said the WGGA, before leaving.

“If some of these growers are to exit, a major part of their financial plan is going to be what they can expect to get in terms of retiring their water rights, and secondly, what the taxation treatment of that might be,” said Mark McKenzie, executive director of the WGGA.

Up until now, growers have been able to purchase a considerable amount of water as a result of wine companies moving quickly to set prices. However, said McKenzie, “at some point as we progress into the irrigation season there are going to be some limitations on the remaining availability of water that is able to be traded.”

Of course, not everyone sees this as an entirely bad thing. Wine companies such as Constellation that have struggled in recent years at the behest of the grape glut and U.K. retailers welcome a drought to the extent it could help drive prices. However, there’s a good chance that global competitiveness could prevent prices from growing too much. Impact reports that W.J. Deutsch and Sons don’t plan to raise prices on Yellow Tail in the U.S. and will reevaluate the situation with Casella in March 2008.

IMPORTS STRUGGLE WITH WEAKENED DOLLAR. Australian winegrowers aren’t the only U.S. imports with problems as foreign wineries continue to feel a pinch from the dragging dollar. Last week, the Australian dollar cost over 90 cents U.S. and the euro was at almost $1.50. To compensate, premium imports have been forced to raise prices, with super-premiums soon to follow if the dollar continues to slide. This should come as a bit of good news for domestic wineries that are likely benefiting from more expensive competition at home and abroad.

COSTCO SAME-STORES SALES ROSE 9%

in October, helped by higher gasoline prices. U.S. same-store sales rose 7%, but grew only 5% excluding the inflated cost of gas. Net sales for the four weeks ended Nov. 4 rose 13% to $5.21 billion.

TOP LEVEL APPLEBEE’S EXECS BID ADIEU

Eight Applebee’s execs, including president and ceo Dave Goebel and cfo Steve Lumpkin, are leaving the company after its $2.3 acquisition by IHOP. In a statement released last week, IHOP will eliminate 11 more leadership positions, leaving Applebee’s top-level team to 10 people.

DO BIG CORPORATIONS RUIN WINE?

Dan Berger of Appellation America wrote an interesting article that examines the effect wine corporations, mergers and buyouts have on the wine itself.

“Wine consumers may not realize it, but such business dealings in wine may actually have a dramatic impact on the wines they have come to know. Most cynics would suggest that corporations only ruin wine, but that’s not always the case.”

He acknowledges that not all mergers have anything to do with the wine’s quality, but some, such as the recent Stag’s Leap acquisition, has everything to do with quality.

To read the article in its entirety, click here.

SURVEY FINDS PINOT NOIR MOST POPULAR AT THANKSGIVING

A survey by the California Wine Club found that a majority of its club members will serve Pinot Noir, the fastest growing varietal, on Thanksgiving. Pinot Noir received 34% of the votes, followed by Chardonnay at 20% and Cabernet at 19%. Zinfandel came in fourth place with 14%, while Champagne/Sparking Wine was fifth with 7% each.

WINEBOW APPOINTS NEW NATIONAL SALES MANAGER

Winbow, Inc. has appointed Vinny Chiaramonte as national sales manager for the company’s import division, effective Jan. 1, 2008. Winebow is a leading importer of premium Italian wines and other luxury wines and spirits.