Burgundy Producers Take Price Increase
Burgundy producers have increased prices for the U.S. market by 10-20% over the past few weeks due to the declining dollar, said Pierre-Henri Gagey, president of the Burgundy wine association and chairman of the Maison Louis Jadot wine company.
"We have been absorbing the dollar decline for the past few years. The producers have given up their margin, the trade has sacrificed its margin and the importers have slashed their margins," Gagey told a news conference, as reported by Reuters.
"But we have now arrived at a situation where we cannot take it any longer and from now on we will feel the full brunt of any further dollar weakness," he continued.
The U.S. is reportedly Burgundy's biggest export market in terms of value at 180 million euros ($284 million) per year and the second biggest in volume, at 18 million bottles, after Britain. Burgundy has benefited from strong demand for white wines and red wines from pinot noir grapes, says Reuters.
The industry has twittered for months that imports, particularly from Europe and even Australia, will have to take a price increase in the U.S. due to the slowing economy. While this bodes well for domestic producers, importers are likely to suffer. Who’s next?
HUNT FOR ABSOLUT HEATS UP
A lot of updates have surfaced this week as the four bidders for V&S end their second round of bidding – or at least we think so. Nothing is of course confirmed, but sources tell members of the foreign press that final bids were due yesterday. New reports claim Bacardi and Fortune Brands have partnered with two separate private equity groups in order to split V&S if their bid is successful. Bacardi has joined forces with private equity firm Ratos, and Fortune Brands has joined with Nordic Capital. In both scenarios Bacardi and Fortune would get Absolut, and Ratos and Nordic would get Vin & Sprit’s Distiller and Wines.
In addition, Sweden's Fourth AP Fund, part of the country's pension system, said it was backing EQT's and Investor AB's bid for Vin & Sprit. EQT is keeping its group local, with all three investors hailing from Sweden. Some newspapers speculate that EQT and Investor will play the Swedish card to persuade the government in their quest for V&S. Reports have also surfaced that EQT has offered to let the government share any profit resulting from a subsequent sale or bourse listing of the spirits group. Still, we think the government will likely sell to the company that offers the highest bid.
Swedish officials say V&S will likely be sold by the end of June. The winning bidder is expected to be named within the next few weeks.
OLD WORD PRODUCTION FALLS, NEW WORLD GROWS
The old word vs. new world wine battle has raged for years, particularly as new world producers increasingly take share. Nonetheless, worldwide wine production is reportedly falling, according to the International Organization of Vine and Wine (OIV), at the hands of rising health concerns among consumers, drought and wine producers deliberately cutting vines.
Europe has seen the biggest decline, as the European Commission offers cash incentives for producers to dig up their vines to help combat over-supply. Europe’s top exporters (German, France, Italy, Portugal and Spain) have seen their share of world trade decline to 61.8% in 2007 from an average 78.8% in the late 1980s.
Meanwhile, new world producers (Australia, New Zealand, Argentina, Chile and South Africa) have had their world wine trade share rise 28% in 2007 from 3.1% in 1986-1990. Consumers in new world countries are drinking more wine, as consumption in old world countries has slowed. As wine popularity grows in the U.S., however, imports and domestics are both benefiting.
"There has been a big marketing effort by the local industry [in the U.S.] and that is benefiting the wine imports as well," said the group.
DIRECT WINE SALES REACH $2.8 BILLION IN ‘07
U.S. direct-to-consumer wine sales (including tasting room, wine club, internet, mail order and phone sales) reached a record $2.8 billion in 2007, according to research by VinterActive LLC. Established wineries, however, had mixed results as gains in tasting room sales were offset by reported reductions in wine club spending and competition from other wineries. As a result, year over year direct sales at established wineries dropped -2% in 2007. Tasting room sales grew 29%, while wine club sales declined -4% and phone order sales were up 33%. Direct mail sales were down -11%.
Almost 57% of U.S. wineries project that direct-to-consumer wine sales will be their fastest growing channel in 2008. Despite a sluggish economy and rising fuel prices, winery sales managers remain upbeat about prospects for growth, with most wine regions forecasting direct sales gains of 10% to 20% in 2008.
NYC’S LABELING LAW DELAYED
A federal judge ordered a two-week reprieve for chain restaurants before complying with the city’s pending menu-labeling law, according to NRN. The requirement will not take effect until April 14. The judge’s order also barred NYC from imposing fines for violations of the law until May 27. Recall that the measure requires local branches of chains with at least 15 locations nationwide to post calorie counts on their menus and menu boards. It was originally scheduled to take effect March 31.
DIAGEO LAUNCHES 500M EURO BOND
Diageo today launched a 500 million-euro ($784 million) fixed rate 5-year bond. The bond is due on July 1, 2013 and pays a coupon of 5.5%. The company said the proceeds from the issuance will be used for general corporate purposes that may include funding for recent merger and acquisition activity.
UNITED FARM WORKERS UNVEIL BLACK EAGLE WINES
Vineyard workers and leaders of the United Farm Workers (UFW) this week launched Black Eagle Wines “that celebrates justice” and “signifies the progress made by the UFW,” said the union in a statement. The new wines are made from grapes that were harvested by union workers.
“There are tens of thousands of farm workers today who are denied any measure of human dignity...It was Cesar [Chavez’s] dream to build a self-sustaining Farm Workers Movement. Black Eagle Wines will support that Movement,” said Arturo Rodriguez, president of the United Farm Workers.
WSD BRIEFS:
RUSSIAN STANDARD VODKA is taking steps to grow the brand globally with a new distribution warehouse and a 30% enhancement of its vodka production line. “It is well known that we have significant global aspirations for the brand. Right now we are putting in place all the mechanisms needed to meet the demands of our distributors and consumers around the world,” said Ilya Blinov, Russian Standard Vodka’s COO.
PATRON HAS EXPANDED ITS DISTRIBUTION IN AUSTRALIA by signing an agreement with Southtrade International to sell its portfolio to more bars, restaurants, hotels, and retail stores throughout the country.
WARREN WINIARSKI. SF Gate’s Jon Bonné wrote a great article on Warren Winiarski, who recently sold iconic Stag’s Leap to Italian winemaker Piero Antinori and Ste. Michelle Wine Estates for $185 million. To check it out, click here.
AUSTRALIAN WINE INDUSTRY. An interesting article on the state of the Australian wine industry in The Economist can be found here. The article discusses Australia’s rise to fame, problems with over-supply and now drought, and how the industry is trying to change.
Until Monday, Megan
“Good breeding consists of concealing how much we think of ourselves and how little we think of the other person.”
-Mark Twain
--------- Sell Day Calendar ----------
Today's Sell Day: 20
Sell days this month: 21
Sell days this month last year: 22
This month ends on a: Mon.
This month last year ended on a: Fri.
YTD sell days Over/Under: +1
"We have been absorbing the dollar decline for the past few years. The producers have given up their margin, the trade has sacrificed its margin and the importers have slashed their margins," Gagey told a news conference, as reported by Reuters.
"But we have now arrived at a situation where we cannot take it any longer and from now on we will feel the full brunt of any further dollar weakness," he continued.
The U.S. is reportedly Burgundy's biggest export market in terms of value at 180 million euros ($284 million) per year and the second biggest in volume, at 18 million bottles, after Britain. Burgundy has benefited from strong demand for white wines and red wines from pinot noir grapes, says Reuters.
The industry has twittered for months that imports, particularly from Europe and even Australia, will have to take a price increase in the U.S. due to the slowing economy. While this bodes well for domestic producers, importers are likely to suffer. Who’s next?
HUNT FOR ABSOLUT HEATS UP
A lot of updates have surfaced this week as the four bidders for V&S end their second round of bidding – or at least we think so. Nothing is of course confirmed, but sources tell members of the foreign press that final bids were due yesterday. New reports claim Bacardi and Fortune Brands have partnered with two separate private equity groups in order to split V&S if their bid is successful. Bacardi has joined forces with private equity firm Ratos, and Fortune Brands has joined with Nordic Capital. In both scenarios Bacardi and Fortune would get Absolut, and Ratos and Nordic would get Vin & Sprit’s Distiller and Wines.
In addition, Sweden's Fourth AP Fund, part of the country's pension system, said it was backing EQT's and Investor AB's bid for Vin & Sprit. EQT is keeping its group local, with all three investors hailing from Sweden. Some newspapers speculate that EQT and Investor will play the Swedish card to persuade the government in their quest for V&S. Reports have also surfaced that EQT has offered to let the government share any profit resulting from a subsequent sale or bourse listing of the spirits group. Still, we think the government will likely sell to the company that offers the highest bid.
Swedish officials say V&S will likely be sold by the end of June. The winning bidder is expected to be named within the next few weeks.
OLD WORD PRODUCTION FALLS, NEW WORLD GROWS
The old word vs. new world wine battle has raged for years, particularly as new world producers increasingly take share. Nonetheless, worldwide wine production is reportedly falling, according to the International Organization of Vine and Wine (OIV), at the hands of rising health concerns among consumers, drought and wine producers deliberately cutting vines.
Europe has seen the biggest decline, as the European Commission offers cash incentives for producers to dig up their vines to help combat over-supply. Europe’s top exporters (German, France, Italy, Portugal and Spain) have seen their share of world trade decline to 61.8% in 2007 from an average 78.8% in the late 1980s.
Meanwhile, new world producers (Australia, New Zealand, Argentina, Chile and South Africa) have had their world wine trade share rise 28% in 2007 from 3.1% in 1986-1990. Consumers in new world countries are drinking more wine, as consumption in old world countries has slowed. As wine popularity grows in the U.S., however, imports and domestics are both benefiting.
"There has been a big marketing effort by the local industry [in the U.S.] and that is benefiting the wine imports as well," said the group.
DIRECT WINE SALES REACH $2.8 BILLION IN ‘07
U.S. direct-to-consumer wine sales (including tasting room, wine club, internet, mail order and phone sales) reached a record $2.8 billion in 2007, according to research by VinterActive LLC. Established wineries, however, had mixed results as gains in tasting room sales were offset by reported reductions in wine club spending and competition from other wineries. As a result, year over year direct sales at established wineries dropped -2% in 2007. Tasting room sales grew 29%, while wine club sales declined -4% and phone order sales were up 33%. Direct mail sales were down -11%.
Almost 57% of U.S. wineries project that direct-to-consumer wine sales will be their fastest growing channel in 2008. Despite a sluggish economy and rising fuel prices, winery sales managers remain upbeat about prospects for growth, with most wine regions forecasting direct sales gains of 10% to 20% in 2008.
NYC’S LABELING LAW DELAYED
A federal judge ordered a two-week reprieve for chain restaurants before complying with the city’s pending menu-labeling law, according to NRN. The requirement will not take effect until April 14. The judge’s order also barred NYC from imposing fines for violations of the law until May 27. Recall that the measure requires local branches of chains with at least 15 locations nationwide to post calorie counts on their menus and menu boards. It was originally scheduled to take effect March 31.
DIAGEO LAUNCHES 500M EURO BOND
Diageo today launched a 500 million-euro ($784 million) fixed rate 5-year bond. The bond is due on July 1, 2013 and pays a coupon of 5.5%. The company said the proceeds from the issuance will be used for general corporate purposes that may include funding for recent merger and acquisition activity.
UNITED FARM WORKERS UNVEIL BLACK EAGLE WINES
Vineyard workers and leaders of the United Farm Workers (UFW) this week launched Black Eagle Wines “that celebrates justice” and “signifies the progress made by the UFW,” said the union in a statement. The new wines are made from grapes that were harvested by union workers.
“There are tens of thousands of farm workers today who are denied any measure of human dignity...It was Cesar [Chavez’s] dream to build a self-sustaining Farm Workers Movement. Black Eagle Wines will support that Movement,” said Arturo Rodriguez, president of the United Farm Workers.
WSD BRIEFS:
RUSSIAN STANDARD VODKA is taking steps to grow the brand globally with a new distribution warehouse and a 30% enhancement of its vodka production line. “It is well known that we have significant global aspirations for the brand. Right now we are putting in place all the mechanisms needed to meet the demands of our distributors and consumers around the world,” said Ilya Blinov, Russian Standard Vodka’s COO.
PATRON HAS EXPANDED ITS DISTRIBUTION IN AUSTRALIA by signing an agreement with Southtrade International to sell its portfolio to more bars, restaurants, hotels, and retail stores throughout the country.
WARREN WINIARSKI. SF Gate’s Jon Bonné wrote a great article on Warren Winiarski, who recently sold iconic Stag’s Leap to Italian winemaker Piero Antinori and Ste. Michelle Wine Estates for $185 million. To check it out, click here.
AUSTRALIAN WINE INDUSTRY. An interesting article on the state of the Australian wine industry in The Economist can be found here. The article discusses Australia’s rise to fame, problems with over-supply and now drought, and how the industry is trying to change.
Until Monday, Megan
“Good breeding consists of concealing how much we think of ourselves and how little we think of the other person.”
-Mark Twain
--------- Sell Day Calendar ----------
Today's Sell Day: 20
Sell days this month: 21
Sell days this month last year: 22
This month ends on a: Mon.
This month last year ended on a: Fri.
YTD sell days Over/Under: +1
posted at 10:57 AM
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