Southern and Glazer’s: Mega-Distributor
Since I started writing this newsletter three years ago, there has been an almost constant stream of rumors that Southern and Glazer’s were coming together, although for awhile it looked like Glazer’s and Wirtz may merge nationally. Needless to say, Southern/Glazer’s makes sense from a business standpoint, particularly during a time when it seems like everyone is getting bigger – retailers, suppliers and distributors. But it leaves us with so many questions. Will the joint venture pass the FTC? What does this mean for other wine and spirits wholesalers? And perhaps most importantly, what does this mean for the industry?
Recall that last year Southern sued the state of Texas and changed the residency requirement, which previously required wholesaler execs to live in the state for at least one year before doing business in Texas. The lawsuit led many to conjecture that Southern would come in and compete against Glazer’s. The merger, however, takes care of that issue.
In the era of big wholesalers, Southern/Glazer’s is what you might call a mega-distributor (assuming the joint-venture is approved). Southern was already huge, and now it’s even bigger. The new company will cover 38 states, and those states represent more than 80% of the total wine and spirits volume in the United States. Southern/Glazer’s is now the largest wine and spirits distributor in the U.S.
Just in case you missed our alert earlier today, here’s what we know of the new leadership structure:
1. Harvey R. Chaplin (current chairman and ceo of Southern): chairman
2. Bennett Glazer (chairman and ceo of Glazer’s): vice chairman
3. Wayne Chaplin (president and coo of Southern): ceo
4. Jerry Cargill: president of Southern/Glazer's
5. Melvin Dick: senior vp
6. Brad Vasser: executive vp and coo
7. Mike Maxwell: executive vp and coo
8. Steven Becker: cfo and co-executive vp/finance
9. Cary Rossel: cfo and co-chief accounting officer
10. Lee Hager: co-chief accounting officer
Southern/Glazer’s will have a footprint covering 38 states, and 17 will be control state markets. The total customer base of Southern/Glazer's Distributors of America will be approximately 300,000 accounts nationwide, supported by 18,000 associates, said the company.
This new strategic joint venture will not include the states of Illinois and Arizona, or Glazer's malt beverage business. Closing of the transaction is subject to certain regulatory clearances.
Let us know your thoughts at megan@beernet.com. As always, all emails are kept confidential.
CONSTELLATION: A NEW ERA?
Senior analyst Kaumil of UBS says a new Constellation is emerging “with an increasing focus on return on capital and free-cash-flow.” UBS is positive on the changes long-term but believes it will take some time before the changes impact returns and drive multiple expansion.
Kaumil points out that in the last 18 months, Constellation sold 5 Beam Estates brands, the low-margin Almaden and Inglenook brands, and a production facility. Additionally, it restructured its UK distribution and Australian wine operation.
“We believe combination of these efforts, plus internal productivity initiatives, should help offset near term challenges—particularly COGS inflation and a high debt burden. Long-term this should improve returns, and justify multiple expansion.”
Nonetheless, there is still continued pressure from the US and UK economies, inflation and slowing wine and spirits trends. UBS also expects some disruption from the multiple simultaneous assets sales and restructurings.
SHOTPAK CLEANS UP ITS ACT
The LA Times featured an article that goes after ShotPak, a line of alcoholic beverages packaged in foil plastic pouches the size of shots. The line included Purple Hooter, Kamikaze, Lemon Drop and Sour Apple and sold for less than $2 in liquor stores in Southern California. Clearly, it is a product that would make responsible alcohol producers pull out their hair.
The company that owns ShotPak was already in the process of changing its website before the story came out. The main website was found in violation of advertising standards for alcoholic beverages set by Discus in April.
"We are tidying up what might be considered controversial. We are trying to turn this into a positive product," said R. Charles Murray, ceo of Beverage Pouch Group, which owns the ShotPak brand, according to The Times.
“This is an example of self-regulation in action and clearly demonstrates the effectiveness of the DISCUS Code. Further it sends a message throughout the industry that it is essential that any producer, regardless of size, adhere to the strict standards of responsible marketing contained in the Code,” said Discus spokesman Frank Coleman to WSD.
FTC ONCE AGAIN SEEKS TO BAR WHOLE FOODS/WILD OATS MERGER
The Federal Trade Commission says it will hold full administrative hearings on the 2007 merger between Whole Foods and Wild Oats that it originally sought to block. A federal judge ruled in 2007 that the Whole Foods/Wild Oats $565 million merger was legit and blocked the FTC’s antitrust challenge. However, a federal appeals court overran the decision two weeks ago, effectively re-opening the issue on the grounds that a trial judge improperly dismissed the FTC's preliminary challenge to the merger.
The FTC believes the merger would lessen competition in the natural and organic foods industry. However, Whole Foods and Wild Oats have already completed their merger.
An FTC spokesman said Monday that the commission had no comment on what remedy it is now seeking, according to Dow Jones newswires. But in legal filings with the federal appeal court, the commission raised “the possibility of reconstituting Wild Oats as an independent competitor.”
Whole Foods could appeal to the federal courts if it loses the hearing in front of an administrative law judge. It could also make an appeal of last month’s ruling but it’s not clear if they’re planning on doing so.
BEAUJOLAIS NOUVEAU WINES IN PLASTIC BOTTLES
Boisset Family Estates says it will now package Beaujolais Nouveau wines from the historical wineries of Mommessin and Bouchard Aîné & Fils in 750ml PET bottles. Boisset will also debut its first California wine, Fog Mountain, in the plastic packaging.
"This year, Boisset Family Estates is the first winery ever to announce that all Beaujolais Nouveau wines imported to North America will be packaged exclusively in lightweight PET plastic bottles," stated Jean-Charles Boisset, president, Boisset Family Estates. "In addition, we will simultaneously debut Fog Mountain, featuring the first organically-farmed California Nouveau in 750ml PET bottles, to highlight our commitment to reducing the wine world’s carbon footprint by producing locally."
He said it is “critical in today’s time” to “reduce fuel use and greenhouse gas emissions by more than half through a responsible choice of packaging."
In 2006, 5 million cases of Beaujolais Nouveau were produced, and approximately 270,000 cases imported to the US and Canada, much of which was air shipped to arrive immediately after their allowed release.
Fog Mountain, hailing from Sonoma, will be the first California wine released in 750ml PET bottles.
WSD BRIEFS:
BELVEDERE MAY SELL MARIE BRIZARD. Local newspaper Les Echos is speculating that Belvedere may consider selling some or all of Bordeaux-based spirits producer Marie Brizard and its subsidiary, Chais Baucairois, to help reduce debt. Belvedere acquired the company two years ago, which is best known for William Peel whiskey. According to the publication, Belvedere founder Jacques Rouvroy is also in “advanced discussions” to sell 15% of Belvedere shares to investors.
AUSTIN RANKS HARDEST DRINKING CITY. A new study by the Centers for Disease Control and Prevention's (CDC's) ranks Austin, Texas as the hardest drinking city in the U.S., according to an article in Forbes. Milwaukee ranks second on the list, followed by San Francisco, Providence, R.I., and Chicago.
Until tomorrow, Megan
“Nearly all men can stand adversity, but if you want to test a man's character, give him power.”
Abraham Lincoln
--------- Sell Day Calendar ----------
Today’s Sell Day: 7
Sell days this month: 21
Sell days this month last year: 23
This month ends on a: Fri
This month last year ended on a: Fri.
YTD sell days Over/Under: +1
WINE & SPIRITS DAILY
Subscribe or check back issues at: www.winespiritsdaily.com
Send news and comments in confidence to: megan@winespiritsdaily.com
© 2008 Wine & Spirits Daily, all rights reserved. May quote with attribution.
Recall that last year Southern sued the state of Texas and changed the residency requirement, which previously required wholesaler execs to live in the state for at least one year before doing business in Texas. The lawsuit led many to conjecture that Southern would come in and compete against Glazer’s. The merger, however, takes care of that issue.
In the era of big wholesalers, Southern/Glazer’s is what you might call a mega-distributor (assuming the joint-venture is approved). Southern was already huge, and now it’s even bigger. The new company will cover 38 states, and those states represent more than 80% of the total wine and spirits volume in the United States. Southern/Glazer’s is now the largest wine and spirits distributor in the U.S.
Just in case you missed our alert earlier today, here’s what we know of the new leadership structure:
1. Harvey R. Chaplin (current chairman and ceo of Southern): chairman
2. Bennett Glazer (chairman and ceo of Glazer’s): vice chairman
3. Wayne Chaplin (president and coo of Southern): ceo
4. Jerry Cargill: president of Southern/Glazer's
5. Melvin Dick: senior vp
6. Brad Vasser: executive vp and coo
7. Mike Maxwell: executive vp and coo
8. Steven Becker: cfo and co-executive vp/finance
9. Cary Rossel: cfo and co-chief accounting officer
10. Lee Hager: co-chief accounting officer
Southern/Glazer’s will have a footprint covering 38 states, and 17 will be control state markets. The total customer base of Southern/Glazer's Distributors of America will be approximately 300,000 accounts nationwide, supported by 18,000 associates, said the company.
This new strategic joint venture will not include the states of Illinois and Arizona, or Glazer's malt beverage business. Closing of the transaction is subject to certain regulatory clearances.
Let us know your thoughts at megan@beernet.com. As always, all emails are kept confidential.
CONSTELLATION: A NEW ERA?
Senior analyst Kaumil of UBS says a new Constellation is emerging “with an increasing focus on return on capital and free-cash-flow.” UBS is positive on the changes long-term but believes it will take some time before the changes impact returns and drive multiple expansion.
Kaumil points out that in the last 18 months, Constellation sold 5 Beam Estates brands, the low-margin Almaden and Inglenook brands, and a production facility. Additionally, it restructured its UK distribution and Australian wine operation.
“We believe combination of these efforts, plus internal productivity initiatives, should help offset near term challenges—particularly COGS inflation and a high debt burden. Long-term this should improve returns, and justify multiple expansion.”
Nonetheless, there is still continued pressure from the US and UK economies, inflation and slowing wine and spirits trends. UBS also expects some disruption from the multiple simultaneous assets sales and restructurings.
SHOTPAK CLEANS UP ITS ACT
The LA Times featured an article that goes after ShotPak, a line of alcoholic beverages packaged in foil plastic pouches the size of shots. The line included Purple Hooter, Kamikaze, Lemon Drop and Sour Apple and sold for less than $2 in liquor stores in Southern California. Clearly, it is a product that would make responsible alcohol producers pull out their hair.
The company that owns ShotPak was already in the process of changing its website before the story came out. The main website was found in violation of advertising standards for alcoholic beverages set by Discus in April.
"We are tidying up what might be considered controversial. We are trying to turn this into a positive product," said R. Charles Murray, ceo of Beverage Pouch Group, which owns the ShotPak brand, according to The Times.
“This is an example of self-regulation in action and clearly demonstrates the effectiveness of the DISCUS Code. Further it sends a message throughout the industry that it is essential that any producer, regardless of size, adhere to the strict standards of responsible marketing contained in the Code,” said Discus spokesman Frank Coleman to WSD.
FTC ONCE AGAIN SEEKS TO BAR WHOLE FOODS/WILD OATS MERGER
The Federal Trade Commission says it will hold full administrative hearings on the 2007 merger between Whole Foods and Wild Oats that it originally sought to block. A federal judge ruled in 2007 that the Whole Foods/Wild Oats $565 million merger was legit and blocked the FTC’s antitrust challenge. However, a federal appeals court overran the decision two weeks ago, effectively re-opening the issue on the grounds that a trial judge improperly dismissed the FTC's preliminary challenge to the merger.
The FTC believes the merger would lessen competition in the natural and organic foods industry. However, Whole Foods and Wild Oats have already completed their merger.
An FTC spokesman said Monday that the commission had no comment on what remedy it is now seeking, according to Dow Jones newswires. But in legal filings with the federal appeal court, the commission raised “the possibility of reconstituting Wild Oats as an independent competitor.”
Whole Foods could appeal to the federal courts if it loses the hearing in front of an administrative law judge. It could also make an appeal of last month’s ruling but it’s not clear if they’re planning on doing so.
BEAUJOLAIS NOUVEAU WINES IN PLASTIC BOTTLES
Boisset Family Estates says it will now package Beaujolais Nouveau wines from the historical wineries of Mommessin and Bouchard Aîné & Fils in 750ml PET bottles. Boisset will also debut its first California wine, Fog Mountain, in the plastic packaging.
"This year, Boisset Family Estates is the first winery ever to announce that all Beaujolais Nouveau wines imported to North America will be packaged exclusively in lightweight PET plastic bottles," stated Jean-Charles Boisset, president, Boisset Family Estates. "In addition, we will simultaneously debut Fog Mountain, featuring the first organically-farmed California Nouveau in 750ml PET bottles, to highlight our commitment to reducing the wine world’s carbon footprint by producing locally."
He said it is “critical in today’s time” to “reduce fuel use and greenhouse gas emissions by more than half through a responsible choice of packaging."
In 2006, 5 million cases of Beaujolais Nouveau were produced, and approximately 270,000 cases imported to the US and Canada, much of which was air shipped to arrive immediately after their allowed release.
Fog Mountain, hailing from Sonoma, will be the first California wine released in 750ml PET bottles.
WSD BRIEFS:
BELVEDERE MAY SELL MARIE BRIZARD. Local newspaper Les Echos is speculating that Belvedere may consider selling some or all of Bordeaux-based spirits producer Marie Brizard and its subsidiary, Chais Baucairois, to help reduce debt. Belvedere acquired the company two years ago, which is best known for William Peel whiskey. According to the publication, Belvedere founder Jacques Rouvroy is also in “advanced discussions” to sell 15% of Belvedere shares to investors.
AUSTIN RANKS HARDEST DRINKING CITY. A new study by the Centers for Disease Control and Prevention's (CDC's) ranks Austin, Texas as the hardest drinking city in the U.S., according to an article in Forbes. Milwaukee ranks second on the list, followed by San Francisco, Providence, R.I., and Chicago.
Until tomorrow, Megan
“Nearly all men can stand adversity, but if you want to test a man's character, give him power.”
Abraham Lincoln
--------- Sell Day Calendar ----------
Today’s Sell Day: 7
Sell days this month: 21
Sell days this month last year: 23
This month ends on a: Fri
This month last year ended on a: Fri.
YTD sell days Over/Under: +1
WINE & SPIRITS DAILY
Subscribe or check back issues at: www.winespiritsdaily.com
Send news and comments in confidence to: megan@winespiritsdaily.com
© 2008 Wine & Spirits Daily, all rights reserved. May quote with attribution.
posted at 3:06 PM
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