Harvey Chaplin: “My Goal is Two Distributors in Every Market.”
It’s not often that you get industry insight from a bigwig like Harvey Chaplin, chairman and chief of Southern Wine & Spirits, so we took particular interest in Market Watch’s November/December issue where publisher Marvin Shanken sat down with the legend.
In the interview, Harvey opened up about the company’s past and future, as well as current conditions. He believes the industry is headed for big changes in terms of acquisitions, growth and players, but also has faith in its long term viability.
AMAZON ENTERING WINE SHIPMENT GAME. When asked about direct to consumer wine sales via the internet, Southern’s chief pointed out that it makes up only 1% of the overall business, and so he doesn’t see it as a major threat to wholesalers.
He said “right now Amazon is making a lot of noise, and we’re currently reviewing that. We’re having our attorneys look at its viability at the legal end of all of that. It surprises me that Amazon wants to do this, because unless their business is not good, I have no idea we’re they’re doing it. But we understand there are certain states that want to ship direct to the consumer.”
However, he doesn’t think direct shipments have had a big impact on Southern. “I really don’t think it has hurt us in any way.”
SPIRITS TAKING A BREATHER, WINE GEARING UP. Southern’s portfolio is 45% wine and 55% spirits, but as Harvey pointed out, “there’s a big difference in volume and profitability.” He thinks spirits is headed for a slowdown in activity and consolidation much like soft drinks companies, which will give wine room to eventually catch up.
“If you look at other industries, like soft drinks, there’s Coca-Cola and Pepsi-Cola, and then a long intermission. I think that’s where this industry is heading, in spirits.”
Wine, meanwhile, is still trying to catch up to the level of activity spirits has seen in recent years, but “it will definitely get there,” he said.
“The problem with the wine side is that most acquisitions are too costly to be profitable, so it has a whole different acquisition concept. But in spirits, there are some major companies today and minor companies today, and they all have to decide what they want. The older the company, the more they either want to stay in or get out. So, it’s really difficult to sort out.”
GROWTH WILL CONTINUE. But even as the industry matures, Harvey says growth will continue as long as companies keep innovating and new generations of drinkers emerge.
“Growth will be there. There’ll be a certain amount of settling back and a certain amount of innovation, and the ones that innovate will continue to grow. I don’t see the industry suffering. The industry will be here a long, long time and it will grow. It may not grow at the 4 to 5 percent rate that everybody wants, but it will definitely grow. As long as you have young adults reaching the legal drinking age, coming out of college, they’re going to try alcohol.”
STRENGTHS, WEAKNESSES AND GOALS. “My greatest strength? Outguessing the competition. My greatest weakness? I don’t know how to use a computer, and I don’t own a Blackberry. I bought two and threw them both away.”
Southern is by far the largest wine and spirits wholesaler in the country, but Harvey wants to make it even bigger. “My goal is two distributors in every market.”
ON RETIRING. It doesn’t look like Southern’s chief is leaving anytime soon. “Why would I want to retire?” he asked. Harvey believes the industry is headed for big changes and wants to be a part of the action.
“I think the industry is vibrant, it’s changing, and today, between the acquisitions, the brands that are available and the things that are happening, it’s unbelievable when you think about how the top side is shrinking and will continue to shrink, as will the wholesale side. And looking at the major suppliers today, there aren’t going to be that many around, but they’re all very good.”
JUDGE & DOLPH JOINS WITH YOUNG’S MARKET
Speaking of wholesaler consolidation, Chicago-based Wirtz Beverage Group and southern California-based Young's Market Co. have tentatively agreed to a joint venture that will span a good part of the western U.S. Rocky Wirtz told the Chicago Tribune that the final equity stake of each firm has yet to be finalized, but Young’s is likely to have more equity because it is a larger company. Each company would have equal voting power and Rocky said he’s slated to be the joint venture's president, while Vern Underwood, Young's chief executive, would serve as its chairman. According to Rocky, the two companies have been “talking actively for the last year to see if it makes sense -- and it makes a lot of sense."
Many in the industry have predicted a Young’s/Wirtz joint-venture for some time since both companies operate in different markets and would avoid overlap. According to Impact database, Young’s is the fifth largest wine and spirits wholesaler in the country, while Wirtz is sixth. Combined they would be the fourth largest wholesaler.
California is Young's largest market, but it's also active in nine other western states. Wirtz owns Judge & Dolph, one of two companies that dominate Illinois's wholesale wine and spirits trade, as well as distributorships in Iowa, Minnesota, Nevada and Wisconsin.
FOSTER’S STAYING PUT FOR NOW
It looks like Foster’s Group is unlikely to sell its wine or beer business anytime soon, according to an article in Reuters. Most analysts have said this for some time due to several reasons. One, the economy doesn’t exactly support major purchases; Two, companies like Constellation are busy trying to sell their own Australian wine brands and paying down debt; Three, analysts speculate that possible buyers would rather give Foster’s time to clean itself up before making a serious bid; Four, Foster’s most likely needs to split it beer and wine businesses to lure potential suitors; and Five, consumer demand is down, particularly for Australian wines.
“Analysts say the A$5 billion wine operation, which ranks behind only Constellation, will be tough to sell as potential buyers are few and harsh debt markets make funding a deal difficult. Returns from selling wine are also under pressure as supplies are plentiful but consumer demand is slowing,” said the article.
Molson Coors has been tapped as a potential acquirer of Foster’s beer business, especially after news that it bought a 5% interest in the Australian company surfaced last month. Analysts suspect Foster’s should demerge its wine unit first, which would only increase debt (already A$2.4 billion) for the company. One thing that is helping Foster’s is the declining Aussie dollar, which has fallen almost 30 percent to around $0.70 from a July peak when it crept close to $1.
MICHIGAN SENATE VOTES AGAINST OUT-OF-STATE RETAILERS
The Michigan Senate passed HB6644 which would ban wine shipments from all retailers (both in-state and out-of-state) to consumers except under tightly controlled conditions. The House approved the bill earlier this month, and now it awaits a signature from Gov. Jennifer Granholm to become law.
The Senate okayed direct shipments to consumers as long as retailers deliver the wine themselves. Clearly, this makes it easier for in-state and local retailers to ship to consumers, while out-of-state stores would have a much harder time unless they opened shop in Michigan. Senate also voted to permit shipments by Michigan retailers to customers in other states.
PERNOD RICARD DIVESTS V&S BRANDS
To gain compliance with the European Commission, Pernod Ricard has agreed to sell several of its newly acquired brands, Star Gin, Grönstedts Cognac, Red Port and Dry Anis brands, to Norway’s Arcus Gruppen. Recall that Pernod committed to the European Commission to divest these brands as a part of its acquisition of V&S. The transaction should be completed early in 2009 after obtaining approval by the European Commission according to the terms of its decision dated July 17.
DIAGEO APPOINTS GLOBAL PUBLIC POLICY DIRECTOR
Diageo has appointed current group corporate relations director, Michael Patten, the company’s global public policy director beginning January 1. He will be responsible for spearheading the company's global public policy and government affairs agenda with particular emphasis on economic, taxation and duties, international trade and market access issues. He will also be accountable for driving overall public policy strategy and building government affairs capabilities across markets and regions. Michael joined Diageo in 2003 after running food group Glanbia’s public relations. He has also served as the chairman of the Drinks Industry Group of Ireland.
SAYING GOODBYE UNTIL ’09. This has been quite an eventful year in the wine and spirits industry, with Fortune Brands selling its wine biz to Constellation, Pernod buying Absolut and Southern and Glazer’s finally joining together. This issue will be the last regular issue of the year. As some of you know, we take off the last week and a half of the year to spend some time with our families. However, we may publish an issue or two if there is breaking news or if we get the hankering. I look forward to 2009 and wish you and your families a joyful, prosperous and healthy holiday.
Until next year, Megan
“A man may be so much of everything that he is nothing of anything.”
Samuel Johnson
--------- Sell Day Calendar ----------
Today's Sell Day: 15
Sell days this month: 22
Sell days this month last year: 20
This month ends on a: Wed.
This month last year ended on a: Mon.
YTD sell days Over/Under: +1
BEER SUMMIT 2009 - The Four Seasons, Austin, Texas - Join us for great speakers, intelligent discourse, good food, and of course great beer at the next Beer Summit on March 1 - 2, 2009. Click here: http://tinyurl.com/beersummit
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.
In the interview, Harvey opened up about the company’s past and future, as well as current conditions. He believes the industry is headed for big changes in terms of acquisitions, growth and players, but also has faith in its long term viability.
AMAZON ENTERING WINE SHIPMENT GAME. When asked about direct to consumer wine sales via the internet, Southern’s chief pointed out that it makes up only 1% of the overall business, and so he doesn’t see it as a major threat to wholesalers.
He said “right now Amazon is making a lot of noise, and we’re currently reviewing that. We’re having our attorneys look at its viability at the legal end of all of that. It surprises me that Amazon wants to do this, because unless their business is not good, I have no idea we’re they’re doing it. But we understand there are certain states that want to ship direct to the consumer.”
However, he doesn’t think direct shipments have had a big impact on Southern. “I really don’t think it has hurt us in any way.”
SPIRITS TAKING A BREATHER, WINE GEARING UP. Southern’s portfolio is 45% wine and 55% spirits, but as Harvey pointed out, “there’s a big difference in volume and profitability.” He thinks spirits is headed for a slowdown in activity and consolidation much like soft drinks companies, which will give wine room to eventually catch up.
“If you look at other industries, like soft drinks, there’s Coca-Cola and Pepsi-Cola, and then a long intermission. I think that’s where this industry is heading, in spirits.”
Wine, meanwhile, is still trying to catch up to the level of activity spirits has seen in recent years, but “it will definitely get there,” he said.
“The problem with the wine side is that most acquisitions are too costly to be profitable, so it has a whole different acquisition concept. But in spirits, there are some major companies today and minor companies today, and they all have to decide what they want. The older the company, the more they either want to stay in or get out. So, it’s really difficult to sort out.”
GROWTH WILL CONTINUE. But even as the industry matures, Harvey says growth will continue as long as companies keep innovating and new generations of drinkers emerge.
“Growth will be there. There’ll be a certain amount of settling back and a certain amount of innovation, and the ones that innovate will continue to grow. I don’t see the industry suffering. The industry will be here a long, long time and it will grow. It may not grow at the 4 to 5 percent rate that everybody wants, but it will definitely grow. As long as you have young adults reaching the legal drinking age, coming out of college, they’re going to try alcohol.”
STRENGTHS, WEAKNESSES AND GOALS. “My greatest strength? Outguessing the competition. My greatest weakness? I don’t know how to use a computer, and I don’t own a Blackberry. I bought two and threw them both away.”
Southern is by far the largest wine and spirits wholesaler in the country, but Harvey wants to make it even bigger. “My goal is two distributors in every market.”
ON RETIRING. It doesn’t look like Southern’s chief is leaving anytime soon. “Why would I want to retire?” he asked. Harvey believes the industry is headed for big changes and wants to be a part of the action.
“I think the industry is vibrant, it’s changing, and today, between the acquisitions, the brands that are available and the things that are happening, it’s unbelievable when you think about how the top side is shrinking and will continue to shrink, as will the wholesale side. And looking at the major suppliers today, there aren’t going to be that many around, but they’re all very good.”
JUDGE & DOLPH JOINS WITH YOUNG’S MARKET
Speaking of wholesaler consolidation, Chicago-based Wirtz Beverage Group and southern California-based Young's Market Co. have tentatively agreed to a joint venture that will span a good part of the western U.S. Rocky Wirtz told the Chicago Tribune that the final equity stake of each firm has yet to be finalized, but Young’s is likely to have more equity because it is a larger company. Each company would have equal voting power and Rocky said he’s slated to be the joint venture's president, while Vern Underwood, Young's chief executive, would serve as its chairman. According to Rocky, the two companies have been “talking actively for the last year to see if it makes sense -- and it makes a lot of sense."
Many in the industry have predicted a Young’s/Wirtz joint-venture for some time since both companies operate in different markets and would avoid overlap. According to Impact database, Young’s is the fifth largest wine and spirits wholesaler in the country, while Wirtz is sixth. Combined they would be the fourth largest wholesaler.
California is Young's largest market, but it's also active in nine other western states. Wirtz owns Judge & Dolph, one of two companies that dominate Illinois's wholesale wine and spirits trade, as well as distributorships in Iowa, Minnesota, Nevada and Wisconsin.
FOSTER’S STAYING PUT FOR NOW
It looks like Foster’s Group is unlikely to sell its wine or beer business anytime soon, according to an article in Reuters. Most analysts have said this for some time due to several reasons. One, the economy doesn’t exactly support major purchases; Two, companies like Constellation are busy trying to sell their own Australian wine brands and paying down debt; Three, analysts speculate that possible buyers would rather give Foster’s time to clean itself up before making a serious bid; Four, Foster’s most likely needs to split it beer and wine businesses to lure potential suitors; and Five, consumer demand is down, particularly for Australian wines.
“Analysts say the A$5 billion wine operation, which ranks behind only Constellation, will be tough to sell as potential buyers are few and harsh debt markets make funding a deal difficult. Returns from selling wine are also under pressure as supplies are plentiful but consumer demand is slowing,” said the article.
Molson Coors has been tapped as a potential acquirer of Foster’s beer business, especially after news that it bought a 5% interest in the Australian company surfaced last month. Analysts suspect Foster’s should demerge its wine unit first, which would only increase debt (already A$2.4 billion) for the company. One thing that is helping Foster’s is the declining Aussie dollar, which has fallen almost 30 percent to around $0.70 from a July peak when it crept close to $1.
MICHIGAN SENATE VOTES AGAINST OUT-OF-STATE RETAILERS
The Michigan Senate passed HB6644 which would ban wine shipments from all retailers (both in-state and out-of-state) to consumers except under tightly controlled conditions. The House approved the bill earlier this month, and now it awaits a signature from Gov. Jennifer Granholm to become law.
The Senate okayed direct shipments to consumers as long as retailers deliver the wine themselves. Clearly, this makes it easier for in-state and local retailers to ship to consumers, while out-of-state stores would have a much harder time unless they opened shop in Michigan. Senate also voted to permit shipments by Michigan retailers to customers in other states.
PERNOD RICARD DIVESTS V&S BRANDS
To gain compliance with the European Commission, Pernod Ricard has agreed to sell several of its newly acquired brands, Star Gin, Grönstedts Cognac, Red Port and Dry Anis brands, to Norway’s Arcus Gruppen. Recall that Pernod committed to the European Commission to divest these brands as a part of its acquisition of V&S. The transaction should be completed early in 2009 after obtaining approval by the European Commission according to the terms of its decision dated July 17.
DIAGEO APPOINTS GLOBAL PUBLIC POLICY DIRECTOR
Diageo has appointed current group corporate relations director, Michael Patten, the company’s global public policy director beginning January 1. He will be responsible for spearheading the company's global public policy and government affairs agenda with particular emphasis on economic, taxation and duties, international trade and market access issues. He will also be accountable for driving overall public policy strategy and building government affairs capabilities across markets and regions. Michael joined Diageo in 2003 after running food group Glanbia’s public relations. He has also served as the chairman of the Drinks Industry Group of Ireland.
SAYING GOODBYE UNTIL ’09. This has been quite an eventful year in the wine and spirits industry, with Fortune Brands selling its wine biz to Constellation, Pernod buying Absolut and Southern and Glazer’s finally joining together. This issue will be the last regular issue of the year. As some of you know, we take off the last week and a half of the year to spend some time with our families. However, we may publish an issue or two if there is breaking news or if we get the hankering. I look forward to 2009 and wish you and your families a joyful, prosperous and healthy holiday.
Until next year, Megan
“A man may be so much of everything that he is nothing of anything.”
Samuel Johnson
--------- Sell Day Calendar ----------
Today's Sell Day: 15
Sell days this month: 22
Sell days this month last year: 20
This month ends on a: Wed.
This month last year ended on a: Mon.
YTD sell days Over/Under: +1
BEER SUMMIT 2009 - The Four Seasons, Austin, Texas - Join us for great speakers, intelligent discourse, good food, and of course great beer at the next Beer Summit on March 1 - 2, 2009. Click here: http://tinyurl.com/beersummit
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 1:49 PM
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