Good News for Jack Daniel’s

Jack Daniel’s saw an improvement in the third quarter after facing a bit of a slowdown in the prior quarter. Depletions grew in the low-single digits in the U.S. despite a low single digit price increase for Jack. Stepped up execution and promotional activities geared towards the off-premise were contributing factors to Jack’s improvement, as were some gift packs during the holiday period, said Paul Varga, chairman and ceo. He also maintains that Jack Daniel’s can take modest price increases and consistent ones, and believes B-F is doing the right kind of pricing.

“We believe Jack Daniels volumes globally increased mid-single digits, and were up low-single in the US, demonstrating slight improvement sequentially. We expect JD trends in the US to remain weak for the next 6 months as the company continues to break the $20 price point across the country,” said Kaumil Gajrawala, UBS analyst.

Gentleman Jack is the fastest growing brand in the company’s portfolio, with “exceptional increase in U.S. demand.” Volumes and net sales grew more than 40% in the quarter in the U.S. Phoebe Wood, cfo, admitted a fair amount of growth for Gentleman Jack is coming at the expensive of regular Jack Daniel volume growth, but at a higher price point and higher margin.

Not only is Gentleman Jack doing well, but the entire B-F super-premium Bourbon portfolio is on fire. The three super-premium brands, Gentleman Jack, Jack Daniel Single Barrel and Woodford Reserve, represent over 400 ml cases and are growing at a 20% rate. The brands also have market share of nearly 50% of the U.S. super-premium American whiskey category (priced above $25 at retail).

OTHER BRAND PERFORMERS. Net sales of Sonoma Cutrer, Woodford Reserve, Tuaca, and Bonterra Vineyards improved in the U.S. with higher pricing and higher volume. Casa Herradura brands performed well in the U.S. during the holiday season, said the company. B-F will now focus on increasing Casa Herradura’s distribution and doing basic marketing work in the U.S. Integration into the company is on track.

SOCO SLIPS. Partially offsetting these gains were softness for Southern Comfort and higher raw material costs, said the company. Soco was weaker in the U.S. and international markets due to “aggressive price increases,” said the company, with depletions declining globally. B-F noted other brands in Soco’s competitive set have not taken price increases. Economic softening, weakness in the on-premise channel (which is important to this brand) and ineffective promotion effort contributed to decline in volume, said Phoebe.

“We have efforts underway that will address these issues,” she continued.

Meanwhile, Paul said he does expect higher grain costs to persist, but anticipates lower wine costs in the future.

U.S. ECONOMY. Paul said the company is a little concerned about both trading down and decreasing consumption volume, particularly in the U.S. Paul said that numbers in recent years suggest a shift from the on-premise to the off-premise which encourages consumers to “trade down.” Overall, he said, the growth rate of spirits volume in the U.S. may be down a point and a half versus a year or two ago.

GLOBAL FOCUS. “We think this [international market] will continue to be our most significant long term growth opportunity. Alongside the potential of growth in the international market, we believe our prospect for growth in the U.S. remains substantial as we have only a 5% share of the U.S. market. We see much more room for growth at home. The fact is, despite our wonderful success over the last two decades, we are still a relative newcomer in most markets and many categories and we believe our long term growth potential around the world remains enormous. With the U.S. environment somewhat softer today then in prior years, we expect to place more of our incremental investments in international markets to help spare the company’s overall growth rates,” said Paul.

WSD BRIEFS:

CONSTELLATION COMPLETED ITS SALE OF ALMADEN AND INGLENOOK wine brands and the Paul Masson winery to The Wine Group for $134 million in cash. Proceeds from the transaction will be used to reduce Constellation's borrowings.

THE AUSTRALIAN WINE & BRANDY CORP. says the 2008 Australian winegrape harvest is expected to be in the range of 1.55 to 1.65 million tons. Recall it is less then half complete. Just six months ago an 800k ton harvest was expected, so clearly the industry is relieved.

THE CSPI held a press conference announcing their intent to sue Miller and A-B unless they agreed to CSPI's terms regarding their caffeinated alcohol drinks. They will sue because the products in question "have more alcohol than beer" and they "contain stimulant additives". As you’ll recall, the products are not advertised on TV and have already been approved by the TTB. In the conference call, the CSPI referred to Sparks, Tilt, and Bud Extra as "alcospeed".

WISCONSIN SENATE voted 30-1 for a bill that would bar wineries from shipping directly to consumers in the state, according to the AP. The Assembly is considering a similar plan.

Until Monday, Megan

“[Memory is] a man's real possession...In nothing else is he rich, in nothing else is he poor.”
-Alexander Smith

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Today’s Sell Day: 21
Sell days this month: 21
Sell days this month last year: 20
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This month last year ended on a: Wed.
YTD sell days Over/Under: 0

Pernod Mixed in the U.S.

As usual, the 15 strategic brands were the main drivers of growth for Pernod Ricard across the board. They grew 7% in volume and 13% in value overall, thereby demonstrating the very positive impact of price increases and mix effects, said Pernod. In particular, premium spirits grew 17%.

All geographic regions contributed to consolidated sales growth, with an accelerated contribution from emerging countries, up 25%. China, India and Russia were, in that order, the leading three contributors to the sales growth, as premium brands continue to grow. Europe (+15%) and France (+12%) also exemplified “dynamic growth in the first half.” Meanwhile, the Americas region fell short with 10% organic growth, hurt by the foreign exchange rate and group structure.

Management raised full year guidance again since it announced first half sales on January 24 from “about 12%” organic growth to “at least 12%.”

ABSOLUT. When asked about Absolut and Stoli, Pierre kept mum. “We shall not speak about vodka. No comment.” Things are likely heating up in the Absolut deal and Pernod probably doesn’t want to mess anything up.

“While we expect strong organic EBIT growth to be delivered, the key driver of the share price is likely to be whether the company acquires Stolichnaya or V&S. We believe that Fortune Brands remains the front runner for acquiring V&S, and take the view that fears of Pernod
diluting returns and earnings are overdone,” said UBS analyst, Melissa Earlam.

U.S. BRAND STRENGTH. The brands that did well in the U.S. were Jameson, The Glenlivet, Malibu, Stoli, Jacob’s Creek and Perrier Jouet. As usual, Chivas, Beefeater and Kahlua were not so hot.

First half depletions of Chivas declined -7%. Pierre said that while the U.S. showed negative performance, “we have to keep in the mind the U.S. market is not the best performer.”

Pierre remarked that Kahlua is “our only tough spot in the portfolio,” as the situation remains difficult in the U.S. Depletions declined -6%, with Nielsen numbers down -2%. However, the company hopes that Kahlua’s new marketing campaign, "Dare to be curious," will help the brand in the future.

“We knew it [Kahlua] would be difficult. It has become somewhat time-worn in its positioning... Before it was desperate housewives that used Kahlua as a sort of comfort in their boring, tedious lives...we hope the brand will be repositioned with a more fashionable, youthful position,” said Pierre.

Beefeater is also having some difficulty in the U.S. market, with depletions down -5% and Nielsen numbers down -4%.

Jameson, meanwhile, “continued outstanding growth in the US with HY1 depletions up 23% (Nielsen +32%).” Pierre noted that “people say the market in the U.S. is difficult, but for some brands that is not true,” as seen with the strong growth for Jameson.

Depletions of Glenlivet grew 5%, with Nielsen up 1% and NABCA up 4%. Malibu shipments grew 4%, with Nielsen up 13% and NABCA up 9%.

Stoli continued its volume growth, in spite of price increases, with first half shipments up 1% and volume up 4%, according to Nielsen.

Jacob’s Creek wine saw stable depletions in the U.S. with improved mix, while Montana had “very strong growth” with depletions up 19%. Perrier Jouet also saw “good growth” in the U.S.

Here’s what Pierre had to say on the overall U.S. market:

“It’s fair to say that what used to perform is still performing and what hasn’t performed too well in the past is not performing any better now. Jameson is still performing very well. Glenlivet is still performing very well. Our wines, Champagnes, Malibu, and Seagram’s Gin are performing well. Seagram’s is a middle of the range product and it’s doing well. But we’ve had problems with Chivas in the recent past. Our positioning is not that good in the U.S. although it’s good elsewhere. You see that Chivas’ growth is quite remarkable...we have problems with Kahlua and we told you about the repositioning that we’ve initiated. We hope the new position “Dare to be Curious” will be more appealing to consumers. We’ve had some problems with Beefeater but there too the campaign is being launched in the U.S. market....with Chivas we haven’t settled the problem yet. With Beefeater and Kahlua we hope the new positioning will be successful. So we’re not bearish about the U.S. So how long will this last? Everyone tells you that’s there’s a crisis looming, so it’s hard to tell....some people think the crisis won’t land too long and I tend to share that view.”

BARTON BRANDS NOW CALLED CONSTELLATION SPIRITS

Barton Brands, Constellation’s spirits division, announced it is realigning its sales and marketing organizations into two groups that will concentrate on premium and value brands. In addition, the company name will be now known as Constellation Spirits, with the newly formed premium brands group named Ascender Brands and the value brands team retaining the Barton Brands moniker. These changes will be effective March 1, 2008. There are no changes planned for Spirits Marque One, producer, importer and marketer of SVEDKA Vodka, which will remain a separate operating group within Constellation Spirits.

Philip Kingston, currently the company's senior vice president of business development, will become senior vice president of national sales for Barton Brands, while Mike Novy moves over from Constellation's Centerra Wine Company to become senior vice president of national sales for Ascender Brands.

Additionally, Rick Renkens will be assuming the role of executive vice president - sales for control states, national accounts and export. Renkens will also manage Canadian sales and marketing efforts. In U.S. control states, his team will sell both the value and premium portfolios. This group will also continue to be responsible for managing Svedka’s business in national accounts, exports and Canada.

WSD BRIEFS:

RED BULL NORTH AMERICA reached a negotiated settlement with Roxy, an Orlando, Fla.-based nightclub, that resolves "passing off" claims alleged in a lawsuit filed by Red Bull. The lawsuit, filed in federal court in Florida, alleged that customers who visited Roxy and requested a Red Bull routinely received a substitute beverage without being notified of the substitution. The terms of the settlement include a permanent injunction against Roxy and its employees that precludes them from "passing off" other beverages as Red Bull. In addition, Roxy has agreed to pay Red Bull an undisclosed amount.

AN ARIZONA JUDGE tossed out a challenge to Arizona's alcohol law yesterday, which only allows wineries producing less that 20,000 gallons a year to ship directly to state residents.

Until tomorrow, Megan

“Whatever you may be sure of, be sure of this, that you are dreadfully like other people.”
-James Russell Lowell

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Sell days this month: 21
Sell days this month last year: 20
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YTD sell days Over/Under: 0

WSWA Alerts Regulators on Illegal Shipping

The WSWA sent a letter to officials in 50 states claiming illegal alcohol shipments are “rampant” and “in dire need” of enforcement measures. The letter by ceo Craig Wolf to liquor control boards, attorneys general and governors expressed concern about direct-to-consumer shipments across state lines, outside of regulatory channels and in clear violation of most states’ laws.

“Evidence has mounted lately that the illegal practice is common and growing—and that prosecutions for it are virtually unheard of,” said the trade group in a statement.

“As you are well aware, the sidestepping of state-controlled alcohol distribution channels causes a host of negative effects—the inability to collect taxes, the absence of a face-to-face transaction that addresses myriad regulatory aims, and the very real possibility of introducing tainted or counterfeit product into your marketplace, to name but a few,” Wolf’s letter says.

It goes on to say that “a growing number of interstate purveyors of beverage alcohol are flaunting their disdain for laws designed to prevent underage access and ensure accountability. They appear both utterly remorseless and resolute in their intention to keep breaking those laws, with little fear of retribution.”

As you’ll recall, the WSWA’s letter is in similar spirit to that of Wine.com in January. (To view our coverage, click here.) In the group’s statement, it points out several comments made by public blogs and journalists (including a New York Times writer) that side with companies that allegedly illegally ship wine and spirits to consumers.

Read Wolf’s full letter here.

PATRON: BETTER BRANDS MAKE BETTER DRINKS

In keeping with the theme we’ve had so far this week, Patrón’s Chief Operating Officer, John McDonnell, gave a keynote address at the annual Nightclub & Bar Show on the luxury spirits market. Not surprisingly, John says premiumization is not going anywhere and is in fact only going to get stronger. According to John, research and day-to-day living proves that people have embraced the idea that better brands make better drinks. He said that consumers prefer luxury spirits and they’re willing to pay for them.

By Patrón’s estimates, based on an average of $10 a shot, sales of Patrón in on-premise establishments in the U.S. in 2007 generated $1.7 billion for bars, restaurants and nightclubs. And, this year, if Patrón achieves its sales forecasts (which John says he’s confident they will), Patrón on-premise should add almost $2.2 billion to bar and restaurant retail sales. (That’s based again on $10 a shot – many establishments charge more than that for Patrón.)

After so much success in the luxury spirits market, John said Patrón is introducing this year its latest addition to the portfolio – Ultimat vodka, an ultra-premium Polish vodka. John told the audience today that The Patrón Spirits Company will spend $15 million in marketing support for Ultimat this year.

TOM FLOCCO DEFENDS ROBBY GORDON

Beam Global is staunchly defending its NASCAR sponsored driver Robby Gordon who received a 100-point penalty after NASCAR inspectors found an unapproved front bumper cover on his No. 7 Dodge at the Daytona 500. In addition to the 100-point penalty, his crew chief Frank Kerr was suspended for six races, and the team was fined $100,000. The deduction in points dropped the only owner/driver in NASCAR's top series from ninth in the standings to 40th. He finished eighth in last Sunday's season-opening race at Daytona and is currently appealing the decision.

As a result, Beam’s chief Tom Flocco wrote a letter to NASCAR officials in support of Gordon. WSD was able to get a hold of the letter and here are some excerpts:

“Robby's team earned an honest 8th place finish in the Daytona 500 through tireless dedication, quality, and character - not because of rule violations... Your decision unfairly penalizes Robby, his sponsors and his fans. In fact, nearly 70 percent of racing fans on NASCAR.com are standing up for Robby and agree with our assessment. While we fully support the rules NASCAR has put in place to keep the playing field level, we ask that you closely review all the facts. Please consider not just the letter of the law, but the spirit of the rules of competition.”

When asked the biggest effect of the penalty, Gordon said, "Perception. Being labeled a cheater where we have not cheated. Where the problem comes into play is with sponsors. When you start impacting our sponsorship opportunities, you start getting into the root of the real situation and we're in trouble for something we didn't do," as quoted in the Associated Press.

"It was something that we didn't build, we didn't fix, we didn't supply," he said. "It was a clerical error from the manufacturer and all we did was install it actually on the race car.”

DIAGEO CREATES J-V WITH ZACAPA RUM

Diageo announced it has been granted a three-year distribution and joint marketing agreement for the high-end Zacapa rum brand (a hugely growing category) by the Industrias Licoreras de Guatemala group of companies. Under the contract, Diageo will become the global distributor of the company’s Zacapa rum brand. After the three-year term runs out, Diageo has the option of buying a 50% stake in Zacapa, including Centenario 15, Centenario 23 and ultrapremium Centenario XO. Diageo will distribute the Zacapa line in all its international markets, excluding Guatemala and some other Central American countries. Financial details were not released.

WSD BRIEF:

THE EURO REACHED A RECORD HIGH at $1.5057 today in early European trading. Another not-so-good sign for European exports to the U.S., or Americans traveling in Europe for that matter.

Until tomorrow, Megan

“The statistics on sanity are that one out of every four Americans is suffering from some form of mental illness. Think of your three best friends. If they're okay, then it's you.”
-Rita Mae Brown

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Today’s Sell Day: 19
Sell days this month: 21
Sell days this month last year: 20
This month ends on a: Fri.
This month last year ended on a: Wed.
YTD sell days Over/Under: 0

Premiumization Train Headed For a Bump in the Road?

Will a slowing economy and rumors of a recession hurt the premiumization train? Respondents to the WSD annual truth squad survey were split down the middle when asked if consumers have already started trading down. Some said yes, some said no, and some said it really depends on what the economy does. Here’s what you had to say.

“Maybe not so much from the $20 premium end, but from the elite super-super premiums ($50+ bottles). The aspirational lifestyle of celebutante/life-in-excess trend is fading for the average consumer. Nobody wants to shell out $400 for a bottle and a table at a night club to look cool. There are better ways to impress!”

“The super premium spirit category is too broad, now mainly anything over $20 now qualifies. I think the proven $20-$30 spirits are still popular although the improved quality of value wine brands has consumers trading down.”

“In wine, they will be forced to move up from the lowest price point as the super-value segment disappears, due to short vintages and reduction in bulk wine surpluses. There may be some trading down at the lower luxury levels. The collectible wine always seems to find buyers if the scores are there and supply is limited.”

“In the wine category consumers are trading down more due to the Charles Shaw phenomenon and to a lesser extent Yellow Tail at the lower mid range price.”

“Not yet. There will be some trading down, but mostly domestic wine and super premium vodkas will be affected.”

“We have very educated consumers and the younger folks representing the next biggest target market are very savvy consumers. There is no room for losers or empty marketing schemes, but these consumers are spenders not savers like their parents.”

“I don't think so, I think that some of the super-premium products are "getting old" and consumers are looking for new super premiums.”

“To an extent I'm sure, but many are still brand loyal. Unless the economic swing is drastic, I don't see folk giving up their "Tanqueray and Tonic" quite yet.”

“I have not noticed it to any great degree. They continue to accept price increases on most commodity items. Milk and eggs have increased more than 20% in the last year.”

“Slightly - mostly in scotch, gin, and Canadian.”

“Seeing more of occasion trading down- I still see consumers ordering upscale brands but maybe trading down at retail.”

“Not going to happen; once you get the taste you don't go backwards. They may undertake a search for good values but that is a positive.

“No evidence of that in wine; millennials seem willing to pay more for perceived quality.”

“Our research suggests that generally only the consumers that are infrequent purchasers of premium and super-premium wines and/or spirits will start to trade down. Those that are now still purchasing mid-priced and lower-priced range beverages most of the time will purchase them more frequently and reduce their previous "occasional" higher priced product purchases especially in the "off-premise" markets.”

“The softening in super-premium wine that began in Australia and California a year or two ago is spreading to market stalwarts like Bordeaux, Burgundy, Barolo, etc. Trading down is inevitable, although some segments of the wine enthusiast population may simply choose to drink less.”

“Recent data shows that they aren't, and retailers and restaurants both are making decisions on the assumption that they aren't. Can perception make the reality true? I don't know.”

“The luxury tier is unaffected. Super and Ultra Premium are experiencing lower rates of growth, but are still growing. Economy is reversing earlier declines.”

WILL WINE OR SPIRITS PERSEVERE? A small majority, 30%, said distilled spirits will be hurt the most by the current slowdown, while 27% cited wine. 17% said neither spirits nor wine will have any problems, and 20% believe both will have a difficult time in 2008. The remaining 7.3% said “I don’t know.”

RNDC COMPLETES ACQUISITION OF REPUBLIC BEVERAGE CO.

Republic National Distributing Company (RNDC) has completed its purchase of Republic Beverage Company (RBC) of Omaha, Neb., RNDC President Tom Cole announced today.

RBC, formerly known as United Distillers Products Company, is now the Eagle Division of RNDC-Nebraska. RBC Chairman David Friedland will serve as chairman of this new division and Ted Friedland will serve as division president. All other members of RBC management as well as their sales team also have joined RNDC.

In addition, RNDC-Nebraska has created the Falcon Division following its recent purchase of Nebraska Wine & Spirits. Also based in Omaha, this RNDC division is headed by Paul and Gary Epstein whose father, Harold Epstein, was the founder and board chairman of Nebraska Wine & Spirits.

WSD BRIEFS:

JACK DANIEL MASTER DISTILLER JIMM BEDFORD will retire effected March 31, the company announced today. Jimmy is only the sixth Master Distiller in the brand's history.

“This year marks my 40th with the Jack Daniel Distillery and my 20th year as the master distiller,” said Bedford. “And it seemed like a good time to make the decision I’ve been thinking about for some time. It’s time I step aside and let the next generation continue the Jack Daniel’s tradition.”

The 68-year old Bedford began working at the distillery in 1968 and has served as its Master Distiller since 1988. Beam said the seventh Master Distiller will be announced soon.

MIA’S PLAYGROUND, owned by Don Sebastiani & Sons, will shift its emphasis to Burgundian varietals from the Sonoma Coast. According to company marketing director Donny Sebastiani, the focus of Mia’s Playground going forward will be a “vineyard program,” using grapes sourced from specific vineyards in the Russian River Valley and Sonoma Coast appellations. Mia’s Playground will also feature a new wrap-around label and continue to retail from $25 to $40 per bottle.

HEAVEN HILL DISTILLERIES has named Ryan O’Connor as Area Manager for Georgia and will be responsible for all of Heaven Hill’s extensive brand portfolio. He will report to Heaven Hill Regional Manager Mike Adams.

Until tomorrow, Megan

“I get up every morning determined to both change the world and have one hell of a good time. Sometimes this makes planning my day difficult.”
-E. B. White

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Today’s Sell Day: 18
Sell days this month: 21
Sell days this month last year: 20
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Wine and Spirits Braces for Economic Slowdown

As you’ll recall, WSD conducted a survey to get a taste of what our readers are thinking and what weighs most heavily on their minds. We had an enormous turnout among subscribers, so thanks to those who took time out of their day to answer our questions. Let’s take a look at what you had to say.

HOW WILL THE ECONOMY EFFECT WINE AND SPIRITS? Many of you feel that wine and spirits will see a big change in 2008 at the hands of the economic slowdown, while others think there would be little or no transformation. A common theme among responders is that consumers may trade down slightly to more “medium priced” brands, but sales will continue to grow. Some think premium brands could take a hit but super-premium and higher will feel little effect at all. Others believe all luxury brands will suffer and premiums and below will persevere. Several respondents even think that they’ll have a better year in 2008 than they did in 2007. General consensus? No one seems too worried. Here is some of the commentary:

“Retailers are scaling back inventory. November and December were the only months last year that came in under our projections.”

“This month Retail business is very slow. Retailers purchased heavily in November/December against anticipated 2008 price increases. Restaurants seem less affected. However, if we are to enter a recession Restaurant and Hotel business will decrease and home consumption will increase. Traditional Grocery will benefit most.”

“Retail sales will remain strong, especially at prices under $20/bottle. Restaurant bottle sales will slow, particularly over $50/bottle on wine lists. Producers will finally be increasing prices due to increased cost of packaging, wine and transportation. Overall, wine sales will continue to be strong.”

“I believe that within the luxury spirits category, you will not see too much effect. But other super premium brands that are driven by volume of middle to upper class consumers will definitely take a slight downturn. People that were trading up for status last year will most likely start trading down.”

“Retail: a customer will purchase one bottle instead of two. Volume has decreased but customers will not stop buying wines and spirits.”

“The ultra-high end is suffering. The mid-tier is strong. Consumers are looking for deals on brands they know and trust. Personal recommendations from retail staff & serving staff are key to drive sell-through.”

“By some it may seem ironic, but it my opinion based on historic trends that in the event of a downtrend in the economy that "Premium" and "Super-Premium" spirits will continue to do well and grow. Wines in those categories will also continue to do well although their growth will rise albeit at a slower rate than spirits in a rough U.S. economy.”

“I feel the weakening economy will change the places where people drink. Instead of going to the nicer ultra lounge, they will head to the local bar, or buy a bottle themselves and stay home.”

WHO HAS A BETTER CHANCE: IMPORTS OR DOMESTICS? When asked if wine imports or domestics will suffer more in the U.S. in 2008, 62% of readers answered “imports,” while only 4% said “domestics.” Those who believe neither imports nor domestics will suffer made up 7.3%, while 21% said “both” will feel some pain. The remaining 6.5% answered “I don’t know.”

“I believe import wine sales will remain the same or be down slightly. Domestic sales should continue to be strong with most growth being in the value wines and some premium priced wines.”

“The prospects for 2008 remain shrouded in uncertainty for the fine wine business. Inflationary pressures on the European Central Bank, combined with the Fed's rate-cutting response to the weakening domestic economy, will continue to drive the value of the dollar down and the price of imported wine up, particularly Italian and French wine. Every-increasing transport costs are no help at all. Wine enthusiasts, in possession of less discretionary income, may curtail spending in both on- and off-premise fine wine consumption. Look to under-valued wine regions like Spain, Argentina, and Austria to ride to the rescue of the wine enthusiast that has no palate for homogenous New World offerings in the $10-$15 range.”

SAFEWAY CLOSER TO A BUYOUT

At least one analyst thinks Safeway’s Chicago-based grocery chain, Dominick’s, could be a part of a private equity group planning to buyout the entire Safeway chain, reports the Sun Times. Sean Egan, managing director at Egan-Jones Ratings Co., said a private-equity firm such as Kohlberg Kravis Roberts & Co., Thomas H. Lee Partners or Chicago's own Madison Dearborn Partners would be the likely buyers of Safeway.

"With the federal government pumping liquidity into the market, there will be a time when conditions will be right for a buyout. Safeway is close to the top of the list," Egan said.

FLORIDA REVISITS DIRECT SHIPPING ISSUE

Florida legislators will consider three winery shipping bills once the regular session convenes March 4. As you’ll recall, Floridians failed to pass a new shipping bill in 2007. HB 693 has a production cap of 250,000 gallons and limits consumers to 18 cases of wine per household per year. SB 1736 is similar, but limits households to 15 cases a year. Lastly, SB 1096 would limit consumers to ordering only 4 cases of wine per household each year.

To read more about the three bills, visit Ship Compliant Blog.

Until tomorrow, Megan

“Horse sense is the thing a horse has which keeps it from betting on people.”
W. C. Fields

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Today’s Sell Day: 17
Sell days this month: 21
Sell days this month last year: 20
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YTD sell days Over/Under: 0

IMPORTED WINES STRONGER IN 2007

In the 52 weeks ended January 12, 2008, table wine dollar sales rose 6.3%, with volume up 3%, according to a report by Nielsen. The blush wine segment continued to decline in 2007, with sales down -1.4% and volume down -2.7%. Red wine showed the highest rate of growth, up 8.2% by dollar sales and 5.4% by volume. White wine showed a slightly slower albeit strong growth, with dollar sales climbing 5.7% and volume rising 2.7%.

Imported and domestics wines were practically neck and neck in dollar sales, with domestics growing 6.1% in 2007 and imports taking a slight lead at 6.8%. Imports took a stronger lead in volume, growing 4.1%, while domestic rose a respectable 2.7%. The industry is predicting that imports will see a decline in growth this year as the depreciating dollar struggles to compete with the strong euro and Australian dollar.

Countries that contributed the most to import growth were South Africa, New Zealand and Argentina, with dollar sales up 37.4%, 34.4% and 29.7%, respectively. The big three importers also showed growth in 2007, with Italy up 7%, Australia up 2.2% and France up 3% in sales.

Varietal wines continue to exemplify the most dollar sales growth, increasing 7%, as compared to generic wines that grew only 2.2%. Volume of varietals rose 5.1% and generics declined -3.2%.

The fastest growing varietals in 2007 were Pinot Noir, Riesling, Cabernet Sauvignon, Pinot Grigio, Sauvignon Blanc and Zinfandel. Dollar sales of Riesling rose 23%, followed by Pinot Noir at 22.8%, Pinot Grigio (13%), Zinfandel (11.9%), Cabernet Sauvignon (11.1%) and Sauvignon Blanc (10%). Oh yeah, and Chardonnay grew 2.6% and Merlot was up 1.9%. White Zinfandel continues to lose momentum, declining -2.8%.

Pinot Noir showed the highest rate of volume growth, rising 25.4%, followed by Riesling at 22.6%. Next in line: Pinot Grigio (14.2%), Cabernet Sauvignon (10.3%), Zinfandel (8.5%), Sauvignon Blanc (5.1%), Merlot (3%) and Chardonnay (1.7%).

Trading up trends also boded well in 2007. Wines priced between $12 and $15 rose 16% in sales, followed by the $15 and above range, jumping 15%. Premium wines, $9-$12, rose 9.7%, says Nielsen, while the $6-$9 category grew 2.9% and $3-$6 rose 4.1%. The low-end segment ($0-$3) declined 0.6%. Volumes showed a similar pattern in terms of which category grew the most.

SWRA SUPPORTS SUPREME COURT DECISION

The Specialty Wine Retailers Association (SWRA) today expressed its support for the U.S. Supreme Court’s recent decision in Rowe v. New Hampshire Motor Transport, which says Maine cannot legally force truck drivers delivering tobacco products purchased online to check IDs. As we reported yesterday, the WSWA is against the Supreme Court ruling.

“Wine retailers are committed to verifying the age of recipients receiving wine via shipment by common carrier and welcome the fact that where shipping is allowed, it is the retailer’s responsibility - not the carrier's liability - for checking identification,” said Tom Wark, executive director of the SWRA. “For this reason retailers and wineries happily pay common carriers for special identification services at the point of delivery.”

“Undoubtedly the alcohol distributor cartel that wants to shut down any wine shipping that does not allow them to line their own pockets will try to use this decision to scare lawmakers and regulators,” said Wark.

“When distributors start talking about shutting down the channel of sales through which they profit, rather than the channel by which minors are least likely to obtain wine, we will start taking them seriously.”

SWRA and its members endorse age verification systems for assuring that those ordering wine via the Internet are 21 or older - as well as the implementation of permit laws that require wine retailers and wineries to contract with shipping companies to obtain signatures of adults when alcohol is delivered, and for the retailer to take responsibility for those sales and for the carriers they hire.

DIRECT SHIPPING UPDATES

Free The Grapes!, a grassroots coalition in favor of shipping wine direct to consumers, issued the following legislative updates yesterday. Most of the updates were provided courtesy of the Wine Institute. To view Free The Grapes! website, go to www.freethegrapes.org.

Maryland – Favorable Bill Heard Monday Could Fix Maryland
Maryland’s state legislators considered House Bill 1260 on February 18, and Free the Grapes! consumer members, retailers, industry representatives and others turned out to testify in favor. Wholesalers and some in-state retailers testified against the bill. Consumers using the Free the Grapes! website sent more than 900 letters to Maryland legislators within 72 hours of a Free the Grapes! email request last week.

New Mexico – Reciprocal Replacement Runs out of Time
On February 14, the last day of New Mexico’s 4-week legislative session, Senate Bill 59 ran out of time. The bill received widespread support and passed out of the Senate unanimously. It was endorsed by the New Mexico Wine Growers Association, and received favorable testimony by the New Mexico Retailers Association and the New Mexico Restaurant Association. The bill would have replaced NM’s reciprocal law.

Wisconsin – 2007 Reciprocal Replacement Bill Resurrected
Last October, the Governor struck language in the Budget Bill that would have replaced Wisconsin’s ‘reciprocal’ direct shipping law with a permit-style system. This year, with the support of the Governor and a broad coalition of interests, the WI legislature is considering Assembly Bill 795 and Senate Bill 485 that create the same type of permit system.

Indiana – Fix-it Bill Dies in Committee

Senate Bill 337 died in committee, and would have removed the face-to-face requirement in the existing law, and removed the prohibition on shipments for wineries with wholesaler representation in the state.

Pennsylvania – PLCB Drafting Delivery, Pick-up Bills

Several bills in drafting stage seek to amend PA’s restrictions but would require consumers to pick-up orders from PLCB stores, or allow only the PLCB to deliver wine to consumers’ homes.

Ohio – Amendments to Cap Sought

Industry representatives have been working with legislators to amend the state’s law that prohibits shipments from wineries or wine companies producing in excess of 150,000 gallons.

Massachusetts – Update on Lawsuit Challenging Cap

The Family Winemakers of California is the lead plaintiff in this lawsuit against the State of Massachusetts seeking to overturn the 30,000 gallon production cap. Summary judgment is expected in late March.

WSD BRIEFS:

DOS LUNAS TEQUILA is launching its full line of ultra-premium tequilas throughout Illinois this month. Dos Lunas is available in Texas, Florida, Arizona, Colorado, and New Mexico, and is also available in Wisconsin, Michigan, Connecticut, New Jersey and Alberta, Canada.

EDITOR'S NOTE: Our offices will be closed on Monday and Tuesday, Feb. 24-25, as our staff will be in San Diego working at the annual Beer Summit with Beer Business Daily. Please be patient with any customer service needs until we return.

Until Monday, Megan

“Reality is the leading cause of stress amongst those in touch with it.”
-Jane Wagner

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States Can’t Force Truckers to Check IDs,

The Supreme Court ruled this week that Maine cannot legally require delivery truck drivers to verify the age of buyers before making a delivery, in addition to intercepting packages from unlicensed tobacco sellers, the AP reports. The justices ruled that federal transportation law bars the state from making such demands.

The situation in Maine sounds eerily close to laws regulating direct to consumer wine shipments. In an argument similar to beer and wine wholesalers’ position against direct shipments of wine, Maine passed the law to ensure state tax collections and to keep cigarettes out of the hands of youths under the age of 18. As a result, the case was closely watched by the beverage alcohol industry because of potential ramifications for unregulated home delivery of alcohol.

The Wine and Spirits Wholesalers of America (WSWA) is now urging states to “reassess the wisdom” of direct shipping laws altogether. The trade group said in a statement that it urges states “to conduct a careful and broad re-evaluation of direct shipping regulations in the wake of a troubling Supreme Court decision.”

“The Supreme Court’s decision is clear: age verification is not a responsibility which can be delegated to common carriers,” WSWA president and chief Craig Wolf said. “States now need to reassess the wisdom of laws permitting direct shipping in light of this Supreme Court ruling. The licensed system in this country is based upon accountability, and if states are powerless to hold carriers accountable, there is no way to ensure that alcohol will not end up in the hands of minors.”

“What we have as a result of this decision is basically the Wild West with regard to direct shipping, because every law out there with this particular age check component is now rendered unenforceable,” Wolf continued.

“This opinion calls the practice of direct shipping into question entirely, because it creates an environment lacking any kind of control and accountability.”

STATE AGS PROBE BREWERS OVER ENERGY BEERS

Miller and Anheuser-Busch is once again facing heat by state Attorneys General regarding their marketing practices with alcoholic energy drinks (Sparks, Tilt, and Bud Extra), according to the WSJ. State AGs in New York, Maine, Maryland, Arizona and Iowa have issued civil investigative demands for internal papers related to the alcohol energy drinks' marketing practices. Recall that A-B pulled Spykes off the shelves last year after a similar investigation.

A-B said in a press release yesterday that it is cooperating with the subpoena, but pointed out that the TTB has already investigated the AGs complaints and found that the brewers were in the clear. A-B also claims that Tilt and Bud Extra have a lower and more consistent alcohol content then spirits mixed with caffeinated beverages, including Red Bull and Coke.

"If the Attorneys General truly believe that - despite the state and federal regulatory approvals - alcohol and caffeine should not be mixed, then they should use their powers to persuade these authorities to regulate or ban all such beverages, not just the lower-alcohol, pre-packaged ones," said Francine Katz, AB’s vp of communications and consumer affairs.

WHOLE FOODS MERGER BODES WELL FOR WILD OATS

The merger with Whole Foods has boded well for Wild Oats so far. Same-store sales at Wild Oats increased 8.9% during the first full quarter of Whole Foods ownership, one of its biggest upswings ever. After beating the FTC in court and purchasing Wild Oats in late August for $565 million, Whole Foods renovated its stores, cut jobs and added more produce and other products. So far, Whole Foods has re-branded nine former Wild Oats stores and expects to complete the rest by the end of the year.

Comparable store sales for Whole Foods increased 9.3% on top of a 7%increase in the prior year. Identical store sales, excluding five relocated stores and three major expansions, increased 7.1% on top of a 6.2% increase in the prior year.

“We realize there are a lot of questions out there about how a slowing economy might impact our sales. Historically, our sales have been highly resilient during economic downturns,” said John Mackey, chairman, ceo, and co-founder of Whole Foods Market.

“We attribute our strong sales to many factors, including our loyal core customers and their dedication to a natural and organic lifestyle, our high percentage of perishable product sales, and our extensive selection of high-quality prepared foods that attracts customers trading down from restaurants.”

TESCO STRUGGLING TO MAKE GROUND IN U.S.

Reports claim Tesco, meanwhile, isn’t fairing so well in the United States. The UK-based grocer is reportedly far from achieving the sales levels officials were originally hoping for, according to consultant Jim Prevor, speaking at a Citigroup conference this week. Recall that Tesco has decided against releasing full sales figures until next year amid growing skepticism of its overall success in the U.S.

Prevor claims that while Tesco isn’t laying off any employees, its reportedly not replacing them once they choose to leave its Fresh & Easy Stores. Also, he says Tesco is pushing out store openings in the Bay area to 2009 instead of later this year, which Tesco says was always the plan.

“While it is still early days, we are pleased with how things are going, and the customer reaction is particularly encouraging,” a Tesco spokesman recently said.

Tesco opened its 50th store, located in Palm Desert, CA, yesterday. It will open an additional three stores by the end of the week -- one in North Las Vegas and two in Henderson, Nevada.

E & J GALLO CELEBRATES 75 YEARS OF WINEMAKING

E & J Gallo has reached its 75th anniversary after brothers Ernest and Julio founded the winery in 1933 at the repeal of Prohibition. Gallo is the largest domestic winery by volume in the U.S.

As a part of their anniversary, the company recently conducted a nationwide survey to gauge American perspective on wine, and particularly on family-owned businesses. The questionnaire found that 92% of Americans would be more inclined to choose a family-owned business over a non-family owned business given the choice. When asked which attributes mattered the most in family-owned companies, consumers placed pride of workmanship (76%), honesty (76%) and loyalty (61%) at the top.

FRENCH EXPORTS STRUGGLE IN THE U.S.

France’s wine and spirits industry reached record export levels in 2007, with the highest level of growth in China, says the French Federation of Wine and Spirits Exporters. China is now the third largest market for French cognac and other spirits, trailing the U.S. and Singapore.

However, this year could prove more difficult for French exports to the U.S. The strong euro compared to the weakened U.S. dollar will make French wine and spirits more expensive, and perhaps not as attractive to the average consumer. The U.S. is France’s largest market by value despite a 3% yoy decline in exports in 2007. Champagne exports to the U.S. already feel by 7% in value and 6% in volume in 2007.

Until tomorrow, Megan

“When people are free to do as they please, they usually imitate each other.”
-Eric Hoffer

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Costco Petitions to Head Back to Court

Costco has filed a petition for a rehearing by the Ninth Circuit Court in San Francisco, as first published by our sister publication Beer Business Daily. Following their disappointing court ruling last month which overturned almost every provision that had been in their favor in the District Court, Costco is asking the three judge panel to hear their case again. In the event that doesn't happen, Costco asks for a rehearing by the full Ninth Circuit Court, which is called en banc. You can read their petition here: http://www.beernet.com/aboutus/costcorehearing.pdf

Basically, Costco argues that they deserve a rehearing because they say the judges ruled incorrectly as it pertains to the severability of Washington's alcohol pricing laws when deciding whether they are unconstitutional under the Sherman Act.

The petition states: "The panel incorrectly evaluated the restraints in isolation from one another, and incorrectly created a rule of absolute antitrust immunity, regardless of the private discretion in how high prices go, for the state laws that, viewed in the isolation created by the erroneous severability analysis, dictate rather than just endorse forbearance from aspects of competition."

The petition also claims that the court made a mistake in a citation of the severability part of the Washington State alcohol code. They say it isn’t there. The petition also claims that the Court was mistaken on its take on hybrid versus unilateral restraints.

It will be weeks or months before a rehearing decision is made by the Court. However, this will postpone the February 26 date the Court would have issued a mandate ending the post and hold part of the law.

FORTUNE PEGGED AS THE ABSOLUT FRONT RUNNER

Fortune Brands has reportedly been picked as the favorite candidate among the four remaining V&S bidders, including Pernod Ricard, Bacardi and Swedish private equity group EQT, sources told Just-Drinks. We have predicted all along that Fortune will come out victorious, simply because it has the most to lose if Absolut goes to someone else. Recall that Fortune distributes Absolut in the U.S. through its j-v with V&S, Future Brands, in addition to their European joint-venture, Maxxium. V&S also holds a 10% stake in Beam.

According to the report, Pernod was pegged as the second most likely contender mainly because it has signed a pledge not to break up V&S. Pernod has expressed interest in Absolut since the beginning, but is also trying to secure the international rights to Stolichnaya. The French company said it would take one or the other, while chairman Patrick Ricard previously said “the one I prefer is the one I buy.”

FOSTER’S WRANGLES WITH DECLINING CONSUMER INTEREST

Could Foster’s down-trodden first half serve as foreshadowing for the entire industry? As WSD reported yesterday, Foster’s blamed a declining rate of growth in the U.S. on a number of factors most notably that consumer demand slowed in November and early December. Andy Kovacs of Macquarie Research Equities believes U.S. consumers will slow their wine spending “over the coming 12 months – or that at the least, turbulence in the trend will remain,” although “some buffer may be provided by increasing per-capita usage thanks to Millennial adopting wine.”

However, other wineries have not and probably will not see the same decline in growth as Foster’s. The ‘blush’ and Australian wine categories (which makes up the majority of Foster’s wine portfolio) specifically saw sales decline in the US in November and December – compared to the overall category which remained in growth. Operational issues in the Australian category were responsible for some of the decline, said Andy in a note, while retailer focus on the category also diminished. To help make up for its losses, Foster’s has taken a 20% price increase on its Beringer Californian Collection.

STZ FILLS NEW BOARD POSITION WITH PETER PEREZ

Constellation said its of directors authorized an increase in board positions from nine to 10, and approved Peter Perez, 54, to fill the new board seat effective yesterday. Perez is currently executive vice president of human resources for ConAgra Foods, Inc., a $12 billion, international packaged foods company based in Omaha, Neb.

Perez joined ConAgra in 2003 as senior vice president of human resources. He previously held a similar position with W. W. Grainger, Inc., after holding senior human resource positions at Pepsi-Cola General Bottlers and the Kraft General Food division of Philip Morris Companies, Inc. He began his career with Emerson Electric as a production supervisor in 1979.

WSD BRIEFS:

VIRGINIA EXPANDS SUNDAY SALES. Legislation expanding Sunday spirits sales to cities with populations of 100,000 or more passed the Virginia Senate today—a move the Distilled Spirits Council (DISCUS) hailed as a “significant victory” for both consumers and the State Treasury.

PENN. HEARING ON PRIVATIZING LIQUOR STORES. Pennsylvania legislators reportedly plan to hold a public hearing this summer about privatizing retail liquor sales after Sen. Rob Wonderling introduced the bill last week. The senator wants the proceeds set aside to meet the state's Medicare obligations. The hearing would be held jointly by the House Liquor Control Committee and the Senate Law and Justice Committee. To read our coverage last week, click here.

Until tomorrow, Megan

“Be modest! It is the kind of pride least likely to offend.”
Jules Renard

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Foster’s Sales Slide In North America

Foster's posted its slowest growth in first-half net profit in several years today at the hands of the U.S. wine slump and strong Aussie dollar. Volume of the Beringer California Collection grew 17.6%, with overall California wine up 11% in North America. Australian wine was down -8.7%.

"We expect U.S. trading conditions to remain tough in the face of consumer economic anxiety," Scott Weiss said as reported by Reuters.

In the company’s interim results presentation, Scott says retailers reduced merchandizing support for all wine in the face of a slowdown in November and December. Wine began picking up in January, however. Also, blush wine continues to lose share of the overall category, which hurts Foster’s since Beringer White Zinfandel is its largest selling wine brand.

Should Foster’s just have stuck with beer instead of venturing into wine? An article in The Sydney Morning Herald suggests Foster’s may have made a mistake by acquiring Beringer for $US1.5 billion in 2000 and Southcorp four years later at A$3.7 billion. As you know, Foster’s has had a hard time integrating the wine business since the Southcorp acquisition, but that seems to be just one of its problems. In hindsight, the deals were overpriced, says the article, particularly the Southcorp acquisition that was made “as the wine industry was moving into global oversupply.”

The North American division took a toll on Foster’s results for a number of reasons. One, the weaker U.S. dollar is not boding well against the increasingly stronger Aussie dollar. Two, sales of wine declined in the U.S. during the holiday months (November and December), mainly at the hands of the economic slowdown. Lastly, the highly competitive U.S. market and trading up trends among consumers did not bode well for Foster’s. In taking a closer look, sales of Foster’s Australian wines fell harder than the overall market due to several reasons, including new pricing competition from Gallo and a supposed consumer backlash against Australian imports. Also, premiumization trends hurt Beringer's as U.S. consumers continue trading up to slightly more expensive wines. Beringer has responded by shifting the price of its flagship line into the higher price range, which managing director Scott Weiss says is successful so far.

“If the US dollar hadn't fallen and the market had been less challenging, the Americas division might have made as much as it did in the first half of 2006-2007...But the greenback did fall, the US market is competitive, and the Foster's wine business is what it is: a relatively low-margin operation in a very tough global market,” says reporter Malcolm Maiden.

THE ABSOLUT NOMINEES ARE IN

The Swedish government has chosen four bidders in the Vin & Sprit auction which include – you guessed it – Pernod, Bacardi, Fortune and private equity group EQT in cooperation with investment firm Investor AB. The four bidders will reportedly enter a due diligence process before finalizing their offers, according to an article in Reuters based on Swedish business daily Dagens Industri.

UK WINE PRICES EXPECTED TO RISE, FINALLY

There’s some good news, however, for the likes of Foster’s and Constellation: wine prices in the UK are expected to rise, according to The Grocer. Smaller harvests in Australia and Europe will force wineries to raise prices, which will eventually translate to retailers and make it harder for them to sell wine for under £5.

MARYLAND ASSEMBLY CONSIDERS NIXING BAN ON DIRECT SHIPPING

The Maryland General Assembly is considering a bill that would reverse the current ban on direct shipments of wine to consumers in the state. House Bill 1260, heard by the House Economic Matters Committee yesterday (Feb. 18), and its companion, Senate Bill 616, would require wine shipments to be conspicuously labeled as alcohol and would require the signature of someone at least 21 years old for delivery.

ABSOLUT SPONSORING KAYNE WEST’S “GLOW IN THE DARK” TOUR

Hip-hop star Kanye West has signed a sponsorship deal with Absolut 100 Vodka for his North American “Glow in the Dark Tour,” which begins April 16 at Seattle's Key Arena. The tour will visit more than 25 major U.S. cities throughout the spring.

WSD BRIEFS:

HAUS ALPENZ has picked up the US import and distribution rights for Velvet Falernum, a spirit from Barbados popular in a number of classic cocktails and tiki drinks. Produced by R.L. Seale, maker of Cockspur, Doorly's and Foursquare Rums, the Velvet Falernum had been imported since 2003 by Spirit of Hartford.

AL GORE praised members of the global wine industry for their efforts against global warming yesterday at the second annual Wine and Climate Change conference in Barcelona. He said that while the wine industry had shown admirable initiative in a relatively short time, there’s still a lot more that needs to be done. He also said that Europe has already begun to experience unpredictable and even harsh weather patterns caused by global warming.

HEARTLAND SPIRITS has purchased Players Extreme Vodka from Sapphire Brands, WSD has learned. Interestingly, the company uses beer wholesalers to distribute its products.

FORMER AMERICAN ONLINE CHAIRMAND AND CEO BARRY SCHULER says he will release a new Napa Valley cabernet sauvignon under the label Meteor Vineyard this spring.

Until tomorrow, Megan

“Youth would be an ideal state if it came a little later in life.”
Herbert Henry Asquith

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Diageo Sees Little Change in Consumer Behavior

Diageo said it saw “no significant change” in consumer behavior in the U.S. during the six months ended December 31, with premiumization trends continuing and a 2% market volume growth expected. Diageo’s growth continues to stem from its premium brands, such as Smirnoff, Captain Morgan, Johnnie Walker, Crown Royal and Sterling and Chalone wines, and reserve brands, while value brands are holding up the show. On-premise and off-premise both experienced some growth in the first half, although the on–premise (particularly casual dining) is slightly softer due to economic slowing in the U.S. Meanwhile, the company has a “very clear strength in the off-channel.”

As we mentioned, the spirits industry gained 2% in volume in the first half, with premium and premium plus brands growing at a faster rate. Ivan noted the trend to premiumization is continuing. While sales of value brands (retailing below $10) were declining, Diageo noted it has no significant presence in that part of the market despite the fact it has lost share in the value segment. The company said it outperformed the industry during the holiday and expects first half trends to continue in the second half.

The company remains confident that consumers will continue trading up despite an economic slowdown in the U.S. "Everyone is focused on subprime, monoline, $400bn write-offs ... to a lot of people it's a total irrelevance. They don't understand it, and they don't want to understand it," said Paul Walsh.

“While Diageo has outperformed the market by 12.2% year to date, we expect continued out-performance while market volatility persists,” said Melissa Earlam of UBS in a research note.

NORTH AMERICA. North America delivered sales growth of 6% and volume of 3%. The company’s leading brands, including Smirnoff, Johnnie Walker and Captain Morgan, all increased volumes by 5% or more in North America. Johnnie Walker again delivered double-digit net sales growth as did Smirnoff and Captain Morgan.

Diageo chalked up growth to price increases, mix benefits, favorable demographics, premiumization and innovation, which was offset by an increased spend behind the reserve brands group, including Don Julio. Diageo has also benefited from improved marketing, due in part to increased spending and a move to "boutique digital agencies".

In addition, growth in North America following the launch of Tanqueray Rangpur and a price increase on the core brand helped Tanqueray internationally. Crown Royal in North America performed strongly with improvement in price/mix, and growth in Buchanan’s was driven by continued strong performance in Latin American markets and by strong growth in North America where net sales grew 31%.

BACARDI, B-F AND REMY EXPAND DISTRIBUTION ALLIANCE

Bacardi U.S.A., Brown-Forman, and Remy Cointreau USA are expanding their distribution alliance to include California and Texas. This latest expansion comes on the heels of the three companies' alignment in New York with Empire Merchants, which began in May of 2007.

The expansion process will begin with RNDC in Texas this month. Discussions have already begun in California with Young's Market Company, and the Alliance anticipates expanding into additional markets in the coming months.

DIAGEO TO EXPAND KETEL ONE PRODUCTION

Diageo plans to expand Ketel One’s production “significantly” outside of North America, according to Drinks International. It may double production of the newly acquired vodka over the next few years, depending on growth in the premium spirits market which is expected to continue. Ketel One currently sells around 1.9 million cases per year, mainly in North America, and has a 14% share of the US premium vodka market.

A NAPA LEGEND PASSES AWAY

We regret to inform you that sparkling wine legend Jamie Davies of Schramsberg Vineyards passed away February 12 at the age of 73 after losing the battle against Parkinson’s disease. The Davies family has operated Schramsberg Vineyards and Cellars since 1965, and launched the family’s first red wine, a 2001 Bordeaux blend, four years ago.

Her husband, Jack Davies, died in 1998. She is survived by three sons, John, Bill and Hugh Davies, and their families. Her memorial service will be held at 1pm Sunday, Feb. 17, at Schramsberg Vineyards, Jack’s Grove. In lieu of flowers, the family suggests donations to the Jack L. Davies Agricultural Land Preservation Fund.

WSD BRIEFS:

CLONTARF IRISH WHISKEY is introducing a new packaging and marketing campaign, said parent company Castle Brands. Bearing “The New Irish” campaign, print advertising and POS material will start appearing immediately, with a new website under development.

AV BRANDS has expanded its Chilean portfolio with the addition of Viña Carmen, the company said this week.

PERNOD RICARD reportedly spent $1.3 million in 2007 to lobby on issues including trade with Cuba, according to a disclosure form posted online by the Senate's public records office.

BACARDI, meanwhile, spent $560,000 in 2007 to lobby on issues including trade with Cuba and trade name protections, among others. Recall that Bacardi has been in a trademark battle with rival Pernod Ricard over rights to Havana Club in the U.S.

Until Monday, Megan

“Fortune can, for her pleasure, fools advance, And toss them on the wheels of Chance.”
-Juvenal

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Wine Sales Rebound in December, Says IRI

The wine industry, particularly imports, fared better in December after experiencing a bit of a slowdown in the rate of growth in November. Of course the holidays are always a busy time of year for wine (and spirits), and this December was no exception.

The rate of growth for imported wines recovered in the four weeks to December 30 in supermarkets, according to IRI scan data. Value of overall wine grew 5.1% in the four week period, while domestic wines grew 5.7% (as compared to 4.8% in November) and imports grew 3% (after growing only 1.5% last month). Domestic dollar share of the category grew 0.5% and imported dollar share declined -0.5%.

Volumes of domestic table wines grew 2.5% (compared to 1.5% in November), which could suggest that consumers were buying more expensive wines or may have something to do with tough comparisons. Imports, meanwhile, were up 0.7% (versus -1.1% in November) in volume. During the four weeks, domestics gained 0.3% of volume share and imports lost -0.3%. The average price per volume rose 3.2% for domestics in December and 2.3% for imports, says IRI.

EUROPEAN IMPORTS. French imports were down -2.1% in dollar sales in the four weeks to December 30. Volume declined a whopping -5.3%, but still improved from November’s decline of -8.4%. Dollar sales of Italian wines grew 3.5% in December, while German wines grew 5.6% with the rate of growth slowing slightly from November. Spanish wines grew 8.2% in value as compared to dollar growth of 18% the month before. Portuguese wine sales grew 5.7%. German volumes were down -3.4%, Italian volumes were up -0.3%, Spanish volumes were up 6.3% and Portugal was flat.

NEW WORLD IMPORTS. Dollar sales of Australian wine were down -2.4% and volume was down -1.6%. Average price per volume for Australian imports decreased -0.9% in December. Argentina, meanwhile, saw value climb 35.5% and volume rise 24.3%. Chilean and South African sales grew 14.5% and 49%, respectively, while volumes rose 8.3% and 56.1%, says IRI. Dollar sales of New Zealand wines grew 32.4% and 22.5% in volume.

HOMEGROWN. Dollar sales and case volume of California wine grew 5% and 2.2%, respectively, in the four weeks, but shares were flat. Oregon and Washington wine value grew 23.5% and 14.8%, respectively. Oregon volumes were up 13.8% and Washington volumes were up 11.3%.

COLORS AND VARIETALS. Dollar sales of red wine grew 5.8%, while volumes were up only 3%. Surprisingly, white wines grew 5.9% in value and 3.5% in volume.

Major wine varietals experienced the following dollar sales growth or decline in the four week period: Cabernet Sauvignon (8%), Chardonnay (3%), Sauvignon Blanc (13%), Merlot (-1.7%), Pinot Grigio (13.7%), Pinot Noir (20.3%), Syrah/Shiraz (-3.5%), White Zinfandel (-4.4%) and Zinfandel (17.5%). French Champagne’s value declined -0.4% and volume decreased -1.3%.

PRICE SEGMENTS. When it comes to price segments, super-premium ($15-$20) reigns supreme, jumping 18.5% in dollar sales. Ultra-premium ($20 and up) grew 6.1% and premium ($11-$15) wines increased 11% in December. The rate of growth for wines priced below $3 to $8 was in decline.

WSD BRIEFS:

CHANGES AT BACARDI. Bacardi Corporation today announced two promotions to its executive leadership team. Angel O. Torres, currently president of Bacardi's Puerto Rico operations, has been promoted to chairman, while Joaquin Bacardi, currently a senior global brand marketing director, has been named as president and chief executive officer. Both promotions are effective April 1, 2008.


“I am certain there is too much certainty in the world.”
-Michael Crichton

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Today’s Sell Day: 8
Sell days this month: 21
Sell days this month last year: 20
This month ends on a: Fri.
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YTD sell days Over/Under: 0


WINE & SPIRITS DAILY
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© 2008 Wine & Spirits Daily, all rights reserved. May quote with attribution.

All Eyes on Diageo

Amid analyst speculation that Diageo may attempt to court a big brewer like SABMiller or Anheuser-Busch, all eyes are on Diageo ahead of their half year earnings report on Thursday. While Diageo’s stock has been a good buy over the last five years, and Thursday’s earnings report is expected to be healthy, the past one year horizon hasn’t been anything to write home about in terms of stock price, despite sales gains. And some analysts are wondering aloud to the UK press whether Diageo’s decision to punt on the Absolut bid (in favor of their rich deal with Ketel One) may put them at a disadvantage.

The Sunday Herald writes: “There are concerns that rivals Pernod or Fortune Brands will use a successful acquisition of Absolut to make inroads into Diageo's position as the world's biggest spirits provider.” The Herald goes on to say that Diageo may be turning its focus to India. That’s where the growth is, we’re told.

Elsewhere, the Scotsman newspaper conjectures that Diageo may be on the hunt for a big brewer deal, like SABMiller or A-B, even though a spokesman for the company told the Herald that “We may not be looking at transformational deals after our past mergers and acquisitions activity, but there are tremendous opportunities to forge new partnerships and joint ventures which will take us into new growth areas.”

Says the Scotsman, quoting an analyst:

“’Beer has since moved a long way down the path of consolidation so there are companies now that are the same size as Diageo, including SABMiller, Heineken, Anheuser-Busch and InBev,’ the analyst said. ‘What Diageo is waiting for at the moment is for a beer company to come forward and say we want that as well.’"

Not sure if we buy this one, but you never know.


CALI GRAPE HARVEST BACK IN BLACK

The AP reports that the California grape harvest came in at “normal levels” for the second year, after the disastrous grape glut in 2005 which drove prices down. California state agriculture officials yesterday said the wine grape crop totaled nearly 3.2 million tons in 2007, only a 3% increase over last year. Napa County grapes got an average of $3,200 per ton, up 7% from the year before.


CALI AND WINE INSTUTUTE TO SPEND HEAVILY ON ADS

The Wine Institute and California’s travel and tourism commission plan to devote $12 million over the next five year for a major ad campaign to tout California food and wine.

Approximately $10 million will be spent on broadcast, print and Internet ads aimed at food and wine lovers over the next three years, says the Wine Institute. That may be increased depending on how well it works. The campaign will be complete with a website, LandofWineandFood.com, and a TV ad campaign featuring Gov. Arnold Schwarzenegger and other local celebrities.


WSWA USING COSTCO DECISION TO FIGHT IN MARYLAND

The Wine and Spirits Wholesalers of America and the National Beer Wholesalers of America have filed an amicus brief utilizing the Costco decision in the long-running Trone case in Maryland (officially TFWS, Inc. v. Peter Franchot, et al). That case, which has been running for years, is now sitting in the Fourth Circuit Court of appeals in Maryland. Some of the same points under consideration in Trone were kind of “settled” with the Costco case. Wholesalers say that Maryland’s challenged statutes, post and hold and a ban on volume discounts, aren’t subject to the Sherman Act because that law regulates “agreements, combinations and conspiracies of private parties, not the actions or programs of states.” The brief also uses Costco-ian logic concerning unilateral versus hybrid restraints, and argues that Maryland’s statutes are unilateral. “What is centrally forbidden is state licensing of arrangements between private parties that suppress competition – not state directive that by themselves limit or reduce competition.” Furthermore, the WSWA/NBWA argues that the restraints of trade in Maryland’s law promote the core concern of temperance.


WSD BRIEFS:

BARRY O’NEIL has been named executive vice president of sales at Major Brands, Inc., Missouri’s largest premium beverage distributor. In his new position, O’Neil will have responsibility for all sales management functions, including sales team management, leadership and development and customer and supplier relationships.

DR. ANN THRUPP, who leads Fetzer Vineyards sustainability and environmental efforts, has been appointed to the National Research Council’s Committee on 21st Century Systems Agriculture. Operating as part of the National Academy of Sciences, the NRC committee will produce a study that aims to lead to increasing environmental awareness and understanding and adoption of sustainable agriculture practices worldwide. Fetzer Vineyards is part of Brown-Forman Beverages.

CASTLE BRANDS announced that it has entered into an agreement with Autentica Tequilera to develop and launch a new brand of super-premium tequila, “Tequila Tierras Autenticas de Jalisco” or “Tierras”. Castle Brands will be the exclusive importer and marketer of Tierras in the United States.


“Friends may come and go, but enemies accumulate.”
-Thomas Jones

--------- Sell Day Calendar ----------
Today’s Sell Day: 7
Sell days this month: 21
Sell days this month last year: 20
This month ends on a: Fri.
This month last year ended on a: Wed.
YTD sell days Over/Under: 0


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.

LVMH Also Not to Bid on Absolut; Says Recession Shmession

The chairman of LVMH, Bernard Arnault, said that his luxury goods group has “no offer” for vodka brand Absolut, making him the second spirits company this week to say they aren’t game (Diageo being the first). In fact, Bernard says that LVMH doesn’t have any acquisition plans at the moment, and doesn’t plan to have any unless he gets an “irresistible” offer.

Moreover, he said that a mild recession in the US was not likely to hurt LVMH, since most of their customers are affluent and therefore more immune from a downturn. He said recession would have a “limited -- even non-existent” impact on the group, says Reuters.


EDRINGTON GETS INTO THE GROG

The Scotsman reports that the owner of The Famous Grouse has entered the rum market through the takeover of the Dominican Republic's leading brand, in a deal believed to be worth more than $500 million. Edrington has acquired an 83% majority stake in the Brugal Company. It plans to widen Brugal's presence internationally.


CONSTELLATION PUTS 3 BEAM WINERIES ON THE BLOCK

Constellation is said to already be flipping its Beam Estate wineries which it just purchased in December, says the San Francisco Business Times, citing the Wine Market Report. The deal reportedly includes Geyser Peak, Buena Vista Carneros and Gary Farrell wineries, along with 1,000 acres of Sonoma County vineyards. Constellation had purchased the Sonoma wineries late last year as part of the $885 million Beam Wine Estates deal from Fortune Brands, along with Geyserville's Clos du Bois and Wild Horse.

Mike Martin, a Constellation spokesman, told the S-F Business Times the company doesn't comment on rumors or speculation in the marketplace, but "having said that, certainly we don't rule out looking at any transaction related to acquisitions or dispositions."

This news comes on the tail of Constellation’s plans to sell the Almaden, Inglenook, and Paul Mason Winery to The Wine Group for $134 million. This meshes with Constellation’s strategy to get out of the jug wine business and focus on the high end.


DISTINCTIVE WINE & SPIRITS TO BE BOUGHT BY SOUTHERN


Southern Wine & Spirits yesterday announced that The Charmer Sunbelt Group and Southern have cut a deal by which CSG's Chicago, Illinois-based Distinctive Wines & Spirits is to be acquired by Southern. The transaction is scheduled to close on or about March 31, 2008; no financial details were released.


“Hollywood is a place where people from Iowa mistake each other for stars.”
-Fred Allen

--------- Sell Day Calendar ----------
Today’s Sell Day: 6
Sell days this month: 21
Sell days this month last year: 20
This month ends on a: Fri.
This month last year ended on a: Wed.
YTD sell days Over/Under: 0

Dear Diageo: Thanks for for Buying Ketel One

Diageo, flush with its announced purchase of 50% of Ketel One vodka for $900 million, has decided not to bid for Absolut vodka. "We didn't submit a bid for Absolut," a spokeswoman told Dow Jones. "We did register an interest late last year but after an internal review looking at what options there were, we felt that the deal that we did last night was a better strategic fit for Diageo." That has to be good news for Fortune Brands, seen as the front-runner for the bidding for Absolut. The Ketel One deal takes out the key player with the deepest pockets, although some though Diageo might have had regulatory hurdles. Bacardi and Pernod Ricard are also confirmed to be on the hunt for Vin & Sprit, which analysts peg at about a $5.4 billion valuation. Ketel One is currently the number-four super premium vodka brand with a 14% share. Absolut is the market leader with 39%, says Dow Jones.

DID DIAGEO OVERPAY? That’s the question on many an analyst’s lips earlier this morning as they pored over the $900 million deal for half of Ketel One. Diageo chief Paul Walsh told news reporters that they had paid a “fair price” for the brand and that it “compared favorably” to other recent deals (Grey Goose, I presume). Ketel One, which sells 97% of its vodka in the US, had sales of about $216 million last year, selling 1.9 million cases. Looking at those numbers, the price looks mighty rich. Even the dullest analyst can't make the numbers work at that price.

PLUG IT IN, PLUG IT IN. However, Diageo isn't paying for Ketel One's current performance, but future performance. It's not what Ketel One can do for Diageo, but what Diageo can do for Ketel One. Diageo can plug Ketel One into its global sales and distribution system and drive huge increases in the brand virtually overnight. Think Asia, South America, and Europe; and think doubling or even tripling sales in a short period of time. Now the deal starts to make sense.

Plus, Ketel One fits nicely into Diageo’s vodka portfolio, priced at about $22 per bottle and growing double digits. Says Paul to Thompson Financial: "The super-premium vodka category is a very attractive area for us. It is one of the fastest-growing categories in the gloabl drinks industry. Ketel One has phenomenal credentials. It gives us a very strong foothold in another category.”

Asked in a television interview why Diageo didn't buy Ketel One outright, he replied simply: "Because the [Nolet] family didn't want to sell it off." That’s one of the problems of the spirits industry: Nobody wants to leave it. However, Diageo is understood to have first right of refusal on the Nolet family’s 50% of the deal, with a "put" structured into the deal in the fourth or fifth year after it closes. If Diageo decides at that time not to buy the remaining 50% stake for $900 mil plus interest, it would have to pay a $100 million penalty. But what’s a hundred million among friends, huh?

So why this rich Ketel One deal over a possible better deal with Absolut? “When I looked at all the options, I preferred the Ketel deal. It gives us certainty and there are no regulatory issues to be overcome," Paul said. In contrast, he said the Absolut auction had been "dragging on" for a long-time, and any deal could have been subject to antitrust review. "All in all, the Ketal deal is the better options for us," he said.


DECEMBER CONTROL STATE VOLUMES STRONG AGAINST EASY COMP

Despite rumors of soft holiday sales for spirits, spirits volumes in NABCA states were up 2.9% in December against an easy comparison of -3% last year. That puts spirits volume in control states (covering a quarter of the US market) up 3.2% for the year 2007, reports UBS analyst Melissa Earlam. DISCUS estimates spirits volumes in 2007 were up 2.4%, so control states likely outsold license states.

Diageo gained share again in December, with strong performances in Canadian whiskey (5% y/y vs category growth 1.5% y/y), cocktails (6% y/y vs category 2% y/y), rum, and gin. It lost share in Cordials (-0.4% vs category +1.3% y/y) and tequila (0% y/y vs category +7%). Vodka was in line (5.5% y/y vs category 5.8%).

WSD BRIEFS:

GLAZER’S ANNOUNCED the appointment of Dolph Parro as Senior Vice President, Wine. Parro will be located in Glazer’s General Office, and will report to Mike Maxwell. Parro will be responsible for brand building activities with Glazer’s vendors, and will work with each state’s sales and marketing team to drive execution of supplier and company objectives.

Glazer’s also announced the expansion of Glazer's Beverage University, the company's eLearning educational website. Now available to all users is "Wines of the World," a seven unit program that addresses wine production in each of the world's major wine producing countries including France, Italy, Germany, Spain, Portugal, Australia, New Zealand, Chile, Argentina and the United States.

A BILL TO PRIVATIZE RETAIL LIQUOR SALES IN PENNSYLVANIA was introduced yesterday by a state senator who wants the proceeds earmarked to meet the state's Medicare obligations.
Under his bill, 30-year franchises for about two-thirds of the 623 state stores would immediately be sold to the highest bidder, while the remaining stores would be offered to a private equity firm. The equity firm would have a 51% share, while the state retained a 49% share. The intent for the "hybrid" approach, according to Mr. Wonderling, is to have the equity firm get the stores that are running efficiently, then sell them for the highest possible price. The state would retain control of the wholesale liquor operation, and there would be no change in how beer is sold. This would obviously be a radical change to the Pennsy liquor system. Not sure that this bill will have a chance.

“Dance like it hurts, love like you need money, work when people are watching.”
-Scott Adams

--------- Sell Day Calendar ----------
Today’s Sell Day: 4
Sell days this month: 21
Sell days this month last year: 20
This month ends on a: Fri.
This month last year ended on a: Wed.
YTD sell days Over/Under: 0


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.

Wine and Spirits Roundup

CONSUMER BACKLASH PROMPTS NAME CHANGE

Riverland growers say McGuigan Simeon is changing its name because of consumer backlash from the company's bitter contract negotiations with growers spanning several years, according to local reports. Apparently, the company raised concerns about consumer opinion to its growers at meetings in December. Shareholders voted last week to change McGuigan Simeon to Australian Vintage Limited.

"Consumer resistance was a result of or was believed to be a result of the very negative view that consumers were taking as a result of the company's poor treatment of growers in the inland regions," said Chris Byrne from the Riverland Winegrape Growers Association to a report in ABC News.

It’s not clear whether the winery will market its wines under the name Australian Vintage, which was the name of the company until 2002 when Simeon Wines and McGuigan’s merged, or if it will continue to market its wines under the McGuigan Simeon name.

McGuigan Simeon says the name change is not a result of negotiations, but acknowledged that consumer sentiment has been negatively affected in some cases by grower sentiment.

ANGOSTURA TO REOPEN CHARLES MEDLEY DISTILLERY

Angostura says it will reopen the Charles Medley Distillers plant in northwestern Owensboro, Ky., later this year after a $25 million renovation. The renovation will increase the distillery’s annual production rate from 1.5 million proof gallons of bourbon to between 2.5 million and 3 million gallons. The company also plans to build whiskey barrels in Owensboro for the first time in decades, according to the Associated Press. Once it's distilled, the bourbon will be aged for four years in new charred white oak barrels that will be made on site. The plant is expecting to produce 20,000 barrels a year and will likely export the majority to Europe and the Far East. Angostura also reportedly plans to create a new Charles Medley Kentucky Bourbon label. The plant hasn’t been used in 15 years, but Angostura is hoping to start production in six to nine months.

ADMIRAL IMPORTS SIGNS DISTRIBUTION AGREEMENT WITH TOSTI

Admiral Imports will become the importer of Italian wine and spirits company, Tosti, in the U.S., Puerto Rico and the U.S. Virgin Islands effective February 1, 2008. The Tosti portfolio includes Tosti Asti Spumante, one of the largest selling Asti Spumante brands in the U.S. market. It also includes Tosti Prosecco, Tosti Bracato, Tosti Brachetto and the Torlasco line of wines from the Provincia di Pavia area including Pinot Noir and Pinot Grigio. Soon to be launched will be Torlasco Moscato di Asti.

NEW YORK RESTAURANTS HAVE REFILLED A LAWSUIT in federal district court to challenge the city’s revised requirements that larger chain restaurants prominently post calorie content for each menu item, according to NRN. A federal judge struck down a similar law in September as a result of a lawsuit filed in the summer by the New York State Restaurant Association (NYSRA).

NEWMAN’S OWN launched its 2006 chardonnay and cabernet sauvignon last week. Founder Paul Newman will donate all profits and royalties after taxes to educational and charitable purposes. Newman worked closely with the Rebel Wine Co., a collaboration of Three Thieves and Trinchero Family Estates. The wines have a suggested retail price of $16 per bottle and are available nationally.

SOYUZ VICTAN plans to outsource sales and distribution for its Silk vodka brand in the U.S. to Compass Brands. Soyuz Victan USA had previously handled sales and distribution out of its headquarters in New Jersey.

HEAVEN HILL DISTILLERIES announces that Tracy Mutter has been named the On-premise Area Manager for San Francisco. Tracy will be responsible for overseeing sales and development for all on-premise accounts in the San Francisco area, working closely with Young’s Market Company. Tracy comes to Heaven Hill with previous experience in the industry selling wine and spirits for Young’s Market Company.

JIM BEAM IS CELEBRATING the filling of its eleven millionth barrel, which took place on February 1. “Not only have we filled another million barrels, but we’ve done so in the shortest amount of time our company has ever seen - two years, eleven months and three weeks,” said Jeff Conder, vice president, North American operations for Beam Global Spirits & Wine

OWNER OF CLOS FOURTET, Philippe Cuvelier, has bought Chateau Poujeaux, the large former cru bourgeois estate in the Medoc, it was announced today. The selling price was an estimated $37 million.

MISSISSIPPI HAS APPOINTED NEW ABC DIRECTOR, Patsy Holeman, after serving with the Tax Commission for 26 years.

I WILL BE TRAVELING out of the country from February 5-February 14. My fellow editor Harry Schuhmacher will take over the reigns starting tomorrow until I return next week.

Until Feb. 14, Megan

“Real success is finding your lifework in the work that you love."
David McCullough

--------- Sell Day Calendar ----------
Today’s Sell Day: 2
Sell days this month: 21
Sell days this month last year: 20
This month ends on a: Fri.
This month last year ended on a: Wed.
YTD sell days Over/Under: 0

Absolut has Record Year in 2007

Vin & Sprit is reporting that 2007 was the best year ever for Absolut, as the Absolut Spirits division enjoyed a “big increase” in sales for the third consecutive year. During the year, total sales of Absolut increased by 9% to an impressive 96,579,000 liters.

More than 5 million nine-liter cases of Absolut were sold in its largest market, the U.S., for the first time, while sales to the trade increased by 4% in fiscal 2007. Since 2006, Absolut has managed to sell more than one in two bottles outside the U.S., making it an increasingly global brand.

V&S Group ceo Bengt Baron said increased sales of Absolut in the US led to a somewhat higher market share in the market in 2007. Outside of the United States, sales saw double-digit percentage growth on most prioritized markets.

As you’ll recall, the new advertising campaign, “In an ABSOLUT World”, was launched in 2007. Absolut also unveiled Absolut Pears, Absolut New Orleans and Absolut 100, which the company said “were very well received.” The $2 million sales profit from Absolut New Orleans was donated for the reconstruction work.

“We focus on around ten key markets, work innovatively with the product portfolio and marketing and invest in the brand in the long term. Our consistent strategy, combined with tough cost control, has made possible both a good profit and much increased market investments,” says Ketil Eriksen, President of V&S Absolut Spirits.

V&S reportedly does not expect Absolut or the premium vodka market to be effected much by the slowing U.S. economy, unless a major downturn takes place.

Cruzan Rum was also responsible for growing V&S’ spirits segment. Volume of Cruzan sold grew by as much as 19% in 2007, primarily in the USA. Cruzan also introduced a new flavor, Cruzan Black Cherry, in the US market.

Now, for a look at the rest of the company.

“The fourth quarter was extremely successful with operating profit up 17%. The main contributing factors are continued strong development for Absolut Vodka and very positive developments in Sweden and Poland,” says Bengt Baron, ceo of V&S Group.

Net sales remained virtually unchanged in 2007. For comparable units the increase was 7%. Sales volume increased to 26.9 million 9-litre cases. For the fourth quarter net sales amounted to SEK 2,964(2,974) million and sales volume was up 5%.

“Our efforts to focus V&S are continuing to yield results. A focus on prioritized markets, prioritized products and lower costs have contributed to our strong figures,” says Bengt Baron.

TOP THEMES AT THE UNIFIED WINE & GRAPE SYMPOSIUM

Let’s take a look at some of the major themes at this year’s Unified Wine & Grape Symposium.

1. Imports are gaining

As Americans are drinking more wine and surpassing countries such as Italy in consumption, imports are looking to profit. (The U.S. is second only to France as the world’s largest wine drinking nation.) During a time when the dollar is weak, consumers are reportedly still willing to spend an extra buck for an imported bottle, which means imports are officially here to stay. One of the main drivers of the trend may be millennials who are more likely to experiment with imports than their baby boomer parents.

The top performing wine brands of 2007 in terms of growth include Ste. Michelle Wine Estates, Barefoot, Clos du Bois and Diageo Chateau & Estate wines.

2. Catching up with overproduction

Now that U.S. consumption is on the rise, local producers have a chance to make a comeback. Years of oversupply, influx of imports and a slowing economy has caused grape prices to dwindle. But now that demand is on the rise and imports are getting increasingly expensive, growers could soon see a return to sustainable prices.

Nat DiBuduo of the Allied Grape Growers said there is a slight shortage of varieties like Chardonnay and Pinot Noir, and recommended that growers plant new vineyards for the first time in ten years. He warned, however, that farmers only begin planting new vineyards if they have a solid winery contract.

3. The glut is drying up

Several factors are helping the worldwide glut to shrink. A drought in Australia, smaller California crops in the past couple of years and new EU reforms are helping drain the oversupply of wine. This can be a good or bad thing, depending on how you look at it. Mainly, prices might go up, which is good depending on who you are.

WSD BRIEFS:

INFINIUM SPIRITS ceo Jeff Underwood has appointed Bill Anderson as president of the Aliso Viejo, California-based company. Bill has over 30 years of experience in the spirits industry primarily with Bacardi USA, Inc. Infinium’s portfolio includes Seagrams Vodka and Corralejo Tequilas.

GLAZER’S has hired industry veteran Dolph Parro as senior vp, wine, where he will lead brand building activities for Glazer’s vendors and work with state’s sales and marketing teams. Parro is currently business development manager for The Wine Group.

THE RESTAURANT INDUSTRY is also feeling a pinch from the credit crunch. Brinker International, owner of Chili’s Grill & Bar, Romano’s Macaroni Grill and Magigiano’s Little Italy, said it plans to close 25 underperforming restaurants.

TESCO is planning to open 18 new store locations to the Bay area of California despite reports that it might not be doing so well in the U.S. The stores will begin opening in 2009, according to Fresh & Easy ceo Tim Mason. He said the 37 locations “have been well-received” across Southern California, Nevada and Arizona, and plans to have 50 stores open in the U.S. by the end of February.

CALLING ALL TRUTH SQUADERS. This is the last chance to let us know what you’re thinking. It only takes a few minutes to fill out our Truth Squad survey, and allows us to understand the issues you’re facing in the industry. All answers are kept anonymous. Click here to take the survey: http://tinyurl.com/yuj9hv

CORRECTION. Yesterday we reported rumors that Majestic Distilling Company was sold to Sazerac. We were assured the rumor is false and apologize for the error.

I WILL BE TRAVELING out of the country from February 5-February 14. My fellow editor Harry Schuhmacher will take over the reigns next Tuesday until I return.

Until Monday, Megan

“You only live once - but if you work it right, once is enough.”
-Joe E. Lewis

THIS IS A LEAP YEAR, DON’T FORGET. We gain a sell day in February.

--------- Sell Day Calendar ----------
Today’s Sell Day: 1
Sell days this month: 21
Sell days this month last year: 20
This month ends on a: Fri.
This month last year ended on a: Wed.
YTD sell days Over/Under: 0