Robert Mondavi Dies at 94

Today is a sad day for the California wine industry. We regret to inform you that the legendary Robert Mondavi passed away this morning at his home in Yountville, California. He was 94. Mr. Mondavi was a visionary who paved the way for what Napa and the California wine industry is today. Known for his energy and charisma, he was a brilliant marketer and one of the most admired figures in the wine world. Our thoughts are with his family and friends.

To read an excellent tribute to Mr. Mondavi, click here.

Napa a Buyer’s Market

Tennessee-based Sapphire Brands is on a mission to acquire ten California wineries over the next five years. The June 2 issue of Forbes reports that Jeff Hopmayer, ceo of Sapphire, is “prowling California’s wine country” for candidates. He needs a production level of at least 1 million cases a year to gain leverage with distributors, he tells Forbes, and bigger buyers like Constellation and Brown-Forman. His currently produces 500,000 cases.

It’s a buyer’s market today in the wine biz, as an over-abundance of wineries and expensive land in Napa and Sonoma will lead many owners to sell. As many as 51% of family-controlled wineries will change ownership in the next ten years, according to a recent report by Silicon Valley Bank. If the next generation isn’t interested in taking over, new owners (roughly 20%) may come into the picture.

In addition, “aging vineyard owners” are finding it difficult to compete in the new wine industry and are increasingly interested in selling. Micro-brands, says the article, “have seen their pricing power and ability to demand shelf space trickle away.” Competition from the large and more established wineries (roughly 5,000), wine imports and distributors makes it difficult to get shelf space. Instead, boutique wineries rely on wine clubs, tasting rooms and direct-to-consumer sales.

“In the coming selloff,” says Forbes, “only wineries that offer a full portfolio of varietals--from pinot noir to cabernet franc--in quantities of at least 100,000 cases annually will be attractive acquisitions (see table).”

BRUNELLO PRODUCERS SCRAMBLING TO COMPLY

As we reported earlier this week, the TTB is banning all bottles of Brunello not accompanied by lab results proving its authenticity. Brunello can only be made with Sangiovese, but Italian police opened an investigation last month when some of the region’s top producers were accused of using grapes grown elsewhere. Starting June 9, the TTB will impound all Brunellos without a certificate after Italian authorities failed to provide the U.S. with a list of guilty producers.

One of the main concerns for importers and exporters of Brunello is that innocent producers are not penalized. Brunello producers will have to scramble to comply with the TTB, since no one is really expecting the often bureaucratic Italian government to quickly provide a list of innocent and guilty winemakers.

Marone Cinzano, the president of the group of Brunello producers, said winemakers will “act rapidly” to conduct lab tests and provide certificates, although it will be a difficult process.

WSD has also learned that the TTB is taking the situation seriously and there could even be some consequences for Brunellos already imported into the U.S. As you can imagine, the fine wine shops and restaurants are rather upset about the situation.

FRESH & EASY LOOKIN’ UP

Despite rumors that Tesco’s Fresh & Easy concept in the U.S. is failing, new evidence shows it is, in fact, booming. A report in the Financial Times earlier this week reported on a consumer survey taken by Executive Research in the U.S., which is not affiliated with Tesco.

Executive conducted interviews with 700 customers outside Fresh & Easy stores in Las Vegas, LA and Phoenix, and nearly 9 out of 10 said they would “highly recommend” Fresh & Easy. Traffic as the stores is between 20 and 30 people an hour.

According to the report, F&E has not yet hit its goal of “dollars spent” per store, but is projected to do so as time goes on.

WSD BRIEF:

THE CHIEF EXECUTIVE OF VIRGIN ISLANDS RUM, John deJongh, is in Paris this week to discuss the future of Cruzan rum with Pernod management. Pernod recently gained ownership of Cruzan when it acquired V&S earlier this year. Cruzan has changed owners several times over the past decade and deJongh is eager to secure a long-term agreement.


Until Monday, Megan

“It is impossible to defeat an ignorant man in argument.”
William G. McAdoo

--------- Sell Day Calendar ----------
Today's Sell Day: 12
Sell days this month: 22
Sell days this month last year: 23
This month ends on a: Fri.
This month last year ended on a: Thurs.
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.

V&S Acquisition in Tact

Fortune’s preliminary injunction again V&S will not delay the acquisition between V&S and Pernod, despite earlier reports that claimed otherwise.

"We don't anticipate this having any effect or delay on closing" of the V&S transaction, a Pernod spokeswoman told Dow Jones Newswires.

"The stake in Beam are not part of our transaction. The dispute has nothing to do with Pernod Ricard," she continued.

As we reported earlier this week, Fortune has taken court action to prevent V&S from selling its 10% stake in Beam Global to the Swedish government. Fortune, which owns the remaining 90% stake in Beam, wants to repurchase V&S’s minority stake, but says it has been unable to agree on a fair price.

V&S spokesman Jacob Broberg said Fortune has offered $350 million for the 10% stake while V&S wants $1.1 billion, which would include "a few hundreds (of millions) dollars " in debt, according to Reuters.

"We paid $375 million when we bought it and we have (invested) $153 million in it. And the firm is significantly bigger now," Broberg said.

Swedish Financial Markets Minister Mats Odell hinted that the lawsuit is more like a price negotiation and is not expected to delay the merger.

"We have yet not landed on a price. I would like to point out the dynamics that occur in a price negotiation when there is only one buyer," he said at a press conference yesterday.

TRUTH IN LABELING WARS

Politico reporter Samuel Loewenberg wrote an interesting article on the battle between spirits and beer over “truth in labeling” laws. The TTB is considering whether nutritional labels on alcohol beverages should include serving sizes – something the spirits industry is in favor of and brewers are against.

The beer industry argues that liquor is consumed in larger amounts then the official 1.5 ounce serving size. Instead, the beer industry wants alcohol content to be displayed as a percentage by volume.

"The products are not the same in the way they are actually consumed," said Art DeCelle, chief counsel for the Beer Institute. He also said it’s not realistic to think that consumers will only drink a standard shot.

The spirits industry says brewers are only interested in protecting their market share. They believe issuing a standard serving size would help “normalize spirits” by showing consumers that one beer and a shot of liquor have the same alcoholic effect.

The beer companies “have spent 50 years marketing beer as America’s beverage of moderation. They think it gives them a public perception advantage over ... distilled alcohol,” said Mark Gorman, a senior vp for the Distilled Spirits Council of the United States.

Mark also told Politico that if the TTB agrees to the alcohol equivalency labeling, it could help distillers fight higher taxes.

The TTB is still considering both sides’ arguments.

To read the article in entirety, click here.

CONGRESS PASSES FOOD BILL, OVERRIDES VETO

Congress today sent President Bush a bill boosting farm subsidies and money for food stamps to help the poor deal with rising grocery prices, the AP reports. Bush had threatened to veto the $290 billion bill, but both chambers of Congress passed the measure with well over two-thirds majority needed to override a veto.

About $40 billion is for farm subsidies, while almost $30 billion would go to farmers to idle their land and to other environmental programs. Most notably for winegrape growers, the bill will increase subsidies for certain crops, including fruits and vegetables excluded from previous farm bills.

To read more about it, click here.

WSD BRIEFS:

SKYY SPIRITS IS LAUNCHING CUTTY SARK BLENDED MALT SCOTCH in select U.S. markets. It’s currently being tested in Colorado and Georgia, with plans to expand later this year. Cutty Sark Blended Scotch retails for $29.99 for a 750ml bottle.

PAUL WALSH, Diageo ceo, has reportedly cited interest in purchasing a South Korean distiller of soju, the country’s traditional spirits, according to local reports. Diageo’s Korean unit will make the decision on which company to purchase, Walsh was quoted as saying.


Until tomorrow, Megan

“That's the secret to life... replace one worry with another....”
Charles M. Schulz

--------- Sell Day Calendar ----------
Today's Sell Day: 11
Sell days this month: 22
Sell days this month last year: 23
This month ends on a: Fri.
This month last year ended on a: Thurs.
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.

Fortune: Spirits “Sustainable” in 2008

In a presentation at the Baird’s Growth Stock Conference today, Fortune Brands ceo Bruce Carbonari talked about the spirits biz today and tomorrow. The company’s top initiative is growing its major premium spirits business, where Fortune is #4 in the world. But is premium spirits growth possible during a recession? Here’s what Bruce had to say about the past, present and future of Fortune’s spirits brands:

PREMIUMIZATION. “[Premium spirits] is a favorable market profile really driven by the consumer. The consumer is very active in what we call the premiumization of the spirits business, and that’s not only in the United States but otherwise. That means they are moving up. They are selecting and calling brands at bars or moving up in price points as they go to their local liquor store. It’s an affordable luxury, and as an affordable luxury we’ve seen great sustainability in this market during good and bad times.”

When asked how spirits is performing in the slowing economy versus beer, Bruce said the following:

“We’ve seen quite a sustainability in the spirits business...In 2008 I think we will be closer to the 2% side of the business. What is interesting also is we continue to see premiumization. The one thing you might question is the mix and what people are willing to drink. Will they be trading down? The only trend we’re starting to see here is on-premise versus off-premise...we’ve seen a shift from on-premise slowing to more off-premise which are liquor stores or the Safeways of the world where you can buy spirits. We’ve seen a shift to people buying off-premise accelerating, which is about 80% of the market.”

UNITED STATES. “The growth here in the United States has been between 2-4% over the near history, and whether that is good times or bad times. That’s supported by this cocktail culture that we see. That is also supporting the gain we are seeing in spirits versus beer here in the United States.”

INTERNATIONAL. “The international profile is just as robust. Actually we are seeing more in the high single digits range growth in the international market as we see most of the emerging markets, the brick countries if you will, really growing and starting the premiumization of the global spirits there from the local spirits that has been a part of their tradition,” said Bruce.

“When we purchased the Allied Brands, as I said, two years ago, we really went through a major transformation from basically a large single brand U.S. company to a global multi-spirits business. We purchased over twenty brands that had a global presence and that really allowed us to move our business split 50/50 between U.S. and international.”

BUZZ MARKETING. “About a year ago we created a new vision around the company. And that vision is centered around building brands that people want to talk about. That is really creating that buzz out there, the pull that people get excited about as they call our brands and call their respected drinks.”

“We are doing that in a non-traditional fashion. We are looking at the occasions when people go out to socialize, whether it be for a birthday party or a get together with friends, and understanding what those occasions are. And not just doing TV ads and print billboards but finding non-traditional ways to make it a personal experience, whether that be on the internet or more on-site, on-premise vehicles. We started that campaign supporting Canadian Club, Courvoisier and Sauza Hornitos in the second half of last year.”

EXPANDING CAPACITIES. “We are also expanding our capacities, again bourbon, scotch and tequila, and we’ve made quite an investment there to support the profile we see for the future.”

CAMPARI HAS SLOW FIRST QUARTER

Italian drinks group Campari said it performed as planned in a tougher environment in the first quarter ended March 31. The small quarter was hurt by the weak US dollar, destocking issues with Skyy Vodka in the US, tough comps and overall slowness in the spirits biz. Campari also lost its Tequila 1800 distribution contract in the US in December 2007.

“In a tougher environment we are performing as planned. Having executed important portfolio changes in the small Q1, we expect our business to build its momentum across key regions in the quarters ahead. Overall, our outlook for 2008 remains unchanged,” said Bob Kunze-Concewitz, ceo.

SKYY sales declined by -13.2% at actual exchange rates, due to the planned destocking in the US, ahead of SKYY Infusions and SKYY Vodka new pack launch in April 2008. The US market registered an organic decrease of -7%

In its outlook, Campari said the US business is expected to return to growth following the completion of portfolio changes in Q1. However, negative effects from the US dollar are expected to continue.

WSD BRIEFS:

GOV. SONNY PERDUE SIGNED HB 1061, which will allow wineries to ship wine directly to consumers. Georgians can now order as many as 12 cases of wine a year directly from wineries over the internet or telephone. Previously, residents were required to make face to face purchases at wineries in order to have up to five cases of wine shipped home.

PERNOD HAS ADDED A MOCHA FLAVOR to its Kahlua line, set to hit the U.S. in June. Kahlua Mocha is the latest extension in the flavor portfolio, joining French Vanilla and Hazlenut.

FRENCH BILLIONAIRE BERNARD ARNAULT will joint Carrefour’s (the world’s second-largest retailer) supervisory board, replacing Robert Halley.


Until tomorrow, Megan

“Death is more universal than life; everyone dies but not everyone lives.”
A. Sachs

--------- Sell Day Calendar ----------
Today's Sell Day: 10
Sell days this month: 22
Sell days this month last year: 23
This month ends on a: Fri.
This month last year ended on a: Thurs.
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 in Fifty Years: China, Plastic and English Champagne

Berry Bros. & Rudd, Britain's oldest independent wine merchant, made several predictions about the state of the wine world in 2058 in its “Future of Wine Report.” Among its many predictions, Berry believes China could one day rival Bordeaux, while England could be a new champagne region in just 50 years.

In the world of volume wine, Berrys believes there are two specific areas set for significant change by 2058:

1. Countries renowned for “new world wine” will alter radically as the effects of climate change are felt.

2. The size of wine “brands” will lead to massive changes in the way wine is produced, packaged and marketed.

Leading the charge in volume wine, predicts Berrys, will be China. Already the world's sixth largest wine producer and number four in terms of area under vine, its not too far-fetched to believe that China could soon be the world’s leading producer of volume wine. Berry believes China will excel in producing Cabernets and Chardonnays, in particular.

"China has the vineyards, but not the technical expertise," agrees Alun Griffiths MW, "however, if good people from wine producing countries think there is opportunity to make wine in China, they will go there and invest."

Berrys also believes that if global warming persists, countries that are currently small scale producers, such as Ukraine, Moldova, Croatia, Slovenia, Poland and Canada,

BLEAK FUTURE FOR AUSTRALIA. In recent years, Australia has suffered from severe droughts that have resulted in vineyard irrigation being temporarily banned. If this trend continues, says Berry, supplies of inexpensive Australian wine may soon be a thing of the past.

By 2058, Berrys predicts Australia will be too hot and arid to support large areas of vine. It will no longer be renowned for volume wine and will become, instead, a niche producer, concentrating on hand-crafted, terroir-driven, fine wine.

WINE BECOMES (EVEN MORE) COMMERCIALIZED. Berry experts believe big brand, blended wines with grapes from around the world could soon replace region-specific varietals.

"By 2058, big brand wine could be grape or blend specific, rather than from a particular country. Grapes will be gathered from all over the world and blended to suit consumers' tastes."

They also believe spirits companies and supermarkets will own most of the world’s wine brands by 2058.

GLASS BOTTLES NO LONGER. In 50 years' time, Berry believes wine is unlikely to be sold in glass bottles as retailers and importers try to cut costs, waste, and reduce the environmental impact of wine being shipped around the globe. Instead, wine will be packaged in plastic or reinforced cardboard containers.

CHINA AND ENGLAND, UNRIVALED WINE REGIONS? While Berry thinks China is set to become a leading producer of volume wine, they also think China has all the essential ingredients to rival the best of Bordeaux.

“It is entirely conceivable that, in such a vast country, there will be pockets of land with a terroir and micro-climate well suited to the production of top quality wines," said Jasper Morris MW.

Thanks in part to warmer temperatures (2007 was the second warmest year in the UK in 356 years), more and more English land is becoming suitable for wine production. Berrys believes the amount of English farmland devoted to wine production may rival that of France by 2058.

French Champagne producers such as Louis Roederer have been looking at the chalky soil of the South Downs with interest, believing it offers them a great opportunity to produce sparkling wines similar to Champagne itself.

Let us know your thoughts at megan@beernet.com

BEAM GLOBAL FILES SUIT AGAINST VIN & SPRIT

Fortune Brands filed a suit Monday in the U.S. District Court in Manhattan to block Swedish distiller Vin & Sprit from transferring its 10% stake in Beam Global Spirits and Wine to the Swedish government, its parent. Fortune is seeking a preliminary injunction to prevent the transfer while the parties negotiate.

The complaint states: "The transfer of the Beam shares to the Swedish government, a contractual and business stranger to Fortune and Beam, would risk serious and irreparable harm."

Court papers also state that Beam wants to repurchase V&S’s stake, but has been unable to agree on a “fair market value” for the shares.

Before Pernod bought V&S in March for over $8 billion, Fortune was considered the front-runner for the coveted Absolut vodka brand.

TTB THREATENS TO BLOCK BRUNELLO IMPORTS

The U.S. Alcohol and Tobacco Tax and Trade Bureau (TTB) has sent a letter to the U.S. Embassy in Rome threatening to block all imports of Brunello di Montalcino. Beginning June 9, all Brunello exported to the U.S. must include lab work that certifies the wine is pure Sangiovese, reports Decanter. The U.S. is Brunello’s biggest market, importing 25% of total Brunello production.

By law, Brunello must be 100% Sangiovese. Adding other grapes would violate a strict labeling agreement between the U.S. and the EU.

Apparently, numerous written requests sent to the Italian Embassy in Washington by the TTB were ignored in the past.

'We have a general assembly in two days, and organizing laboratory analysis will be our number one priority, to ensure that Brunello will continue to be imported into the US,' Marone Cinzano said.

Let us know your thoughts at megan@beernet.com.

DIAGEO OFFSETS RISING COSTS WITH PRICE INCREASES

In a note published today by UBS senior analyst Melissa Earlam, the firm reports that Diageo is not immune to raw material pressures, but is outperforming on cost execution. Diageo’s supply chain presentation highlighted that glass and grain price inflation in particular has taken a toll.

“Diageo commented that while gross margins have been better than expected in 08E and would increase y/y, the objective of holding gross margins flat in 2009E would be a challenge. Raw material pressure is not expected to dissipate in the mid-term, hence Diageo is building in strong pricing, which is holding well in the US, Asia and Latin America in particular, though could be more challenging in Western Europe short-term,” said Melissa.

Diageo’s scale and supplier relationships have driven better rates for key raw materials. The new “Perfect Plant Program” (started Jan 08), production optimization (Ireland and Lehigh plant in US) and efficiencies in Asia will be the focus of supply efficiencies, now that the bulk of headcount reduction is complete, says Melissa.

WSD BRIEFS:

NORTH CAROLINA GOV. MIKE EASLEY proposed Monday to raise state taxes on alcohol to help reform the state’s mental healthcare system. New taxes on beer, wine and spirits would generate $66 million next year.

THE NEW JERSEY LEGISLATION is considering a bill that would encourage consumers to recycle old cans and bottles (including beer and wine). The bill would charge an extra $.10 for bottles and cans less than 24 ounces and $0.20 for larger ones. Consumers would get the money back by returning containers to either newly created redemption centers or to retailers. New Jersey would be the 12th state with such a law.


Until tomorrow, Megan

“Mistakes are the portals of discovery.”
James Joyce

--------- Sell Day Calendar ----------
Today's Sell Day: 9
Sell days this month: 22
Sell days this month last year: 23
This month ends on a: Fri.
This month last year ended on a: Thurs.
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.

Constellation Makes Its Case

In a wide-ranging presentation to analysts at the Goldman Sachs consumer goods conference, Constellation Brands' chief Rob Sands painted a pretty good picture for premium wine and spirits, which happens to be the sandbox in which Constellation plays.

Summarizing their strategy in one sentence, Rob said: “The foundation of our strategy is based on generating growth from sources that create returns above our cost of capital, whether it comes from our existing portfolio, the introduction of new products, or through acquisitions or strategic alliances.”

That just about sums it up. But how to do that? The key, says Rob, is to focus on premium and super-premium brands. In spirits, Rob explained how STZ is the fourth largest spirits company and is growing, particularly Svedka Vodka which they acquired in March of 2007, “which significantly increased our premium spirits mix.” Svedka is a 1.5 million case brand in calendar 2007, it's the fourth largest vodka, and “the fastest growing major imported vodka brand in the United States. It's actually the fastest growing major premium spirits brand, period, in the world with a five year CAGR of approximately 50%,” says Rob. Now Constellation is focusing on “leveraging our distribution infrastructure to capture additional opportunities in all major channels.” Constellation has grown the mix of premium spirits from about 10% to about 30% in fiscal 2008.

RECESSION PROOF? What about consumer softness due to the economy? Rob says don't sweat it:

“The alcoholic beverage business is generally pretty resistant to economic trends. People tend to drink not more or less because of economic cycles. I would say, talking about it category by category: the wine category remains very healthy, especially in the categories that we participate in [premium and above]. These categories continue to grow in double digits......the value business, interestingly enough, has been pretty weak as of late...... Spirits also continues to have pretty strong growth in the premium category in particular. I would say there has been a little bit of a slowdown in spirit growth, but nevertheless, it remains pretty strong and pretty healthy. In general compared to what it has been, say, three or four years ago, spirits has really come back strong and has gained market share, especially against beer...”

“There has been some channel shift.....there's been a shift away from on-premise consumption to off-premise consumption...... The interesting thing is that people don't drink less, they just sell at home.......we're seeing some shift from supermarket chains to mass merchandisers.”

GRAPE GLUT OVER? Regarding the wine market and grape supply, Rob says we are entering an era of better margins:

“I find it interesting. Grape supply is very cyclical. Depending on who you're talking to, they tend to go in 7 to 10 year cycles, from over supply to under supply. I would say that the world has been in a state of oversupply for the previous cycle. Australia was in oversupply, Europe was oversupply, South America was in oversupply, even California was in oversupply. I would say that we're right on the tipping point of seeing the world go into under supply.....we're definitely seeing that shift.....That generally creates a pretty strong pricing environment and should be a positive thing for margins.”

Lower priced wines and private labels (Two Buck Chucks) can't find cheap juice, and that creates “a healthy market.”

CONSTELLATION DONE ACQUIRING? With STZ's high debt load, analysts were wondering if the buying binge is over for the acquisitive company. Rob says kind of, but hedges his bets: “All of our free cash flow goes to paying down debt. We're about 5.3 times debt to EBIDTA, which is traditionally high since we run in the low fours our high threes.....We're well below our covenants......We're targeting to be down in the low fours by the end of this fiscal year......It doesn't prevent us from making an acquisition” although they are more focused on generating free cash right now and “fine tuning” the business they own.

CHIVAS REGAL SIGNS EURO RSCG

Pernod Ricard has transferred global creative duties on Chivas Regal to Euro RSCG from TBWA/Chiat/Day, reports Jeremy Mullman of Ad Age. Sources tell Jeremy that spending may reach as high as $90 million globally.

Chivas, a Scotch whisky, is Pernod’s biggest brand by retail value and had estimated 2007 retail sales of about $1.5 billion, based on Impact data.

TBWA handled Chivas for 14 years and most recently produced “The Chivas Life” campaign. TBWA will continue to handle brands such as Jameson and Seagram’s. Euro does not currently handle any Pernod brands other than Chivas.

DIAGEO DENIES REPORTS OF MOVING TO IRELAND

An Irish newspaper reported this weekend that Diageo is considering moving its headquarters to Ireland to save money on corporate taxes. According to the Sunday Independent, Diageo managers, including chief Paul Walsh, held talks with Ireland’s deputy prime minister Mary Coughlan about moving its headquarters to Ireland to benefit from lower corporation tax rates.

Diageo denies the report. Rather, Diageo said the meeting was set up to brief the Irish government on the recently announced brewery plans in Ireland.

"I was absolutely stunned by the article in the Sunday Independent because no such discussion took place," Michael Patten, head of corporate relations at Diageo's Irish operations told Reuters.

The corporate tax rate in Ireland is among the lowest in Europe at 12.5%.

The Sunday Independent reported such a move by Diageo would save the company 250 million euros ($386.5 million) in taxes a year. The newspaper cited one well-placed source as saying the company's board was divided over whether to relocate.

WSD BRIEFS:

YOUNG’S MARKET COMPANY announced that Geoff Labitzke, vp of import sales and wine education for its Estates Group, is being promoted to the newly created position of corporate vp of fine wines. Young’s has operations in California, Hawaii, Arizona, Oregon, Washington, Alaska, Utah, Idaho, Wyoming and Montana.

WSWA NAMED JERRY BROWN AS ITS NEW VP for Communications and Public Affairs.
Brown was most recently Director of Public Affairs at the Society for Human Resource Management (SHRM).


Until tomorrow, Megan

“A conference is a gathering of important people who singly can do nothing, but together can decide that nothing can be done”.
Fred Allen

--------- Sell Day Calendar ----------
Today's Sell Day: 8
Sell days this month: 22
Sell days this month last year: 23
This month ends on a: Fri.
This month last year ended on a: Thurs.
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.

Diageo Reaffirms Commitment to Beer

Any rumors of Diageo selling its beer unit were laid to rest today after the company announced plans to invest £520 million ($1 billion) in a new brewery near Dublin. Once it is completed in 2013, the new brewery will be the largest in the country, says Diageo.

The company also plans to renovate its famed Dublin brewery at St. James’s Gate (which produces Guinness for the Irish and British markets) and close two smaller breweries, Kilkenny and Dundalk, by 2013. When the program is completed St. James’s Gate will be the second largest brewery in the country.

The new brewery near Dublin will produce Guinness for export markets (such as Asia and Africa) and make ales and lagers for the Irish market.

“This will be the single biggest capital investment made by Diageo in its supply infrastructure since the company’s creation 10 years ago and will enhance the cost competitiveness of our global beer operations. It represents a major vote of confidence in our beer business and in Ireland as a global brewing centre of excellence for our company,” said ceo Paul Walsh

“It will marry 21st century solutions to our 300 years of brewing tradition, craft and heritage in what I believe will be a winning combination.”

Walsh said the new brewery site has yet to be determined and the group is looking at a number of options. The move will raise its Irish annual brewery capacity by 20% to 9 million hectoliters, with 6 million from the new brewery.

Surplus land on parts of the St. James’s Gate site as well as in Dundalk and Kilkenny will be available for redevelopment. It is estimated to have a current value of approximately €500 million (£400 million).

Upon closing Kilkenny and Dundalk, Diageo says its Irish brewing workforce will be cut from 450 to 250 by 2013.

“Both of these breweries have played a critical role in the historic success of Diageo’s beer brands in Ireland but currently do not have the scale necessary for sustained success in increasingly competitive market conditions,” said Diageo in a statement.

WILLIAM GRANT APPOINTS NEW CHAIRMAN

Peter Gordon, the great, great grandson of company founder William Grant, has been appointed non-executive chairman of William Grant & Sons. Gordon became a member of its board in 2003. He replaces another family member, Charles Gordon, who will transfer to the newly created position of Life President.

CHAMPAGNE ROEDERER BUYS CALIFORNIA VINES

Champagne house Louis Roederer has acquired 27 acres of vineyards in Anderson valley (near Sonoma) in northern California to expand its operations. Pinot Noir is reportedly produced on 17.5 of those acres. In total, the French company now owns 486 acres of vineyards in the valley. Transaction details were not disclosed.

WSD BRIEFS:

COCKTAIL MIXER STIRRINGS HAS APPOINTED Robert Swartz, former VP of sales at Terlato Wines International, as ceo.

THE CALIFORNIA ASSEMBLY has unanimously approved legislation to help nonprofit organizations hold fundraising events involving donated California wine.
Assembly Bill 1964 now moves to the state Senate for further review.


Until Monday, Megan

“Well-timed silence hath more eloquence than speech.”
Martin Fraquhar Tupper

--------- Sell Day Calendar ----------
Today's Sell Day: 7
Sell days this month: 22
Sell days this month last year: 23
This month ends on a: Fri.
This month last year ended on a: Thurs.
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.

U.S. Getting Tougher for Imports

Which imports are suffering due to economic weakness? Which varietals are posting growth and which ones are dropping off?

IMPORTS SCALE BACK. After years of speedy growth, imports showed signs of slowing in the four weeks to April 5 2008, according to Nielsen scan data. Dollar sales of domestic wine grew 5.5% in April 2008, while imports were up only 2.8%, which is considerably lower than its year performance. For the 52 weeks to April 2008, growth of domestics (+5.4%) and imports (+5.2%) were only a hair apart.

In terms of volume, domestics grew 2.2% in the four weeks to April 2008 and imports declined -0.6%. In the 52 week period, domestics rose 2.2% and imports grew 2.3% (another big disparity).

As we reported earlier this week, the period to April 7, 2007 was a different story. In the four weeks to April 2007, imported wines were starting to creep up on domestics and post slightly higher growth. Domestic growth trailed imports with dollar sales growing 10.7% for domestics and 11.9% for imports. In the 52 weeks to April 2007, however, domestics grew 7.2% and imports were up 6.1%.

In terms of volume, domestics grew 6.2% in the four weeks to April 2007 and imports jumped 9.4%. In the 52 week period, domestics rose 2.5% and imports grew 4.3%.

It looks as though the weak U.S. dollar and global supply problems have made conditions in the U.S. harder for imports. After swallowing price increases for several months, importers and retailers have starting passing it on to consumers, which may drive cost-conscious buyers to lower categories or cheaper, domestic brands.

SOFTNESS IN THE BIG THREE. The big three importers, Australia (which was once thought invincible), France and Italy, are all seeing smaller growth in 2008. In the four weeks to April 2008, dollar sales of Australian imports rose only 0.6%, while volume increased 1.2%. Quite differently, Australian dollar sales in the four weeks to April 2007 grew 4.9%, while volume rose 6.1%.

Value of French wine was flat in the month of April 2008, while volume was down -3.3%. In 2007, meanwhile, dollar sales of French imports showed promise, up 5.9%, while volume grew 2%.

Lastly, Italian wine sales delivered the most growth out of the big three, rising 1.2%, in April 2008. Volume, on the other hand, was down -3.8%. In the four weeks to April 2007, Italian dollar sales grew a whopping 15.7% and volume increased 12.6%. Clearly, pricing is up for French and Italian imports, most likely stemming from the weak USD and strong euro.

Imports that showed the most dollar sales growth in the four weeks to April 2008 hail from countries such as Argentina, Germany, New Zealand, Portugal and Spain. In the same period last year, the countries posting the most dollar sales growth were South Africa, New Zealand, Spain, Portugal, Italy, Germany and Argentina.

RED & WHITES, NECK AND NECK. Another noticeable trend in April 2008 was the difference in growth between red and white wine (not to mention the pace of growth). In 2007, red wine was growing at a faster pace then white wine. Today, red and white are practically neck and neck.

Dollar sales of red wine grew 5.1% in the four weeks to April 2008, while white wine grew 4.9%. However, in the four weeks to April 2007, red wine dollar sales increased 12.4% and white wine sales jumped 11.3%. Red and white wine growth in April 2007 more than doubled growth in April 2008.

Red and white wine both posted volume growth of 2.3% in the four weeks to April 2008. In April 2007, however, red wine volume grew 9.2% and white wine rose 7%. The rate of growth for red wine is four times less in 2008 than it was in 2007. Similarly, white wine grew three times faster in April 2007 than in April 2008.

SIDEWAYS AFFECT ALL OVER AGAIN. In April 2008, Pinot Noir and Riesling are still the two fastest growing varietals. In dollar sales, Pinot Noir grew 18% in 2008 and Riesling grew 18.4%. By volume, Pinot Noir increased 21.2% and Riesling rose 16%. The only difference between 2007 and 2008 is the rate of growth.

As far as the big varietals are concerned, only Merlot showed a slight decline in growth in the four weeks to April 2008. Dollar sales of Merlot declined -0.7% and volume declined -0.8%. Dollar sales of Chardonnay grew 3% and volume rose 2.5%, while Cabernet Sauvignon rose 7.1% and 6.4%, respectively.

In April 2007, Merlot posted solid dollar sales growth (6.6%) and volume growth (7.9%). Chardonnay and Cabernet also posted solid growth, just at a faster pace.

Dollar sales of Pinot Gris/Grigio (8.5%), Fume/Sauvignon Blanc (8.1%) and Zinfandel (5.4%) all posted growth. In terms of volume, Pinot Gris/Grigio rose 6.5%, Fume/Sauvignon Blanc grew 5% and Zinfandel increased 4.4%.

DIAGEO’S ORGANIC NET SALES RISE 7%

Diageo’s statement for the nine months ended March 31, 2008 was rather brief. Organic net sales grew 7% and were “in line with the performance seen in the first half of the year ending June 30, 2008.”

Said Paul Walsh, Diageo ceo:

“Trading in the third quarter continued in line with the first half and we are therefore maintaining our guidance for 9% organic operating profit growth for the current fiscal year.

We continue to believe that the diversity and strength of our brands, the success of our marketing campaigns, our superior routes to market and our global reach will be key in delivering our performance.”

No acknowledgement of the economic slowdown here boys and girls. CFO Nick Rose has said in the past that Diageo is “very optimistic” about sales in the U.S. Paul Walsh has also stated that consumers view spirits as an “affordable luxury” and that premiumization will continue in the U.S. amidst a slowdown.

“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 during Diageo’s first half earnings report in February.

WSD BRIEFS:

LITTLE BLACK DRESS WINES, owned by Brown-Forman, is adding a 2006 Pinot Noir sourced from France, and will introduce Chardonnay in a traditional Burgundy package with the 2007 vintage release. LBD also plans to test an Italian-sourced Pinot Grigio version, one of the most popular varietals in the line. With the addition of Pinot Noir, Little Black Dress Wines current varietals will now include Chardonnay, Pinot Grigio, Syrah Rose, and Merlot. The wines are line priced nationally at $9.99 suggested retail, with Syrah Rose available in limited markets.

ILLINOIS OPENS DIRECT SHIPPING. Beginning June 1, wineries holding an Illinois Winery Shipper's License may ship up to 12 cases of wine annually to adult residents. The act, signed this week by Governor Rod Blagojevich, permits wineries producing under 25,000 gallons per year to self-distribute up to 5,000 gallons annually directly to Illinois retailers. This includes both in-state and out-of-state wineries that have a Wine Shipper's License, according to Wines & Vines.


Until tomorrow, Megan

“I believe in looking reality straight in the eye and denying it.”
Garrison Keillor

--------- Sell Day Calendar ----------
Today's Sell Day: 6
Sell days this month: 22
Sell days this month last year: 23
This month ends on a: Fri.
This month last year ended on a: Thurs.
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.

SVB Remains Optimistic in ‘08

So far, 2008 is looking like an unpredictable year. Some people in the industry think the recession will have little impact on wine, while others contend it will leave a huge stamp on the U.S. wine biz. What about fine wines versus high-volume wines? Will imports manage to power through the recession? And how will the industry bounce back?

Silicon Valley Bank’s (SVB) annual State of the Wine Industry Report addresses all these questions. Researchers use data, experience, knowledge of the wine industry and an extensive survey to help give insight on current conditions and trends as well as a forecast for the coming year.

In the beginning, the report notes that the wine industry is “experiencing both short term cyclical and economic shocks.” Not only are we headed into a recession, but the wine biz has morphed from a small, part-time industry into a $30 billion business with loads of M&A activity. So what does that mean for the future of the industry?

Some of the key takeaways:

1. SVB feels the next 12 months will be generally positive for the wine industry despite downward economic trends.

“Financial performance of the fine wine segment will be marked with moderate growth rates falling from last year’s cyclical highs.”

“Outside of recession fears, the industry is optimistic. While we generally support their optimistic view, we suggest many may be overly optimistic and we offer a note of caution. A recession is upon us and sales growth rates will likely moderate.”

“Yet overall, wine is still an affordable luxury even in a bad economy. So while wine is not recession-proof — like electricity and visits to the doctor — people still continue to consume wine even during difficult times, and our experience is that wine continues to demonstrate volume growth.”

2. Nonetheless, SVB expects to see a small deterioration in the fine wine segments as supply runs low and consumers become more cost conscious.

“For fine wine, we expect 2008 growth rates in the low-teens and slightly lower profits.”

“Concerns in this segment include everything from high costs of sought after vineyard properties, foreign competition, brand proliferation, a weak USD, grape shortages, distribution over-consolidation, regulatory processes impacting free trade, and evolving — yet still inefficient — Internet and consumer sales models. However, in the long term, we expect sales growth to be in the 4-6 percent range for the wine industry as a whole.”

3. High volume wine producers will experience improving trends as the weakening economy forces value-conscious buyers into lower-priced and moderately-positioned price segments. However, low-end producers will likely have a harder time selling their wines in the long term.

“Improved conditions for growers selling into the higher volume segments are expected this year. This is due to a weaker U.S. dollar (USD) slowing bulk imports, lower volumes in the tank from prior harvests, and a strong demand for wines in the $9 - $14 range. However, growers producing grapes destined for wines with price points under $8 will likely find business conditions more difficult in the long term.”

4. Overall consumption of both foreign and domestic wines in the U.S. has reached $30 billion. This is a result of consumer acceptance of imported wines, an increasing number of millennials drinking wine and trading up.

5. As restaurant sales take a hit during the economic downturn, wines will not perform as well on-premise. The NPD Group, a consumer marketing research firm, found that less than 40% of meals purchased in restaurants are currently eaten on-premise. SVB predicts that if this trend continues, the on-premise sales of wine will shift more into direct or off-premise purchases for home consumption.

“Analysts support specific regional weakness in Nevada, Florida, Michigan and California — all four were also among the highest mortgage default rates per household in the country.”

6. The U.S. wine industry has seen an onslaught of imports in recent years. However, domestic producers might get a (albeit short) break as the weakening USD is becoming increasingly troublesome for importers, especially given more cost-cautious buyers.

“Over the long term, if the USD remains weak and nominal pricing of foreign wine continues to climb, the increased cost of shipping may become so great that it will begin to deter imports. That may slow the onslaught of imports temporarily; however, foreign producers continue to make progress in this market at a time when all the signs indicate they should not...It is an opportunity that should not be taken lightly.”

7. Distributor consolidation continues to pose problems for small wineries. SVB found that many wineries producing fewer than 10,000 cases annually are entirely shut out of distributor markets and are going the direct to consumer route as a result.

“Unfortunately, fine wine producers are faced with a mountain of compliance issues to ship direct, and a cold shoulder from the national distribution system.”

To end things on a good note, we leave you with this positive message from the report: wine prices are expected to hold stronger than in past recessions.

“As we review the impact of the changing economy, there is one major difference between the last two recessions and the current one. Supply is currently in balance or short in most major varietals. As a consequence, while we do expect the normal disruption as the venues of wine sales shift, we expect prices to hold better than during the past recessions, and imports will have a more difficult time filling demand gaps because of the weak USD.”

ROBERT PARKER ANGERS BORDEAUX WITH LOW SCORES

U.S. wine critic Robert Parker has angered many Bordeaux producers with B+ or lower ratings of the 2007 vintage.

"There is unquestionably little need to buy these wines as futures, unless dramatic price reductions occur. I don't expect that to happen," said Parker in his annual vintage review, titled "2007 Bordeaux: Who Will Buy Them and at What Price?"

Winemakers in the area claim it’s very hard to sell wine scored below a 90. One Bordeaux wine broker told the AFP that Parker “has assassinated some of the wines."

In total Parker only gave three wines (Chateau Pape Clement white, Haut-Brion and Chateau Climens) 100 point scores, and all three were for whites, in a town best known for its reds. Bordeaux's top five, first growth wines, received the following ratings: Chateau Margaux earning a 92-94, Chateau Haut-Brion a 91-94, and Mouton-Rothschild a 90-94. Chateau Lafite and Chateau Latour both got a 90-93.

ROSEMOUNT DROPS DOUBLE-DIGITS IN U.S.

Foster's Group Ltd.'s wine sales in the U.S. dropped in the four weeks through April 19, signaling that a recovery for the company's American wine division is still some way off, Bloomberg reports, based on the Australian Financial Review.

Wine sales at supermarkets and retailers, which make up about 27% of U.S. sales, dropped -4%, the Review said, citing figures from Nielsen. The Rosemount brand suffered the biggest slide in sales, falling -20.7%.

WSD BRIEFS:

FUTURE BRANDS announced the appointment of Tony Truzzolino to vice president, sales – east region. Truzzolino, a 25-year veteran of the beverage alcohol industry, joins Future Brands from Beam Global Spirits & Wine, where he was vice president, commercial development.

GEMINI SPIRITS & WINE announced that effective May 1st, 2008 it will be handling the U.S. brand building activities for Tortuga rums from the Cayman Islands.

NEWTON VINEYARDS appointed Chris Millard as winemaker yesterday. Newton’s wines include Unfiltered Chardonnay and Bordeaux-style red wines from the estate on Spring Mountain in St. Helena. Millard joins Newton Vineyard from Sterling Vineyards, where he was senior winemaker.

WASHINGTON D.C. COUNCIL IS CONSIDERING A BILL that would let restaurant-goers in the District put a cork in a bottle of wine and take it home. Forty-eight states including Maryland and Virginia already have such laws in place.

TO READ A NOSTALGIC PIECE ON ROBERT MONDAVI by Alan Goldfarb, the last man to interview him, click here.


Until tomorrow, Megan

“Punctuality is the virtue of the bored.”
Evelyn Waugh

--------- Sell Day Calendar ----------
Today's Sell Day: 5
Sell days this month: 22
Sell days this month last year: 23
This month ends on a: Fri.
This month last year ended on a: Thurs.
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 Growth Slowing

How is wine performing during the weak economic climate? Are consumers still trading up? According to Nielsen’s food, drug and liquor scan data, wine and even high-end wine is still growing but at a much slower rate. To get an idea of the difference, we took a look at Nielsen data in the period to April 5, 2008 and April 7, 2007.

OVERALL TABLE WINE. Table wine continued to post growth in the four weeks to April 5 but at a slower rate than the 52 week period to April 5. Table wine dollar sales grew 4.7% in the four weeks, but were up 5.4% for the year.

In terms of volume, the four week period saw growth of 1.5% while volume jumped 2.2% in the 52 weeks. It takes longer for trends to show up in 52-week data, while four-week numbers tend to reflect current trends. Case in point? Growth of wine in the U.S. is stalling and isn’t showing signs of turning around (yet).

Let’s take a look at the same period last year. In the four weeks to April 7, 2007, dollar sales jumped 11.1%. In the 52 weeks to April 7, 2007, dollar sales grew 6.9%. Volume increased a whopping 7% for the month and 2.9% for the year to April 2007. Volume growth of table wine in 2007 was almost five times more than in 2008.

TRADING UP. High-end wines reached a new record of growth in 2007. Since then, the rate of growth has slowed. It turns out that consumers are still trading up, just not as much as they were last year.

Higher-priced wines continued to post growth in April 2008, but at a much slower rate than in April 2007. In the four weeks to April 2008, dollar sales and volume of wines priced $15 and above rose 8.1%. Wines priced $12-14.99 saw sales climb 7.8% and volume rise 5.5%. Meanwhile, wines in the $9-11.99 range increased 7.5% in dollar sales and 5.3% in volume.

Dollar sales of wines prices $6-8.99 grew 1.9%, followed by $3-5.99 (3.7%) and $0-2.99 (1.2%). Volume of wines prices $6-8.99 grew 0.6%, followed by $3-5.99 (1.5%) and $0-2.99 (-0.6%).

The difference between 2008 and 2007 is vast. In the four weeks to April 2007, the $15 and up category grew 26.9% in value and 26.3% in volume. Dollar sales of wines prices $12-14.99 grew 20.3%, while volume jumped 20.1%. Wines in the $9-11.99 range rose 15.1% in value and 14.4% in volume.

All of the lower priced wines grew faster in 2007 as well, aside from the $0-2.99 price segment. Dollar sales of the $6-8.99 category rose 8%, followed by $3-5.99 (7.8%) and $0-2.99 (0.3%). Volume of wines priced $6-8.99 grew 9.2%, followed by $3-5.99 (7.3%) and $0-2.99 (0.2%).

Stay tuned for more Nielsen wine data tomorrow...

ARIZONA CHANGES DIRECT SHIPPING LAW

Arizona made a small change to its direct-to-consumer wine shipping regulation, effective immediately, according to ShipCompliant. Under the original law, Arizona residents could not receive direct-to-consumer wine shipments unless they purchased the wine on-site, and shipments did not exceed 2 cases per consumer per year.

The new law allows wineries to ship to Arizona consumers, as long as the consumer has physically visited the winery at anytime during the calendar year prior to placing the order. Arizona consumers who have visited the winery may place off-site orders and have shipments sent to them as long as they do not exceed the 2 case limit. If Arizona consumers wish to have additional wine shipped to themselves in subsequent years, they will need to physically visit the winery each year.

CALIFORNIA GRAPE GROWERS EXPECT LOWER HARVEST

April was a tough month for California winemakers, who were faced with a series of unusually late frosts. The damage is still being assessed but most growers expect a smaller-than-average harvest this year. It could be June before growers know the full extent.

SACRAMENTO VALLEY FARM CREDIT has merged with Farm Credit West, an agricultural lending cooperative almost five times its size, creating a company that spans 15 California counties and has assets of more than $4.6 billion. The new operation carries Farm Credit West's name and plans to move its headquarters to Roseville.


Until tomorrow, Megan

“Punctuality is the virtue of the bored.”
Evelyn Waugh

--------- Sell Day Calendar ----------
Today's Sell Day: 4
Sell days this month: 22
Sell days this month last year: 23
This month ends on a: Fri.
This month last year ended on a: Thurs.
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.

French Millennials Stray from Wine

As U.S. wine consumption continues to grow, France – typically thought of as a country synonymous with wine – is drinking less wine then ever before as young adults turn to beer and spirits. Unlike in the U.S., French millennials (young adults aged 21 to 31) aren’t so hot on wine. Since 1980 French wine consumption has decreased by more than 50% from 120 liters per capita to today's rate of 55 liters per capita, according to Winebusiness.com’s Daily News Links. As a result, French wine producers are having a harder time finding a market in their own country.

A qualitative research project was jointly organized by Sonoma State University and Montpellier in an attempt to find out why French millennials aren’t drinking wine. Here are the top reasons why young French adults are choosing not to drink wine.

1) Many French millennials consider wine to be a drink for older people. As a result, they prefer to drink other beverages (beer or spirits) but will still have a glass of wine with their family several times per month.

2) According to winebusiness.com, several interviewees referenced the strong anti-alcohol movement that has been in effect in France since 1991. The impact on wine consumption has been particularly strong and led some young consumers to steer clear of wine altogether.

3) Some French millennials simply do not like the taste of wine. In fact, when they did drink it, most said they preferred sweet white wines such as muscat, moelleux, or Sauternes.

4) Also, good wine tends to be too expensive while beer is cheaper.

5) Surprisingly many of the young French adults said wine is confusing.

On the positive side, most respondents said they never drink wine without food. They also described wine as a drink for relaxation with friends and family.

A few recommendations to help boost France’s domestic wine industry included: starting a Buy Local Wine Campaign; launching a national French wine brand at a premium price point; enhancing wine education and culture in schools and universities; offering smaller bottles on-premise; and making labels more colorful.

GEORGIA SHIPPING BILL AWAITS GOV. SIGNATURE

A Georgia bill that would allow direct to consumer wine shipments has passed the legislature and awaits a signature from Gov. Sonny Perdue. If passed, Georgians could order as many as 12 cases of wine a year directly from wineries over the internet or telephone. Gov. Perdue is notoriously conservative but has not stated an opinion on the wine bill. The Christian Coalition did not oppose the internet bill and will reportedly not ask Perdue to veto it (unlike the Sunday sales bill).

Under current law, Georgia residents are required to make face to face purchases at wineries in order to have wine shipped home. Georgians who visit a winery can ship as much as five cases of wine home. Similarly, Georgia wineries can't ship wine to customers unless they show up at the winery to buy it.

The Senate also gave final approval Monday to legislation allowing wineries with tasting rooms to serve beer and liquor.

SPIRITS STILL TAKING SHARE FROM BEER AND WINE, BUT AT A PRICE

Even with this lousy economy, spirits is taking share from beer and wine. If you look at YTD IRI scans of spirits, wine, and beer in supermarkets, spirits has 3.6% growth as compared to 0.8% for both wine and beer and a 1.2% growth for total alcohol, says Morgan Stanley's Bill Pecoriello. In the latest 8 weeks, spirits drove 40bps of volume share while wine share declined 10bps and beer share declined 20bps. Ah, but at what price? It ain't easy being cheap. The average price per volume increased a paltry 1.5% for spirits, 2.5% for beer, 4.4% for wine and 3% for total alcohol.

HISPANIC POPULATION GROWING ORGANICALLY

Hispanics now account for more than 15% of the U.S. population, and the increase is largely the result of births from Hispanics already in the country, according to new Census Bureau data.

In an annual report, the Census said there are 45.5 million Hispanics in the U.S., up from 35.7 million in 2000, when they made up 12.6% of the population. It said growth among Hispanics was responsible for half of the U.S. population gains between 2000 and 2007.

BOTTLED WINES FROM AUSTRLIA SLOW

The Australian wine industry is facing a host of problems as the rising Aussie dollar, drought and foreign competition result in mounting pressure. Bottled wine exports are still growing but at a declining rate and some experts believe the growth may stop within two months, according to news.com.au. Cheaper brands are taking the biggest hit while premium wines are less impacted by the exchange rate.

Importers and retailers in the U.S. have tried to swallow extra costs from the exchange rate but eventually higher prices had to be passed to the consumer.

LAWRENCEBURG DISTILLERY TO BOTTLE SEAGRAM’S VODKA

Lawrenceburg Distillery, owned by Caribbean rum producer Angostura, has signed a contract with Infinium Spirits to begin bottling Seagram’s Vodka. Recall that Pernod sold the brand to Infinium Spirits in 2005.

Bottling operations began in April 2008. LDI expects to produce 1 million cases of Seagram’s Vodka in the next year, increasing total plant production from 1.7 million cases to 2.6 million cases.

FLORIDA REMAINS THE SAME

The Florida legislature adjourned Friday (May 2) without passing a direct wine shipping permit bill, which means wineries can continue shipping as they have been since 2006.
Several bills were considered for direct wine shipping, but most included a capacity cap on annual production for wineries – something winery advocates strongly oppose.

THERE’S A GREAT ARTICLE ON THE PETER MONDAVI Jr. family in the LA Times by Jerry Hirsch. To check it out, click here.


Until tomorrow, Megan

“In politics, absurdity is not a handicap.”
Napoleon Bonaparte

--------- Sell Day Calendar ----------
Today's Sell Day: 3
Sell days this month: 22
Sell days this month last year: 23
This month ends on a: Fri.
This month last year ended on a: Thurs.
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.

Growth of Ultra-Premium Spirits Slow

Higher priced spirits showed signs of slowing in the four weeks to March 8, 2008, according to Nielsen U.S. food, drug and liquor scan data. The total spirits category grew 2.6% in value to almost $500 million and 1.6% in volume to 3.6 million cases. Excluding prepared cocktails, the industry gained 2.7% in sales and 1.7% in volume.

Value priced spirits gained 1.2% in dollar sales in the four weeks to March and lost -0.3 share points. Volume was up 0.8% and also lost -0.3 share points.

Mid priced spirits increased 2% in value and 2% in volume. It lost -0.2 share points in dollar sales and gained 0.1 volume share.

Premium spirits grew 3.3% in dollar sales and 2.9% in volume. As far as share goes, premiums gained 0.2 points in value and volume.

Ultra-premium spirits continued to be the fastest growing category in terms of value although growth is slowing. Ultra-premiums gained 5.7% in dollar sales and 1.7% in volume. The category also gained 0.4 dollar share points but volume was flat in the four weeks to March 8.

One of the hottest topics in the spirits industry right now is whether trading up will slow or evaporate in the ensuing recession. Will consumers start trading down to lower-priced brands and save the extra money for gas? Data seems to support this theory although ultra-premium and premium brands are still growing. In the four weeks to March 8, spirits growth showed signs of slowing for all price categories excluding value brands.

In the 52 weeks to March 8, value brands gained only 0.8% in dollar sales, but rose 2.3% in the 13 week period and 1.2% in the four week period. This suggests that value brands are starting to growth at a faster rate.

Every other category, however, is showing signs of a slowdown. Mid-priced brands increased 4% in the year to March, but gained only 3.5% in the 13 weeks and 2% in the four weeks. Premium brands went from gaining 5.3% in the 52 weeks, to 5.1% in the 13 weeks and 3.3% for the month.

Ultra-premiums saw the biggest dip in dollar sales. In the 52 week period, they grew 10.9%. In the 13 week period, ultra-premiums grew 8.6% and in the four weeks to March they grew 5.7%.

In terms of volume, ultra-premiums saw the biggest dip. In the 52 weeks, ultra-premium grew 7.8%, but grew only 1.7% in the four weeks to March. Premiums went from 4.5% for the year to 2.9% for the month. Mid-priced spirits increased 3.3% in volume for the year, but grew only 2% in the four week period. Lastly, value brands went from gaining only 0.2% in the 52 weeks to March 8, to growing 0.8% in the four week period.

So, with all that said, let’s take a look at the actual spirits themselves. The tequila category continues to be on fire. In the four week period, tequila grew 11.6% in dollar sales and gained 0.5 share points. In terms of volume, tequila was up 7.2% and gained 0.2 points.

Vodka, meanwhile, was the second fastest growing spirits category in March. Dollar sales of vodka grew 5.2% in the four weeks to March 8, while volume climbed 5%. Dollar share grew 0.7 points and volume share was up 1.1 share points. Could it be that premium and ultra-premium vodkas are losing their momentum?

Dollar sales of whiskey grew 2.6% in value but share was flat. Irish whiskey continues to show the most growth in the whiskey category, up 23.1%, while Scotch was down -0.6%. Whiskey grew 0.3% in volume and lost 0.3 share points. In volume, Irish whiskey grew 23.2%, while Scotch declined -4.4%.

Gin grew 1.7% in dollar value, while share was flat. Volume of gin declined -1.1% and lost -0.2 volume share points.

Lastly, rum value grew 3.1% and gained 0.1 share points. Volume of rum increased 2.4% and also gained 0.1 points.


Until Monday, Megan

“Be sincere; be brief; be seated.”
-Franklin D. Roosevelt

--------- Sell Day Calendar ----------
Today's Sell Day: 1
Sell days this month: 22
Sell days this month last year: 23
This month ends on a: Fri.
This month last year ended on a: Thurs.
YTD sell days Over/Under: 0