Spirits and Beer Lead July Growth

In the four weeks to July 13, overall alcohol volumes increased 2.3%compared to a -0.8% decline a year ago, according to Morgan Stanley based on IRI data. Dollar sales rose 4.7% versus a 3.2% jump last year. Spirits and domestic beer reportedly drove volume and dollar share gains. In the latest 4 weeks, spirits gained 30bps of servings share and 10bps of dollar share while domestic beer drove 10bps of volume share and 40bps of dollar share.

Wine trailed total alcohol in servings and dollar growth. In the latest 4 weeks, wine lost 30bps of servings share and 20bps of dollar share as volumes for the segment increased 0.8% and sales increased 3.9%. Within wine, Constellation and Foster's lost volume and value share while Gallo, The Wine Group and Kendall-Jackson drove share gains. In the latest 4 weeks, Constellation’s volume and value share declined 70bps.

Wine by price has largely held up relative to prior performance. Industry trends remain soft for the lowest price wines (less than $3), where sales declined -4.3%. Sales for wines in the $3-7 range have picked up 11% but were flat to down this time last year. Wines in the $7-14 segment were down -4.2% in the latest 4 weeks but grew double-digits previously. Wines priced above $14 continue to grow at strong rates, up 20%, which is ahead of mid-teens growth seen last year.

OLYMPIC CELLARS COMES TO TERMS WITH OLYMPIC COMMITTEE

Olympic Cellars Winery and the U.S. Olympic Committee have reached an agreement that allows the winery to keep its name and website as long as wine sales east of the Cascade Mountains are not "substantial." Other terms of the agreement were not disclosed.

Olympic Cellars received a letter almost a year ago from USOC citing it for violation of the 1998 Olympic and Amateur Sports Act, which gives the committee commercial control of the word "Olympic," reports the Seattle Times. The act has been amended to allow businesses on the Olympic Peninsula to use the word in marketing west of the Cascade Mountains.

The winery has used the name since 1992 and is located on Washington’s Olympic Peninsula with a view of the Olympic Mountains.

"Though my Working Girl Wine brand was exempted from all restrictions, the bottom line is that I can't significantly grow a brand that incorporates the winery name, Olympic Cellars," co-owner Kathy Charlton said in a press release Tuesday. "We will be forced to remain small even though the term OLYMPIC is our birthright and heritage."

She called for Congress to amend the 1998 law again to account for changes in electronic commerce and the global economy.

FORTUNE ELECTS NEW BOARD MEMBER
After announcing earlier this week that Fortune’s board of directors had approved a plan to declassify the board beginning in 2010, the company also announced that Ronald V. Waters III has been elected to the board. The appointment was effective yesterday and increases the size of Fortune’s board to ten members.

Waters is currently president and chief operating officer of LoJack Corporation. Prior to joining LoJack in 2007, Mr. Waters was chief operating officer at Wm. Wrigley Jr. Company. In his seven years at Wrigley, Mr. Waters also served as chief financial officer. He previously held senior executive positions at The Gillette Company, and was a partner and practice leader at KPMG International.

"We are pleased to welcome Ron Waters to the board of Fortune Brands," said Bruce Carbonari, president and chief executive officer of Fortune Brands. "With his background in consumer packaged goods and unique blend of operating and financial experience, he will bring a valuable perspective to the work of our board."

With regards to the declassification, shareholders must approve the plan at the company’s 2009 annual meeting. To read more, click here.

CALIFORNIA GRAPE GROWERS IN BEST POSITION IN A DECADE

Wine grapes prices have reached their highest point in seven years, according to Allied Grape Growers, California’s largest wine grape grower cooperative. Nat DiBuduo, president of the group, said: “Wineries are offering better prices than any of the past seven years, and they are offering term contracts,” as quoted in an article in Western Farm Press.

California grape growers have had to grapple with low demand and even lower prices for many years. But as the article said, “the long-awaited and oft-predicted turnaround in California wine and concentrate demand is finally at hand.”

However, DiBuduo warns against over-planting, which is what usually happens when demand rises. Instead, he says to plant with contracts to meet winery needs.

The rise in demand is attributed to rising California wine sales, strong exports, lower import sales, lower bulk wine inventories and better quality grapes, among others reasons.

This year’s crop will likely be smaller because of weather problems, which ensures improved wine grape demand. However, farming costs are going up as well and “will challenge even the best growers,” said DiBuduo.

U.S. WINERIES “IN DENIAL”

According to one researcher, the United States is “doing nothing” to study the problem of climate change, reports Decanter. Professor Greg Jones of Southern Oregon University said the U.S. is “in denial” and that “it is absolutely clear that viticultural climates of tomorrow will not be as they are today.”

Predicted changes include warmer and longer growing seasons, warmer dormant periods, reduced frost damage in some areas, altered ripening profiles, and changes in soil fertility and erosion.

He said the Australian wine industry has already paid for numerous projects concerning the issue because “leaders in Australia see the risk and are reacting while the US is still mostly in denial.”

WSD BRIEFS:

DOS LUNAS SPIRITS has struck four distributor partnerships in four additional states. The tequila will be recognized in Arkansas by Moon Distributing Inc., in Kansas through Standard Beverage Corporation and Oklahoma and Louisiana will be represented by Republic National Distributing Company (RNDC). Dos Lunas Tequila is currently available in 18 states, including Texas, Florida, Arizona, Colorado, New Mexico, and can also be found in Wisconsin, Michigan, Connecticut, New Jersey, New York, Georgia, Illinois, California and Alberta, Canada.

HEAVEN HILL HAS ADDED two flavor extensions to Georgia Moon Corn Whiskey Brand, the top selling Corn Whiskey in the U.S. The company said it is “taking advantage of the unprecedented popularity of American Whiskeys, and the growing Corn Whiskey sub-segment, as well as the trend toward infusing fresh fruits into clear spirits,” by launching Georgia Moon Peach and Georgia Moon Lemonade Flavored Corn Whiskeys nationally. The new flavors will be offered in September at 70 proof in a 750ml glass mason jar.


Until tomorrow, Megan

“Americans will put up with anything provided it doesn't block traffic.”
Dan Rather

--------- Sell Day Calendar ----------
Today’s Sell Day: 22
Sell days this month: 23
Sell days this month last year: 22
This month ends on a: Thur
This month last year ended on a: Tues.
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.

Foster’s Chairman: Letter to Shareholders

Foster’s “Considering All Options”

In a letter to shareholders yesterday, Foster’s chairman David Crawford said the company is working to fix its failing wine business rather than sell it, at least at the moment.

“The fundamentals of our business remain strong and the actions taken are measured and proportionate to the challenges that we face. Foster's retains a robust financial position and continues to generate outstanding cash flows,” he said.

“We own a great company. The beer division is delivering consistently strong financial returns and, while financial returns from our wine assets are not acceptable, we own leading international brands with excellent potential.”

Once again, Crawford partly blamed economic conditions and the strength of the Australian dollar for reducing earnings and returns. The company has also admitted in the past that it paid too much for Beringer ($2.6 billion) and Southcorp ($3.2 billion).

Crawford said the strategic review of the wine business will focus “on where we compete, how to capitalize on the growth characteristics of the wine category and the optimal structure and operation of our wine business into the future.”

However, Crawford said the company will “consider all options” in improving shareholder value.

“Our focus now is very clear - to consider all options to improve shareholder returns from wine and to exploit the growth potential of our leading portfolio of global brands.”

In our opinion, “all options” includes the possibility of a sell-off in the future. Analysts generally agree that it’s unlikely anyone would be willing to buy Foster’s wine business right now, although the usual suspects have been named as possibilities: Diageo, Pernod Ricard and Constellation Brands. Perhaps once the company is spruced up a bit, Foster’s wine will become more attractive to potential buyers. Or, just maybe, Foster’s is committed to remaining a multi-drinks company.

Anayst Andy Kovacs of Macquarie Group doesn’t believe Foster’s is in the position to sell, describing the company’s situation as “woeful” earlier this month.

“Furthermore, the weak operational performance highlights why this is a risky option, with acquirers, at least for the wine business, very difficult to identify,” he said in a research note.

Most analysts agree the likelihood of Foster’s selling its wine business is unlikely to happen before the end of the year, when the review of the wine business is complete and another ceo has been appointed.

OPTIONS FOR FOSTER’S. If Foster’s were to sell its wine business, an easier solution would be to break it up.

“We continue to believe a takeover is unlikely in the short term. The wine business is clearly in poor shape, and full of uncertainty. Furthermore it is very difficult to find acquirers of large wine assets...wine therefore acts as a poison pill for anyone interested in the beer business,” Andy said in another research note.

“Nevertheless, if broken up it would be an easier acquisition target...”

Analysts have also suggested that Foster’s separate its wine and beer business, namely because the beer business is more valuable to potential buyers (such SABMiller or Heineken) and it would allow management to focus more closely on the wine biz.

POSSIBLE REPLACEMENTS FOR O’HOY. Lots of speculation on who will replace Trevor O’Hoy as ceo is mounting among analysts. UBS has said an international brewing executive could be a good match.

“In our view there are a number of Beer executives who could be considered for the CEO role at FGL especially post the Heineken / Carlsberg takeover Scottish & Newcastle in January 2008 and the US merger of Molson Coors and SABMiller,” said analyst Lindy Newton.

In Lindy’s opinion, possible contenders include: Tony Froggatt (former ceo of Scottish & Newcastle), John Dunsmore (who succeeded Froggatt at Newcastle), Dan O’Neill (former Molson Coors Brewing Co. exec), Leo Kiely (ceo of MolsonCoors) and Tom Long (who heads Miller), according to UBS. We somehow doubt that Tom Long or Leo Kiely would take the position, especially since Tom was just named president and chief commercial officer of the new MillerCoors j-v and Leo was appointed ceo. It is an interesting notion nonetheless.

QUICK BACKGROUND. On June 10 Foster’s announced a revised earnings outlook for the 2008 financial year, which included a $700 million write-down and a transfer of $600 million in goodwill to the company’s beer operations. The company also said it would reduce the level of U.S. distributor inventories at year end by approximately 1.4 million cases compared to the prior period.

Perhaps most importantly, the Board accepted former ceo Trevor O’Hoy’s resignation. Ian Johnston, a non-executive director on the Foster's Board since September 2007, has agreed to assume the interim role of acting ceo while the company looks for a permanent successor for Trevor.

FORTUNE FACES SETBACKS IN SECOND QUARTER

Fortune’s faced some setbacks in the second quarter due to a combination of factors including the softening consumer environment and higher commodity costs, The tax increase in Australia on ready-to-drink spirits products took the industry by surprise and has “inversely impacted” Fortune’s business as well. Nonetheless, ceo Bruce Carbonari maintained that the U.S. spirits market remains resilient, although its growing at a more moderate pace, and outperformed beer in April and May.

"While our double-digit increase in brand-building investments and the Australia RTD tax increase adversely impacted operating income in our spirits business, we drove solid revenue and volume growth for several key premium spirits brands in the U.S. We also benefited from the anticipated rebuilding of U.S. spirits distributor inventories,” said Bruce in a statement.

THE U.S. FACTOR. He said the spirits industry performs well in most economic conditions. Overall, the U.S. market, which accounts for over half of Fortune’s spirits sales, remains healthy. Consumers continue to trade up though at a slower pace. The biggest change is that consumers are shifting from the on-premise to the off-premise, opting to drink at home to save money. Fortune has also seen some softness in areas hit the hardest by the housing correction, namely California and Florida. As a result, Fortune has realigned its business to fit the changing consumer shift from on-premise to off-premise.

A LOOK AT THE BRANDS. The company managed to drive revenue growth at a faster rate than volume growth in the second quarter. YTD depletions in the U.S. for Hornitos were up double digits and Gold and Blanco were up in the high single digit range. YTD depletions of Canadian Club “are solidly higher” following the “damn right” advertising campaign, reversing years of declining growth.

U.S. depletions for the Jim Beam brand were “off,” said cfo Craig Omtvedt, remarking that the brand has only just begun its new marketing campaign.

In all, Bruce said Fortune is performing in line with the market, with softness coming from the DeKuyper’s line “mostly because Apple Pucker was on fire for a number of years and it’s not as hot of a drink right now.”

REVENUE DEPLETIONS OUTPERFORM. Net sales were up high single digits in the U.S. as shipments rebounded from the larger than usual distributor inventory takedowns in the first quarter. The company also benefited from higher pricing. On a revenue basis, depletions grew significantly faster (3-4%) than depletion case volumes, particularly for premium brands in the U.S. Volume depletions were flat as the company focuses on building revenue and premiumizing their brands.

Like other spirits companies, Fortune said it is experiencing growth in emerging markets such as Russia, India, China and Brazil.

ACQUISITION QUESTION. In the question and answer portion of the conference call, Bruce said the company was most focused on internal growth. However, he said the company continues “to look for acquisitions that would help our portfolio or round out our portfolio both in gaps that we have or enhance some of the positions we currently have in certain categories as well as acquisitions that would help us in the emerging markets, those markets being what we believe will be the high growth markets.”

GOOD DISTRIBUTOR RELATIONS. Bruce also said relations with distributors are still very strong. He said there is always speculation over whether the company will make another acquisition, but “we’re well positioned in the U.S. with some of the best distributors, and I think it’s business as usual. We have great brands and those brands work especially well in the U.S.”

As we mentioned on Monday, Fortune completed the repurchase of Vin & Sprit’s 10% minority interest in Beam Global for $466 million. Fortune now owns a 100% of Beam.

Lastly, the company boosted dividends 5%, or 8 cents, to an annual rate of $1.76 per share from $1.68 per share. Share buybacks exceeded 4.3 million shares of its common stock since implementing on March 31 an authorization to repurchase up to 15 million shares.

REMY HEADED FOR A TOUGH YEAR

Remy Cointreau’s shares sunk today after the economic slowdown in the U.S. and weak dollar resulted in lower sales for the fiscal year. In addition, the company said it’s headed for a tough year.

“The 2008/09 financial year will be one of transition and enhancement of its distribution since the Group will leave the Maxxium network on 30 March 2009.”

“The slowdown noted in economic activity in the US and the unfavourable movement in the EUR/USD exchange rate will adversely affect the Group’s prospects for the year while other very significant geographical regions for the Group maintain their strong momentum
As a result, taking into account the temporary additional costs already announced for the setting up of the new distribution network, the Group does not anticipate organic growth in its current operating profit in 2008/09,” said the company in a statement.

The company initially withheld its year end results because of a dispute between Maxxium participants. Remy said they are “continuing their discussions and have noted the effective acquisition of V&S by the Pernod Ricard Group on 24 July 2008. These discussions focus notably on finding an agreement on the net asset value of Maxxium at 31 March 2008.”

Remy said the distribution activity in the US comprises mainly the distribution of the Scotch whisky brands, The Famous Grouse and The Macallan, and wines. It also reflects the transfer of Russian Standard to its own distribution network.

APPEALS COURT REOPENS WHOLE FOODS, WILD OATS CASE

A federal appeals court said a trial judge was wrong in dismissing the FTC’s challenge to the August 2007 merger of Whole Foods and Wild Oats, says the WSJ.

"The court should have taken whatever time it needed to consider the FTC's evidence fully," the ruling said.

It also said U.S. District Judge Paul Friedman "underestimated the FTC's likelihood of success on the merits" when he denied the agency's request.

The three judge panel’s (although one dissented) ruling revives legal proceedings over the $565 million transaction and may give the FTC a shot at forcing Whole Foods to sell some operations to meet competitive concerns raised by the merger.

Whole Foods said it was disappointed by the decision and could seek a review by the full appeals court. Meanwhile, it would carry on "business as usual."

Meanwhile, the FTC hopes the ruling will allow it to undertake a full review of competition issues raised by the merger.

"We are pleased by today's decision of the appeals court in the Whole Foods matter and are looking forward to future proceedings before the district court, leading to a full trial on the merits before the Commission," said Jeffrey Schmidt, head of the FTC's competition bureau.

NEW RESEARCH ON CONSUMER IN-STORE BEHAVIOR

A new study disproves the idea that 70% of consumer decisions are made at the shelf. According to a study from OgilvyAction, 39.4% is the actual number of consumers who decide what to buy at the store. About 10% change their minds while in the store and 20% decide against buying a product they previously planned to purchase. Nearly 30% of consumers buy something they didn’t intend on buying.

"The good news for marketers is that a product display and sampling can build brand equity," Jeff Froud, senior strategic planner for OgilvyAction, told AdAge.com. "No matter what rulebook you studied when you were studying marketing, price promotions don't build any brand equity and in some cases can be equity destroyers."

EXTREME SPIRITS RELAUNCHES WOKKA SAKI

Extreme Spirits are rebranding their eclectic ‘east meets west’ vodka, Wokka Saki. Starting August 1, the brand will be known as Wokka-Fusion Vodka. Simultaneously, the company is launching a quarter size version (20cl) bottle known as Mini Wokka. WOKKA is a micro distilled grain vodka with a subtle blend of Japanese sake infused with Asian fruit.

Wokka Saki was launched in South Beach Miami on April 2005, and is now exported internationally to 10 countries.

WSD BRIEFS:

BENNIGAN'S AND STEAK & ALE casual dining chains have filed for bankruptcy. Not Chapter 11, but Chapter 7 liquidation, proving it's tough out there in the casual dining industry. They are shutting more than 300 sites and letting go of thousands of employees, and they are unlikely to reopen. The told managers Monday to close the stores as they didn't have enough cash to make payroll that week. Filing does not include Ponderosa and Bonanza restaurants. Earlier this year, Bakers Square, Village Inn and Old Country Buffet filed for Chapter 11 bankruptcy protection, and many other dining chains are struggling, from Outback Steakhouse to Ruby Tuesday.

ABSOLUT ON THE WALK OF FAME. Absolut vodka will receive the first "Friend of the Walk of Fame" honorary star on Hollywood Boulevard. The brand is receiving recognition for being the inaugural donor to the restoration of L.A.’s historic “Walk of Fame.” The announcement is tied in with the launch of Absolut Los Angeles (made of blueberry, acai berry, acerola cherry and "fruity notes of pomegranate"), which debuted this month nationwide.

Until tomorrow, Megan

“Three o'clock is always too late or too early for anything you want to do.”
Jean-Paul Sartre

--------- Sell Day Calendar ----------
Today’s Sell Day: 21
Sell days this month: 23
Sell days this month last year: 22
This month ends on a: Thur
This month last year ended on a: Tues.
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.

Bacardi Buys Stake in Patron

John Paul DeJoria, co-founder of Patrón tequila, will become the principal owner of parent company Caribbean Distillers Corporation. In addition, Bacardi Limited will purchase a significant, although unspecified, minority stake in the company through a subsidiary, according to Barry Kabalkin, vice chairman of Bacardi Limited. Specific terms of the agreement were not disclosed.

Under the agreement, Bacardi will hold one seat on the board of directors of Patrón’s parent company. Kabalkin will be appointed to the board position.

The transaction will result in an unspecified payment to the estate of the late Martin Crowley (co-founder of Patron) in exchange for its interest in the company. In accordance with the terms of Crowley’s will, the estate will contribute the money to the Windsong Trust, a charitable trust created by Crowley to support the education of underprivileged children across the globe.

Recall that Crowley teamed up with DeJoria, who is also the co-founder and chairman of the Board of John Paul Mitchell Systems, to found Patrón in 1989.

Bacardi and Patrón intend to operate independently from each other and the agreement does not provide for changes in the day-to-day operations of Patrón or in Patrón’s management or distributor network. However, the companies said the “relationship is expected to lead to beneficial synergies.”

The parties intend to close the transaction, which is primarily subject to certain court approvals, within approximately 60 days.

“Bacardi and its brands have set many standards in the spirits industry and its worldwide experience can certainly help us grow in markets both inside and outside of the U.S.,” said Ed Brown, President and ceo of Patrón. “We look forward to gaining from their international experience as we continue to grow Patrón around the world.”

“Patrón is one of the fastest growing products in the entire spirits industry, and becoming a significant shareholder is a fantastic opportunity for Bacardi,” said Kabalkin.

BACKGROUND. Last year Bacardi launched a lawsuit at Martin Crowley’s estate to stop the payment of nearly $755 million to help underprivileged children in the third world. Crowley’s executors agreed in January 2007 that DeJoria would pay the estate $755 million for Crowley’s remaining 50% shares. The settlement was then blocked by Bacardi, which states in court papers that it had a prior agreement from 2004 with the executors to buy the stake for $175 million.

The industry has speculated for years that Bacardi, among others, may eventually acquire Patron entirely.

PERNOD TO SELL NON-CORE WINE AND VODKA BRANDS

Last week, Pernod announced it will dispose non-strategic brands over the next 12 to 18 months in effort to decrease debt levels after acquiring Vin & Sprit. Sources say that Pernod Ricard will likely divest non-core wine and vodka brands to help pay down debt, according to an article in the Financial Times.

Allegedly, the company’s wine assets are no longer considered strategic. As a result, “important wine assets in Spain and Argentina, inherited from the acquisition of Allied Domecq, are likely to be divested,” industry sources told mergermarket. French analysts slated Bodegas y Bebidas, a Spanish wine company and owner of Campo Viejo, as the most likely wine divesture. The Argentinean company Graffigna, which Pernod also inherited from Allied, is also likely to go. FT cited Constellation Brands as “a logical bidder.”

In terms of spirits, Gronstedts Cognac in Sweden is the biggest disposal planned, sources said. Up for sale is also Dry Anis in Finland, Serkova vodka in Greece, Lubuski gin in Poland and Star Gin and Red Port.

Sources were mixed on whether Pernod would consider selling Chivas, Beefeater or Kahlua, noting all brands have suffered in the current climate but were still considered strategic. Kahlua seemed to be the likeliest divestment out of the three.

NABCA VOLUMES FLAT IN JUNE

Spirits volumes for control states were flat in June, up 2.5% year to date, reports UBS analyst Melissa Earlam. Premium brands were still growing faster than the market, but at a slower pace than prior periods. For example Grey Goose grew 4.3%, Ketel One rose 4.9% and Patron was up 19%.

Diageo’s volumes declined slightly in June, falling -0.2%. The company took share in Canadian whisky (1% versus category 0%) and cocktails (6.6% vs category 1%y/y). It lost volume share in vodka (0.2% vs category 3.4%), rum (-2.5% vs category -1.9%), gin (-3.8% vs category -3%) and Scotch (-5.9% vs category -4.1%). UBS said it believes this is related to 5% price increases introduced in the U.S. over the last months.

Pernod’s volumes declined -6%. It gained share in Irish whiskey (23% vs 18%), and Scotch
(-2.8%). However, it lost share in vodka (-2.5%), gin (-5.5%), rum (-12.4%) and brandy/Cognac (-73% vs category -4%) where it is de-emphasizing VS growth.

Brown Forman volumes declined -2.8% and Remy declined -1.8%. Campari grew 4.1%, driven by strong vodka growth of +5.9%.

UBS rated Pernod and Campari Buy. Diageo and Brown-Forman were rated Neutral. It expects a slowdown in US spirits growth during the recession, but forecasts market volume growth of 1.7% and 4.5% sales for 2008.

FORTUNE BRANDS TO DECLASSIFY BOARD

Fortune Brands board of directors has unanimously approved a plan to declassify the board beginning in 2010. The plan will be subject to shareholder approval at the company's 2009 annual meeting.

The company's directors are currently divided into three classes and are elected to staggered three-year terms. If the plan announced today is approved by shareholders, the company will phase-in annual election of directors beginning at the 2010 annual meeting. As of the 2012 annual meeting, all directors would be elected on an annual basis.

A non-binding shareholder resolution calling for annual election of directors received the support of 54% of the shares outstanding at the company's 2008 annual meeting. The classified board was originally approved by shareholders in 1986.

TROUBLE FOR PAX WINE CELLARS

Pax Mahle has been fired as winemaker from his eponymous label Pax Wine Cellars and replaced by Tyler Thomas, reports Wine Spectator. Meanwhile, Mahle, his wife Pamela Schaab, and Pax’s majority owner, Joe Donelan, are locked in a legal battle over the winery.

Mahle founded the winery in 2000 along with his wife and Connecticut-based investor Donelan, who owns a 55% share. The partners have supposedly disagreed over several winemaking and management decisions, and Mahle expressed a desire for a buyout or outright dissolution of the brand. Donelan rejected a buyout offer and filed a suit against the couple.

Donelan told Wine Spectator that he intends to continue the Pax label. Mahle, meanwhile, is building a winery in Sonoma, where he plans to make a variety of wines.

FORMER PRESIDENT OF JOSEPH PHELPS DIES

We regret to inform you that Tom Shelton, the former president of Joseph Phelps Vineyards, died on Saturday night after a long battle with brain cancer. He was 55.

Shelton joined Phelps in 1992 as vice president of sales and was promoted to president in 1995, a position he held for 13 years. He was also a spokesperson for the Napa Valley Vintners, which worked to protect Napa Valley producers and to develop less restrictive direct-to-consumer shipping laws.

In a statement released Monday, the Shelton family said: "Tom was a wonderful husband, a loving father, and a great friend who will be missed very much. We are all so blessed to be touched and inspired by such a caring and outgoing individual.”

B-F INVESTS $6M IN JACK DANIEL DISTILLERY

Brown-Forman is reportedly set to invest more than $6 million in its Jack Daniel Distillery in Lynchburg, Tennessee to improve efficiency and increase output of 20 million liters a year. In all, the distillery plans to add 9 fermenters to its already 48 fermenters to increase the amount of spirit yielded from each batch of grain. Through cost savings, B-F believes it will recapture the cost of the investment in just a few months.

WSD BRIEFS:

PERNOD RICARD USA has appointed Thomas G. Krekeler, a veteran beverage alcohol Operations executive, as Plant Manager at the Wild Turkey Distillery in Lawrenceburg, KY. Krekeler will join Pernod on August 18, 2008, reporting to Dan Denisoff, senior vp, operations.

THE LOUISIANA STATE LEGISLATURE has named the Sazerac the official cocktail of New Orleans during their recent legislative session. The drink contains Sazerac Straight Rye Whiskey, Herbsaint and Peychaud's Bitters.


Until tomorrow, Megan

“Be thou the first true merit to befriend, his praise is lost who stays till all commend.”
Alexander Pope

--------- Sell Day Calendar ----------
Today’s Sell Day: 20
Sell days this month: 23
Sell days this month last year: 22
This month ends on a: Thur
This month last year ended on a: Tues.
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.

Bacardi Buys Minority Stake in Patron

**Alert**

John Paul DeJoria, co-founder of Patrón tequila today announced an agreement that will make him principal owner of the parent company of The Patrón Spirits Company. In addition, Bacardi Limited will purchase a significant minority stake in the company through a subsidiary, according to Barry Kabalkin, vice chairman of Bacardi Limited. Specific terms of the agreement are confidential

The transaction will result in a payment to the estate of the late Martin Crowley (co-founder of Patron) in exchange for its interest in the company. In accordance with the terms of Crowley’s will, the estate will contribute the money to the Windsong Trust, a charitable trust created by Crowley to support the education of underprivileged children across the globe.

Recall that Crowley teamed up with DeJoria, who is also the co-founder and chairman of the Board of John Paul Mitchell Systems, to found Patrón in 1989.

Bacardi and Patrón intend to operate independently from each other and the agreement does not provide for changes in the day-to-day operations of Patrón or in Patrón’s management or distributor network. However, the companies said the “relationship is expected to lead to beneficial synergies.”

“Bacardi and its brands have set many standards in the spirits industry and its worldwide experience can certainly help us grow in markets both inside and outside of the U.S.,” said Ed Brown, President and ceo of Patrón. “We look forward to gaining from their international experience as we continue to grow Patrón around the world.”

Under the agreement, Bacardi will hold one seat on the board of directors of Patrón’s parent company. Mr. Kabalkin will be appointed to the board position.

“Patrón is one of the fastest growing products in the entire spirits industry, and becoming a significant shareholder is a fantastic opportunity for Bacardi,” said Kabalkin.

The parties intend to close the transaction, which is primarily subject to certain court approvals, within approximately 60 days.


Until later, Megan

“To be great is to be misunderstood.”
Ralph Waldo Emerson

--------- Sell Day Calendar ----------
Today’s Sell Day: 20
Sell days this month: 23
Sell days this month last year: 22
This month ends on a: Thur
This month last year ended on a: Tues.
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.

Sweden Sells Beam Stake to Fortune Brands

Sweden has officially agreed to sell its 10% stake in Beam Global to parent company Fortune Brands for $466 million. Fortune now owns 100% of Beam.

Pernod struck a deal in March to acquire Vin & Sprit from the Swedish government, but did not purchase V&S’s 10% stake in Beam Global, Absolut’s U.S. distributor owned by Fortune.

Since then, Fortune had been looking to exercise a clause allowing it to buy the V&S stake, although the companies initially failed to agree on a price. Fortune had offered $350 million for the Beam stake but V&S wanted $1.1 billion, which would include “few $100s (of millions)” in debt.

“It (the Beam deal) is a good deal ... We are very pleased with it,” Swedish Financial Markets Minister Mats Odell spokeswoman Sarah Lundgren said, according to Reuters.

“The price established for the repurchase of the equity minority interest is good news for our shareholders,” said Fortune chief Bruce Carbonari. “Because this valuation was below the $543 million value we carry on our books, we have recorded a gain in our second quarter results.”

Vin & Sprit finalized its purchase by Pernod Ricard last week as well.

IS STOLI THE NEXT SUBJECT OF A BIDDING WAR?

Now that the Vin & Sprit acquisition is final, some analysts are saying that Stolichnaya (owned by SPI) will soon be the target of a new bidding war, according to an article in the Scotsman. Some are predicting that SPI could make as much as £1.5bn if Stolichnaya went up for auction.

Possible contenders are Bacardi, Campari, Beam Global and Brown-Forman, the report said, while Diageo was ruled out after buying 50%shares of Ketel One. Stoli currently controls about 5% of the vodka sector in the U.S., where vodka consumption is growing by over 6% a year.

The article also went on to speculate that Pernod Ricard may consider selling several non-core Scotch whisky brands to reduce debt following the completion of the V&S acquisition. The brands include Prince Charlie, Passport, Royal Salut and White Heather because of “unprecedented interest in the mid-tier of the whisky industry.”

“Scotland on Sunday” revealed earlier this month that Pernod is understood to be in final negotiations to sell its Glendronach malt whisky distillery. Chivas Brothers has allegedly received a first round of bids for the malt and is close to sealing a £30m deal for the Huntly distillery.

EUROPEANS LOOKING TO SNATCH U.S. WINERIES
It is likely we will see more interest in U.S. wineries by foreign investors as long as the U.S. dollar stays weak and other currencies remain strong.

The big news last week was when Bordeaux chateau Cos d'Estournel announced it was in negotiations to purchase Chateau Montelena.

"It's time to go winery shopping if you're a European," said analyst Jon Fredrikson, owner Gomberg, Fredrikson & Associates. "There are lots of bargains out there."

An article in the Press Democrat says the “number of foreign individuals, major wine companies and investment groups feeling out the California market” has increased dramatically as the euro surges.

Furthermore, U.S. vineyard and winery values have held up well unlike the residential real estate market, making properties in Napa and Sonoma increasingly attractive.

But “for every completed deal there are innumerable cases of inaction, with potential investors holding back out of fear, confusion about the U.S. market, or just not being able to get their act together quickly enough, brokers say,” the article continued.

YOUNG’S MARKET MAKES NEW APPOINTMENTS

Young's Market Company and Young's-Columbia jointly announced they have promoted several key executives, including John Klein, Dennis Barnett, Dan Ewer, Andy Lytle and Brian Young.

John Klein, formerly the president of Young's Pacific Northwest division has been promoted to president of Young's Market Company. Dennis Barnett, formerly the president of Young's Market Company-California has been promoted to the newly created position of president of Young's Market Company-Southwest.

Dan Ewer, formerly the executive vp of sales/marketing for Young's-Columbia of Oregon has been named to replace John Klein as president of Young's-Columbia Pacific Northwest division.
Andy Lytle, formerly the vp of sales and marketing for Mt. Hood Beverage Company has been named to replace Dan as vp of sales/marketing of Young's-Columbia of Oregon.

Brian Young, formerly the president of Young's Market Company Brokerage-Washington State has been promoted to the newly created position of president Young's Market Company Pacific Northwest Brokerage where he will oversee the company's brokerage activities in Oregon, Washington, Utah, Idaho, Montana and Wyoming.

FREDERICK WILDMAN AND SONS MAKE CHANGES

Frederick Wildman and Sons says it will increase staffing by 50% in the next year throughout the United States and its headquarters

The company’s portfolio consists of over 50 brands from around the world including wines from Italy, Australia, France, Argentina, Chile and Spain. The portfolio will now be divided into two divisions, National Brands and Fine Wine. National brands have higher volume and a broad market appeal, while Fine Wine focuses more on boutique wineries in the above mentioned countries as well as Portugal, South Africa, Austria and Germany.

The National Brands division is now operating with sales directors based in the east, midwest, south and west/southwest. The Fine Wine Division, meanwhile, includes two divisional managers – an eastern and a western manager.

WSD BRIEFS:

B-F APPROVES CEO’S SALARY. Brown-Forman said its board's compensation committee approved a base salary of $1.01 million for chairman and ceo Paul Varga for the current fiscal year. It becomes effective August 1 and includes a holiday bonus. The committee also approved a short-term incentive compensation target of $1.25 million based on “depletion-based operating income.”

BEER'S LEAD OVER WINE AND SPIRITS grew this year to double digits, according to the latest Gallup poll. The trend back to beer reflects a shift among drinkers aged 30 to 49 years old, the survey indicates. From 2004 to 2005 concludes wine and beer were almost equally preferred. But, wine as a favorite peaked at 39% in 2005 and has since slipped to 31%, while beer is now chosen first 47% of the time, the poll said.

THE EUROPEAN COMMISSION began the release of $8.5 million in grants last week to European Union wine producers. The money will pay for “public relations, promotional or publicity. highlighting EU products'.quality, hygiene, food safety, nutrition, labelling, animal welfare or environment-friendliness.”

THE HEAD OF WINE AUCTIONS AT CHRISTIE’S, vp Richard Brierley, is leaving the auction house’s North American division after eight years to return to the UK. Charles Curtis MW will take the place of Brierley in New York and serve as head of wine sales in the US. Curtis was previously director of wine and spirits education at Moët Hennessy USA.

LOW COUNTRY IMPORTS WILL MERGE with Grape Expectations Wine Imports, both corporately based in Raleigh, NC, to form Low Country Imports as of August 1. Low Country Imports’ best known brands are are Dyed in the Wool, Zintry, Soiree, Vindelocks, Vin Dillon and Premonitions. Brands of Grape Expectations include Charles Wiffen, Mt. Difficulty, Zilzie, Gemtree and Castillo Perelada.

TOTAL WINE & MORE OPENED ITS FIRST PHOENIX STORE last week, making it the retailer chain’s 54th store in 10 states. The store was named Beverage Dynamic's 2008 Retailer of the Year and is known for its wide selection and low prices.


Until tomorrow, Megan

“To be great is to be misunderstood.”
Ralph Waldo Emerson

--------- Sell Day Calendar ----------
Today’s Sell Day: 19
Sell days this month: 23
Sell days this month last year: 22
This month ends on a: Thur
This month last year ended on a: Tues.
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.

Pernod and Brown-Forman Speak

Pernod says it has fully acquired Vin & Sprit from the Kingdom of Sweden, following the European Commission’s decision to authorize the transaction. The transaction is valued at €5.69 billion, including debt.

“The acquisition of V&S enables Pernod Ricard to assume co-leadership of the global wine and spirits industry,” said the company in a statement. “Absolut, the number one premium vodka worldwide, is the ideal addition to complete Pernod Ricard’s brand portfolio and makes the Group the second-largest player in the US.”

THE ABSOLUT COMPANY. The Absolut Company has the worldwide responsibility of Absolut including production. It becomes part of the brand-owner network, alongside Chivas Brothers, Martell Mumm Perrier-Jouet, Irish Distillers, Malibu-Kahlua International, Pernod Ricard Pacific and the joint venture Havana Club International.

Ketil Eriksen has been appointed ceo of The Absolut Company and reports to Thierry Billot, deputy managing director of Pernod Ricard in charge of brands.

PERNOD RICARD NORDIC. In order to maintain it decentralized structure, Pernod is putting in place two Swedish-based business units within V&S. Pernod Ricard Nordic will market Pernod Ricard’s international and local brands in Sweden, Denmark, Finland, Norway, the Baltic States and Iceland. The company was created by merging V&S wines, V&S Distillers, and Pernod Ricard Nordic Countries (Pernod’s current distribution subsidiary in the Nordic region).

Michel Mauran becomes its managing director, reporting to Laurent Lacassagne, chairman and ceo of Pernod Ricard Europe. In addition, Rolf Cassergren has been appointed coo in charge of finance, marketing, communications and operations for Pernod Ricard Nordic. He reports to Michel Mauran.

Bengt Baron, the current chief of V&S, will assist with the integration until October 31, when he will leave the group. Anders Narvinger has also agreed to continue his position as chairman of the board of V&S.

DISPOSED BRANDS. Pernod says it will shed about $1.57 billion in assets, which includes the following V&S brands: Groenstedts Cognac, Red Port, Star Gin, Dry Anis and Lubuski Gin and Serkova vodka (owned by Pernod).

In addition, Pernod will end its distribution agreements for Stolichnaya vodka outside Russia and for Royal Canadian whisky in Sweden.

The disposals, coupled with improved cash generation and profitability, would help cut net debt to below four times earnings before interest, tax, depreciation and amortization (EBITDA) from six times EBITDA within the next three years, said the company.

EXECUTIVE COMMENTS. In today’s conference call, managing director Pierre Pringuet said: "The question is, of course it is the right acquisition? It is the right brand? Strategically, it is the right thing to do. But is it the right moment to have basically about Euro 12 million of debt? And the answer is, first of all, we couldn’t choose. It was either to go for it or not to go for it. We had no choice. Secondly, yes we will certainly work to decrease the debt. Keep in mind that this ratio of net debt/EBITA is 6 times and is precisely the same ratio we had for the Seagram’s deal and more recently the Allied deal.”

PERNOD POSTS STRONG FISCAL YEAR RESULTS

Managing director Pierre Pringuet said he doesn’t see evidence of a severe economic downturn in Pernod’s numbers, hinting that reports in the media have exaggerated the issue. He maintained that Western markets (Europe and the U.S.) are still growing, albeit at a moderate rate and slower than a year ago.

Growth of the 15 strategic brands was very strong overall, gaining 11% in value and 5% in volume. Ten of these brands reported double-digit growth rates: Martell (+24%), Jameson (+21%), Mumm (+18%), Havana Club (+17%), The Glenlivet (+14%), Perrier Jouet (+14%), Stolichnaya (+12%), Chivas (+11%), Ballantine's (+11%) and Malibu (+10%).

Over the full financial year, the spirits business grew in value by 9%. The wine business grew by +6%, compared to +1% in the previous financial year. Overall, second half growth (+7%) remained strong following a very good first half (+10%), against a background of further appreciation of the Euro against most other currencies.

Absolut (world leader in premium vodkas) recorded excellent performances, said the company, illustrated by its accelerated growth in the first half of 2008 (+12% compared to +9% in the calendar year 2007) and a volume of 11.3 million 9-liter cases sold, which is a 600,000 liter case increase compared to last year.

UNITED STATES “SATISFACTORY.” Overall, the U.S. continues to do well amidst a tough economy, said Pernod. North America grew 5%, with spirits gaining 4.4% and wines rising 9.6%. Pernod said there was a shift of consumption from the on-trade to the off- trade in the U.S., although premium brands continued “satisfactory growth.”

This includes Jameson, The Glenlivet, Malibu and Wild Turkey for spirits and Montana, Perrier Jouet, Mumm Napa and Campo Viejo for wines. At the same time, brands with weaker franchises suffered from the economic downturn, including Kahlua, Beefeater and Chivas. Absolut grew 5% in the 12 months to June 30, according to Nielsen.

Jameson depletions were up 24% in the year, with Nielsen numbers rising 29% and NABCA up 20%. Glenlivet 12-month depletions grew 6%, with Nielsen numbers up 3% and NABCA up 5%. Malibu depletions grew 5% in the U.S., while Nielsen and NABCA numbers grew 5% and 7%, respectively.

The Kahlua situation remains difficult, with depletions declining -7% and NABCA down -3%. Nielsen numbers, however, grew 2%. Similarly, the U.S. gin market remains tough, as represented through Beefeaters performance. Twelve month depletions declined -3% and NABCA and Nielsen numbers were down -3% and -0.5%, respectively. Depletions of Stoli, meanwhile, grew 3%, while Nielsen was flat and NABCA declined -1%. Chivas Regal 12-month depletions declined -6% in the U.S. and Nielsen numbers declined -6%.

Absolut is reportedly losing some share in the U.S. do to its middle tier pricing. It’s too expensive for consumers trying to cut costs, but it’s not expensive enough (like Grey Goose or Ketel One) to do especially well in trendy bars.

Pierre said Absolut has been subject to too many price promotions in the past and that he will ensure it doesn't stray far from $20 a bottle in stores. He also wants to cutback on the recent proliferation of new flavors for Absolut.

Montana wine saw strong growth in the United States. Depletions were up 15% and Nielsen up 12%. Pierrier Jouet had “satisfactory” growth in the U.S.

ORGANIC GROWTH STRATEGY. Pernod says it is changing its growth strategy and will instead focus on existing labels rather than making more acquisitions over the next few years.

“‘Organic growth is a must,’ Pernod managing director Pierre Pringuet said in an interview with WSJ. He noted that ‘antitrust authorities will look at any new acquisitions even more carefully,’ making additional purchases difficult.”

In November, Pierre will replace Patrick Ricard as ceo.

“Because the company has grown so much in recent years, it could soon find itself in the same position as industry leader Diageo: unable to make big acquisitions because it already has dominant positions in most segments,” said the WSJ article.

However, Pierre insisted Pernod will likely make more acquisitions once it pays some of the debt, most notably in the bourbon and tequila categories where the company currently has a gap.

EMERGING MARKETS TO THE RESCUE. Meanwhile, Pernod Ricard finance director Emmanuel Babeau forecasts emerging markets (India, Russia and China) will continue to do well, while the United States and Europe will have “more subdued” growth.

"Even in difficult years, the consumer protects what for him holds pleasure value," Pernod Ricard Finance Director Emmanuel Babeau told Reuters in an interview.

"This has been one of the best years for Pernod Ricard over the past 10 years with strong growth in emerging markets and a limited slowdown in Western Europe and satisfactory growth of our premium brands in the U.S.,” he also said in today’s conference call.

WORD FROM UBS. “Consistent with our thesis that spirits are relatively safer than beer in a weaker consumer environment, we include Pernod and Campari as most preferred” alcohol beverage companies in Europe, said UBS analyst Melissa Earlam.

BROWN-FORMAN: YEAR OF CHANGES

CEO and Chairman Paul Varga began the conference by putting fiscal 2008 in context and reviewing the business environment “that influenced how we behaved” last year. One, Brown-Forman was still “very new” to Casa Herradura last year and the transition, including cultural aspects and incorporating a private company into a public one, was still ahead of B-F. Paul remarked that the Casa Herradura team displayed “some of the most impressive work we’ve seen in years.”

Two, five senior level executives retired from the company at the same time, which Paul admitted “made me a little nervous to be honest.” However, he maintained that the company was prepared for the management shift and was able to promote a lot of fresh faces that have helped generate new ideas.

Lastly, the company saw some softening in the consumer environment last year, including tightened spending and a switch from the on-premise to the off-premise.

“This posed a challenge to us,” he said. “But I was particularly proud of the organization because we needed to tighten our belt...we still invested very nicely but it was at a lower level.”

Paul said that as consumers in the U.S. started going to bars and restaurants a little less, and opted to drink at home, “it required us to take resources we’d put on the on-premise to the of-premise.” As a result, the second half saw strong financial results. Paul said it’s still a good environment for growth.

The fastest growing brands in fiscal 2008 were Gentleman Jack and Woodford Reserve. The newly re-packed Gentleman Jack grew at the fastest rate, surpassing the 200,000 case mark last year. Woodford Reserve grew beyond the 100,000 case mark.

Paul characterized this as “examples of homegrown growth,” and says it will be a part of the company’s growth strategy for now on.

In addition, B-F is increasingly focused on becoming a more global company as it expands in foreign markets.

CHATEAU MONTELENA COULD SELL FOR $150 MILLION

As we reported earlier this week, Michel Reybier, owner of Chateau Cos d’Estournel, grand cru classé of Saint-Estèphe, is in discussions with Chateau Montelena’s founder, Jim Barrett, to acquire the Chateau Montelena Winery in Napa Valley, pending regulatory approval this fall. Chateau Montelena is famous for its chardonnay wining the renowned Paris Tasting of 1976, or “The Judgment of Paris.”

The Barrett family acquired the 125 year old Chateau Montelena in 1972.

“This is a perfect fit – a dream marriage,” said Jim Barrett in a statement. “We could not have asked for a finer team to carry on this legacy.”

Several publications have speculated that it will cost about $110 million or higher. However, we’ve heard Chateau Montelena’s price tag could be as high as $140 million to $150 million.


Until tomorrow, Megan

“When everyone is against you, it means that you are absolutely wrong-- or absolutely right.”
Albert Guinon


--------- Sell Day Calendar ----------
Today’s Sell Day: 17
Sell days this month: 23
Sell days this month last year: 22
This month ends on a: Thur
This month last year ended on a: Tues.
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.

Robert Parker’s Cryptic Message

Famed wine critic Robert Parker posted a cryptic message on his blog yesterday that led to speculation all over the internet.

“One of the biggest stories in my 30 years in the wine field will be the detailed announcement ...officially set for tomorrow...that will shake the fine wine world ......and I am not referring to BOTTLE SHOCK the movie...,” he wrote (ellipses added by him).

It turns out that Chateau Cos d'Estournel (hailing from Bordeaux) announced the purchase of the historic Chateau Montelena in Napa. Some agree that Parker’s announcement may have been a little dramatic, but there’s no denying the rising success of Cos d'Estournel and the historical prominence of Chateau Montelena in Napa.

Details of the transaction were not included but an article in Decanter, among others, is speculating it will cost about $110 million or higher. Final authorization from US authorities is not expected until October 2008.

With regards to the news, Vinography writer Alder Yarrow wrote: “While I certainly don't think this event merits the description Parker used, it's certainly an interesting development, and if the economy continues the way it has recently, probably not the last time a prime Napa property will be snapped up by European investors of one kind or another.”

The 2008 vintage for Montelena will be overseen by Cos d'Estournel's director and winemaker.

SOUTHERN WINE & SPIRITS MERGES WITH THE ODOM CORP.

Southern Wine & Spirits has joined with The Odom Corporation in a merger across 7 Pacific Northwest states, which includes the states of Oregon, Washington, Idaho and Alaska and will also incorporate the Southern Wine Spirits West existing six-state Control States operation in Idaho, Montana, Oregon, Utah, Washington and Wyoming.

The new venture will encompass a strategic partnership for the distribution of wine throughout the state of Washington and Northern Idaho; wine and spirits within the state of Alaska; and the immediate establishment of a fully operational wine distributorship in the state of Oregon.

In a related transaction, the partnership has agreed to purchase certain wine and the spirits distribution rights from Alaska Distributors in the States of Alaska, Washington and Idaho.

Adam Hilpert was named executive vp, general manager to oversee the wine wholesaling division in Washington, Oregon, Idaho and Alaska.

James Allen will serve as executive vp, managing director, fine wine, of the Southern-Odom partnership and will also work closely with all current and prospective wine suppliers and trading partners.

Michael McLaughlin was appointed vp, general manager of pacific northwest six-state brokerage operations as well as Alaska’s Spirits Division.

The new ‘greenfield’ division in Oregon is scheduled to be completely operational and fully staffed by September 15, 2008.

All appointments are effective immediately and further management appointments to follow.

FOSTER’S HAS MIXED GROWTH IN THE U.S.

Foster’s U.S. sales growth was flat in the 52 weeks to the end of June, with Beringer growing only 1% in the eight weeks and Lindemans, Rosemount and Wolf Blass declining from the same period last year. Case sales of Foster’s wines priced below $9 declined -8% in the month while the category grew 2%.

Foster's wines priced above $9 a bottle were up 24% by volume, ahead of category growth of 7%. Penfold's was the only Foster's brand to exhibit any growth in the US market in June, up 7%. Sales of competitor Jacob's Creek, however, grew 11% in the same period.

ROBERT BERNING OF TRADER JOE’S DIES

We regret to inform you that Robert Berning, the principal wine buyer for Trader Joe's beginning in the 1970s, has died of bone cancer at the age of 73. He is most famous for introducing consumers to bargain priced wines from around the world after joining Pronto Market (now Trader Joe’s) in 1965. As head wine buyer, Berning played a major role in building Trader Joe's private label wine program. He retired from the company in the mid-1990’s.

He was born Jan. 25, 1935, in Avalon on Santa Catalina Island. He’s survived by his daughter Christina Coulourides, he son Craig, daughters Nanette Berning-Pate and Julia Berning-Escamilla, his sisters, Evie Vesper and Laurie Berning, and 13 grandchildren.

To read more, click here.

MONDAVI FAMILY COMPLETES CLOUD VIEW PURCHASE

Continuum, a partnership of the Marcia and Tim Mondavi families and Margrit Biever Mondavi, announced today it has completed its purchase of Cloud View Vineyards on Pritchard Hill, overlooking the Napa Valley in St. Helena. Escrow closed on the deal on July 16, exactly 42 years after the opening of the Robert Mondavi Winery in Oakville, reports Wines & Vines.

Until the new winery is completed at the Pritchard Hill property, Continuum will continue to be produced under an alternating proprietorship arrangement with Tony Cartlidge's Greenfield Wine Co. in America Canyon, CA.

Former owners of the property, Linda and Leighton Taylor, will continue to produce the Cloud View Vineyards brand that they launched in 1999. The Mondavis have reportedly searched for a permanent home for Continuum since 2005.

OKLAHOMA WINERIES AWAIT STATEWIDE VOTE

The Oklahoma legislature passed a bill that would allow both in-state and out-of-state wineries producing 10,000 gallons per year to bypass wholesalers and distribute the products directly to retailers. No products can be shipped via common carrier (such as Fed-Ex or UPS). Now, it’s up to the voters to make SB 995 a law. SJR 29 created State Question 743, to be presented to voters this November.

NEW LABEL REQUIREMENTS FOR LODI WINES

A new California law is requiring wineries to put “Lodi” on the labels of wine from the 552,000-acre Lodi American Viticultural Area, regardless of whether the labels name more specific vineyard locations. The bill, AB 2397, was supported by winegrape growers and wineries concerned about Lodi’s diminishing name recognition, reports the St. Helena Star.

WSD BRIEFS:

COGNAC ONE IMPORTS NEW XAVIER FLOURET WINES. Xavier Flouret Wines have been launched in the U.S. at a suggested retail price of $15-29. The portfolio consists of ten white, rose and red wines, including Nationale 7 (2006 Côtes de Provence Rosé), Fé (2001 Rioja Reserva Red) Rouge Noir (2006 Menetou-Salon Red), French Blonde (2007 Sancerre), and La Victoire (2005 Bordeaux Red). Beginning in the fall, the company will offer 5 additional wines with another 15 expected in the next year.

GLAZER’S TEXAS APPOINTS RYAN CHANDLER as GM, Cactus Spirits. Chandler will be responsible for all sales and marketing activities/execution on Cactus Spirits brands in the state. Ryan joined Glazer's in August of 2000 and has held a number of management positions.

LVMH HAS SELECTED MORPHEUS MEDIA as its new U.S. interactive agency of record following an extensive agency review. Morpheus will be responsible for domestic online marketing strategy and execution across the LVMH brands.

ABSOLUT LOS ANGELES HITS SHELVES. Absolut Los Angeles, a limited-edition, city-inspired flavor honoring the City of Angels. Celebrating the city's trend-forward ideals, said the company. It is made with all-natural blueberry, acai berry, acerola cherry, and fruity notes of pomegranate. Los Angeles will be available beginning in July at bars, restaurants, nightclubs and retailers nationwide.

PIPELINE BRANDS ANNOUNCES STEPHEN SCHULER is joining the company effective August 4th. Steve will serve in the newly created role as the Director of Brand and Market Development. Pipelines current clients include St. Germain Elderflower Liqueur, the Rhum Clement and Rhum JM lineups of Martinique, Charbay Winery and Distillery of Napa, Ca., Palmes d’Or Champagne from Nicolas Feuillatte, Potocki Vodka of Poland and Coole Swan Dairy Cream Liqueur of Ireland.


Until tomorrow, Megan

“The time is now, the place is here. Stay in the present. You can do nothing to change the past, and the future will never come exactly as you plan or hope for.”
Dan Millman

--------- Sell Day Calendar ----------
Today’s Sell Day: 16
Sell days this month: 23
Sell days this month last year: 22
This month ends on a: Thur
This month last year ended on a: Tues.
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.

An Update on Foster’s

Foster’s Group said today that Ian Johnston, a non-executive director of the company since September, will serve as acting chief executive officer while the company looks for a permanent replacement for Trevor O’Hoy. In addition to his ceo duties, Johnston will assist chairman David Crawford in overseeing the wine review announced in June, along with a $700 million write-down and a transfer of $600 million in goodwill to the company’s beer operations.

There are several components that have brought Foster’s to where it is today, including some that could have been avoided and others that could not. Foster’s admitted it paid too much for Southcorp and Beringer in the past, but has also suffered from a difficult Australian wine industry (including gluts and droughts in the past several years), the slowing U.S. economy and the strong Aussie dollar.

O’Hoy, 53, announced his resignation last month (June 10) and officially stepped down from his role as ceo today after 33 years with the company. Before replacing Ted Kunkel in 2004, O'Hoy ran the Australian brewing business and was chief financial officer.

"Trevor has led Foster's through a period of significant structural and business change since his appointment as CEO in 2004, including the acquisition of Southcorp, the rationalisation of the Company's manufacturing and logistics footprint and the divestment of non-core assets,” said Crawford.

"We again thank Trevor for his significant contribution throughout his 33 years with Foster's and wish him well in his future endeavours," he continued.

Johnston, who has been a director since September 2007, is a former executive with Unilever Plc and Cadbury Plc. He retired as Cadbury's head of global confectionary in 2000 after almost 20 years with the company. The press release says he will “maintain senior management focus and energise the team to drive day-to-day business performance across product categories and global businesses” at Foster’s.

The company says it continues to expect that the wine review and search for a new ceo will be concluded during the first half of fiscal 2009. This means Johnston, 61, could be chief for about four months.

The Age reports that Johnston roughly makes a base of $140,000 as a director and will likely receive a substantial raise with his temporary promotion. O’Hoy earned about $1.37 million of base pay in the 2007 financial year, plus nearly $500,000 in bonuses.

DIAGEO’S STOCK UNDER-RATED

The Wall Street Journal’s Neil Martin featured a story on “trading up” in the alcohol biz, particularly focused on Diageo. He says that “fears on Wall Street that a sluggish U.S. economy and rising global costs of raw materials like grains, wood and glass, will hurt world-wide sales and earnings this year and near term, especially in the U.S. which accounts for 33% of Diageo's net sales and 39% of operating profits” are keeping Diageo’s shares down on the New York Stock Exchange.

However, Diageo and some analysts say the frenzy is unwarranted because consumers are continuing to trade up.

"U.S. sales have come off a bit, but they haven't fallen off a cliff," said Diageo's ceo, Paul Walsh.

"Whatever the state of the global economy, it's not about to derail the world-wide trend toward more premium brands -- especially in the developing world, where economies are creating more affluent social classes with Western tastes for premium spirits, beers and wines," he continued.

Says Bank of America Securities analyst Bryan Spillane: "We believe these concerns are overblown."

Bryan believes Pernod is trading at an undeserved premium. He rates Diageo’s stock a “buy” and projects the shares will be trading more than 30% higher within a year. He also predicts operating profit will increase 9% and 7.5% to 8% in 2009.

KUNDE ESTATE & WINERY FOUNDER DIES

Arthur "Bob" Kunde, co-founder of Kunde Estate & Winery in the heart of Sonoma, died Friday afternoon at the age of 80. His death was the result of surgery complications following a bad fall last Sunday.

Kunde founded the winery in 1990 with his brother, Fred, making the transition from grape growers to vintners, reports the Press Democrat. He was retired at the time of his death but “was still very much involved in the business.”

In addition to his brother Rich and his three children, Kunde is survived by his wife of 55 years, Leslie, and six grandchildren.

A celebration of Kunde’s life will be held Friday at Kunde Estate Winery in Kenwood. Friends and family are invited to attend the 4 p.m. celebration at the winery, located at 9825 Sonoma Highway. Inurnment is private.

Memorial contributions may be made in Kunde’s name to either the 4H Foundation of Sonoma County, PO Box 1283, Rohnert Park, CA, 94927, or, to the Kenwood Firemen’s Association, PO Box 249, Kenwood, CA, 95452.

KIM CRAWFORD SELECTED AS GLOBAL PRIORITY BRAND

Kim Crawford was selected as a Global Priority Brand by owner Constellation Wines, a status awarded to four brands from their global portfolio, the company reports.

Announcing the news, Constellation NZ CEO Joe Stanton said "This is great news for Constellation NZ and means we are ready and resourced to take what is already a successful brand to the next level."

"But the great majority of wine drinkers off-shore are still yet to taste a New Zealand wine. To have the global reach of Constellation focused on the Kim Crawford brand means we are poised to take advantage of that opportunity. An opportunity that began with Sauvignon Blanc but we are able to extend now into other varieties like Pinot Gris, Pinto Noir and Merlot."

Following the acquisition of Kim Crawford Wines by Constellation NZ, Kim Crawford was contracted to the company until February of this year. Kim left to carry on the future of the brand that he co-founded 11 years ago with Erica Crawford, who remains involved as senior vp global sales and marketing for Constellation NZ.

WSD BRIEFS:

SOBIESKI VODKA REACHES 200,000 CASE MARK in the U.S. in less than 12months since launching in 2007 with its “Truth in Vodka” marketing campaign. “There is no question that Sobieski is poised to reach its stated goal of 1 million cases in sales in five years,” said Chester Brandes, ceo of Imperial Brands, Inc., importer of Sobieski Vodka.

THE EDRINGTON GROUP LAUNCHES FROZEN SCOTCH. The Edrington Group is introducing “The Snow Grouse,” an extension of The Famous Grouse brand that is designed to be stored in the freezer. It will be distributed by Maxxium Global Travel Retail as a travel-retail exclusive for six months before a wider international roll out. It retails at $31.64.


Until tomorrow, Megan

“Life is far too important a thing ever to talk seriously about.”
Oscar Wilde

--------- Sell Day Calendar ----------
Today’s Sell Day: 15
Sell days this month: 23
Sell days this month last year: 22
This month ends on a: Thur
This month last year ended on a: Tues.
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.

Foster’s Names Temporary CEO

Foster’s Group said today that Ian Johnston, currently a non-executive director of the company, will serve as acting chief executive officer while the company looks for a permanent replacement for Trevor O’Hoy. In addition to his ceo duties, Ian will assist chairman David Crawford in overseeing the wine review announced in June after the company admitted it had paid too much for Southcorp and Beringer.

O’Hoy also announced his resignation last month and will officially step down from his role as ceo today.

"Trevor has led Foster's through a period of significant structural and business change since his appointment as CEO in 2004, including the acquisition of Southcorp, the rationalisation of the Company's manufacturing and logistics footprint and the divestment of non-core assets,” said David.

"We again thank Trevor for his significant contribution throughout his 33 years with Foster's and wish him well in his future endeavours," he continued.

Ian, who has been a director since September 2007, is a former executive with Unilever Plc and Cadbury Plc.

The company says it continues to expect that the wine review and search for a new ceo will be concluded during the first half of fiscal 2009.


Until tomorrow, Megan

“I like life. It's something to do.”
Ronnie Shakes

--------- Sell Day Calendar ----------
Today’s Sell Day: 14
Sell days this month: 23
Sell days this month last year: 22
This month ends on a: Thur
This month last year ended on a: Tues.
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.

Pernod Moves Forward with Absolut

Pernod has been given the okay to move forward with its $9 billion acquisition of Vin & Sprit by the European Union and Federal Trade Commission. But first, the FTC has required Pernod to end its distribution agreement with SPI (owners of Stoli) in the next six months before the V&S deal is completed. Pernod had already planned to end its agreement with SPI, so it’s really nothing new.

The company also signed a consent order that imposes firewalls to prevent Pernod from using “competitively sensitive information” about Beam Global. The FTC was concerned that Pernod could have an unfair advantage regarding Beam Global’s Cognac, domestic cordials, coffee liqueur, and popular gin once it assume V&S’s role in Future Brands (the joint-venture between Beam and V&S).

"The proposed acquisition would have...raised concerns about the exchange of information in four other distilled spirits markets," said Jeffrey Schmidt, Director of the FTC's Bureau of Competition. "The consent order announced today effectively addresses those concerns and ensures that the Absolut and Stolichnaya brands, and the Pernod and Beam Global brands, will continue to compete aggressively."

The European Union also approved the acquisition on the grounds that Pernod divests Dry Anis in Finland, Serkova vodka in Greece, Lubuski gin in Poland and Star Gin, Red Port and Groenstedts cognac in Sweden. In addition, Pernod agreed to discontinue the distribution of Royal Canadian in Sweden, and will soon end its distribution agreement with the SPI Group concerning Stolichnaya and Moskovskaya in the EU.

CONSTELLATION CHIEF DRAWS $6.2M IN 2008

Constellation ceo Robert Sands drew compensation valued at $6.2 million in the company’s 2008 fiscal year according to its proxy statement, reports the Associated Press.
For the year ended Feb. 29, Robert Sands drew a salary of $978,070, a bonus of $606,403, $835,663 in performance incentives plus perks worth $205,549, most of which was use of company aircraft. He also received stock and options valued at $3.59 million. In fiscal 2007, he received $1.5 million in compensation.

Richard Sands, 56, who switched to chairman after 14 years at the helm, had compensation valued at $4.1 million in fiscal 2007. In the latest fiscal year, he received nearly $7.3 million, including stock and options with an estimated value of $4.2 million.

NEW BABY BOOM IN 2007

Baby Boomers move over. The National Center for Health Statistics just reported that a record 4,315,000 babies were born in the United States in 2007, according to ABC News. The prior record was in 1957, which was the height of the baby boom. Apparently, this is the first year the baby boom has been beaten.

However, the difference lies in the fact that the overall population has nearly doubled since the 1950’s. Back then, the average woman was having close to four children. Today, she’s having close to two. Another difference is that women are having babies later in life. Among women in their 40s, the birth rate has doubled since the 1990s and quadrupled since the 1980s.

The biggest factor contributing to the current baby boom is immigration. The birth rate is rising fastest among Hispanic immigrants in particular, far outpacing the 2.1 average births per woman.

"These are going to be future wage-earners and they're going to be supporting the Social Security system for some decades to come," said Robert Engelman, vice president for programs at the Worldwatch Institute.

He remarked that it will also take a toll on gas prices, food prices and environmental issues in the future.

SAFEWAY SHARES DROP 11% ON ECONOMIC WOES

Safeway says same store sales have dropped as consumers switch to store brands versus name brands. The grocery chain lowered its fiscal 2008 identical-store sales growth forecast to 1% to 2%, excluding fuel sales, from 2% to 2.3%, reports WSJ’s David Kesmodel. As a result, shares fell 11%, or $3.23, to $26.78 Thursday.

"I don't think any of us feel the economy is going to improve anytime soon, at least not consumer confidence," said Safeway chairman and ceo Steve Burd.

He said that although the company has been encouraging the shift to private label brands, “we're not happy with our [identical-store] sales and clearly have plans to improve our momentum as we move through the balance of” the year.

Safeway’s second quarter same-store sales rose 1%, while identical-store sales increased 0.9%. Excluding fuel sales, sales were down -0.2% and -0.3%, respectively. Safeway says it has been slashing costs by cutting jobs, reducing advertising spending and becoming more efficient in moving goods onto store shelves.

WSD BRIEFS:

NORTH CAROLINA REVIEWS ABC SYSTEM. Lawmakers in North Carolina (a control state) are reviewing the Alcoholic Beverage Control system, which could lead to possible changes although it is unlikely it will result in a privatization of liquor stores. Currently, consumers must buy liquor from ABC package stores run by local ABC Boards across the state. The Program Evaluation Division is expected to have a final report for lawmakers by the end of the year, including any recommendations for ways to improve the state's Alcoholic Beverage Control system, according to local reports.

GOV. SCHWARZENEGGER SIGNED A BILL ALLOWING WINES-BY-THE-GLASS OR BOTTLE to be consumed at winery tasting rooms and picnic areas.

TO SEE THE WINNERS OF THE SAN FRANCISCO WINE COMPETITION, click here.


Until Monday, Megan

“I like life. It's something to do.”
Ronnie Shakes

--------- Sell Day Calendar ----------
Today’s Sell Day: 14
Sell days this month: 23
Sell days this month last year: 22
This month ends on a: Thur
This month last year ended on a: Tues.
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.

FTC Approves V&S Buyout Under Certain Conditions

The Federal Trade Commission today issued a complaint charging that Pernod Ricard's proposed $9 billion acquisition of Swedish spirits company Vin & Sprit (V&S) would be anticompetitive and in violation of U.S. antitrust laws because it would effectively combine the two most popular brands of "super-premium" vodka sold nationwide, Absolut and Stolichnaya.

To eliminate the anticompetitive effects of the proposed transaction, the FTC will require Pernod to end its distribution agreement with the owners of Stolichnaya, Spirits International BV (SPI), within six months of acquiring V&S and the Absolut brand. This requirement is contained in a consent order agreed to by Pernod. Recall that Pernod had already planned to end it agreement with SPI.

The FTC also showed concern for Pernod having access to "competitively sensitive information" on Beam Global's Cognac, domestic cordials, coffee liqueur, and popular gin once it assume V&S's role in Future Brands (the joint-venture between Beam and V&S).

"Fortune's subsidiary Beam Global Spirits & Wine, Inc. (Beam Global) owns brands that compete with Pernod brands in four markets - Cognac, domestic cordials, coffee liqueur, and popular gin. Pernod's participation in the joint venture would give Pernod access to competitively sensitive information about the competing Beam Global brands. The consent order preserves the competition between Pernod and Beam Global by imposing firewalls to prevent Pernod from acquiring and using competitively sensitive information about the Beam Global brands."

"The proposed acquisition would have...raised concerns about the exchange of information in four other distilled spirits markets," said Jeffrey Schmidt, Director of the FTC's Bureau of Competition. "The consent order announced today effectively addresses those concerns and ensures that the Absolut and Stolichnaya brands, and the Pernod and Beam Global brands, will continue to compete aggressively."

To read the full press release, click here.


Until tomorrow, Megan

"The secret of staying young is to live honestly, eat slowly, and lie about your age."

Lucille Ball

EU Approves Absolut Acquisition

The European Union has given Pernod “conditional approval” to buy Vin & Sprit (maker of Absolut) for $8.9 billion from the Swedish government. The Commission found problems in various European countries, so Pernod offered to sell Dry Anis in Finland, Serkova vodka in Greece, Lubuski gin in Poland and Star Gin, Red Port and Groenstedts cognac in Sweden. Pernod also agreed to discontinue the distribution of Royal Canadian in Sweden, and will soon end its distribution agreement with the SPI Group concerning Stolichnaya and Moskovskaya.

"The Commission's decision is conditional on the sale of a number of brands in markets where the Commission identified competition concerns," the European Union's top competition regulator said in a statement.

"The remedies that have been proposed by Pernod Ricard will ensure that effective competition is maintained in spirits markets concerned after its acquisition of (Absolut maker) Vin & Sprit," the Commission said.

The company said a 12 billion euro syndicated loan would pay for V&S and refinance existing Pernod debt.

RETAIL SHIPPING UPDATES

The Specialty Wine Retailers Association (SWRA) provided some legislative updates on the issue of direct to consumer shipping by retailers. As you know, the SWRA is working to increase consumer access to wine by making it legal for retailers to ship wine directly to adults in each state. Here’s a recap:

TEXAS. The SWRA is currently appealing a law that prohibits out-of-state retailers from shipping to Texas residents in the 5th Circuit Court of Appeals. As you’ll recall, a Texas District Court judge ruled that the 2005 Granholm v. Heald Supreme Court decision applied as much to retailers as it did to wineries, meaning a state may not allow in-state wine retailers to ship directly to consumers but ban out-of-state retailers from doing the same thing.

However, the judge ruled that the state can require out-of-state retailers to purchase the wines they intend sell to Texas residents only from Texas wholesalers. The SWRA says “the scheme is not only economically unfeasible, but would amount to an unlawful transaction. Retailers may not purchase wine from out-of-state wholesalers.”

Siesta Village Market v. Perry will continue on to oral arguments after another series of response briefs.

The State of Texas and Texas Wholesalers are also appealing the decision and asking the court to ban all retailer shipping in Texas, be it from in-state or out-of-state retailers.

NEW JERSEY. In New Jersey, State Senator Stephen Sweeney introduced SB 1810, a bill that, if passed into law, would allow retailers and wineries both in and outside of New Jersey to ship wine directly to New Jersey consumers. The bill provides for up to 24 cases annually to be shipped by wineries or retailers to any adult resident of New Jersey and creates a shipping permit that would cost $100 per year. SWRA says it is monitoring this bill and expects it to receive a hearing in the fall.

TENNESSEE. In Tennessee, Senate Bill 2686, introduced by Senator Doug Jackson, was sent over to a summer study committee after receiving a hearing, but no vote, in the Senate State & Local Government Committee. The bill would allow in-state and out-of-state wineries and retailers to ship wine directly to Tennessee residents.

SWRA Executive Director Tom Wark attended the hearing and testified on the effect of the bill, claiming it would result in significant tax revenue for the state, but also provide significant protection against underage access.

WASHINGTON. After a bill was killed in Washington State that would have allowed consumers to purchase wine from out of state retailers, the State of Washington has formed the “The Washington State Beer & Wine Regulation, Joint Select Committee Task Force.” The Task Force will be considering potential changes to the state's alcohol regulatory environment, including the issue of retailer-to-consumer wine shipping. SWRA says it has submitted initial written testimony to the Task Force as well as interviewed with staffers.

CONSUMERS FREQUENT BIG BOX STORES, PRIVATE LABELS

A Nielsen study says high gas prices are leading more consumers to purchase private label groceries and shop at supercenters. A majority of consumers (78%) are combining shopping trips and more than half (52%) are eating out less and staying home more often (51%).

In effort to use the minimum amount of gas, 28% of consumers are doing more of their shopping at supercenters, where more items are in one store. More Americans (35%) are buying less expensive brands, although Nielsen warns retailers “to be cautious when making decisions about private label products.” More than half of private labels sales growth comes from milk, fresh eggs, cheese and bread or baked goods.

On the subject of private label, Food Lion’s private label wine, Surf Point, received recognition at the San Francisco International Wine Competition. Surf Point Pinot Grigio received the gold medal, while Surf Point Merlot won the silver medal and Surf Point Chardonnay won the bronze medal, says the company. Surf Point is made and developed on California’s mid-coast from Sonoma grapes and has been available for a month.

WSD BRIEFS:

DEKUYPER INTRODUCES BURST BAR SHOTS, pre-mixed shots containing all ingredients in one bottle. According to a press release, “all the consumer needs to do is “Open, Pour and Party!” Burst Bar Shots come in Red Headed Burst, Kamikaze Burst and Washington Apple Burst. “This new product line reaffirms our commitment to simplifying the liqueurs category and the consumer shopping experience,” said Sheryl Rosenberger, senior brand manager, DeKuyper. A 750ml bottle has a suggested retail price of $10.99.

PATRON LAUNCHES MUSIC IN MOTION. In the three year anniversary of Hurricane Katrina, Patrón tequila is partnering with New Orleans’ St. Bernard Project and Preservation Hall to create a national fundraising initiative called the Music in Motion tour (www.musicinmotiontour.com). The Patrón Tequila Express (a vintage 1927 train car), will visit cities such as Chicago, Indianapolis, Cleveland, Los Angeles, Washington, D.C., Baltimore and New York (and all points between) collecting donations and offering an opportunity for people who raise the most money to ride the train to attend music-related events. The train departs from New Orleans today (July 17).

CHILEAN WINE TERRA ANDINA has launched its 2007 Chardonnay Reserva in the U.S., made exclusively with grapes harvest in Chile’s Limari Valley region. It will sell at the suggested retail price of $12.99 and will be available nationwide beginning August 2008. Terra Andina also introduces its 2007 Chardonnay Varietal at a retail price of $8.99.

COMPLI LAUNCHES DIRECT SHIPPING SOFTWARE. Complí Inc. has released eComplí, a do-it-yourself model that helps wineries complete the necessary steps to ship direct in the U.S. In addition, Compli has opened new Napa offices and hired Clay Wallin to lead its sales and marketing efforts nationally.


Until tomorrow, Megan

“The secret of staying young is to live honestly, eat slowly, and lie about your age.”
Lucille Ball

--------- Sell Day Calendar ----------
Today’s Sell Day: 13
Sell days this month: 23
Sell days this month last year: 22
This month ends on a: Thur
This month last year ended on a: Tues.
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.

Will Alcohol Weather the Economic Storm?

Costs are going up for American consumers across the board, which begs the question, how will this effect the alcohol beverage industry? U.S. consumer prices reached the highest point in June since 2005 thanks to increased costs for fuel and food, reports Bloomberg. Prices increased 5% in the 12 months to June, the most since May 1991. The cost of living soared above its forecast at 1.1%, after a 0.6% gain the prior month, according to the Labor Department.

Energy expenses jumped 6.6%, while gas prices soaring 10.1% and fuel oil jumping 10.4%. The cost of fuel will continue, which means there is no break from pricing pressures in the near future. Crude oil futures reached a record $147.27 a barrel on July 11 and have risen almost 90% in the past year. Prices for all commodities increased 1.9%.

As a result, Americans are dining out less and spending less money on non-necessities.

ALCOHOL “PRETTY RESILIENT.” Clearly, high fuel prices will take a toll on individual businesses, but how will it affect consumers’ purchasing patterns? Industry bigwigs have said for months that beverage alcohol will dodge most bullets because it is seen as an “affordable luxury,” even necessary, by consumers. Many companies have admitted that on-premise sales have taken a dive as more consumers opt to eat at home, but off-premise sales remain strong. However, Richard Hurst of Nielsen said in an article in Business Week that it could be only a matter of time before consumers start cutting back on alcohol sales.

"We think wine and spirits will be the last to be impacted, so some of this may be a delay. But there's enough strength in that income [group] that they can probably weather this pretty well."

Nielsen’s research has echoed the sentiment that alcohol is “pretty resilient” in economic downturns, although on-premise sales have been “considerably impacted” by the declining economy. Off-premise sales have experienced a “mild impact.”

So far, the economy is weighing most heavily on wine, says Nielsen, namely because it is most often consumed at restaurants where sales are soft. Beer sales have remained the most durable.

“Alcoholic beverages are withstanding the economic slowdown very well, compared to other categories that might be considered indulgent or non-necessities. To many consumers, alcoholic beverages are an affordable luxury,” said Danny Brager, vp, Client Service, Beverage Alcohol, Nielsen.

To read a summary of Nielsen’s on-premise research, click here.

To view a summary of the economy’s effect on the alcohol industry according to Nieslen, click here.

NCL SEEKS TO EDUCATE CONSUMERS ABOUT A “STANDARD DRINK”

The National Consumers League is launching a new initiative called Alcohol: How It All Adds Up, which challenges “the myth that some alcoholic beverages are ‘safer’ and less ‘potent’ than others,” says the group. The group is fighting in support of serving facts labels for beer, wine and spirits, which would feature nutrition content (calories and carbohydrates) and alcohol content per serving.

“It is a myth that beer and wine are not as strong as the typical cocktail. Standard serving sizes of all alcohol beverages -- beer, wine, and distilled spirits -- are equal in alcohol strength and their effect on the body,” said the organization.

A standard drink is 0.6 fluid ounces of pure alcohol. Or, a 12-ounce bottle or can of regular beer (5% alcohol), a 5-ounce glass of wine (12% alcohol), and a 1.5 ounce drink of 80 proof (40% alcohol) distilled spirits (either straight or in a mixed drink). The standard drink campaign, along with nutritional content, is generally supported by larger spirits companies (particularly Diageo) and Discus but disliked by most beer and wine producers.

The TTB is reviewing a proposal that would require all alcohol beverages to display serving facts. However, the proposal does not require producers to display the amount of alcohol per serving or the definition of a standard drink.

"Without ready access to information about the amount of alcohol they are consuming, many Americans believe that beer and wine offer a 'soft' option and can be consumed in greater amounts than so-called 'hard' liquor," said Sally Greenberg, Executive Director of the League.

"We are trying to give consumers the basics about the alcohol content of different alcoholic beverages, but the real answer is government action to require standardized and complete labeling information on beer, wine and distilled spirits products. Consumers should know how many calories, carbohydrates, and other nutrition information are in a standard drink. They have it for nonalcoholic beverages, food, and nonprescription drugs. It is time for this information to be on the labels for alcoholic beverages."

The NCL is making available a new Alcohol: How It All Adds Up guide and a series of information sheets about alcohol content, alcohol labels, and binge drinking to consumers, community leaders and health professionals. These materials are available on their website, www.nclnet.org.

ABSOLUT FEATURES KANYE WEST INFOMERCIAL

Absolut vodka has been working to change is traditional image through its “Visionaries” campaign featuring pop celebrities. The most recent, and arguably the most popular, was a spoof on infomercials with Kanye West, which Brandweek covered this week. The spot promoted "fast-acting Kanye tablets" that can turn anyone into Kanye West complete with a toll-free number: 877-Bekanye.

A newer version of the advertisement launched this week and features what you think is Kanye West at a nightclub until the Kanye tablet wears off.

So far, Absolut has worked with about 20 artists in the campaign in effort to dispel the classic Absolut bottle image. "It's been a challenge," said Ian Crystal, brand director at Absolut. "The new campaign has been in the market for a little over a year and people were still thinking of the old one. As of the past few months though, they started to adapt. This new campaign, which is a more ideal look at the world, has a lot of legs to it."

To view the original spot, click here.

To view the newest spot, click here.

WHAT IS FUME BLANC?

Fume Blanc, a term invented by Robert Mondavi in the 1960’s, is something you don’t hear much about nowadays. Basically another word for Sauvignon Blanc, Mondavi decided to use “Fume Blanc” as a way to differentiate his wines from sweet, American wines. However, California winery Dry Creek Vineyard has launched a "What is fumé?" campaign complete with Web site (whatisfume.com), brochures, store signage and educational tastings to promote the term.

The Chicago Tribune featured an interesting article on the subject of Fume Blanc and Sauvignon Blanc, its history and whether the term Fume Blanc should be officially retired.

ONLINE ALCOHOL ADS STILL ILLEGAL IN FRANCE

Promoting wine in any way on the internet is still illegal in France after the Senate failed to pass an amendment, reports Decanter. It was voted out mainly because it did include the results of a government study because the report was not yet available. It was also rejected because it proposed a new definition of the word 'publicity,' which aimed at clearing up whether writing about wine in an editorial context can be considered advertising. A revised amendment should be presented in September or October.

WSD BRIEFS:

WINE INSTITUTE NAMES DIRECTOR OF ENVIRONMENTAL AFFAIRS. Allison Jordan has been named Director of Environmental Affairs at Wine Institute, a new department to oversee the sustainable winegrowing program and environmental issues. Jordan joined the Wine Institute in 2004 and was previously Communications Programs Manager and also Executive Director of the California Sustainable Winegrowing Alliance (CSWA), a position she will continue to hold.

SAN MATEO COUNTY CONSIDERS MENU LABELING. California's San Mateo County is evaluating a proposal similar to San Francisco’s menu labeling laws. If passed, it would require chain restaurants to disclose the calorie, fat, sodium and carbohydrate content of every standard menu item on menus, menu boards or posters. Non-complying restaurants would be subject to fines and a revocation of their operating permits, reports NRN.

CALIFORNIA PASSES TRANS-FAT BILL. The California legislature has passed a bill that would require restaurants throughout the state to eliminate trans fats from all menu items during a multi-year process. Gov. Arnold Schwarzenegger has yet to indicate whether he will veto the measure or sign it into law, says NRN. Several cities and counties have banned trans fat from menus, but California would be the first state to do so.

BULGARIAN WINES HIT $1M. BulgarianWine.com, an importer of Bulgarian wines, has surpassed the $1 million dollar milestone in Internet sales of Bulgarian wines. In a statement, the company says “this achievement illustrates the vastly improved quality of Bulgarian wines over the past decade.”


Until tomorrow, Megan

“The wit makes fun of other persons; the satirist makes fun of the world; the humorist makes fun of himself.”
James Thurber

--------- Sell Day Calendar ----------
Today’s Sell Day: 12
Sell days this month: 23
Sell days this month last year: 22
This month ends on a: Thur
This month last year ended on a: Tues.
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.

CAMY Halts Alcohol Research

CAMY, the Center for Alcohol Marketing and Youth, has “concluded its activities,” according to its mission statement on its website. The organization is no longer receiving funding and the federal government has decided it will assign one of its agencies to keep tabs on alcohol advertising in the future. A press release by STATS (Statistical Assessment Service) calls CAMY a “serial abuser of statistics” and says “even scholarly research can have a hard time staying dispassionate and objective.” Many people in the alcohol industry have accused CAMY of having its own agenda and distorting the facts for years.

“...If intuition was a good predictor of cause and effect, one would also expect to see some correlation between increased drinking among teens and overexposure to advertising. The signal problem for CAMY is