WSWA Urges Members to Form a United Front

FILED APRIL 11, 2011

Dear Client:

The 68th Annual WSWA Convention & Exposition kicked off yesterday in Orlando, Florida, beginning with a speech from incoming chairman Bobby Harmelin, who is also evp of Allied Beverage Group. "We're only as strong as the commitment from our members," he told the audience. "Complacency and inaction threaten our strength and ultimately our survival."

He urged WSWA members to form a united front: "Each and every one of us must speak to the issues that effect us today" in order to help shape how the industry will look tomorrow. He reminded the audience that the wine and spirits industry is much different now than it was several generations ago, and that it will look even different in the future. For example, "consolidation has dramatically reduced the number of large and medium sized distributors," but it has also resulted in "a large number of new wholesaler enterprises emerging" in states.

As the industry adapts to changes, Bobby said there are "three critical issues" wholesalers must take into account. One, they need to focus on "strengthening the WSWA to maximize our sphere of influence." Two, enhance their ability "to safeguard our interests." And three, take a stand on "critical legislation." That includes opposing attempts to repeal Last-In-First-Out (LIFO); lobbying for the CARE Act; and eliminating the Estate Tax.

It is "in your best interest to be well informed about the current issues that effect us. It is also in your best interest to attend meetings," said Bobby. He urged listeners to attend the "Fly In" May 25 on Capitol Hill. "There is strength in numbers."

"If we want our business not only to survive but to flourish we have to look out for our best interests. We have to speak up and we have to put our money where our mouth is."

COMMENTS ON CARE ACT (HR 1161). The CARE Act, said Bobby, "supports and protects state regulation of alcohol and limits litigation efforts to erode" that regulation. "Nowhere else on the face of this planet does the alcohol consumer have such a large range of choices," thanks to the three-tier system.

This latest version of CARE was amended to address "concerns of many of our partners in the three-tier system." He said their goal is to determine who makes the decisions regarding alcohol regulation, but not what those decisions should be.

He urged the audience to "come to us" if you object to this legislation, and "perhaps we can assure you." But "if you find that you still cannot support us.be Switzerland, remain neutral" instead of objecting to the WSWA's efforts on Capitol Hill. It is important that they represent a unified front to Congress, he said. "A fractured split over this one issue will" hurt us all. Your support "is necessary if we are to succeed." Then he encouraged members to reach out to their state representatives.

"I implore you, get more involved. Attend the meetings and make a contribution to the PAC."

SIDNEY FRANK AWARD. This year the Sidney Frank Award was presented to Bill Samuels Jr., the retiring president of Maker's Mark and seventh generation distiller. "After 43 years it's been a great ride," he said. "To watch Maker's go from hobby to icon.it's really something."

BEHIND THE SCENES. It is apparent that DISCUS and all of its members except Luxco are not present at the event this year. Instead of the traditional industry reception sponsored by DISCUS, the main reception this year was sponsored by Sazerac, Proximo and Heaven Hill. Maxim magazine and Skyy Spirits sponsored an after-party Sunday night, and Luxco is sponsoring the invitation-only CLD reception tonight. The traditional suites are being hosted by non-DISCUS members, mainly medium and small suppliers, which is giving them more face time with wholesalers. However, we've learned that certain DISCUS members are meeting with wholesalers at nearby hotels.

When we asked DISCUS about their expected absence in March, they told us: "In an era of consolidation, where suppliers meet with their wholesaler partners weekly and even daily, DISCUS members have concluded that a traditional convention doesn't meet their commercial needs."

WSWA chief Craig Wolf told WSD: "The fact that some DISCUS members have opted to forego the tremendous opportunities that the convention provides simply means that wholesalers will be able to commit greater time and resources to those suppliers that are attending."

STAY TUNED. Tomorrow we will hear from WSWA chief Craig Wolf and attend a number of breakout sessions, so stay tuned for that coverage..

LEGEND EDDIE PHILLIPS DIES

We regret to report that industry legend Eddie Phillips died Friday of multiple myeloma at the age of 66. He was at his home in Minneapolis, surrounded by his four children, reports the Minneapolis Star Tribune. As you know, Eddie is credited with starting the luxury vodka category.

HISTORY IN THE BUSINESS. His grandfather, Jay Phillips, build spirits distributor giant Ed Phillips & Sons. Eddie joined the company after college and stayed on after Alco Standard acquired it. In the 1970s he revolutionized the industry by launching a national advertising campaign encouraging moderation.

Then in the mid-1980s Eddie bought back Alco's beverage division. In order to pay down debt, he sold Phillips Beverage's spirits distributorship but kept its production and marketing businesses.

In 1994, he started Millennium Import, which imported both Belvedere and Chopin vodkas to the US. He sold Millennium to Moet Hennessy in 2005.

His son, Dean Phillips, is now ceo of Phillips Distilling, with brands including UV vodka and Phillips Union flavored bourbon.

In addition to having a big impact on the spirits industry, Eddie was also a major philanthropist. He served as a trustee on the foundation started by his grandparents and raised $10 million for Alzheimer's research after his mother, Pauline Phillips or better known as "Dear Abby," was diagnosed with the disease. He was also board chairman of Children's Hospitals and Clinics of Minnesota.

Among his survivors are his adult sons, Dean and Tyler; son J.J. and daughter Hutton, who are teenaged twins; parents Mort and Pauline; a sister, Jeanne, and two grandchildren. Services will be held at 11 a.m. Monday at Temple Israel, followed by burial at the Minneapolis Jewish Cemetery.

You can read his full obituary here. We offer our condolences to friends and family.

WA LEGISLATORS MULL PRIVATIZATION OPTION - BUT WILL IT PASS?

Partial privatization of Washington's spirits business is closer than ever. The House passed its budget bill over the weekend, including a measure that calls for the state to lease out its spirits distribution system to a private company for as much as $300 million. The lease would span 20 years. The plan was introduced by Tom Luce, who founded the Washington Beverage Co.

Currently staffers with the legislature and the governor's budget office are researching how the plan would work. Right now "the goal is to issue a request for proposals," reports The Olympian. The state can reject the proposals if it turns out not to be a good deal. Tom says his plan would give the state about $1.5 billion more revenue over 20 years if state profits can increase 1% more a year than it does already. The private company would take a cut of the profits. Early drafts of the bill say the bidder or its partner must have experience in distribution, whether inside or outside the state. As for the 94 employees at the state's spirits warehouse, they would remain unionized but would no longer be government employees.

So it's all hinging on the supposition that a private company could produce higher profits than the government. "She's certainly willing to explore it but has expressed concerns over the loss of revenue down the road," Gov Gregoire spokeswoman Karina Shagren said.

We'll have to wait and see if this initiative is put into action. Meanwhile, what about that privatization proposal that Costco is reportedly pushing? According to the Seattle Times, "it doesn't appear to be going anywhere." So despite pushes for privatization from several different sides, there is a good chance nothing will happen this legislative session. We'll be watching closely.

LEASING PROPOSAL MADE IN VERMONT AS WELL. Dean Williams, president of Maine Beverage Company, has proposed a similar plan to the governor and legislators in Vermont, but so far it is not sparking much interest, says the AP. And yes, it is all connected. The company's Maine operations are managed by the Massachusetts-based Martignetti Companies and financially backed by the Lindsay Goldberg private equity firm. Goldberg is also involved in the Washington proposal.

CUBAN GOVERNMENT DECRIES HAVANA CLUB RULING

The Cuban government "condemned" the latest Havana Club ruling by the U.S. Court of Appeals that said the US Treasury Office of Foreign Asset Control was correct in blocking Pernod Ricard and Cubaexport from renewing their Havana Club Rum trademark in 2006, reports the Cuban News Agency. You can read our coverage of the ruling here.

The article notes that Section 211 of the Omnibus Appropriations Act of 1998, which makes trademarks confiscated by the Cuban government unenforceable in the US, "was drafted and presented to a US Senate Judiciary Subcommittee on Intellectual Property by former Assistant Secretary of State for the Western Hemisphere Otto Reich, who was advising Bacardi at that time, when this company was under litigation in New York for using illegally the trademark."

Bacardi and Pernod/Cuba Export have been fighting over the rights to the Havana Club name in the US since 1994, when Bacardi applied for a US trademark. The U.S. Patent and Trademark Office rejected Bacardi's request in part because Cubaexport already had a trademark. Bacardi then lobbied for Section 211, which keeps Havana Club out of the US - at least for now since Pernod says it will continue to fight.

The report goes on to say that "the US government's goal is to prevent Cuba from having a commercial presence within its territory, in which 17 percent of the world's production of Premium rums is consumed."

WSD BRIEFS:

ROBERT HALL WINERY has selected Domaine Napa Wine Company, a division of Bronco Wine Company, to represent the winery nationally with sales and distribution management for its Robert Hall and Terra Robles wines. Domaine has distributed Paso Robles-based Robert Hall in California over the past 8 years.

THE MARYLAND HOUSE has passed the first of 2 bills needed to increase the sales tax on beer, wine and spirits from 6% to 9%. The House plan would take effect within a year, as opposed to the Senate proposal to raise alcohol taxes by 1% annually for three years. The House plans to take up a second bill on the issue later today. Both measures must also win Senate approval by midnight to be sent to Gov. Martin O'Malley. If passed, it would take effect in July. The House also passed a measure that would require ignition interlock devices on the vehicles of repeat drunk drivers.

NEW MEXICO has passed SB 445, which creates a wine shipping permit for out-of-state wineries. "New Mexico will be the last state to change from reciprocity to permit status for winery shipping since it was the last state that had a reciprocity law still on the books for wineries," said Ship Compliant Blog. It goes into effect on July 1.

CENTENNIAL FINE WINE & SPIRITS, a liquor store chain based in Dallas, has paid $32.6 million to buy most of the assets of Majestic Liquor Stores, which has been reorganizing under bankruptcy protection since last year. Majestic has 32 stores in Texas. Centennial, which also operates Big Daddy's Liquors, more than doubled in size with the acquisition and now has 67 stores and five warehouses.

WAL-MART IS RESTORING 8,500 PRODUCTS to store shelves to help boost sales, reports Bloomberg. That includes new pasta, beverages, snacks, fresh groceries, electronics, sporting goods and apparel.

UTAH LAWMAKER Rep. Ryan Wilcox is working on a bill that would privatize Utah liquor stores. He reportedly plans to file the bill in early May. Details are still emerging.


Until tomorrow, Megan

"Always laugh when you can. It is cheap medicine."
Lord Byron

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