Maker's vs Cuervo: Arguments Heard in Appeals Case

FILED DECEMBER 1, 2011

Dear Client:

The 6th Circuit Court of Appeals today heard oral arguments regarding Maker's Mark ownership of the dripping red wax seal. You may recall that a district judge ruled in April 2010 that Maker's alone can use the red wax seal, and issued an injunction preventing Cuervo (or any other distiller for that matter) from doing the same, even though Cuervo had stopped using the red wax seal on its Reserva brand years earlier. (To read more background click here.] Well Diageo and Cuervo have since appealed that decision on the grounds that Maker's trademark is invalid because the industry has used wax seals for hundreds of years.

Maker's attorney Edward Colbert (yes, the brother of comedian Stephen Colbert) argued this: "What they have here is a competitive desire to use the wax, not a competitive need to use wax," reports the Associated Press, noting that the wax seal is central to Maker's advertising.

Meanwhile, Cuervo's attorney said consumers would not be confused if other brands used a red wax seal: "They're not going to get confused and think it comes from Kentucky," argued Michael Aschen. He pointed out that Maker's uses a square bottle with black lettering and costs $25, while Cuervo's Reserva bottle is "tall, cylindrical, bears the tequila's logo and cost about $100." The only similarity would be the red wax seal. Now it's all up to the appeals court to decide.

PAUL WALSH WOULD RATHER EXPAND IN EMERGING MARKETS THAN BUY A BOURBON

In an interesting interview with "This is Money," Diageo chief Paul Walsh said he "would prefer to put my incremental capital into new markets," rather than acquiring a well-known bourbon brand such as Maker's Mark (speaking of the devil). And they've been doing just that with recent acquisitions that include Turkey's Mey Icki and purchasing a controlling stake in China's Shui Jing Fang, which produces Baijiu. He also sees opportunities in "family owned brands where the families" are looking for some help. Their recent, 50% controlling stake in Guatemala's Zacapa rum is one example.

WINE TAKING A BACK SEAT. Regarding wine, Paul is happy with their current position: "I have no desire to put a lot more capital into wine." He says that having wine brands is helpful in expanding their spirits portfolio in restaurants, but if another company wanted to buy their wine business, "we would look at it."

TREASURY CONTINUES BRAND FOCUSED REORG WITH NEW LINDEMAN'S HEAD

After the spin-off Treasury Wine Estates chief David Drearie said the company would focus on its brands moving forward rather than operating as a business fragmented by 4 regional divisions. Hence the restructuring that began in October, with the latest installment announced yesterday. Treasury has named Michelle Terry as managing director of Lindeman's, which makes her the fourth out of 5 appointments for "Brand Business Unit Managing Directors" that will lead Treasury's foundation brands. As with the others, Michelle will report directly to David. She most recently served as global brand director of Wolf Blass and global marketing manager of Lindeman's. As managing director, she will be responsible for setting and driving the strategic direction of the Lindeman's business unit.

"Our new structure will ensure that we think and behave as a global business and allow us to allocate our resources to growth opportunities that optimize returns for the group as a whole," said David. "It recognizes equally the importance of our brands, winery operations and winemaking, and the regions in which we operate."

Recall that Stephen Brauer, former managing director of Treasury's Americas unit, heads Beringer, while Simon Marton, who was managing director of Australia and New Zealand (ANZ), is the managing director of Wolf Blass, and Angus McPherson, who was most recently export sales manager for Casella, will lead Rosemount.

To read our recent interview with Stephen Brauer, click here: http://www.winespiritsdaily.com/publications_daily.php?id=1599

ITALY MOVES TO AUTHENTICATE PROSECCO EXPORTS

A few years back Italy had some problems with fraudulent Brunello being sold, i.e. it didn't contain 100% Sangiovese grapes, which led to the TTB taking certain time consuming precautions with those imports. Well the Italians are now taking steps to ensure that the same thing doesn't happen with the oh-so-popular prosecco category. The prosecco D.O.C. of Italy (Consorzio Tutela) has approved adding seals on prosecco bottle tops that guarantees their authenticity starting January 1, reports WineBusiness.com. Apparently there are some concerns about importers in the US and other countries taking private label brands made from Italian bulk white sparkling wine and selling them as prosecco. You can see where the temptation lies, as prosecco was up 81.4% in sales and 87.3% in volume in October, based on SymphonyIRI scans in food, drug and c-stores.

DEBATES OVER PRIVATIZATION CONTINUE IN PENNSYLVANIA

It depends on who you talk to in Pennsylvania, but privatization is looking like more of a possibility as the House Liquor Control Committee conducts its final hearings on legislation to sell the state's wine and spirits stores this week. Committee chairman John Taylor promised the privatization train would get rolling before the end of the year, according to The Morning Call. The issue facing the committee is finding a solution that will garner support from everyone involved, which may prove challenging. Grocery store operators want to do away with the cap on the number of stores that can obtain licenses to sell wine and spirits, brewers want to be included in the bill and substance abuse advocates want the legislation to make education and abuse prevention a priority. Before the vote on December 13, the committee still has to hear from Public Financial Management Inc., a company Governor Corbett commissioned to perform a study on privatization, as well as opponent United Food and Commercial Workers local 1776. Pennsylvania Auditor General Jack Wagner has already voiced his opposition. He recently said this in a statement: "In certain instances I support privatization because I believe it can be beneficial in appropriation situations. However, I oppose privatizing the state's liquor stores because the negatives far outweigh any potential benefits."

WSD BRIEFS:

THANKS TO CYBER MONDAY online sales hit a billion dollars for only the second time in history this week and consumer confidence surged. The consumer confidence index increased 15.1 points in November compared to October 2011 in the highest month-over-month gain since April 2003. According to CSN, the improvement can be attributed to the small gain in consumer optimism in relation to the US job market. A report from MarketWatch indicated the $1.25 billion online sales and 22% increase for this year's Cyber Monday was due to the heavy promotional marketing and a larger volume of sales shifted to online channels. "It will also be vital to see whether retailers' deals and price discounting, which consumers are now able to discover via so many different digital media channels, will have a negative impact on retailers' margins this holiday season," said Gian Fulgoni, chairman of online measurement firm comScore.

CASH-STRAPPED STATES ARE LOSING AN ESTIMATED $24 BILLION to untaxed online purchases and they want to level the playing field, reported Retailingtoday.com. In 1992 a Supreme Court ruling declared retailers are required to collect sales tax from out-of-state customers only if the retailer has a physical presence like a store, warehouse or office in the customer's state. A suggestion for new legislation submitted to a House Judiciary Committee calls for tax collection reform that will require all sellers to collect sales taxes regardless of a physical presence.

THE ROBERT MONDAVI ESTATE IN NAPA SOLD to an undisclosed buyer for an undisclosed price. The 11,800 square-foot estate with 53 acres is in the Stags Leap district and was listed in auction in October with bids starting at $13.9 million, according to the Napa Valley Register.

GLAZER'S HAS OPENED A NEW SALES OFFICE in Rogers, Arkansas to house its national account group supporting Walmart and Sam's Club. The 2,000 square foot office includes sales, category management, analytics, replenishment, trade development and oversight of compliance execution across 10 states. "Walmart and Sam's Club are important and strategic customers of Glazer's, and being in close proximity to their corporate offices is important to us," said Don Pratt, Glazer's svp of off-premise corporate accounts.

ABSOLUT MIAMI is the latest in the brand's limited edition city series. It is a blend of passion fruit and orange blossoms, and hits shelves on New Year's Day until at least the spring, reports the Miami Herald.


Until tomorrow, Megan

"Start every day off with a smile and get it over with."
W. C. Fields

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