Missouri Court Denies Southern's Residency Argument

FILED MAY 30, 2012

Dear Client:

The fight by Southern Wine & Spirits to overturn Missouri's residency requirement has hit a wall. District Judge Nanette Laughrey has granted a summary judgment in favor of the Missouri Division of Alcohol and Tobacco Control (the defendants) to overturn Southern's lawsuit seeking to overturn Missouri's residency requirement.

You may recall we reported back in January that Southern had filed a motion for summary judgment where it claimed Missouri's residency requirement is invalid under the Equal Protection Clause, the Commerce Clause and the Privileges and Immunities Clause of the United States Constitution. Thus far Southern has been successful in overthrowing residency requirements in Texas and Indiana, but so far not in Missouri unless Southern decides to appeal.

Here's what Judge Laughrey wrote:

COMMERCE CLAUSE ARGUMENT. Wineries successfully used the Commerce Clause argument in Granholm v. Heald, which ultimately said states could not allow in-state wineries to ship directly to residents but bar out-of-state wineries from doing the same thing. Southern tried to apply the same logic to Missouri's residency requirement, but the judge says they are two separate things.

Granholm "only related directly to producers of alcoholic goods," she wrote. Furthermore, it ruled that "'[t]he Twenty-first Amendment grants the States virtually complete control over whether to permit importation or sale of liquor and how to structure the liquor distribution system.'" It also declared the three-tier system "'unquestionably legitimate.'"

So what does that mean for Southern? "Unlike in Granholm, Missouri's residency requirements do not discriminate against any types of alcohol products or producers," writes Judge Laughrey. Furthermore, "The language of Granholm thus allows Missouri to discriminate in favor of in-state wholesalers."

This puts Missouri in disagreement with the Fifth Circuit, which struck down the Texas residency requirement. But that's due to timing, said the judge, because the Granholm court had not yet "clarified for lower courts the proper interaction between the Twenty-First Amendment and Commerce Clause."

PRIVILEGES AND IMMUNITIES ARGUMENT. This clause does not apply to Southern "on account of the Twenty-First Amendment's broad grant of power to the states" and because "corporations are not protected by the Clause," says the judge.

EQUAL PROTECTION ARGUMENT. As above, Judge Laughrey says the Twenty-First Amendment "defeats the need for an equal protection analysis," but she does one anyway. A residency requirement fits into the larger scope of the three-tier system because it can "rationally be assumed to promote greater accountability and responsibility on the part of the wholesaler towards the community." It's not irrational that the residency requirement does not apply to retailers because "retailers are more visible in the community and thus are likely subject to greater pressure from the public and law enforcement than wholesalers acting in an irresponsible manner."

So there you have it. Now we wait to see if Southern appeals.


Campari America has secured the exclusive import and distribution rights of Morrison Bowmore Distillers' McClelland's Single Malt Scotch Whisky in the US, which was previously held by White Rock Distilleries. Campari already distributes MBD's other brands in the US, including Bowmore Islay, Auchentoshan Lowland and Glen Garioch Highland. The deal is effective June 1. Note that MBD is a subsidiary of Suntory Limited and that Campari markets other Suntory brands in the US.

Since McClelland came to the US market 18 years ago, it has become the fifth best-selling single malt, said the company. It remains the second best-selling malt in the MBD portfolio on a global basis and ranks number 15 in worldwide sales, according to an IWSR 2011 report.

The McClelland's range includes four offerings: Highland, Islay, Lowland and Speyside. This further boosts Campari's whiskey portfolio, which includes Wild Turkey, Russell's Reserve, Glen Grant, Hibiki Whisky, Hakushu Single Malt and The Yamazaki Single Malt.

As it turns out, these brands fit into some of the fastest growing categories based on off-premise Nielsen scans. Dollar sales of bourbon grew +12.4% in the 52-weeks ending April 28, followed by single malt Scotch at +10.9%, Japanese whiskey at +31.5%, Corn and Rye whiskey at +73.5% and flavored whiskey at +176.9%.

"The addition of the broad McClelland's portfolio lets us offer even wider choices for our distributors, retailers and consumers, furthering solidifying our position as the premier whisk(e)y supplier in the U.S.," said Gerry Ruvo, Campari America's chief.

Since Campari America took on MBD's other brands in 2008, their portfolio has "shown significant volume and value growth," said MBD chief Mike Keiller. "We are confident that McClelland's strong growth trajectory will only continue under the expert leadership of Campari America and its outstanding sales force."


Pernod Ricard's Malibu is launching a new lower calorie extension to its pre-mixed cocktails line called Caribbean Cosmo Light. It is a blend of Malibu Coconut, Lime, Orange and Cranberry and will replace the current Caribbean Cosmo offering. At 12.5% alcohol per volume, it has 100 calories per 4 ounce serving. It hits retail shelves in July, and is the first of the Malibu Cocktails to come in the new 1.75L pouch. It has a suggested retail price of $19.99/1.75L.

"Our Caribbean Cosmo Light provides consumers with a delicious, low calorie cocktail option for on-the-go versus traditional portable options such as light beer or calorie heavy wine coolers," stated Lisa McCann, Brand Director, Malibu, Pernod Ricard USA.

The rest of the Cocktails line includes Tropical Sea Breeze, Tropical Mojito, Rum Punch and, most recently added to the portfolio, Melon Margarita.


CALIFORNIA'S SB 778, a bill that was brought by The Wine Institute and is backed by Diageo and Korbel, would allow sweepstakes and exempt contest prizes from established gift limits. It also prohibits a purchase or entry fee to enter a contest of sweepstakes unless the principal sponsor is an organization "established for the encouragement and promotion of an activity." Currently all licensees in the state are prohibited from giving any gift or free goods in connection with alcoholic beverages. It has passed the Senate and is now being considered by the Assembly. You can read the full bill here.

KETEL ONE HAPPY WITH CURRENT ARRANGEMENT. That's according to a tweet from international drinks journalist Lucy Britner. She writes: "Just interviewed Ketel One's Bob Nolet. He said they are happy with Diageo joint venture, Nolet will not sell rest of company to Diageo."

AVENIU BRANDS RELEASES NEW SPANISH BLEND. Mermelada is a new sweet red blend from Spain scheduled to release nationally in summer 2012. With a suggested retail price of $12 a bottle, Mermelada is a blend of Tempranillo, Cabernet Sauvignon and Merlot grapes grown and estate-bottled in the D.O. Costers del Segre region of northeastern Spain. Its target audience is "younger, primarily female wine lovers," said the company. Grupo Codorniu is the parent company of Aveniu Brands.

Until tomorrow, Megan

"The only sure thing about luck is that it will change."
Bret Harte

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