Pernod Chooses Major Brands in Missouri


Dear Client:

Recall WSD reported that in January Pernod Ricard filed lawsuits against two of the state's largest distributors, Major Brands and Glazer's Midwest, over the legality of terminating its contract with both. However, Pernod has just announced that it has decided to stick with Major Brands, which will represent the company's entire portfolio, as of May 1.

QUICK REFRESHER: In Missouri, Glazer's and Major Brands split Pernod's portfolio 44% and 56%, respectively. Pernod says neither of them have a written distribution agreement, and as of September 2012, Pernod decided to consolidate distribution in the state. Pernod requested both distributors submit a proposal on why it should be the one to distribute the entire Pernod portfolio. This rubbed both distributors the wrong way, and according to Pernod's legal complain, both distributors refused to participate. Furthermore, they feel that Mississippi franchise laws would prevent Pernod from making this move at all. Pernod subsequently filed a lawsuit in January against both of them.

LAWSUIT PENDING. A statement from Pernod says litigation is still pending, but that Glazer's will continue to distribute Pernod's products in Arkansas and Kansas.

"We are very pleased to be able to achieve our goal to consolidate the distribution of our premium portfolio into one wholesaler in Missouri, as this move will further strengthen our powerful Route to Market in that state," says Bryan Fry, president and ceo of Pernod Ricard USA.

Major Brands chairman and ceo Susan McCollum added, "Today's announcement reaffirms the strength of the longstanding partnership between Pernod and Major Brands."

Don't forget Bacardi and Diageo still have their own lawsuits pending where they are seeking to terminate their distributor contracts with Major Brands. The other lawsuit that could affect the outcome in Missouri is between Southern Wine & Spirits and the state. Recall Southern is suing to overturn the state's residency requirement.


Every year SymphonyIRI reveals the 20 fastest growing wine brands at the off-premise. The results for 2012 show that the industry is continuing to invest in the $8-$11 price segment, and that it's importance is only increasing. California wines dominated, with only 2 imports (San Antonio Winery's Stella Rosa from Italy and Gallo's Alamos from Argentina) and 2 Washington wines (Ste. Michelle Winery's 14 Hands and Chateau Ste. Michelle) making the list. Furthermore, Gallo had the largest number of momentum brands at 6, followed by Constellation Wines (4) and The Wine Group (3).

You can see the Top 20 Momentum brands for yourself:

1. Cupcake Vineyards, $8-$11 (The Wine Group)
2. 14 Hands, $8 - $11 (Chateau Ste. Michelle)
3. Barefoot, $5 - $8 (E&J Gallo)
4. Liberty Creek, Below $3.50 (E&J Gallo)
5. Apothic, $8 - $11 (E&J Gallo)
6. Black Box Wines, Above $3.50 (Constellation Wines)
7. Bota Box, Above $3.50 (Delicato Family Vineyards)
8. Rex Goliath, $5-$8 (Constellation Wines)
9. Stella Rosa, $11-$15 (San Antonio Winery)
10. Chateau Ste. Michelle $8-$11 (Chateau Ste. Michelle)
11. Bogle Vineyards, $8-$11 (Bogle Vineyards)
12. Woodbridge by Robert Mondavi, $5-$8 (Constellation Wines)
13. Alamos, $8 - $11 (E&J Gallo)
14. The Naked Grape, $5-$8 (E&J Gallo)
15. Menage A Trois, $8-$11 (Trinchero Family Estates)
16. Gallo Family Vineyards, $3.50-$5 (E&J Gallo)
17. J Lohr, $11-$15 (J Lohr)
18. FlipFlop, $5-$8 (The Wine Group)
19. The Dreaming Tree, $11-$15 (Constellation Wines)
20. Franzia Box, Below $3.50 (The Wine Group)

CONSUMERS TRADING UP TO HIGHER PRICES THAN BEFORE. The $8-$11 industry sweet spot for pricing has the most number of momentum brands represented. "A lot of the volume losses in the segment below $5 are a result of people actually switching into the higher segments," Curtis Mann, SymphonyIRI's director of wine and spirits insights, told WSD. He noted that in current scan data a lot of consumers are moving from the $5 and under segment up into the $8-$11 price segment, and in some cases even higher than that.

That trend is a reverse of what was happening three years ago when most consumers were entering the wine category at the $5 - $8 price points and then switching down to the value segment ($5 and below) or up into the $8 and above price segment. Even the price segment in which consumers enter the category has gone up . "Now we have a lot of people coming in that same range," but instead of just $5 - $8, new consumers are coming in at $5 - $11, says Curtis. "And instead of switching down or up they're either staying in the same place, or switching up." In addition, he says people who were already drinking in the $11-$15 price segment are now consuming more.

NEW ENTRANT TRENDS: As you can imagine, this has resulted in a lot of new brands being released in the $8 - $11 space. SymphonyIRI also compiled a list of the best selling new wine brands in 2012, in terms of sales. With the exception of Skinnygirl, which costs around $13 a bottle, every single one of the Top 10 new wine brands is in the $8-$11 price segment. Below is the complete list of the Top 10 new brands.

1. Skinnygirl (Beam Global)
2. Be. (Treasury Wine Estates)
3. Bella Bolle (Prestige Wine Group)
4. Acronym (Winery Exchange)
5. Macaron (The Wine Group)
6. Fancy Pants (Trinchero Family Estates)
7. Thorny Rose (Constellation Brands)
8. Wine Sisterhood (Canopy Management)
9. Flirt (Vintage Wine Estates)
10. Ooh La La (Constellation Brands)

While the list of the Top 20 Momentum brands is dominated largely by California and the big players like The Wine Group and E & J Gallo, there's certainly a lot more diversity among the fastest growing new brands. Italy makes up 20% of the Top 10 list with Bella Bolle and Macaron, and smaller companies like Canopy Management and Vintage Wine Estates also made the cut.

Interestingly, Washington is represented on both lists, but Oregon is absent. As we mentioned above, Ste. Michelle Wine Estates has two brands on the Top 20 momentum brands list: 14 Hands (No 2.) and Chateau Ste. Michelle (No. 10). For the Top 10 new brands list, Thorny Rose and Constellation Brands represent Washington.


Deutsch Family Wine & Spirits has acquired Eppa SuperFruit Sangria from Eppa Wine Company. Created by four former Bacardi employees, Eppa has achieved impressive growth for only having been in the market since September 2011. It sits at about 40,000 cases currently, and first launched in a Florida Whole Foods. Eppa is organic and made with fresh fruit (including pomegranate, blueberry, blood orange and acai).

"Whole Foods was so pleased with it that they asked Eppa to immediately take it national," Deutsch Family president Tom Steffanci told WSD. "Eppa hadn't planned to go national as quick as it did, it was really driven by the interest from Whole Foods and others." Publix also picked it up soon afterward and expanded its distribution at "lightening speed."

SANGRIA BY THE NUMBERS: In traveling the conference circuit this year, your editors have heard a great deal about the potential of Sangria going forward. If we look into the numbers a bit, we see Sangria sales have jumped in the 4-weeks ending March 2 to 3.9%, up from 2.6% in the 13 weeks, per Nielsen data. Volumes trends are also headed in the right direction. For the 52 weeks volumes were down -0.1%, but have since rebounded to 1.1% growth in the 4 weeks.

PRICING: At $12 a bottle, Eppa is premium-priced for its category.
"If you look at the data you would say that consumers don't really want to pay very much for Sangria because what has been out there traditionally has been inexpensive -- even Yellow Tail is premium by Sangria pricing standards," says Tom. "Where Sangria pricing is today is not really relevant to what Eppa can do."

Tom went on to say that he doesn't think all Sangria can be painted with one brush. "The way we came at it was not that we want to be a Sangria." Instead, he believes Eppa is a natural progression for consumers who like sweet wines.

WHY SANGRIA?: Here's the logic behind that transition: moscato went from 2 million to 10 million cases in a four-year period. But in the last 18 months moscato drinkers started to disperse into pink and red moscato, and other sweet variants of wine, says Tom. At the same time, in the spirits category, consumers can't get their hands on enough flavored spirits. "We said consumers' next obvious step is they're going to want sweet, but they're going to want more flavor. How are you going to get more flavor and sweet from wine? I don't think that comes from traditional varietal wines."

GROWING WITH DEUTSCH: To grow the brand initially, Eppa Wine Company focused on environments where consumers are buying premium products and focus on healthy living. Tom says Deutsch will continue with this strategy and just add some of Deutsch Family's muscle behind the distribution. "We will immediately expand it nationally and in addition to the focus on the chain channel, which will continue, we will also expand into independent channels where they just didn't have the resources or sales force to disperse as much as the independent channels require."


A new bill (HB 2026) has been introduced in the Washington legislature today in attempt to relieve the state from future lawsuits - currently there are at least 10 - regarding the transition to privatization. The bill would allow any party who successfully bid on a former state-owned liquor store to apply for a refund from the state on the total amount of the bid plus premiums through July 30. "This proposed legislation is designed to mitigate hardships suffered by bidders of former state liquor stores. Of equal importance, the bill also protects our state government from future litigation related to the transfer of state liquor stores," said a statement from Representative Liz Pike, who introduced the bill.

Some of the hardships that the bill addresses include: problems with timely processing of liquor applications; proximity to other larger liquor stores; inability to secure new leases at existing state store locations; uncertainty of inventory to be purchased; and low order fulfillment for replacement items by distributors.

"Based on the testimony by those representing numerous bidders, I have come to the conclusion that most of the private liquor store bidders were not given accurate financial information in order to make an informed investment," said Liz.

In addition, the bill will allow owners of former state-owned liquor stores to sell their remaining inventory of spirits to any holder of a spirits retail license. "Some of these folks have lost everything and have no way to liquidate their inventory. This bill will help them get some of their investment back," she continued.


BOUTIQUE SCOTCH COMPANY WEMYSS MALTS is introducing two new Scotch whiskies to the US through Classic & Vintage Artisanal Spirits, a division of Domaine Select Wine Estates (DSWE). The Hive, an 8 year old blended malt Scotch and a single malt single cask bottling, and Heathery Smoke, a 30 year old from Caol Ila distillery on Islay, are now available nationally.

SALES TEAM CHANGES AT MICHAEL DAVID WINERY. Shannon Feeney, who has over ten years of industry experience, has joined Michael David Winery (MD) as the Northeast region manager. Her territory will include CT, ME, MA, NJ, NH, NY, PA, RI and VT. She comes to MD from Terlato Wines International where she was the New England regional manager. Additionally, MD has promoted Kelly Vorst to the newly created role of Florida district manager. Furthermore, Nicole Gardner has been promoted to newly formed position of district manager of Michigan, Ohio and Kentucky. Both women will be responsible for interacting with the distributor management team as well as creating, implementing and monitoring distribution and sales programming in their respective states.

Until tomorrow, Emily

"The thing that doesn't fit is the thing that is most interesting."
- Richard Feynman

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