WHO Proposes Banning Duty Free Alcohol

FILED DECEMBER 1, 2009

Dear Client:

The World Health Organization (WHO) has proposed a global ban on duty-free wine and spirits sales in a strategy paper published earlier this month. In the paper, they recommend "taxing sales of alcoholic beverages to, and/or the importation of such beverages by, international travelers on the same basis as if such travelers had purchased such beverages in the domestic market of the country levying the taxes." In other words, no tax breaks.

There are a few more steps before WHO fully adopts the strategy. Next, the WHO executive board will review the document during their January 18–23 assembly. If approved, WHO’s general assembly would consider the proposal in May and would then need to release a strategy paper as policy. Note that the WHO’s decision would not be binding but opponents feel that some member countries may feel obligated to adopt their strategy.

The European Travel Retail Council (ETRC) secretary general Keith Spinks told the Moodie Report: “As a strategy paper it will probably be adopted by the Executive Board in January, and will then pass forward to the Assembly. We should note that this is not a binding document, but many governments would feel an obligation to implement the strategy with the strength of UN backing behind it. In that case it would create chaos, with certain countries enforcing the details of the paper, and others rejecting them.”

As a result, the ETRC is urging spirits suppliers, retailers and airports to lobby their governments and communicate how overthrowing duty free alcohol sales would greatly damage the business. The worldwide duty free alcohol market was valued at $6.3 billion in 2008. Something tells us that wine and spirits companies won’t take this sitting down.

DIAGEO LACKS PATIENCE FOR BORDEAUX?

Other Bordeaux suppliers are stepping in where Diageo left off. Recall the wine and spirits giant is no longer buying Bordeaux wine and is attempting to push its current inventory through the system by dropping prices and selling to other suppliers. The New York Times’ blog The Pour by Eric Asimov cites an executive who suggests that wine is too unpredictable for a company dominated by spirits, which resulted in Diageo treating Bordeaux like “Wild Turkey.” Michael Aaron, the retired chief executive of Sherry-Lehmann, a leading retail shop in New York, stated: “Chateau & Estate has a vast inventory that you don’t turn over every year. It didn’t pass the test of the bean counters. They were treating it like Wild Turkey bourbon.’’ In fact, according to the article, Diageo did not purchase either the 2007 vintage or the 2008 vintage of Bordeaux.

Now companies like Joanne Bordeaux USA – run by a leading French Bordeaux negociant – are popping up in the US. There are more deals now than ever on high-end Bordeaux wines as Diageo pushes out their inventory and other producers drop prices to attract American consumers.

When asked what will happen to Bordeaux prices in the future, John Laird, who was recently the vice president of European estates at Chateau & Estates, answered: “With the world awash in oceans and tidal waves from every country producing perfectly drinkable stuff, the producers of classic wines are going to be under a lot of pressure to maintain an appropriate price. Of course, the other real clobbering issue is the wimpy U.S. dollar.’’

HERBAL AND “HEALTHY” FRUIT FLAVORS ARE “MUST-HAVES” AT UPSCALE BARS

A recent study by Chicago-based Technomic found that herbs like mint, basil, rosemary and sage are “must-have ingredients” in drinks at upscale bars, according to an article by Nightclub and Bar. However, fruit flavors are still dominant, especially less traditional flavors like blueberry, pomegranate and acai that have perceived health benefits. “Along the same lines, we are seeing a rise in the creation of more complex cocktails accented with fruit purees, homemade or specialty bitters and premium syrups,” said Lisa Ash, beverage innovation director at Monin Gourmet Flavorings.

INERTIA BEVERAGE RAISES NEW CAPITAL, COMPLETES NVL INTEGRATION

Inertia Beverage Group (IBG) today announced it has secured $14 million in new capital, from existing investors Allegis Capital and Sid R. Bass Associates, and new investors, including PEI Funds. The money will be put towards IBG’s fulfillment, winery-direct ecommerce and compliance services.

Inertia says it has also completed the integration of New Vine Logistics (recall they acquired the company this summer), which has resulted “in the elimination of redundant roles and significant cost savings.” Forty new customers have signed with the company in the past 3 months, says Inertia, which now operates from two primary locations, a Napa Valley headquarters and fulfillment center in American Canyon. In addition, Dave Manougian, former chief of The Golf Channel, will serve as chairman of the board at Inertia.


Until tomorrow, Megan

“I think that somehow, we learn who we really are and then live with that decision.”
Eleanor Roosevelt

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