Overall volumes declined for Ste Michelle Wine Estates in the fourth quarter and full year, but flagship brand Chateau Ste Michelle posted mid-single digit growth. The winery’s new parent company, Altria, announced that Ste Michelle’s wine shipment volume fell -2.2% from the prior year period to 1.9 million cases in the fourth quarter ended December 31. This was “due primarily to the timing of shipments around year-end 2008,” said the company. Ste Michelle suspended shipments to take inventory prior to the closing of the UST acquisition, and wholesalers built inventories in the last few weeks of 2008 in advance of this suspension. For the full year, Ste. Michelle's wine volume declined 2.1% to 6 million cases, due primarily to wholesale inventory reductions, and declines at the on-premise.
“We remained encouraged by Ste Michelle’s performance in a particularly challenging environment for the wine business...Adult consumers continued down-trading to less expensive wines and reduced their on-premise purchases at restaurants and bars,” said cfo David Beran in his prepared remarks. The company was pleased that Ste Michelle’s full year volumes grew by 10% at the off-premise, according to Nielsen scan data, “as adult consumers increasingly chose high quality and affordable wines.” Ste. Michelle grew 7% at retail in the fourth quarter, according to Nielsen.
In looking at the individual brands, Chateau Ste. Michelle saw volume rise 4.5% in the fourth quarter and 5.3% in the year. Volumes of Columbia Crest declined -6% in Q4 and -7.9% in the full year. Net revenues for the wine segment were $132 million in the fourth quarter and $403 million for the full year.
INDIANA CONSIDERS CONTROVERSIAL BILL PROMOTING EQUITY PROTECTION FOR WHOLESALERS
Indiana legislators are debating controversial legislation that would allow beer and wine wholesalers to carry a limited amount of spirits, and provide wholesalers with equity protection.
Upon leaving committee yesterday, the House Bill had three parts. The first part would allow a wine and beer wholesaler to sell new (not in previous distribution) spirits brands from a wine supplier with whom the beer wholesaler has done business for at least 10 years. The second part provides “equity,” not franchise, protection for wine and spirits wholesalers by providing that a terminated wholesaler is entitled to payment from a successor wholesaler (not the supplier) for the fair market value of brands transferred to the successor wholesaler. The third part eliminates the face-to-face requirement of Indiana’s direct shipping law. A similar bill passed the Senate committee yesterday but does not propose banning the face-to-face requirement.
Monarch Beverage, a wine and beer wholesaler in Indiana, supports the first part of the bill because Gallo is now producing spirits. They proposed eliminating a ban that prevents wholesalers from carrying both beer and spirits but it didn’t pass committee.
The second section of the proposed bill is championed by National Wine & Spirits, which has the most to lose once Southern Wine & Spirits enters the state. [Ed note: Recall that Indiana recently gave Southern a wholesaler permit to operate in the state]. The equity provision is opposed by Southern, Olinger Distributing, Discus, Diageo, The Wine Institute, Indiana wineries and the Indiana Retail Council which is primarily made up of large, national chains.
Opponents of HB 1191 and SB 0244 struck a PR campaign , “Stop the Indy Bailout,” in attempt to halt these bills. They allege on the website that the legislation “will bail out two Indiana wholesale alcohol distributors (National Wine and Spirits and Monarch Beverage). The legislation creates a monopoly in the state by preventing any other wholesalers from competing for business in Indiana.”
As it turns out, the Speaker of the House did not hand down the committee report today which means the House version is dead. The Senate version is alive and kicking so far.
UPDATE ON SOUTHERN. We’ve learned that Southern has not yet begun operations in the state. There’s no word yet when or if they’ll set up operations in Indiana or merge with an established company. In a statement in December, Southern chairman and chief Harvey Chaplin said: "We are extremely pleased about the prospect of establishing operations in Indiana... We look forward to serving Indiana's licensees -- as well as all of the future supplier partners who will join us there...We are grateful that the IATC officials recognized Southern's qualifications, and we look forward to working closely with them as we establish operations in Indiana."
OUTSOURCING CHEAP WINE REACHES NEW HEIGHTS IN 2009
In reading coverage on the "State of the Industry" presentation at the Unified Wine & Grape Symposium, a few things stood out to us. It’s well known that the wine industry experienced an exceptionally tough year in 2009, which led many California wineries, particularly the major wine companies, to source cheap grapes from other countries where over-supply outstrips demand. Cheap bulk wines allowed companies like Constellation and Gallo to tap further into the trading-down phenomenon and post growth in 2009. During the presentation, John Fredrikson of Gomberg, Fredrikson & Associates said imported bulk wine grew 87% over the prior year to 25 million cases in 2009. Meanwhile California wine shipments dropped for the first time in 16 years. It’s believed that the industry won’t experience a major recovery until 2011 once the private sector starts hiring.
As wineries in the US have struggled, so have wineries in other countries. This has led to an influx of imports competing for valued US consumers who are increasing their consumption of wine as other countries are decreasing consumption.
Good news for the industry is that the $9-$13 wine market posted growth in recent months.
[Sources included Wines & Vines, The Press Democrat, Modesto Bee and North Bay Business Journal].
BROWN-FORMAN filed a complaint against Meadowcroft Wines claiming their “Sumptuary” label is too similar in name to B-F’s “Sanctuary” label, which could cause confusion among consumers. Owner Tom Meadowcroft agreed to discontinue Sumptuary, which produces about 15,000 cases a year, to avoid any litigation. B-F agreed to let Meadowcroft sell off the remaining 900 cases of Sumptuary’s sole vintage, a 2007 Zinfandel. "Apparently corporate bullying and harassment is alive and well in the U.S.A.,” said Tom. "I am also frustrated that the U.S. Trademark office does not have more sense to uphold the rights of individuals to trademark names that are so dissimilar in meaning and intent."
FREDERICK WILDMAN & SONS has struck a deal to import Hecht & Bannier wines of the Languedoc-Roussillon region of France.
Until tomorrow, Megan
“Always do sober what you said you'd do drunk. That will teach you to keep your mouth shut.”
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