Captain Morgan NFL Pose Makes Headlines

FILED NOVEMBER 1, 2009

Dear Client:

The NFL put a stop to a rather clever marketing campaign by Diageo’s Captain Morgan this week, although we’re sure the company is thrilled at all the exposure its gaining from the press. The brand pledged to donate $10,000 to a charity every time a player struck a pose on the football field. Not just any post though – one that imitates the infamous “Captain Morgan” pirate that’s featured on the label. The donations went to the Gridiron Greats Assistance Fund, which is a non-profit for retired NFL players, and would have risen to $25,000 in the playoffs and $100,000 in the Super Bowl per pose.

During the third quarter of the Dallas Cowboys vs the Philadelphia Eagles game last Sunday, Eagles tight end Brent Celek aligned himself with the cameras and assumed the pirate position. The campaign was effectively banned this week. And although Brent won’t face a fine, the NFL warned that striking the pose in future games will result in a "significant" penalty.

"A company can't pay a player to somehow promote it's product on the field," NFL spokesman Greg Aiello told Yahoo! Sports this week. "Every league has the same rule. It's come up before, companies trying to use our games and then players for ambush marketing purposes."

An Eagles spokesman denied that Brent had any knowledge of the Captain Morgan campaign, but an account executive handling the promotion told Yahoo! Sports the Eagles tight end was indeed involved.

As it turns out, the campaign wasn’t supposed to launch until next week although it’s been in the making “for awhile,” a spokesman for Captain Morgan told Yahoo Sports. Brent reportedly learned of the program through his contact at Diageo and “sort of beat us to the punch, but we're certainly not going to complain," said Glenn Lehrman, an account director at Rogers & Cowan. “I don't want people to think our intention was to [upset] the NFL. We want to find a way to do it, but it's not going to work out as currently formulated. It's at the point where we need to re-think how we can go about doing this and find a way that we can raise money for [Gridiron Greats] without getting people upset.”

This afternoon Captain Morgan issued the following statement: “Captain Morgan here, as you know I believe in celebrating legendary times with my fans and my friends and always doing so in a socially responsible manner. I am a man of action, a man of the moment, and I always make fun a priority. And when it comes to football what is more fun than a touchdown? I believe in drinking responsibly, marketing responsibly and helping charities too, but understand my friends at the NFL's perspective. I will continue in my quest for legendary times and ask my fans to do the same.”

FDA GIVES CAFFEINATED MALT BEVERAGE PRODUCERS 30 DAYS TO DEFEND THEIR PRODUCT

The FDA notified nearly 30 caffeinated malt beverage manufacturers, that it intends to look into the safety and legality of their products. The FDA has given them 30 days to provide evidence that the combination of caffeine and alcohol is safe at the urging of 19 state attorneys general.

Recall this is not the first time the FDA has targeted malt beverage producers for putting caffeine in their brands. Last year Miller Brewing Company and Anheuser-Busch complied with the FDA and agreed to remove caffeine from their respective products, Sparks and Tilt, and to not produce any caffeinated alcoholic beverages in the future. Just a few months ago the FDA went after Constellation's Wide Eye caffeinated schnapps claiming its online advertising was "deceptive." This took place after Constellation had already discontinued the product due to "limited commercial success."

Now the FDA is targeting small independent companies such as Joose and Four Loko. If they fail to prove that caffeinated alcohol isn't harmful to consumers, the FDA "will take appropriate action to ensure that the products are removed from the marketplace."

So how does this apply to wine and spirits? As you know, there are many caffeinated spirits brands in the marketplace owned mainly by small, independent companies. Will the FDA target them next? Perhaps these malt beverage providers will find a way to prove that caffeine is not a harmful additive to alcohol. Nevertheless, we'll be watching the current situation closely.


RESPONSES TO BORDEAUX CONTROVERSY

Our coverage of Diageo and Bordeaux earlier this week struck a nerve with our readers, who had a lot to say on the subject. Here are some emails that stood out:

1. “The Diageo Bordeaux headline should probably read, "Long-anticipated Diageo Bordeaux Failure Finally Materializes." It could be noted that from the time the Bronfmans’ sold the concern, Diageo had little interest in agency brands that accounted for 15% gross profits when "owned brands" profits at manufacturing, marketing and sales levels provided many-many times the return of non-owned assets. The total business is a fraction of its size a decade ago and its influence proportionately smaller. In the Seagram's era, the C&E portfolio was used as a drawing card to invite customers into the larger Seagram's world, a strategy not realized by subsequent management.

As the new organization took over, innovation froze at 1980's-era development and the new company missed emerging brands and trends, including the innovations based around St. Emilion and satellite-appellations. As wholesalers created new relationships with negotiants to provide these items, they found in addition to sourcing wines not available from C&E (Valandraud, Teyssier, Troplong-Mondot), they could also buy traditional C&E mainstays such as Gloria and Lafite for 15% less. Furthermore, the new DC&E organization de-emphasized the balance of "everyday" priced wines (the old "3 musketeers") to the speculative high-end, leaving the portfolio highly imbalanced and exposed to market downturn and correction.

It should be noted that one great benefit provided by C&E up through today is domestic (USA) inventory of Bordeaux where wholesalers could pick up small quantities of needed properties or vintages. The next generation of Bordeaux suppliers will need to find a cooperative warehouse arrangement in order to succeed and grow.

It might also be pointed out that Bordeaux follows a bell curve, with a small amount of generic Bordeaux imported into the USA (although a giant sea produced) and a small but highly-visible set of "first-growth" and other highly-collectible/speculative wines that gather headlines. The mass in the middle (0ver $10-under $40) represents the true bulk of the market for importers and American distributors, restaurants and retailers.”

2. “First of all, I have been in the wine and spirits business for over 15 years. But, before that I started collected wine and have been collecting for over 35 years. I have a vast collection ( over 11,000 bottles) of wines from all over the world. However, I stop buying First Growth Bordeaux wines, Chateau Latour, Chateau Lafite, Chateau Margaux, Chateau Haut Brion, and Chateau Mouton Rothschild, and also second, third and fourth growths in 2000. That was the last time. The prices they charge are absurd. There are no wines in the world worth that amount of money. I could care less if Robert Parker or anybody else says so. I talk to collectors and customers every day and most of them think that it is an abomination to ask that much for a bottle of wine. We are talking about charging over 20 times the cost of making the wine, with most vineyards doing about 5 times on average. This is madness. The wine is just not that good...that's the bottom line here. I know people are going to say it's about the experience...and it is. You can jump out of airplanes, drive fast cars and have many memorable experiences...but, the most memorable experience you will ever have is when you sit across from someone you truly love or like a great deal with a bottle of wine and something good to eat...but it doesn't have to be a $500 bottle of wine.”

3. “The mega marketers are discovering they have been unprepared and unqualified when it comes to selling traditional, premium wines. There still exists a market for the multi level, full complement of Bordeaux. Here are the missing elements that resulted in Chateau & Estates (BNP) divisions’ failure to execute: 1.Sales people that are inundated with unrealistic sales quotas. 2. Newly hired, salaried sales reps with little or no experience selling in a "post busted bubble economy." What’s the motivation to try harder is your salary is static! 3. Lack of fundamental comprehension regarding of the nuance of Bordeaux sales and its complex, multi layered politics. Let’s see how long Diageo’s sales increases last. Anyone can lower prices, let’s see if they can hold onto their distribution points. Lesson to be learned: there is no substitute for experience!”

4. “I worked with Bordeaux wines for some years. I found that many thought their wine was the best. The single estates, smaller individuals that sell to the bigger Negocients often are caught in the middle. They are not large enough to sell on their own so they must go thru those such as Chateau and Estates. Under the terms in this market, they often must sell their wines at a lower price or be caught with stocks in their warehouses. This business in estate wines is greed pure and simple. The Buyers buy at one price and hope they can sell at a higher price. These bigger companies must commit in purchase quantities over a period of time, usually a year, and continue this buying for their warehouses each year. Then they sell to the importers and in turn they sell to the retailers. I do not feel a bit sorry for any of these big ones. They have gotten themselves in a real bind and have to unload at a lower price. Last time I recall this happened was the 1972-73 very poor vintages. The previous 70-71 were very good to great for the 1970s. These companies were stuck with the poor vintages and had to dump at lower prices and most, including our company, refused.”

5. “Diageo was sleep walking in regards to this segment of their market. Hoarding is not what happened. Their sales force was changed from a fine wine group to more of a mass market team that had little impetus or knowledge on how to market these wines. We have been involved with them for 25 + years and this part of the market is a people business not a wine business. Once a wine category is off wine lists, then you depend on the collectors to sustain your business with no sales opportunities to move wines for immediate consumption and usage patterns involving dining situations. The Bordelais are going to have to seek ways to establish themselves again in the market that started their exposure to American consumers: Wine Lists. That means a reliable supply so that the lists can be sustained. Diageo provided a stable supply and access to multiple vintages.”

WAL-MART AND COSTCO EXPRESS CONCERN OVER HOLIDAYS

Both Wal-Mart and Costco have expressed concerns about the upcoming holiday period. In speaking with the Financial Times, Wal-Mart USA chief Eduardo Castro-Wright said: “Customers continue to tell us they're concerned about their own finances and unemployment. We recognize that some customers may be more cautious in their holiday spending.” They believe there will not be a significant change in consumer spending until unemployment improves. As a result, Wal-Mart expects its US holiday sales to be flat.

Similarly, Costco cfo Richard Galanti said at the company’s investor meeting that “we still are cautious but are keeping our fingers crossed that people are buying a little bit.”


Until Monday, Megan

“I want to stay as close to the edge as I can without going over. Out on the edge you see all kinds of things you can't see from the center.”
Kurt Vonnegut

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