TTB Still Requires Brunello Certification Despite Italy's Claims

FILED OCTOBER 1, 2009

Dear Client:

Despite reports to the contrary, TTB’s director of public and media affairs Art Resnick confirmed to WSD that they have not in fact put an end to their current certification process with the Italian government regarding Brunello di Montalcino wines.

“Contrary to the reports that we’re not longer requiring the certification, we are indeed enforcing the certification and awaiting further information from the Italians to determine a future course of action,” he told us.

Italy’s agricultural minister, Luca Zaia, met with TTB administrator John Manfreda in Washington D.C. last week, where they discussed the Italian government’s ongoing investigations into the improper blending of several Italian wines including Brunello di Montalcino. Recall allegations surfaced last year that certain Brunello producers were illegally using mixed grapes in their wines, which is in violation of existing rules that require Brunello di Montalcino producers to use 100% Sangiovese grapes grown in Montalcino. The TTB responded by requiring all Brunello imports in the US to bear a certification from the Italian government proving they were in fact legitimate Brunello di Montalcino wines.

After meeting with the TTB last week, Luca issued a press release (in Italian) claiming “I have obtained the definitive go-head to import Brunello di Montalcino into the United States. The case is now definitively closed.”

The TTB also issued a statement that basically says although they’ve received reassurance from the Italian government, they still need to see the prosecutors’ report before “determining the future” of the certification process.”

“The Minister reassured TTB that his office has taken full responsibility for the integrity of all 500 Italian wine denominations and has ensured that none of the mislabeled products that have been the subject of numerous press reports for months now are on the market. He stressed that he has taken TTB concerns about the integrity of certain Italian wines seriously and consequently mandated a heightened quality control and oversight role for the Ministry of Agriculture. The Minister also advised that the court case would be concluding soon and that TTB would be provided with information on the final disposition of the cases as soon as possible.

“While reassuring the Ambassador and the Minister that TTB’s goal is not to disrupt trade or act unfairly against producers who have not been found guilty, TTB strongly emphasized the need to receive the prosecutors report as soon as it is available to assist in determining the future need for and scope of the certification process currently being enforced by the Bureau ,” said the TTB.

Clearly something doesn’t add up between the two statements so we decided to take a closer look. As WSD went to press, the TTB issued a press release dispelling Luca’s claim and further clarifying the situation: “At this time, TTB continues to enforce the certification requirement and has no plans to lift this requirement.”

DIAGEO EXEC SAYS INVENTORY LEVELS STILL LOW

Spirits industry execs for months now have partly blamed inventory de-stocking by distributors and retailers for softer sales. Distributors and retailers, of course, are responding to waning demand as consumers’ trade down and opt to drink more at home. Now that we’re moving into the oh-so-important holiday selling season, Ron Anderson, Diageo’s chief customer officer, told WSJ he doesn’t expect retailers and distributors to build their stock to 2008 levels. "I haven't seen any restocking," he said, "I don't expect a significant change either."

This is partly the reason Diageo reported organic sales decline of -6% in the first quarter. Recall that in the first quarter of 2008 Diageo’s wholesalers actually increased inventory, which led to tough comparables in Q1 2009. The good news is that Ron doesn’t seem to expect further de-stocking since “they can only reduce inventory levels once, you can't go below zero.” Several sources have told us they believe wine and spirits sales will start revving up closer to the holidays, which is expected to be especially competitive this year.

WSD BRIEFS:

EXPECTED RAIN THIS WEEKEND ON THE NORTH COAST has grape growers rushing to pick the last of their grapes on the vine and wrap up this year’s harvest, says The Press Democrat. Most grapes in Sonoma County have been harvested with the exception of some reds, including cabernet sauvignon and those used in dessert wine. However, some reports say 20% of the Mendocino County crop is still on the vine.

GLAZER’S HAS APPOINTED JOHN BROOKS DIRECTOR, NATIONAL ACCOUNTS. John will report to Randy Porter, svp, national accounts. Most recently, John held the position of general manager for the RoomStore.


Until tomorrow, Megan

“In three words I can sum up everything I've learned about life: it goes on.”
Robert Frost

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