Southern/Glazer's J-V Off

FILED SEPTEMBER 1, 2009

Dear Client:

WSD can confirm that discussions concerning a strategic collaboration between Southern Wine & Spirits (SWS) and Glazer’s Distributors have been called off. Recall that the official name of the j-v was to be Southern/Glazer's Distributors of America. The only reason given was that it was in both company’s long terms best interests to end discussions “driven by the sheer complexity of the transaction.”

“Following more than a year of wide-ranging planning efforts with Southern Wine & Spirits, we have made the decision that it is in our company’s long-term best interests to end these meetings and discussions. Since August 2008, we have explored numerous options and concepts about how best to forge an association with Southern to generate enhanced value for both companies. However, our decision today has been driven by the sheer complexity of the transaction,” said Glazer’s chairman and ceo Bennett Glazer.

Today’s decision was a very difficult one. We continue to hold the Glazer’s Family—and all that their company has accomplished over the last 100 years—in high regard,” said SWS chairman and chief Harvey Chaplin.

When they announced plans to form a j-v a little over a year ago (August 12, 2008), they likely didn’t anticipate such hard times looming ahead. Once the recession hit, consumers started trading down in wine and spirits and drinking more at home, which led distributors and retailers to dramatically scale back inventory. It’s also been very hard to secure credit in the current environment and fund these types of deals. There are other supplier and wholesaler deals waiting to be finalized, which leads us to wonder if they could fall by the wayside as well.

SOUTHERN BARRED FROM INDIANA

In an unexpected twist, the Indiana ABC has ruled that Southern Wine & Spirits of America (SWS) cannot hold a wine and spirits permit in the state due to what they consider “anti-competitive behavior,” reports the Indianapolis Business Journal (subscription required).

You may recall that the state informed SWS of Indiana last year that it couldn’t distribute liquor in Indiana because owners of its parent company reside in Florida. Ironically, SWS managed to do away with a similar Texas residency requirement in 2007 by claiming it was in violation of the Commerce Clause (an argument also used in the Granholm dispute).

SWS headed to the courts in December and sued the Indiana Alcohol and Tobacco Commission, specifically targeting the residency requirement.

Last week, though, the commission offered a new rationale in its formal denial after the Indiana Attorney General’s Office issued an opinion that the state’s residency law violated the commerce clause and would not stand up to a pending legal challenge. The ABC now claims SWS would monopolize the state by taking brands away from local wholesalers and raising prices on wine and spirits, which would result in lost jobs.

Of course National Wine & Spirits has the most to lose and strongly opposed SWS entering Indiana. Chief James LaCrosse argues that SWS would put his company out of business and pointed to settled trade-practice violations by SWS subsidiaries in Illinois and New York as an example. He also expressed concern over a pending joint-venture between Glazer’s Distributors (who owns a minority stake in Olinger) and SWS. However, well placed sources tell WSD that the Southern/Glazer’s j-v is possibly off and an official announcement is maybe expected sometime this week. [Ed note: this was written the Southern/Glazer’s announcement was made].

The state dropped its residency restrictions on beer and wine distribution several years ago but spirits distributors lobbied to keep the requirement claiming “they have more to lose.” This is because beer distributors are protected by franchise laws and spirits distributors are not.

Byron Leet, an attorney for SWS, defends the company’s track record by stating, “Southern is a very reputable company.”

Interestingly, Indiana University law professor J. Alexander Tanford, who is known for representing the interests of direct shippers, defended SWS in the article by claiming they would bring more choices to consumers. “Indiana is an underserved market. Southern Wine has much more product in their catalog they can distribute.”

BEAM GLOBAL APPOINTS NEW CMO

Beam Global has tapped Unilever vp and general manager Kevin George, 42, as its new global chief marketing officer, effective September 28, 2009. He succeeds Rory Finlay, who decided to leave Beam after 3 years with the company.

“Rory told me some time ago that he felt the time was right to move on, and I appreciate that he agreed to stay on and help us transition to new marketing leadership. We all wish Rory nothing but the best in his next endeavor,” said Beam chief Matt Shattock.

Kevin spent 13 years at Unilever where he now oversees its deodorants and hair care business unit. Prior to joining Unilever, Kevin spent seven years in the spirits industry at Seagram Americas, where he held key sales and marketing positions for brands like Captain Morgan, Crown Royal, Chivas Regal and Absolut.

“I’m excited that Kevin George will be joining Beam Global to lead our global marketing team,” said Matt. “...Kevin has what it takes to propel our marketing capabilities to the next level.”

JACK DANIEL’S DROPS OUT OF NASCAR

Jack Daniel’s has ended its NASCAR program and will no longer sponsor Richard Childress Racing's No. 07 team. Owner Brown-Forman chalked it up to a change in its “spending priorities” due to the recession, though it will continue sponsoring RCR for the remainder of the 2009 racing season. Jack Daniel’s vp and brand director Tim Rutledge said “other areas in the marketing mix” take precedence.

"Jack Daniel's has enjoyed a good five-year run with Richard Childress Racing (RCR) and NASCAR, and we are pleased with the overall performance of our sponsorship program," said Tim Rutledge, vp and brand director for Jack Daniel's. “While it is difficult for us to end our formal relationship with RCR, the current economic environment has compelled us to reevaluate our spending and we've concluded that other areas in the marketing mix require additional investment."

"Being flexible with our strategic investments has been a consistent theme for us at Brown-Forman and I support the decision to move from sponsoring NASCAR to investments in other areas," said B-F chief Paul Varga.

ABI ASKS THAT INTERLOCK MANDATE ONLY APPLIES TO HARDCORE OFFENDERS

The American Beverage Institute (ABI), which represents thousands of American restaurants, sent a letter to the House Transportation and Infrastructure Committee urging the members to amend a component of the Highway Bill draft which would require that all 50 states mandate ignition interlocks as punishment for all drunk driving offenders, including first time offenders.

They say in the letter that “studies have shown that drivers are more dangerous talking on a hands-free cell phone than they are driving at .08 BAC. And yet that is the level at which this bill would mandate ignition interlock devices—which, due to their fallibility and intrusiveness, have previously been reserved for hard-core offenders.”

It would also cost each state millions of dollars to enforce, approximately $432 million according to the American Probation and Patrol Association (APPA).

“We should not punish individuals who are one sip over the limit the same way we punish hard core drunk drivers.” Instead, the ABI wants the interlock mandate of the Highway Bill to apply only to repeat hardcore drunk drivers.

“This unfunded mandate forces states to implement a misguided policy that will prove prohibitively expensive to enforce and will not solve the drunk driving problem,” said ABI managing director Sarah Longwell. “Furthermore, this mandate is an incremental step in a broader campaign to see ignition interlock technology installed in all cars as standard equipment.”

MADD ENTERS THE VIRGIN DRINKS BIZ

In some rather surprising news, Mothers’ Against Drunk Driving (MADD) is entering the drinks business but not in the way you may think. In conjunction with Hill Street Marketing, the anti-alcohol group is launching MADD Virgin Drinks that include three “cocktails” without alcohol (Mojito, Margarita and Pina Colada), along with a virgin Lager & Lim and virgin red and white wine. They said in a statement that “distribution is not yet confirmed,” and Hill Street is currently in talks with “traditional retailers” to carry their product. Hmmm. Do you think it will catch on?


Until tomorrow, Megan

“A little more moderation would be good. Of course, my life hasn't exactly been one of moderation.”
Donald Trump

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