Liquor Industry News 1-7-13



The Great Vine Decline


Source: Financial Times

Jancis Robinson

Jan 4th


The rise in the incidence of vine wood diseases is worrying vignerons


Throughout my recent travels tasting the 2011s in Burgundy and the Rhône valley, I encountered worried vignerons. This was not the well-ventilated problem of 2012’s demanding growing season and short crop, but something potentially much more serious and long term.


It was my very first stop in the Côte de Nuits, in the well-kept cellars of Denis Bachelet in Gevrey-Chambertin, that first alerted me. Bachelet is a mild man who makes delightfully balanced wines and is not given to exaggeration. But he is worried about the health of his vines, and, in particular, the fact that they seem to be dying off at a rate of between 10 per cent and 20 per cent a year because of esca, a disease that affects the wood of the vine.


Up the road in the world-famous cellars of Domaine Armand Rousseau, Eric Rousseau told me how their revered Pinot Noir vines are dying too. A significant proportion of their 50-year-old Cazetiers Premier Cru vines are now having to be replaced each year, for example. In Châteauneuf-du-Pape, Paul-Vincent Avril’s treasured Clos des Papes vineyards have also been losing about 100 vines per hectare each year to disease. And the worst of it is that there is no known cure.


All that is known is that, most unfortunately, esca has so far been much more likely to affect old vines – those at least 10 years old – than young ones. I say unfortunately because the quality of wine made from old vines well-acclimatised to local conditions with their deep root systems and relatively low yields, is famously better and more complex than the typical produce of young vines – which is why so many labels proclaim Old Vines, Vieilles Vignes or Viñas Viejas.


But esca is increasingly seen on young vines too, and is associated with a substance known as “black goo”. Both wood and leaves can develop patterns of discolouration, generally stripes or spots. Leaves, then stems, may suddenly shrivel in the middle of the growing season, the bunches of grapes fall to the ground and the vine suffers apoplexy, or sudden death. It’s impossible to predict how soon a vine will die after the first symptoms appear, but it can happen in a matter of days, particularly in midsummer in dry weather after a period of wet weather.


Then there are at least two more nasty conditions that are currently preoccupying The International Council on Grapevine Trunk Diseases (formed in 1999): eutypa dieback, also known as eutypiose, and a newer one on the scene known as botryosphaeria dieback, black dead arm or BDA. All of them have been much more evident recently, particularly last year. One theory put forward in a paper on the increased incidence of esca and BDA, published by the Institut Français de la Vigne et du Vin last September, is that the unusually wet spring of 2012 followed by unusually high temperatures in early summer may have stressed the vines and left them particularly vulnerable – with some vineyards suffering losses of up to 50 per cent of vines.


It has been known since the beginning of this century that both Sauvignon Blanc and Cabernet Sauvignon, the much admired vine variety and the noblest grape of the Médoc in Bordeaux, are particularly susceptible to all three of these maladies. What is worrying is that they seem to be spreading to varieties such as the Pinot Noir of Burgundy that were not previously thought to be especially prone.


Despite considerable monitoring and identification of various associated fungi, very little is known about exactly how and why the disease spreads. Until the beginning of this century vines used to be treated with arsenic but, for obvious reasons, this is now banned – which may have played a part in the rise in incidence of these vine wood diseases. And they are by no means limited to France. They are now common in Italy and seem to have swept their way through Spain from north to south – and are now so familiar that some Spanish vintners have evolved a folkloric way of dealing with them. Vine trunks are rent asunder, the two halves wedged apart with a big stone to encourage the offending fungi to dry out, and the next year’s growth taken from a new branch that sprouts below the join. Fingers are then tightly crossed.


The maladies are not (yet?) quite so prevalent in Germany but are becoming more so, as they are in Switzerland where hopes are being pinned on a new pruning technique developed in Italy which may stave off the spread of the relevant fungi. One theory is that it is pruning rather than the fungi themselves that provoke the diseases.


It is all rather horribly reminiscent of the last wave of vine pests and diseases to spread through Europe in the 19th century when powdery and downy mildews were followed by the most deadly of all, the phylloxera louse, fatal to European vines. At one point it looked as though the whole of French wine production was doomed, until it was realised that American vine species are resistant to phylloxera, since which time most European vines, and the members of European species that produce 97 per cent of all wine made today throughout the world, have been grafted on to phylloxera-resistant American roots.


Mickaël Anneraud, director of the Médoc subsidiary of the local Chamber of Agriculture, has a theory that the characteristics of rootstocks may hold the key. He has noticed that even in contiguous plots in his much-affected wine region, vines that are 25-40 years old have been more robust than those that are around 20 years old, planted when the rootstocks commonly used were markedly less vigorous. He thinks it may be worth researching a possible link with vine vigour (how leafy the vines tend to be).


The Burgundians, on the other hand, feel bereft since they have no equivalent of the vast, well-funded, wine-minded University of Bordeaux. One theory is that the nurseries have been cutting corners when sanitising the young cuttings they sell, a worrying echo of what happened to the quality of wine corks a decade or so ago.




GuestMetrics Releases Full Year 2012 Cocktail / Flavor Trends based on locations with over $8B in sales during past 24 months


Source: GuestMetrics

Jan 6th


Flavored cocktails drove category growth in 2012.


According to GuestMetrics, based on its extensive proprietary database of POS transactions from restaurants and bars, sales of cocktail drinks grew +1.9% in 2012 compared to 2011, which was disproportionately driven by sales of flavored drinks. The data is based on analyzing 24 months of data representing over $8 billion dollars in transactions and over 250 million checks across the entire US.  “In analyzing the nearly 2,000 unique cocktail types captured in our system and comparing sales for full year 2012 versus full year 2011, we see that cocktails grew nearly 2%.  However, this growth was driven largely by cocktails that have a specific flavor associated with the drink,” said Bill Pecoriello, CEO of GuestMetrics LLC. In addition to analyzing the 2,000 cocktail types, GuestMetrics has also classified the flavors of each cocktail.   “While flavored cocktails make up about 26% of cocktail sales, they accounted for 51% of the incremental growth in 2012.”  According to Pecoriello, flavored cocktails grew 3.9% in 2012 versus the more tepid pace of 1.3% experienced by regular cocktails without a specific flavor associated with them.


“This disparity in growth rates of flavored drinks over non-flavored drinks is also evident in the types of cocktails sold, with the largest category share gains experienced by Margaritas and Mojitos, while at the other end of the spectrum, we see that Cosmopolitans and Martinis experienced the greatest share loss in 2012,” said Peter Reidhead, VP of Strategy and Insights at GuestMetrics.  Based on data from GuestMetrics’ POS database, the specific flavors that achieved the largest share gains across all cocktail types in 2012 versus 2011, in descending order of their share growth in basis points, were Mango (+35), Tea (+30), Ginger (+15), Melon (+15), and Cucumber (+10).


“As the pressure to innovate continues to grow, it will be increasingly important for the various spirits companies to have a finger on the pulse of what is really driving the incremental growth in on-premise,” continued Pecoriello, “and based on our data, we believe having a detailed understanding of which specific flavors are growing the fastest is a critical factor when these companies consider line extensions for their existing brand portfolios.  Staying on top of the latest flavor trends will be critical as consumer tastes continue to change and the duration of flavor trends varies from market to market.”


“For restaurant and bar operators it critical to manage cocktail assortment and increase exposure to the fastest growing cocktail types and flavors while reducing dependence on cocktail types and flavors which are falling out of favor” said Brian Barrett, President of GuestMetrics. “The success of a beverage alcohol program is one of the most important differences between those operators enjoying strong sales and traffic and those experience declining sales and profits.”   The results vary widely by city and by restaurant type, requiring detailed local market information in order to drive traffic and improve profits.  In 2012, the cocktail flavor types that lost the most market share are Apple, Chocolate, Pomegranate, and Banana.


About GuestMetrics LLC

GuestMetrics, LLC is revolutionizing how the hospitality industry operates.  Despite the dawn of the Digital Age having begun more than three decades ago, the hospitality industry essentially functions the same way it did centuries before.  GuestMetrics has cracked the code by collecting data from tens of thousands of restaurants and  turning billions of raw transactions into intelligible data that is fundamentally transforming the business operations of everyone from the independently-owned bar/restaurant on the corner, to multi-national chains, to the food & beverage companies that supply them.  Please visit for more information , to arrange for a free demo or to inquire about subscribing to our data services..




Sazerac Company Launches Sazerac Logistics Services (SLS)


Source: Sazerac Company

Jan 7th


Today, Sazerac Company announces the launch of its Sazerac Logistics Services Division (SLS) which will provide a full range of logistics, manufacturing, compliance, finance and administrative services to spirits suppliers in the industry that want to focus their energies on brand building, sales and marketing activities as opposed to operations and back of house activities.


“Sazerac’s logistics, manufacturing and administrative platform provides a perfect vehicle for industry companies wanting to save significant costs which in turn can be dedicated to increased sales and marketing activities” said Kent Broussard, who will be spearheading the addition of customers for this new division.


Sazerac launches the division with an existing roster of clients and expects to add several additional customers in the coming months.


Spirits companies interested in learning more about SLS should contact Kent Broussard at




PERNOD RICARD : Completion of the Disposal of Certain Aquavit and Bitter Brands and Assets for 103 Million


Source: 4-Traders



Following satisfaction of regulatory closing conditions and in line with the previous press release of 13 July 2012, Pernod Ricard (Paris:RI) announces the completion of the sale to Arcus-Gruppen of the Danish aquavit brands Aalborg and Brøndums, the German brand Malteserkreuz Aquavit and the Danish bitter brand Gammel Dansk.


The transaction also includes the sale of the Aalborg production plant in Denmark.


About Arcus-Gruppen

Arcus-Gruppen AS is a leading player in the sale and marketing of wine and spirits in the Nordic region and selected international markets. The company holds the leading aquavit brand Linie, the international vodka brand Vikingfjord and the Nordic top selling cognac brand Braastad. Arcus-Gruppen is the largest importer of wine to the Swedish market and the Norwegian markets through relationships with some of the world premier producers of wine. The Arcus-Gruppen headquarters are located outside Oslo in Norway, where the company has new offices, distribution centre and production facilities. Arcus-Gruppen employs 470 people and generates an annual turnover of approximately NOK 2 billion. Arcus-Gruppen key values are market focused, goal oriented and united. The principal owner is the listed Swedish private-equity conglomerate Ratos AB.




Asia Pacific head quits SPI Group (Excerpt)


Source: Just-Drinks

By Olly Wehring

4 January 2013


The regional director for SPI Group’s operations in the Asia Pacific region has left the company, less than nine months after joining the Stolichnaya vodka owner.


just-drinks can exclusively reveal that Nigel Bath has stepped down from the role that he assumed in April last year. A replacement has not been secured yet.




ABI Pushes Back Against NTSB Interlock Recommendations


Source: ABI

Jan 4th


The National Transportation Safety Board (NTSB) issued recommendations in December urging states to pass laws requiring the installation of ignition interlock devices for all drunk driving offenders–even low-BAC, first-time offenders. NTSB also pushed for the rapid completion of the Driver Alcohol Detection System for Safety (DADSS) program, the federal program developing technology to detect a driver’s blood alcohol concentration (BAC) level before allowing the car to start.


ABI fiercely opposes those recommendations and our position was covered by Bloomberg, the Associated Press, CBS Evening News, USA Today, The Los Angeles Times, CNN, and local television affiliates throughout the country.




Wells Fargo’s Weekly Economic & Financial Commentary


Source: Wells Fargo

Jan 4th



.         Nonfarm payrolls increased by 155,000 in December with the unemployment rate steady at 7.8%.

.         Reconstruction following Hurricane Sandy helped increase construction employment by 30,000, the largest monthly gain in more than a year.

.         Sluggish global economic conditions combined with uncertainty surrounding the fiscal cliff have hindered manufacturing activity.

.         The lack of a long-term solution from the fiscal cliff debate is keeping manufacturers cautions.

.         Total construction spending fell modestly in December, while residential outlays continue to be strong.

.         Despite some dissenting views among FOMC members, asset purchases are likely to continue into 2014.



.         The Japanese economy continues to struggle with weak foreign demand and business confidence, coupled with falling industrial production.

.         In response, the Japanese government is considering a stimulus package to jump-start the economy.

.         On the opposite end of the spectrum, South Korea’s economy is strengthening with increasing industrial production, improving business confidence, and a declining unemployment rate.

.         Despite continuing to grow, China’s economic growth has decline recently.

.         However, economic growth appears to be stabilizing with rising industrial production, along with firming business and consumer confidence.


Point of View

.         Interest Rate Watch

.         In the current economic environment, credit is fundamentally mispriced and misallocated because the choices made by borrowers and lenders are not following traditional supply and demand forces.

.         Credit Market Insights

.         Mortgage applications slumped in the last few weeks of 2012 as uncertainty surrounding taxes and tax credits/deductions pushed potential new buyers away from the market.

.         Expectations for continued low interest rates and additional fiscal uncertainty stemming from the pending debt ceiling debate may be reducing the sense of urgency to get in the market now.


Topic of the Week

.         The Almost Fiscal Cliff Deal

.         At the 11th hour, Congress passed a bill to avert the fiscal cliff.

.         By extending Bush-era tax rates for most Americans and certain pro-business tax credits and by deferring spending cuts for two months, Congress and the President added nearly $4 trillion to the federal deficit over 10 years when compared to what would have occurred if all the tax increases and spending cuts were allowed to go into place.

.         Even with this deal, additional discussions regarding the debt ceiling and spending cuts scheduled for February and March will create additional uncertainty for businesses and consumers.




RUM FOR ALL Enters Second Year of Bringing the Evolving Story of Rum to North America!


Source: Spirit Journal, Inc.

January 7, 2013


Spirit Journal, Inc.’s Rum For All, the groundbreaking Rum advocacy initiative, is entering its second full year of activities with an ambitious docket of planned trade/media and consumer events. Rum For All is the unique, innovative partnership between blue chip rum producers and independent spirits experts and journalists F. Paul Pacult and Sean Ludford.


The core goal of the initiative is to educate beverage industry trade professionals, media and, starting in 2013, consumers through dynamic seminar/tasting events, an educational website and active social media about the folklore, history, production and mixology applications of Rum.


Said Ludford, “In our first full year, Paul and I hosted major events in Vancouver, New York, San Francisco, New Orleans, Boston and Dallas geared directly to beverage retailers, bartenders and media. This year, the Rum For All roadshow will hit Chicago, Denver, New York and Washington D.C., with more cities in the planning stage, including the Pacific Northwest. The resurgence of the Rum category is evident just by the crowds that Rum For All is attracting in every city.”


Added Pacult, “In 2013, we will be adding one, possibly two new Rum producer members to the remarkable roster of existing A-list producers. And on Saturday, April 13th in New York, we will host our exciting Rum For All “Rum Day at Astor Center”, where consumers will get the daylong opportunity to attend a formal sitdown Rum tasting and cocktail party. Another tasty perk for attendees will be that Astor Wine & Spirits will be featuring selected Rums at special sale prices that day. How could any red-blooded American imbiber not love that concept?”


The Rum For All Founding Members for 2013 are:

. 10 Cane, Trinidad

. Appleton Estate, Jamaica

. Bacardi, Puerto Rico

. Banks Rum

. Brugal, Dominican Republic

. Cruzan, Virgin Islands

. Denizen

. Depaz, Martinique

. Diplomatico, Venezuela

. Don Q, Puerto Rico

. Mount Gay, Barbados

. Ron Abuelo, Panama

. Shellback, Barbados

. Zacapa Rum, Nicaragua


For more information and/or to subscribe to the monthly Rum For All e-newsletter, please log onto You can also like Rum For All on FaceBook


About Spirit Journal, Inc.  Founded in 1991 by F. Paul Pacult and Sue Woodley, Spirit Journal, Inc. is a leading publisher, events producer and consulting firm to the beverage industry. For more information, please email mail@spiritjournal.comor call 845-895-8910.




A walk down New Gin Lane


Source: FT

By Tim Hayward

Jan 4th


The resurgence in the British gin scene should have plunged Tim Hayward into dipsomaniac’s nirvana – but instead he’s confused


I am extremely fond of gin. I love its subtlety, its fragrance, its fascinating history and, above all, its power to render me as comprehensively wrecked as a smashed crab in fewer than four servings.


Imagine, then, my delight at the current resurgence in the British gin scene with every back-bar loaded with tailored, designered, bespoke and exotic gins created by keen, young, independent distillers. I should be in dipsomaniac’s nirvana, but instead, I am confused.


Our national relationship with gin is old and well-established. Between 1689 and 1697, the British government, troubled by the increasing consumption of imported wines and brandies, created legislation which taxed these drinks heavily while encouraging the domestic distillation of gin. Within a few years anyone with access to quantities of wheat and some simple equipment was turning out gallons of cheap “white lightning” – pure (ish) alcohol. Unlike the Scots and the French, we didn’t waste valuable drinking time storing or maturing the stuff in barrels, we just flavoured it with various aromatics. The most popular was juniper – an idea we’d freely nicked from the Dutch who called it “jenever”, hence the contraction “gin” – but many others were used. The British took to gin with astonishing alacrity and soon drunkenness was effectively epidemic; the “gin craze”. Early Georgian governments attempted control through legislation culminating in the Gin Act in 1751 – the same year William Hogarth etched and engraved his brilliantly dystopian “Gin Lane”.


Sophisticated distillers added the aromatics before distillation to produce a gorgeous limpid fluid. This is a “distilled” gin. A simpler method much favoured by the Georgians was simply to chuck in the ingredients and let them macerate to create a so-called compound gin. You can still make your own compound gin by dropping a few juniper berries and other herbs and spices of your choice into a bottle of vodka (essentially flavourless spirit) and letting it stand around long enough for the flavours to transfer.


For many years, most of the big-brand gins tasted predominantly of juniper. Bombay Sapphire was the first to rack up the exotic aromatics, which, along with a highly decorative blue bottle, made many a hardened barfly wonder whether to drink it or dab it behind their ears. Since then, gins with everything from grapefruit to citrus and, in one case, geranium predominating, have filled the shelves.


Gin, then, is defined by the quality of its aromatics – as our new artisanal master distillers are amply demonstrating – but it’s here that my confusion begins.


Gin is almost never drunk neat, or even, as the Georgians were fond of doing, with a little hot water to bring out the aromas. Purists will mix it into a lethal martini, with vermouth – a fortified wine flavoured with another complex mixture of botanicals. Even hardier topers will order their gin “pink”, with a splash of bitters – a strong alcohol base flavoured with, you’ve guessed it, a complicated and usually secret melange of aromatic roots, herbs and spices etc.


Perhaps this made sense back in the days of Hemingway, Benchley and Parker, when gin was of a simple, just-post-prohibition character. Today though, if the marketing material can be believed, a hipster with a still has spent half his life selecting the combination of flavours most calculated to seduce our senses. The very idea that we should then serve it with another unrelated mixture is like telling a chef you want his sauce bordelaise served blended with someone else’s custard.


Serving a decent gin with “tonic” – mass-produced, sugary fizz, laden with bitter quinine – is little short of blasphemy and it’s no use telling me it “contrasts with the sweetness, cuts through the oiliness or brings out the flavours”. Tonic could stun the palate of a scavenging rat. and that’s before we stick a lump of lemon in it.


It seems that to stop my senses becoming permanently and terminally confused, I’m going to have to make a fairly simple choice. I can either ignore the blandishments of the new craftsmen and stick to gin that tastes of nothing but juniper. Or I could learn to drink it like a Georgian costermonger: with furtive pleasure, a shifty glance and a shot of hot water.




Recreational marijuana users could get pot from vending machines, company says


Source: NBC News

By Jeff Black

Jan 4th


Now that Colorado and Washington have legalized marijuana, entrepreneurs are embarking on what is being called “the green rush.” NBC’s Pete Williams reports.


If a California company has its way, recreational marijuana users in Colorado and Washington state will one day be able to get their pot out of vending machines.


Such machines are already in use in some states where medical marijuana is legal, but now the maker’s founder says the company is working to adapt the machines to comply with new laws in Colorado and Washington, where adults can legally use marijuana for recreation.


The vending machines for medicine require a fingerprint scan to verify the identification of the patient, which is then linked to a prescription on file.


But as Washington and Colorado figure out how to create a legal pot market for the masses, Hollywood-based Medbox, a public company, is offering up its expertise in convenient delivery systems.


“One day we envision these machines to be accessed, when it’s allowed, 24 hours a day,” Vincent Mehdizadeh, the founder and chief consultant of a subsidiary of Medbox that produces, installs and consults on the vending business, told NBC News. “One day in the future that may happen, but for now these machines sit behind the counter as an inventory control and compliance tool.”


He said the Medbox machines and consultancy are in high demand in states such as Arizona, Massachusetts and Connecticut that have published medical marijuana regulations. Dispensaries use them to keep marijuana from being pilfered and comply with laws.


So where will all that ‘legal’ pot come from? Sale of pot stymied


Medbox is now offering to work with Washington and Colorado officials who are mobilizing to create the framework for a legal marijuana industry – and to collect taxes on pot sales.


“These machines behind the counter act an inventory control and taxation tracking tool so that the states can effectively track the taxes and collect on them more efficiently with real-time reporting directly from the machine to the state database,” Mehdizadeh said.


The company also helps operators get licensed in states that have licensing programs.


“We’ve probably been the most successful consulting firm in the marijuana business,” he said.


Mikhail Carpenter, spokesman for Washington’s Liquor Control Board, said Medbox has been in contact with the state but at this point no outside vendors have been chosen to help with marijuana sales.


Under state law, marijuana and marijuana-infused products, Carpenter said, would have to be sold from inside the confines of a retail outlet.


“So I can’t imagine with the way the law is written that you would see vending machines on the street corner,” Carpenter told NBC News.


In November, Washington and Colorado voters passed initiatives to legalize the recreational use of marijuana. Those laws went into effect last month.


In Washington state, voter-approved Initiative 502 made it legal for anyone 21 or over to possess up to an ounce of marijuana, 16 ounces of “solid marijuana-infused product” (pot brownies and such) or 72 ounces of “marijuana-infused liquid.


Washington’s Liquor Control Board has until Dec. 1 to develop rules for implementation of its new recreational marijuana law.


Colorado, under Amendment 64 to the state Constitution, legalized not only recreational use, but also home growing, which is still illegal in Washington.


Growing, selling and possessing marijuana remains illegal under federal law, and the federal government is reviewing options in both Washington and Colorado.


President Barack Obama last month weighed in on the issue, telling ABC’s Barbara Walters the federal government has more important things to do than go after recreational marijuana users.


“We have bigger fish to fry,” he told Walters.




Have We Lost the War on Drugs?


After more than four decades of a failed experiment, the human cost has become too high. It is time to consider the decriminalization of drug use and the drug market.


Source: WSJ


Jan 4th


The American “war on drugs” began in 1971.


President Richard Nixon declared a “war on drugs” in 1971. The expectation then was that drug trafficking in the United States could be greatly reduced in a short time through federal policing-and yet the war on drugs continues to this day. The cost has been large in terms of lives, money and the well-being of many Americans, especially the poor and less educated. By most accounts, the gains from the war have been modest at best.


The direct monetary cost to American taxpayers of the war on drugs includes spending on police, the court personnel used to try drug users and traffickers, and the guards and other resources spent on imprisoning and punishing those convicted of drug offenses. Total current spending is estimated at over $40 billion a year.


These costs don’t include many other harmful effects of the war on drugs that are difficult to quantify. For example, over the past 40 years the fraction of students who have dropped out of American high schools has remained large, at about 25%. Dropout rates are not high for middle-class white children, but they are very high for black and Hispanic children living in poor neighborhoods. Many factors explain the high dropout rates, especially bad schools and weak family support. But another important factor in inner-city neighborhoods is the temptation to drop out of school in order to profit from the drug trade.


The total number of persons incarcerated in state and federal prisons in the U.S. has grown from 330,000 in 1980 to about 1.6 million today. Much of the increase in this population is directly due to the war on drugs and the severe punishment for persons convicted of drug trafficking. About 50% of the inmates in federal prisons and 20% of those in state prisons have been convicted of either selling or using drugs. The many minor drug traffickers and drug users who spend time in jail find fewer opportunities for legal employment after they get out of prison, and they develop better skills at criminal activities.


Prices of illegal drugs are pushed up whenever many drug traffickers are caught and punished harshly. The higher prices they get for drugs help compensate traffickers for the risks of being apprehended. Higher prices can discourage the demand for drugs, but they also enable some traffickers to make a lot of money if they avoid being caught, if they operate on a large enough scale, and if they can reduce competition from other traffickers. This explains why large-scale drug gangs and cartels are so profitable in the U.S., Mexico, Colombia, Brazil and other countries.


The paradox of the war on drugs is that the harder governments push the fight, the higher drug prices become to compensate for the greater risks. That leads to larger profits for traffickers who avoid being punished. This is why larger drug gangs often benefit from a tougher war on drugs, especially if the war mainly targets small-fry dealers and not the major drug gangs. Moreover, to the extent that a more aggressive war on drugs leads dealers to respond with higher levels of violence and corruption, an increase in enforcement can exacerbate the costs imposed on society.


The large profits for drug dealers who avoid being caught and punished encourage them to try to bribe and intimidate police, politicians, the military and anyone else involved in the war against drugs. If police and officials resist bribes and try to enforce antidrug laws, they are threatened with violence and often begin to fear for their lives and those of their families.


Mexico offers a well-documented example of some of the costs involved in drug wars. Probably more than 50,000 people have died since Mexico’s antidrug campaign started in 2006. For perspective, about 150,000 deaths would result if the same fraction of Americans were killed. This number of deaths is many magnitudes greater than American losses in the Iraq and Afghanistan wars combined, and is about three times the number of American deaths in the Vietnam War. Many of those killed were innocent civilians and the army personnel, police officers and local government officials involved in the antidrug effort.


There is also considerable bitterness in Mexico over the war because the great majority of the drugs go to the U.S. drug cartels in Mexico and several other Latin American countries would be far weaker if they were only selling drugs to domestic consumers (Brazilian and Mexican drug gangs also export a lot to Europe).


The main gain from the war on drugs claimed by advocates of continuing the war is a lower incidence of drug use and drug addiction. Basic economics does imply that, under given conditions, higher prices for a good leads to reduced demand for that good. The magnitude of the response depends on the availability of substitutes for the higher priced good. For example, many drug users might find alcohol a good substitute for drugs as drugs become more expensive.


The conclusion that higher prices reduce demand only “under given conditions” is especially important in considering the effects of higher drug prices due to the war on drugs. Making the selling and consumption of drugs illegal not only raises drug prices but also has other important effects. For example, while some consumers are reluctant to buy illegal goods, drugs may be an exception because drug use usually starts while people are teenagers or young adults. A rebellious streak may lead them to use and sell drugs precisely because those activities are illegal.


Prescription for Addiction: The U.S. spends about $15 billion a year fighting illegal drugs, often on foreign soil. But America’s deadliest drug epidemic begins and ends at home


More important, some drugs, such as crack or heroin, are highly addictive. Many people addicted to smoking and to drinking alcohol manage to break their addictions when they get married or find good jobs, or as a result of other life-cycle events. They also often get help from groups like Alcoholics Anonymous, or by using patches and “fake” cigarettes that gradually wean them from their addiction to nicotine.


It is generally harder to break an addiction to illegal goods, like drugs. Drug addicts may be leery of going to clinics or to nonprofit “drugs anonymous” groups for help. They fear they will be reported for consuming illegal substances. Since the consumption of illegal drugs must be hidden to avoid arrest and conviction, many drug consumers must alter their lives in order to avoid detection.


Usually overlooked in discussions of the effects of the war on drugs is that the illegality of drugs stunts the development of ways to help drug addicts, such as the drug equivalent of nicotine patches. Thus, though the war on drugs may well have induced lower drug use through higher prices, it has likely also increased the rate of addiction. The illegality of drugs makes it harder for addicts to get help in breaking their addictions. It leads them to associate more with other addicts and less with people who might help them quit.


Most parents who support the war on drugs are mainly concerned about their children becoming addicted to drugs rather than simply becoming occasional or modest drug users. Yet the war on drugs may increase addiction rates, and it may even increase the total number of addicts.


One moderate alternative to the war on drugs is to follow Portugal’s lead and decriminalize all drug use while maintaining the illegality of drug trafficking. Decriminalizing drugs implies that persons cannot be criminally punished when they are found to be in possession of small quantities of drugs that could be used for their own consumption. Decriminalization would reduce the bloated U.S. prison population since drug users could no longer be sent to jail. Decriminalization would make it easier for drug addicts to openly seek help from clinics and self-help groups, and it would make companies more likely to develop products and methods that address addiction.


Some evidence is available on the effects of Portugal’s decriminalization of drugs, which began in 2001. A study published in 2010 in the British Journal of Criminology found that in Portugal since decriminalization, imprisonment on drug-related charges has gone down; drug use among young persons appears to have increased only modestly, if at all; visits to clinics that help with drug addictions and diseases from drug use have increased; and opiate-related deaths have fallen.


Decriminalization of all drugs by the U.S. would be a major positive step away from the war on drugs. In recent years, states have begun to decriminalize marijuana, one of the least addictive and less damaging drugs. Marijuana is now decriminalized in some form in about 20 states, and it is de facto decriminalized in some others as well. If decriminalization of marijuana proves successful, the next step would be to decriminalize other drugs, perhaps starting with amphetamines. Gradually, this might lead to the full decriminalization of all drugs.


Though the decriminalization of drug use would have many benefits, it would not, by itself, reduce many of the costs of the war on drugs, since those involve actions against traffickers. These costs would not be greatly reduced unless selling drugs was also decriminalized. Full decriminalization on both sides of the drug market would lower drug prices, reduce the role of criminals in producing and selling drugs, improve many inner-city neighborhoods, encourage more minority students in the U.S. to finish high school, substantially lessen the drug problems of Mexico and other countries involved in supplying drugs, greatly reduce the number of state and federal prisoners and the harmful effects on drug offenders of spending years in prison, and save the financial resources of government.


The lower drug prices that would result from full decriminalization may well encourage greater consumption of drugs, but it would also lead to lower addiction rates and perhaps even to fewer drug addicts, since heavy drug users would find it easier to quit. Excise taxes on the sale of drugs, similar to those on cigarettes and alcohol, could be used to moderate some, if not most, of any increased drug use caused by the lower prices.


Taxing legal production would eliminate the advantage that violent criminals have in the current marketplace. Just as gangsters were largely driven out of the alcohol market after the end of prohibition, violent drug gangs would be driven out of a decriminalized drug market. Since the major costs of the drug war are the costs of the crime associated with drug trafficking, the costs to society would be greatly reduced even if overall drug consumption increased somewhat.


The decriminalization of both drug use and the drug market won’t be attained easily, as there is powerful opposition to each of them. The disastrous effects of the American war on drugs are becoming more apparent, however, not only in the U.S. but beyond its borders. Former Mexican President Felipe Calderon has suggested “market solutions” as one alternative to the problem. Perhaps the combined efforts of leaders in different countries can succeed in making a big enough push toward finally ending this long, enormously destructive policy experiment.




Blindness, coma, death….experts give warning


Source: NZ Herald

By Nicholas Jones

Jan 7, 2013


Health experts say Kiwis travelling to Indonesia should pay close attention to the source of any alcohol they drink, andavoid jugs of pre-made liquor.


Dr Leo Schep, a toxicologist at the National Poisons Centre in Dunedin, said very little pure methanol was needed to have deadly results.


“All you need is half a millilitre per kilogram of body weight, so if you’re 80kg, you need 40ml of pure methanol to have a potentially lethal dose.”


Dr Schep said physical symptoms were similar to drunkenness and could appear vague at first.


If untreated, the poisoning could lead to rapid breathing, blindness, a coma and seizures which could lead to brain damage.


About one-third of serious poisoning victims suffered irreversible visual impairment, but victims’ lives could be saved if they received medical treatment quickly. The antidote was ethanol, or alcohol, which acted as a blocking agent.


“If they are out drinking alcohol, they are administering the antidote at the same time.


But the problem is the alcohol is removed quicker from the body than the methanol.”


Christchurch Hospital emergency department doctor Paul Gee published a paper last year on methanol poisoning after treating a 19-year-old North American backpacker who was left partially blind.


Dr Gee said the woman had eight to 10 cocktails in Indonesia the night before she flew to Christchurch.


About 30 hours after having the drinks, she began to experience symptoms.


“The first thing she felt was panic, distress. Then her vision was getting darker and darker, like she was in a twilight room … Within a few hours we’d organised dialysis to try to get rid of the methanol … but even then, she lost pretty much most of her vision.”


Dr Gee said bars in tourist areas of Indonesia put out free drinks in an effort to attract patrons.


Those drinks often contained home-brewed spirits, which were poorly made and dangerous.




State of the Wine Industry 2013


Source: SVB

Jan 4th


Join us for a lively and insightful round table discussion as Rob McMillan, founder of Silicon Valley Bank’s Wine Division, reveals findings from Silicon Valley Bank’s 2013 Wine Industry report. Rob will be joined by industry luminaries Paul Mabray, Chief Strategy Officer of VinTank, Tony Correia, Founder Correia-Xavier Inc., and Mary Jo Dale, Chief Consumer Direct Officer of KLH Consulting, in this first of its kind live video conference, including live viewer Q & A.


Webinar Details:

Tuesday, January 15, 2013

9:30 – 10:30 a.m. Pacific Time


This annual industry report is based on SVB’s in-depth survey of wine industry experts and insiders, third-party research and Rob’s unique perspective as a long-time member of the wine industry.


This presentation will include insight on:

.         Winery inventory positions and consumer demand

.         Impact of domestic and international economic conditions

.         Harvest yields and their impact

.         Winery financial performance

.         Bottle pricing decisions

.         Bulk import activity

.         M&A and vineyard acquisitions

.         The 5th Column (Web 2.0, CRM, DtC Sales, Social Media, 3rd-Party Marketers, Compliance)


The complete Silicon Valley Wine Report 2013 Wine Industry Report will be available for viewing on after the webinar.


Join Us On Twitter:

Follow Rob (@SVBWine) and Paul (@pmabray) on Twitter and join the conversation before, during, and after the webinar by using #SVBWine.




Local vodka maker tangled in trademark tussle


Source: Norwich Bulletin


Jan 04, 2013


An upstart local vodka maker is in a trademark dispute with an industry titan over the use of brackets on its labels.


Carl Brown, CEO and co-founder of Oakdale-based KC Brang’s Food & Beverage LLC, has not declared total victory but said recently his company won a round when Casella Wines dropped opposition to one aspect of the case. Casella, maker of [yellow tail] wines, ceased opposing KC Brang’s trademark request for the [Kra-ze] brand in the category of ultra-premium vodka. KC Brang already has a registered trademark for its liqueurs, according to Brown.


KC Brang, maker of [Kra-ze], a liqueur-based vodka, and Casella discussed a settlement that would have removed brackets from around [Kra-ze] name, but no agreement was reached, Brown said. Casella, which is based in Australia, dropped opposition after those talks ceased, he said.


“Another David beating Goliath, now that’s crazy,” Brown said in a press release, playing on his product’s name.


Casella ships 8 million cases to the United States annually, making it the most popular imported wine in the U.S., according to a 2011 story in the Sydney Morning Herald. Sales in 2010-11 were AU$426.7 million while profit was AU$12.25 million (dollar amounts are in Australian dollars).


Casella is still seeking to be the only company in the wine and spirits category to be able to use brackets around product names, Brown said.


Casella didn’t respond to an email request for comment. Its U.S. distributor, W.J. Deutsch & Sons Ltd., based in White Plains, N.Y., didn’t respond to phone and email requests for comment.


“Goliath” has actually done considerable damage to Brown’s “David,” helping thwart growth of KC Brang, the Oakdale businessman said.


“The legal matter has cost our company an abundant amount of money,” Brown wrote in an email. “(It) is evident that we have next to no additional funding to fall back upon other than the profit we obtain through sales. We are local men that come from local families, meaning we do not come from money.”


KC Brang has $180,000 in annual revenue, according to the Dun & Bradstreet Credibility Corp. website. Brown and Kevin Clang founded the company in 2009. It has three employees and its headquarters is listed as 15 Noble Hill Road.


Brown and Clang are both Montville High School graduates. Brown graduated in 1986, and Clang graduated in 1990. Brown was a civil engineer at the state Department of Transportation before starting the beverage company.


Big Gary’s Montville Wine & Spirits in the Montville Commons plaza was among the earliest Eastern Connecticut merchants to carry [Kra-ze] products.


Big Gary’s owner Gary Trombley Jr. couldn’t be reached for comment Friday.


“Sales in the state have been fairly decent considering the lack of consumer knowledge about who and what we are,” Brown wrote.




Casella Wines counts cost of flood


Source: Weekly Times

Sandra Godwin

January 2, 2013


FLOODING in March cost Riverina winemaker Casella Wines more than $2.6 million and contributed to its first loss in 18 years.


In financial reports lodged with ASIC last month, Casella Wines advised a loss of $29.89 million after tax for 2011-12.


Casella Wines managing director John Casella said it was ”an accounting loss, not a total loss”, the company’s balance sheet remained solid and there would be no cutbacks.


Staff managed to keep the Yenda winery site dry during the March floods by building a huge earthen bund wall, but it was closed for a week.


”The biggest cost was contract processing,” Mr Casella said.


”We were processing at 22 different sites in order to keep the volume going and not hold up growers who were mid-harvest.”


The company also lost a significant quantity of dry goods and packaged wine stored at the former McWilliams Yenda site which was inundated.


As well as the cost of flood recovery, the loss was exacerbated by loan writedowns ”to related and outside parties” of $29.79 million.


The overall result is being blamed on the Australian dollar which has squeezed margins on the exports that make up 95 per cent of Casella sales.


”History will show this dollar will leave a trail of business wrecks,” Mr Casella told Griffith newspaper, The Area News.


”I don’t believe the currency can stay where it is. But we will have to make hard decisions if the currency doesn’t balance out.”


Mr Casella has already spoken of plans for a new premium range of wines next year to satisfy a growing demand for luxury wines.


But price rises for other products from Australia’s largest family-owned winery might also be on the cards.


Mr Casella told The Weekly Times it was ”business as usual” for staff and the company’s 400 grape grower suppliers, and the company again expected to crush about 170,000 tonnes of grapes in the coming vintage.


Casella Wine labels include the [yellow tail], Yendah, and Mallee Point ranges, as well as the boutique beer, Arvo, which was launched in June.




Clever wine packaging for people on the go


Source: Fox News

By Meghan McGovern

January 06, 2013


Good wine can be found in just about anything these days –not just a bottle.


Why be hassled with a bottle, corkscrew or stemware.  These clever and unique packaging concepts are perfect for picnics, hikes–and sharing.


Sofia Mini – Small enough to take anywhere, this clever little package even comes with its own straw. Sofia Blanc de Blanc has delicate bubbles and is light and crisp with flavors of melon and honeysuckle. A 4-pack of this canned sparkler by Francis Coppola Winery, retails for $20 and can be found on the Winery Store website.


STACKED Wines – Perhaps one of the most unique ways to package wine, this product is divided into four separately sealed individual glasses made of durable plastic, with the volume of your typical 750 ml bottle of wine. No longer do you have to worry about wasting any leftover wine from a bottle you couldn’t finish. Perfect for bringing in a cooler skiing or sharing with friends. Each sleeve of wine retails for only $15, so try all varietals- Merlot, Cabernet, Pinot Grigio, and Chardonnay. Available at


Bandit – This may look similar to your child’s juice box they bring to school, but this grape is strictly for adults. Each tetra-pack is made largely from renewable resources, comes in a variety of grape varietals, and is perfect to bring along when glassware just isn’t appropriate. The smaller 500ml retail for $4.99 while the large one-liter boxes go for $8.99. Available at many local wine shops across the country.


Target Wine Cube – Yes, Target (as in the store) sells these clever cubes of wine. The cube is deceiving small, and can fit nicely in your fridge or shelf, but beware: it holds a whopping equivalent of four bottles. The advantage of boxed wine is preservation. Your wine will not spoil as quickly since air doesn’t not damage the wine. Wine Cubes are exclusively available at more than 980 Target and Super Target stores across the country that sell wine.


Volere Wine Purse – A perfect gift for Mother’s Day, bachelorette parties, or your fashionista-wino friend. The purse holds the volume of three bottles of wine and is available in Pinot Grigio, Cabernet/Pinot Noir blend, and Rose. They retail for about $14.99 and can be shipped throughout the US.


Sutter Home Minis – Great to throw into your purse when you need some “me time” on the go, each portable bottle comes in a recyclable plastic bottle with a screw cap.  It retails for $4.99/4-pack.


Unique Corkscrews – Got a good, old fashion bottle of wine and need something to open it with?  Hightower’s Custom Chains and Ironwork (a one man band) creates corkscrews out of old railroad spikes? Hat tip to wine expert Mark Oldman who told us that he bought some as gifts. See how they are made and how to get your own, here.



Jackson family buys into new AVA


Source: the drinks business

by Gabriel Savage

3rd January, 2013


Jackson Family Vineyards has completed the latest in a series of major acquisitions with the purchase of an 877-acre property in California’s recently created Pine Mountain-Cloverdale Peak AVA.


Previously owned by the Seghesio family, no vineyards are currently planted on the estate but it is thought that more than 280 acres on the hilly property offer a gradient suitable for viticulture.


Bordering Alexander Valley in northern Sonoma, the Pine Mountain-Clover Peak AVA in Mendocino County was created at the end of 2011 and claims to be one of California’s highest elevation grape growing regions. Red Bordeaux varieties dominate, with just 230 acres of the 4,750-acre AVA currently under vine.


Among the AVA’s existing vineyard owners are Silverwood Ranch, Pine Mountain Vineyards and Tin Cross Vineyards, which supply grapes for names including Frances Ford Coppola Winery and Captûre Wines.


The Jackson family, which owns over 14,000 acres across more than 35 wineries in California alone, including its Kendall-Jackson flagship, is understood to have completed the deal at the end of December, although no financial details have been released.


This latest purchase follows the family’s 2012 acquisitions of Sonoma properties Richard’s Grove, Saralee’s Vineyard and Ramal West Vineyard, as well as the historic Clarendon Vineyard in McLaren Vale, Australia. The latter demonstrated the family’s interest in adding to its international estate portfolio, which already reaches from Tuscany to Chile and St Emilion.




St Emilion’s class struggle


Source: the drinks business

4th January, 2013


The recent St Émilion reclassification leads Mark Savage MW to question whether terroir is still valued as an indicator of quality.


The revision was bound to raise the odd eyebrow, even among people who are dubious about classifications in general, while recognising an element in the human psyche that enjoys belonging to a club or being part of an establishment hierarchy, writes Mark Savage MW.


St EmilionThose who prefer to be non-conformist in this respect are probably a minority. Certainly when it comes to being in the Syndicat des Grands Crus Classés de St Émilion, there seems to be a strong desire among most château proprietors for the status conferred by membership. Whether the actual consumer knows or cares about this sort of thing is rather more debatable.


Revisions of classifications may cause some of us to stop and ask ourselves what purpose they are intended to serve and what criteria are important for inclusion. As with the appellation system in general, it needs to be considered whether it best serves the interest of the producer or the consumer.


Some may still harbour the notion that the important factor is the actual “terroir” of the vineyard concerned and its supposed superiority, as evidenced by a successful track record over an extended period of time. The logic and advantage of this concept is surely that its roots lie in something permanent, that there is in fact a natural rather than a man-made reason behind it.


It’s fairly well-established that the famous 1855 classification of the Médoc was based on money rather than on specific soils and it seems perfectly acceptable for a first growth to acquire a parcel of vines whose fruit had previously had no loftier destination than the local co-op. By contrast, in the Côte d’Or individual sites are considered to be of primordial significance and each cru produced by a domaine will have a price that corresponds to a status firmly entrenched in the belief that the very specific “terroir” really makes a difference.


Where does the Syndicat de St Émilion stand on this issue today? Is the view that the actual location of the vineyard as the prime criterion is now beginning to look naïve, if not rather quaint? The driving forces behind the latest revision seem to have more to do with money and politics than intrinsic terroir superiority.


Here is a cru whose terroir is modest rather than exceptional, finding itself elevated to the elite category of the four wines at the top of the premiership. In the lower half of that top division is a name for which the word cru seems inappropriate given that its vineyard location is somewhat elusive or even movable.


On the other hand, it is still possible to find a St Émilion proprietor whose wine commands a higher price than the majority of the top ten châteaux and yet resolutely declines to accept an invitation for promotion, preferring it would seem to rely on the judgement of his loyal clients rather than on the views of the Syndicat.


To some observers, classifications are of little interest and do not affect buying decisions in the least, but the question of their validity remains. Should wine be ranked as if it were a restaurant or football team – on the whim of a Michelin inspector or the fortunes of an oligarch – or is there merit in the idea that land itself, regardless of its ephemeral owners, is entitled to some recognition of its own?


If ranking is based upon human interference – the influence of external consulting oenologists and the techniques employed in the cellar – then it seems logical that vineyards should be subjected to annual inspection.


But do we want to treat vineyards like restaurants and base the ratings on those of inspectors? Surely not – for a restaurant can be simply relocated, while a vineyard site is permanent. If classification becomes a reflection of human interference, then the terroir game must be over.


That will be a matter of regret for those who value the potential for originality offered by a great wine. Let’s return to the cui bono question. The recent revision of St Émilion will no doubt do wonders for the egos of proprietors who find themselves promoted. However, along with the question of pride, there is also the question of price.


The promotion saw an instant upward revaluation of the wines in the marketplace. How many of the producers will pause to wonder how many of their previously loyal consumers will now admit defeat and feel priced out of the market – turning their attentions elsewhere? Clearly the speculative investor will be more interested by any reclassification than the consumer for whom drinking pleasure matters more than the asset value of the bottle.


The philosopher Montaigne, born near St Émilion, would have surely appreciated the irony of this situation, where a good wine becomes so expensive and so important that it succeeds brilliantly in alienating itself from a substantial section of its market. He would have mused from his viewpoint a few miles further east along the same calcareous côte that one should simply respect the classification, as long as the arbitrators leave winemakers in peace and respect their freedom of spirit.


And Montaigne would have added: “Si vous êtes roi, exigez que l’on s’incline devant vous.cependant n’y croyez pas!” In other words – those at the top of the tree should acknowledge the worship of their devotees without ever allowing it to go to their heads.


For a defence and explanation of the St Emilion reclassification from Alain Moueix, click here.


This article originally appeared in the drinks business December 2012 edition.




Wickham Vineyard ‘goes into administration’


Source: Decanter

by Richard Woodard

Friday 4 January 2013


Award-winning English winery Wickham Vineyard has gone into administration, according to local press reports.


Wickham, which was established in Hampshire in 1984, filed for bankruptcy just before Christmas, with the loss of more than 20 jobs, although it is understood that allied businesses The Vineyard restaurant and WineShare are continuing to trade.


Reports in the Southern Daily Echo suggested that Wickham had gone out of business thanks to problems with sister business Wine Shak, a retail chain rescued from the Threshers collapse, but which went into voluntary liquidation in November.


However, there were also thought to be problems with trading over the past year, plus a lack of fresh investment.


From an initial vineyard of six acres, Wickham increased its plantings to 18 acres of vines on a 40-acre estate, including 10 different grape varieties including Pinot Noir, Rondo, Dornfelder, Bacchus, Reichensteiner and Kerner.


Three of its wines were served at a lunch attended by HM The Queen and the Duke of Edinburgh to mark the Queen’s Diamond Jubilee in Walthamstow, London, last year.


Three other Wickham wines – its Special Reserve Red 2006, Special Reserve Fume NV and Vintage Selection Dry NV – won medals or commendations in the Decanter World Wine Awards 2009.


Some of Wickham’s wines were listed by Berry Bros & Rudd, which described the producer as a ‘standard bearer’ for English wine.


The future of the Wickham winery facilities and vineyard is as yet unclear.


Neither Wickham nor insolvency practitioner Benedict Mackenzie – the business’ administrator – commented on the reports.




Vinance collapsed ‘owing wine worth £5m’


Source: Decanter

by Jim Budd

Friday 4 January 2013


Collapsed wine investment company Vinance plc owed £5m-worth of wine to its 1,300 clients when it went into administration, according to administrators.


Vinance plc was placed in administration last November


However, the business has an estimated deficiency of £2.37m, thanks to a ‘large’ amount of wine owned by Vinance with an estimated value of £3m.


The report from Herron Fisher, the administrators of the company, shows that Vinance’s records were ‘incomplete’ and ‘inadequate’ and that the directors had no idea of the true position.


‘It was apparent that the company’s records were inadequate and that the position of each individual client was not recorded properly,’ the report states.


‘The directors could not easily work out which clients were short of wine they had ordered and paid for, or what the extent of the shortfall was. The clients themselves were unaware that there was any problem.’


The report can only estimate what is owed to investors:  ‘We cannot provide a full list of creditors as we do not know, at this stage, which of the 1,300 clients are creditors,’ it says.


Until the true position is known, no indication of the dividend due to creditors can be given.


Vinance used investors’ money to finance the running of the company, the report adds: ‘It transpires that sometimes the company took money from clients but did not buy the wine immediately and the money was used for general overheads.’


Vinance was placed in administration on 16 November, and in late November Albany Vintners Ltd/Arc Reserves Ltd paid £30,000 plus VAT for Vinance’s client database.


At the end of the 12-month administration period Vinance plc will be put into voluntary liquidation.


A creditors’ meeting will be held in London on 7 January.




Patron appoints DISCUS chairman as president


Source: The Spirits Business

by Becky Paskin

4th January, 2013


Patron Spirits has appointed Distilled Spirits Council of the United States (DISCUS) chairman John McDonnell to President, International to focus on its global growth.


McDonnell, who is also chief operating officer at Patron Spirits, is now based in the group’s Switzerland headquarters and is responsible for its day-to-day US and global operations and growth in the newly-created position.


“In only a few short years, Patrón has quickly expanded into more than 130 countries worldwide,” he said.


“As our brands and our company continues to gain momentum in international markets, it’s important that we devote all available resources into growing our global business and international market share.


“I’m honored to take on this new role and this new position, based strategically here in Europe, to work with our team to focus on our longterm global growth and success.”


McDonnell has worked with Patron Spirits since 2005.




Cerberus Close to Supervalu Deal


Source: WSJ


Jan 4th


Cerberus Capital Management LP and Supervalu Inc. SVU +13.51% are close to a deal in which the private-equity firm would buy some parts of the grocer and take a stake in the rest of the company, a person with knowledge of the plan said.


Supervalu is set to disclose its quarterly financial results on Thursday and could unveil a deal with Cerberus by then, the person said.


Eden Prairie, Minn.-based Supervalu, parent company to chains such as Shaw’s in New England, Jewel-Osco in Chicago and Shop ‘n Save in St. Louis, put itself up for sale this past summer amid growing losses and discounts to customers that had yet to drive up sales. The grocer has struggled to improve its business while shouldering a large debt load.


Supervalu’s stock rose 13.5% to $2.94 in 4 p.m. composite trading Friday on the New York Stock Exchange, after The Wall Street Journal reported a deal with Cerberus was close. The company’s stock is down more than 60% over the past 12 months.


In the deal currently envisioned, Cerberus would have a stake in the part of Supervalu it wouldn’t buy, which would remain public, the person said. The private-equity firm, which is working on the deal with several real-estate firms, would lead an investment of around $500 million in equity, said the person. That is several hundred million dollars less than earlier discussed, but the investors also wouldn’t be taking full ownership of the whole company, previously a possibility.


The deal structure is designed in part to bridge a gap between how much cash Cerberus is willing to invest and the amount of cash banks have wanted buyers to commit.


Cerberus months ago began seeking financing from banks and planned to invest equity of about $800 million in a deal for the whole company. Banks, which consider the unprofitable chain to be a high-risk investment, at one point pressed Cerberus and its partners to put up closer to $1.3 billion, people familiar with the matter said.


Much of Supervalu’s appeal to Cerberus and its partners lies in its Albertsons chain. In 2006, a Cerberus-led group acquired more than 650 underperforming Albertsons stores as part of a larger deal to dismantle that grocer, Albertsons Inc. In the broader deal, Supervalu acquired more than 1,100 Albertsons grocery stores. Cerberus would like to reunite the Albertsons chain, according to people familiar with the matter.


Supervalu, with a market capitalization of $628 million as of Friday, carries more than $6 billion in debt and lease obligations. The company lost $70 million in the first nine months of 2012, compared with a $134 million profit in the same period of 2011.




Walgreen December Same-Store Sales Decline 6.1%


Source: WSJ


Jan 4th


Walgreen Co.’s (WAG) December same-store sales fell a bigger-than-expected 6.1% as the drugstore chain continued to struggle with lighter customer traffic and new generic drugs.


Analysts surveyed by Thomson Reuters were expecting sales to decline 5.2% at locations open for more than a year.


For the month, total sales fell 4% to $6.71 billion from a year ago. Front-end sales fell 1.3%, while same-store front-end sales fell 2.3%, compared with expectations of 0.4% growth. Customer traffic in comparable stores dropped 4% though basket size rose 1.7%.


Pharmacy sales dropped 4.9% and same-store pharmacy sales fell 8.9%, compared with an expected 9% decline. The decline was due in part to calendar day shifts negatively impacting sales and new generic drug introductions, the company said.


Flu shots administered at pharmacies and clinics season-to-date were nearly 5.5 million versus approximately 5.3 million last year.


The company opened seven stores during December, acquired one and closed four.


Walgreen has reported weaker monthly same-store sales throughout 2012, as it lost customers due to a contract dispute with pharmacy-benefits manager Express Scripts Holding Co. (ESRX). The issue was eventually resolved, and the company is now expected to see improved results as some Express Scripts customers return to Walgreen.


Last month, Walgreen said its fiscal first-quarter earnings fell 25% due to lower same-store sales and a change in the way the drugstore chain recorded its investment in European pharmacy operator Alliance Boots, which masked margin improvement.


Shares closed Thursday at $37.79 and were down 0.8% premarket. As of the close, the stock was up 28% over the past six months.




Holidays not so happy at Family Dollar


Source: RT

January 3, 2013


Despite solid sales trends at Family Dollar during the company’s first quarter ended November 24, margins contracted and profits were less than expected.


The company reported earnings per share of 69 cents that were at the low end of the company’s guidance range of 69 cents to 78 cents and well below analysts’ consensus forecast of 75 cents. The culprits were sales driving initiatives that involved food and consumables that put pressure on gross margins. The company’s second quarter is also off to a shaky start due to a weaker than expected 2.5% same store sales increase in December.


Sales for the quarter increased 12.7% to $2.4 billion due to a combination of a 6.6% same store sales increase, the addition of 125 news stores and the renovation, relocation and expansion of 169 others. The top line improvement didn’t translate entirely to bottom line success though as net income for the quarter was $80.3 million compared with net income of $80.4 million for the first quarter of fiscal 2012. Gross margins also contracted to 34.1% of sales from 35.3% of sales the prior year. Stronger sales of lower margin consumables, higher markdowns and increased inventory shrinkage were partially offset by higher markups and lower freight expense, according to the company.


“Early results from our sales-driving initiatives exceeded our expectations in the first quarter, resulting in more gross margin pressure than anticipated. This mix pressure, combined with expected headwinds from insurance expense, resulted in earnings that were at the low end of our guidance,” said Family Dollar chairman and CEO Howard Levine.


He added that investments made to increase Family Dollar’s relevance to customers are delivering results and increasing traffic and market share. The company’s sales were strongest in the consumables category, which increased 18.5% during the quarter, driven primarily by strong growth in tobacco, food and health and beauty care. The 6.6% comp increase was driven by a mix of increase traffic and larger average transaction sizes.


“While the near-term economic environment remains difficult to predict, I continue to be excited about the long-term opportunity for our business,” Levine said. “We are seeing tangible benefits from our margin-enhancing investments in global sourcing and private brands, and as we work to drive further benefit from the investments we are making to expand profitability, I remain confident that our efforts will deliver stronger results as we progress through fiscal 2013 and beyond.”


Although the company’s second quarter is off to a slow start given the 2.5% December comp increase, Family Dollar said it expects comps for the second quarter to increase between 4% and 5%.


“Despite the ongoing economic uncertainty, we expect that the investments we have made in traffic-driving categories will continue to build sales momentum through January and February, as customers focus even more on basic needs,” Levine said.




Economist’s Notebook: Restaurant hiring finished strong in 2012


Source: NRA

by Elissa Elan

January 4, 2013


In his latest commentary, Bruce Grindy, the National Restaurant Association’s chief economist, breaks down the latest jobs report.


Eating and drinking places added a net 38,000 jobs in December, their second-strongest monthly gain of 2012.


Restaurants continued to add jobs at a robust pace in December, according to preliminary figures from the Bureau of Labor Statistics.


Eating and drinking places – the primary component of the restaurant industry, which accounts for roughly three-fourths of the total restaurant and foodservice workforce – added a net 38,000 jobs in December on a seasonally-adjusted basis.




(DIN): Treating DineEquity as “DineBond” suggests no upside potential


Source: Goldman Sachs

Jan 4th


What’s changed

Marcato Capital Management filed a 13-D indicating a 5.5% active stake in DIN shares. It presented its views on capital allocation to the company; to which DIN management formally responded. We have reevaluated our own views on the topic, and now expect DIN to transition from debt pay-down to a 50/50 mix of dividends/buybacks as a base case. We raise our 12-month price target as a result, but this is still below the current share price. Remain Neutral.



We come away from our updated analysis thinking that DIN should be treated more like a bond-like investment than as a traditional equity. We expect no EBITDA growth in out-years (as a result of flat SSS, nominal new unit growth, and a lack of G&A leverage). However, the company’s EBITDA stream is stable and predictable given DIN is now 99% franchised. As such, along this line of reasoning, we believe DIN should trade like a bond, but at a discount to its debt yield given the equity is further down the capital structure. DIN’s primary franchised compares trade at a 1-2% discount to their debt yields, and as such we assume a 2% discount for DIN (at the higher end given soft fundamentals). Assuming DIN can refinance at 7%, as per current market conditions, this would suggest a 9% FCF yield, and equates to a value of $66, which is below the current $70 share price.



We update our 2012-2014 EPS estimates to $4.27/$4.19/$4.92 on DIN’s likely new capital structure. Our EBITDA estimates come down to reflect less G&A leverage, but 2014E comes up to reflect the likelihood of a refinancing of its debt. We raise our P/E and DCF-based 12-month price target to $66 from $58 to reflect our new base case view that DIN will likely switch to dividends/share repurchases from debt pay-down in the coming years (a 14-15x P/E from 13x).


Key risks

Upside/downside risks are (1) A change in SSS trends, (2) better/worse G&A leverage, and (3) Different capital allocation plans than anticipated.




Singapore: Key personnel leave APB after Heineken takeover


Source: Channel News Asia

By Conrad Raj

04 January 2013


A spate of resignations among top personnel has hit Asia Pacific Breweries (APB) following its complete takeover by Heineken of the Netherlands, the world’s third-largest beer maker.


APB, which makes Tiger Beer, was the subject of a fierce takeover battle last year between Heineken and Thai Beverage, with the Dutch brewer eventually emerging victorious. Heineken forked out S$5.6 billion to buy the rest of APB from its joint venture partner Fraser and Neave to secure an asset which will help it exploit the fast growth in Asia’s beer market.


Among those who have left or have given notice is Mr Christopher Kidd, APB’s Regional Director for Indo-China, its most profitable division. He joined APB in 1994. Others include Mr Leslie Buckley, Regional Director for South-east Asia/Oceania excluding Singapore, who joined the company in 1995, and Group Finance Director Loy Juat Boey, who has been with APB since 1987. Also gone is public relations head Sarah Koh.


The first three were among the best-paid senior managers at APB, according to the company’s annual report, along with Chief Executive Roland Pirmez, Mr Vivek Chhabra, Regional Director (South Asia)/Director (Group Business Development), and Mr Bennett Neo, Regional Director for the Singapore cluster and Cambodia. Mr Neo will soon take over Mr Chhabra’s South Asia portfolio of Sri Lanka.


Mr Kidd and Mr Buckley earned between S$1.25 million and S$1.5 million in the company’s last financial year, according to the annual report, while Ms Loy was in the S$1-million to S$1.25-million range.


While no official reason has been given for their departure, the talk among insiders is that there has been some unhappiness with the new management style since the takeover, with changes to reporting lines and final decisions being taken at Heineken’s Netherlands headquarters.


“We appear to have lost our independence and creativity as reporting is now done on a functional basis to superiors in the Netherlands,” remarked an ex-insider.


Mr Kidd, 55, is said by people familiar with the situation to have been miffed when Mr Pirmez took over his portfolio as Regional Director for Indo-China.


Heineken said in reply to queries from TODAY: “We would like to stress the fact that the business is strong and that the members of APB’s leadership team, who we know well, are doing a good job.” Heineken also said that those who left “are not the top four executives” but that they are members of a leadership team comprising 15 people.


“Ms Sarah Koh and Mr Chris Kidd have decided to leave the company and pursue their careers outside the company. We respect their decisions and highly value their long-standing contribution to build and grow the business. Yet it is not on us to comment on personal choices,” Heineken told TODAY.


The company also said that Ms Loy has taken early retirement and her portfolio has been taken over by Mr Kenneth Choo, who is also Director, Regional Finance and Business Development, of Heineken Asia Pacific.


While a search for a new corporate relations director is on, Mr Michael Dickstein from Heineken HQ will do the job in the interim.


Asked if more management changes were on the way, Heineken said: “Management changes are part of the ongoing business in any operation and we usually treat such changes in a very sensitive way.”


Meanwhile, the integration process which Heineken initiated upon taking over is expected to be completed by the end of next month. This includes Heineken giving up its office at Novena Square to move to either Alexandra Point, where APB’s HQ is located, or to its brewery at Tuas.




Philippines: Risking life and limb to make Philippine ‘vodka’


Source: Business World Online

Jan 6th


With their huge copper vats and open fires, little-known backyard liquor makers have toiled for generations on Philippine coconut farms to distill their equivalent of Russian vodka.


Once considered a lowly peasant’s drink whose potency is said to put other liquors and spirits worldwide in the shade, lambanog is the Philippine version of the coconut arrack that is also made in Sri Lanka and Indonesia.


“Many have compared it to Russian vodka or English gin but what sets our lambanog apart is that you don’t get a hangover,” said 65-year-old distiller Isabelita Capistrano.


The family-owned Capistrano Distillery in Tayabas is one of two leading makers of lambanog, which it sells to the country’s biggest supermarket chain.


“It is a very hard drink. Japanese and South Korean [tourists] especially like it. Americans find it too strong, but smooth,” said the former high school teacher.


But if drinking it is a challenge, making it is a high-risk pursuit that can lead to the death of those charged with climbing coconut trees to collect the frothy sap that is fermented to produce the drink.


“People have fallen and died or had broken bones,” said Eugenio Andaya, who has been climbing the trees since he was a teenager.


Workers climb the trees without protective harnesses to prune the coconut flowers before they turn into fruits. The sap is allowed to drip into bamboo receptacles.


Like high-wire performers, the tappers navigate a network of bamboo bridges connecting the trees nine meters above the ground, with blades on their waists and bags tightly strapped to their shoulders.


Pruning is mostly done in the afternoon, and the climbers return at dawn to collect the liquid.


Farmhands then deliver the sap to the distillery in big plastic containers, where it is fermented into a local wine called tuba, which if distilled further, yields the colorless lambanog, with methanol as a byproduct.


Ms. Capistrano said the process of distilling the equivalent of coconut vodka was first recorded in Tayabas in the early 19th century.


Founded by Spain in the 1580s as part of its move to Christianize its Asian colony, Tayabas lies in the shadow of Mount Banahaw, a spiritual place where shamans live and where rainwater rushing down the slopes keeps the land fertile.


According to local lore, the first known Tayabas distillery was owned by a Spanish soldier named Alandy who settled in the area.


Alandy’s line is now produced by the rival Mallari Distillery, whose owners trace their ancestry to the soldier and who still maintain the original recipe of a drink with a 90 proof grade, which means it contains 45% alcohol.


Lambanog remains a cheap, popular drink across the Philippines. But official data on how much income it generates domestically remains sketchy, with the beverage sold locally through neighborhood shops that do not remit any taxes or reports.


In 2001 the government approached the Mallari and Capistrano houses and 14 other smaller lambanog distillers with a plan to develop the product for export. It provided packaging expertise, introduced modern bottling operations and sponsored tasting tours.



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