Franklin Liquors
Monday March 25th: Sad News About Jim Barrettt,Absolute Tune Recall And More!
Diageo’s Paul Walsh cracks China
Diageo’s CEO visited China last week to catch up on plans to become a major player in Asia. James Quinn joins him to hear a story about global growth .
Source: Daily Telegraph
By James Quinn, in Beijing
24 Mar 2013
Standing in a cavernous basement bar with more than 10,000 copper pipes jutting above his head, Paul Walsh appears more concerned about the cleaning rota than the array of Scotch whisky laid out before him.
“Can you keep it pristine?” the chief executive of Diageo asks Laurence Law, brand director for Johnnie Walker in China and the man responsible for Beijing’s new Johnnie Walker House. “We need to keep it looking like this all the time, not just when we have visitors,” Walsh continues.
On another floor of the House – a private members’ club designed to showcase the whisky to Beijing society – Law is showing Walsh a series of special edition bottles marking the Chinese year of the snake.
The snake bottle costs RMB8,000 (£847), or RMB37,000 for a set of 12 carrying symbols of the Chinese zodiac. “Too cheap,” says Walsh, smiling.
He may be tongue in cheek, but it is this attention to detail on which Walsh has built his 31-year career with the company. He is in China to check on the progress of plans to cement Johnnie Walker’s place in Chinese society, thereby further strengthening Diageo’s future profitability in the wider Asian region.
As he continues on his tour of the property, flanked by Diageo’s Asia Pacific president, Gilbert Ghostine, Walsh is interested in how the House has been built and its array of Johnnie Walker ephemera.
On the second leg of a three- week visit to Asia which also takes in Singapore, Tokyo and Seoul, Walsh spent most of the evening after touring the new House hosting a private reception. Guests included Sebastian Wood, the UK ambassador to China, as well as high-value clients and advertising and marketing specialists.
“Welcome to the world’s largest embassy for luxury Scotch whisky,” proclaimed Walsh.
The House will “create a halo effect for other brands” he continued, pointing to the potential to “capture an incredible opportunity, much broader than China”.
Having vowed to shareholders in 2012 that 50pc of Diageo’s sales would come from “new high-growth markets” by 2015, China and its environs are as important to him as they are to Diageo.
This could well be his last lengthy visit to the region as group chief executive, as Walsh has announced he intends to stand down by the end of 2014. This month, Diageo’s share price rose above £20 for the first time. Where it goes next is vital to Walsh’s legacy.
In the shadow of Mao Zedong’s mausoleum, part of Beijing’s historic Forbidden City, the second Johnnie Walker House – the first opened in Shanghai in 2011 – is in a fine location.
Fellow residents include luxury brands Hermes and Patek Philippe, as well as bars and restaurants designed to appeal to Beijing’s wealthy elite.
It is exactly this category – the city’s new breed of “super deluxe” consumers – that the House is intent on attracting.
Less than 12 hours after the dinner, Walsh, again flanked by Ghostine, is sitting in a boardroom in the nearby Peninsula Hotel, questioning senior members of his Greater China team about strategy in the region.
Ghostine’s presence to his right is important, as it was following his appointment to the current role in July 2009 that Diageo began to revitalise its performance in the region.
Ghostine’s vision was to focus on the “super deluxe” consumers who would not balk at paying RMB6,000 for a bottle of Johnnie Walker Odyssey or as much as RMB23,000 for The John Walker.
In China, Diageo operates with a joint venture – MHD – with Moët Hennessy, part of Bernard Arnault’s LVMH group. The agreement dates back 22 years and leaves Diageo holding 34pc of Moët Hennessy. The venture allows Diageo to piggyback on MH’s luxury products experience, combining the marketing of Hennessy cognacs and Moët & Chandon Champagnes with Johnnie Walker products and other Diageo brands, such as Guinness.
The relationship has been invaluable, according to Walsh, in planning brand extensions such as the new breed of Johnnie Walker Houses, where members can blend their own Walker flavours or relax in one of its private bars.
The promotion of the Walker brand in China started first with its Black Label product but has moved to centre on its premium Gold Reserve product, as well as its Blue Label and other more exclusive – and therefore expensive – blends.
The marketing attack is not about “tartan and heather”, Walsh says, but building exclusive brands that people talk about and want to take part in.
He says that as the brand developed through its tie-up with Formula One and with golf sponsorship, so the “experiences” – such as the houses – should make the drink more relevant to wealthy Chinese.
Walsh acknowledges that China is one piece of a bigger jigsaw. “I think you have to prioritise how you’re going to allocate your resources. The reality is that if you look at Asia, you basically have three big plays for us: India, greater China, and south east Asia, where you’ve got a collection of brands.
“I would reckon if you put these three blocks together, you’ve got 80pc of the region’s growth.”
Although it is estimated that the Chinese beverage market is worth £45bn to £50bn a year, international spirits account for just 2pc of a total dominated by baijiu (a local clear liquor) which accounts for approximately half. Cognac accounts for 50pc of the international spirits, with Scotch making up slightly more than 40pc.
In February 2011, Walsh signed a deal for a controlling stake in the Sichuan Chengdu Quanxing Group, giving it control of ShuiJingFang, a producer of baijiu.
“International spirits are dwarfed by baijiu, and we’re fortunate to have one of the premium brands,” says Walsh. The deal followed five years of negotiations and discussions with Chinese authorities, with Diageo becoming the first non-Chinese company to be allowed to invest in the spirit. “Our strategy here is twofold. First of all, to continue to establish our majority control on the business – aka get more equity.
“And to look for other acquisitions. One thing that is sometimes not understood [is that] in buying ShuiJingFang, we also got approval to use that as a further acquisition vehicle in China.”
Diageo is boosting ShuiJing-Fang’s operations, introducing a new bottling plant, developing a new bamboo-filtered blend, and increasing duty-free sales at airports and in expatriate communities to increase export revenues – a promise made to the Chinese authorities when signing the deal.
China is not the only market Walsh has recently visited.
Last November, Diageo announced a deal to buy as much as 53.4pc of United Spirits (USL), the Indian drinks conglomerate founded and part-owned by entrepreneur Vijay Mallya, for £1.28bn.
Since then, Walsh and his advisers have ensured the necessary regulatory approvals are received. The deal is structured as Diageo buying an initial 27.4pc stake, and then launching a tender offer for a further 26pc.
“I’m expecting to get the final regulatory approvals sometime this week,” he said at the end of last week. “From a regulatory point of view, we’ll get what we need.
“We’ll then be clear to launch our tender offer. Clearly the stock’s trading above the price we’ve offered. We’ll see what happens when we stick to our number.” Walsh won’t answer whether Diageo will stick to the original terms set out last autumn, but confesses: “There’s a lot of hope [in the USL price] and maybe I’ll disappoint a few people.”
The deal will give Diageo access to USL’s brands such as Whyte & Mackay but more importantly its indigenous distribution network to leverage Diageo’s own brands in to the country.
“The biggest difference between India and China is around familiarity with Scotch,” Walsh said. “The Indian consumer knows what Scotch is, knows how to drink it, how to pronounce it, and by the way, they know Johnnie Walker.”
Like China, it is increasing demand for premium brands which has attracted Walsh to India. But he says that does not mean Diageo will rush to place all its brands into USL.
Diageo has a small distribution system in place in India, and had USL not come on the market – as a result of Mallya’s difficulties linked to his Kingfisher Airlines – he says he would have been happy to grow organically.
One acquisition in which Walsh was less fortunate was Jose Cuervo, the tequila brand owned by Mexico’s Beckmann family. In December, Diageo called time on the talks, also ending its decade-long US distribution deal for the tequila.
Walsh won’t comment on why the talks collapsed – sources suggest the Beckmanns’ increasing demands of “exclusions” to the deal while trying to maintain the price offered wore Diageo’s patience thin – but does not seem to regret them ending.
“The reality is that since then I’ve become more impressed with our ability to really build a brand from scratch,” he said.
He points to the introduction in 2003 and subsequent success of high-end vodka, Cîroc. He says that based on current revenue levels, the drink produces more sales than Grey Goose did when it was sold to Bacardi for $2.4bn in 2004. Diageo also added to its upmarket vodka range by buying a 50pc stake in Ketel One in 2008.
“I’m willing to be patient and what I want to do is what we did in vodka. Both an organic play with a little bit of M&A,” Walsh says.
One business he is not interested in buying – not at current prices in any case, based on his answers – is Beam Inc, home to Jim Beam and Maker’s Mark. The Sunday Telegraph revealed that Diageo had considered making a joint $10bn-plus bid with Japan’s Suntory but had pulled back from the deal.
“If you just look at it with our lens, there are sizeable pieces of that business that we either wouldn’t or couldn’t own,” says Walsh with reference to Courvoisier cognac and Teacher’s whisky, which it would have to dispose of on competition grounds.
“It’s trading at a very full price and that could very well be an asset that just sits in the market place for a very long time. And I come back full circle to what I said: we don’t have to do anything we don’t want to.”
What Beam would bring is further exposure to the US spirits market, although here Diageo already has a 30pc share.
“If you said today Paul, do you want another 10pc out of China or another 1pc out of the US, I’ll take the 1pc out of the US as that just goes straight through to the P&L,” he admits. “Now, the reality is we have to do both. But a third of our business is in North America, the largest spirits market in the world and the most profitable spirits market in the world.”
He acknowledges that the US operations can be a little obscured by the focus on emerging markets. As well as China and India, Diageo has made recent acquisitions in Vietnam and Turkey.
Walsh, though, points to the “very attractive” demographics as to why Diageo is far from turning its back on America.
“The US is approaching one million new consumers reaching the legal drinking age every year,” Walsh said. “Increasingly, people are adopting spirits earlier in their drinking life cycle:it’s a gorgeous market.”
The combination of high- growth markets and more mature markets such as the US are important to a company the scale of Diageo, he says.
“When the financial crisis hit, the US went a little bit off the boil. It’s now coming back on the boil and has been for the past 18 months, two years.”
Correcting that balance between emerging and developed markets has been important to Walsh for some time, but more so as he contemplates stepping down.
Having joined the then Grand Metropolitan in 1982 as a financial planner for brewer Watney, Mann & Truman after a degree in accounting at Manchester Polytechnic, the Lancastrian admits bluntly that he did not think he would get to where he is now. “Of course not, no.”
He rose up swiftly through the ranks, and on becoming chief executive of the newly named Diageo in September 2000 he sold off non-core assets Pillsbury and Burger King, and brokered the acquisition of Seagram in 2001.
As such, he is the architect of the company whose products range from Blossom Hill wines to Johnnie Walker’s premium labels.
He is now responsible for more than 25,000 employees and is also a UK Trade & Investment trade ambassador.
He says that he is not overly focused on his Diageo legacy.
“Bear in mind I’ve been in the business 30-odd years,” he smiles. “I want to make sure that the trajectory that we have created – and I use ‘we’ as it is not only just the executive but all of our employees – is maintained and built upon.
“Therefore when you talk about legacy, I’ve had a fabulous career. And my dedication is to make sure the business is handed on in good shape. And to offer whatever assistance I can to continue the track that we’re on. That’s it.”
Walsh points to his decision to appoint Ivan Menezes – his right-hand man of 12 years – as chief operating officer in February 2012, and his comments a month later that he would remain in post until 2014. “The one thing that Diageo has demonstrated is that it has a pretty good track record on talent development and hand-overs,” he says, recalling the internal support Deirdre Mahlan was given for two years before she became chief financial officer in October 2010.
“By the time it [Mahlan’s appointment] happened, everyone just thought ‘That was obvious, wasn’t it?’ And that’s what I hope happens here [with the CEO job].
“Ivan and I have worked together for 12 years, and he knows that when he does take the reins, to be determined by the board, I’ll be there to do whatever he wants me to do.”
Walsh admits for the first time publicly that when he stands down as chief executive he will not be leaving Diageo. “I have massive affection for this company and therefore I’m not sailing off into the sunset,” he said.
“Equally, my role will change – you can’t have two people holding on to the reins of a horse. The reins have to pass. But equally, I can be there in the stable doing what people want me to do.”
As well as his so far undefined future role at the drinks giant, Walsh admits candidly he’d be interested in “some form of chairmanship,” having been often linked to the role at Unilever, where is already a non-executive director.
But whatever the future holds for the 57-year-old, as he himself noted last week in Beijing during his time at the Johnnie Walker House it’s important to follow the Scotch’s moniker -and keep walking.
——
Pernod Ricard whisky sales fall in China
Source: FT
By Louise Lucas, Consumer Industries Editor
Mar 24th
Pernod Ricard, the world’s second-biggest distiller, is set to report an annual decline in Scotch whisky sales in China after years of surging growth, suggesting that Chinese frugality is undermining one of the UK’s export successes.
Spirits makers have been touting growth in China in particular and Asia in general as western European sales falter in weak economic conditions.
Pernod Ricard, the Paris-headquartered maker of Chivas Regal whisky, is holding an investor conference in Beijing in May. China contributes 14 per cent of its sales and a far bigger slice of profits.
Yet distillers’ pricey spirits are falling foul of Beijing’s frugality campaign, as officials obey orders from the top to reduce conspicuous consumption – a move already denting sales at high-end restaurants and luxury goods makers.
The new government’s anti corruption drive is also hurting gifting, which makes up around 10-15 per cent of Scotch and cognac sales in China.
Last week, Pernod Ricard said volume sales in China were flat over the Chinese New Year period, when it sold more cognac but saw Scotch sales fall by double-digits in percentage terms year on year.
The company said the weak performance during this key selling period meant a decline was likely in Chinese Scotch sales for its current financial year, which runs until the end of June.
“China’s anti-corruption campaign is having an impact and will continue to have an impact for some time,” said Jamie Isenwater, analyst at Deutsche Bank. “These risks are significantly underestimated by the market.”
Sales at high-end restaurants, where meals range from Rmb300 (£32) to thousands of renminbi per person, dropped 35 per cent in Beijing and 20 per cent in Shanghai during the recent peak banqueting season, according to the Xinhua news agency.
While international spirits account for a tiny proportion of total China sales at about 1-2 per cent, the high price tags and surging growth means they contribute disproportionately to manufacturers’ profits.
Diageo’s Scotch business in China, for which figures are not broken out, is growing rapidly, although analysts reckon it is yet to turn profitable.
The maker of Johnnie Walker is investing £1bn over five years to increase manufacturing capacity in Scotland, largely to service emerging markets such as Asian and Latin America.
Scotch boasts a shorter history in China than cognac and is hence seen as less resilient. However, it also has a business model that relies on structural growth of the market over the long term: whisky laid down today may be bought by consumers five or 10 years out.
Pernod Ricard said the drop in China sales – which has only been witnessed once before, in 2008/9 – was a temporary result of the change in leadership and relative economic slowdown alongside the anti-corruption drive.
“We definitely see this impact as a short-term one and continue to have ambitions for Scotch globally and particularly in China, and continue to see the potential there,” said Jean Touboul, vice-president for investor relations.
Ian Shackleton, analyst at Nomura, said there was still “a little bit of a question mark” over how entrenched the slowdown would be. “It is not a question of the model being totally bust, but the idea of slowdown here is definite,” he said.
——
Bourbon Mania! (Excerpt)
A curious cocktail of scarcity, black-market machinations and artisanal cachet has made us woozy for Kentucky’s native spirit. But are these bottles really worth it?
Source: WSJ
By JOSH OZERSKY
Mar 22nd
THERE IT WAS, just a few tantalizing feet away: the legendary Pappy Van Winkle’s Family Reserve 23-Year-Old, the most prized bourbon in the world. It was in Dallas, at a place called the Chesterfield. An eccentric cocktail guru named Eddie “Lucky” Campbell had stood on his bar in the middle of service, reached up to remove a secret wood panel behind a light sconce and brought out a bottle that seemed to emit an inner amber glow. I was getting Lucky’s private stash! It was a daunting moment: Spoken of in whispers, tracked by rumor and gossip, Pappy is a kind of Maltese Falcon for hard drinkers. What if I didn’t like it?
As it happened, I did. A lot. But then, it wasn’t necessarily the deeply wooded, ineffably mellow taste of the whiskey that I had been after; it was the distinction of having bagged the white rhino of American spirits. In this, I was like a whole body of bourbon customers these days, ambitious souls more than willing to pay hundreds of dollars on the black market for the rarest and most prestigious brands of bourbon. On eBay, EBAY +0.66% which doesn’t allow the sale of alcoholic beverages (except for preapproved sales of wine), bottles selling for serious money are advertised as empty (wink, wink). Pappy 23-year-old is only the most sought-after of the lot; other bourbons, like Black Maple Hill and Eagle Rare (not to mention Pappy 20- and 15-year-old) are almost as coveted. Despite being sold for $600 or even $700 on the Internet, the 23-year-old Van Winkle isn’t even the most expensive bourbon to be found on the open market: A Brooklyn, N.Y., whiskey bar and restaurant, Char No. 4, sells 24-year-old Martin Mill at an astounding $100 per ounce.
Drinkers have been willing to pay a premium for high-end spirits such as single-malt scotch and V.O.C. cognac for many years. But I can’t remember anyone hawking “empty” bottles of them online. So what is driving this bourbon frenzy? Part of it is the simple issue of scarcity. “We never know when we are going to get a case of Black Maple Hill,” said Nima Ansari, the spirits buyer for Astor Wines & Spirits, one of New York’s top liquor stores. “We can’t really say we carry it. If we have it, word gets around, and then it’s gone.” The best bourbons generally take more than 15 years to age, and no one saw the current bourbon boom coming in the ’90s; if anything, demand was down at the time. The bourbon producers are doing everything in their power to cope with a demand the simple physics of space-time makes impossible to fill. Some, like Maker’s Mark, have been reduced to the expedient of simply watering down their liquor-a plan it quickly abandoned, though not before a public-relations disaster of New Coke proportions.
Of course, as anybody who ever had a crush on someone unavailable can testify, obstacles have a way of making an objective more attractive. Plus, small-batch production speaks to a particular ideal of quality that is very much in the air: We live in an era of “artisanal” jams and candy bars. The craft cocktail movement, more to the point, put customers in a woozy and expansive frame of mind. “The revitalization of cocktail culture helped make bourbon cool again,” said Eric Gregory, the president of the Kentucky Distillers’ Association. “People are drinking classic cocktails again. They watch ‘Mad Men’ and want to order an Old-Fashioned like Don Draper. It’s part of the culture now.”
Beyond the Mystique: What We’re Actually Drinking
Bourbon is, legally speaking, a whiskey made from at least 51% corn and aged in charred new oak barrels. (There are some complicated proof requirements, but they’re not important.) The original purpose of charring was to make the wood smooth and clean, but the burn imparts its own smoky taste and rich red color, too. As for the requisite newness-barrels are used only once; after that, they’re often shipped off to Scotland for aging that country’s own native spirit-it guarantees that there is plenty of the wood’s natural sugars, vanillas and tannins to impart. Other ingredients, like rye or wheat, affect the taste, as does the water bourbon is made with and, of course, the amount of time it sits in a barrel. Most bourbons are a mix from various barrels the master distiller selects, but some are from a single barrel he or she considers exceptional and are marked as such on the bottle.
If the pump was primed for bourbon generally, the idea of trophy bourbon came in the form of the Pappy-worship expressed by influential chefs like Anthony Bourdain, David Chang and especially Sean Brock, of Husk in Charleston, S.C., who calls it “America’s finest product.” Why not pay for the greatest of all American spirits? “Big bottles” are, after all, a huge part of high-end dining and drinking, a sector of the market that has swollen in recent years. It’s only natural that, as Americans have come to accept our own cuisine as being as good as France’s or Japan’s, we’d do likewise for our native liquor.
Things can start to get weird, though, when a bottle’s cultural value balloons out of pace with its rate of production. The connoisseur who sighs longingly over the memory of a Cheval Blanc ’47 revisits a real and precious experience; a day-trader who guzzles Rémy Martin Louis XIII because it’s the most expensive bottle at the bar is just a punch line. (The latter liquor is so highly valued that thieves once broke into Manhattan’s Osteria del Circo just to steal it, leaving the cash register untouched.) It’s inevitable that, in a seller’s market of the kind the best bourbons now command, a fog of mystery would begin to shroud some of the less well-known brands on the shelves.
For one thing, it’s not always entirely clear to buyers that very few bourbons are actually distilled by the people who sell them. There are basically a handful of big distilleries in Kentucky responsible for nearly every good bourbon you ever heard of. The Buffalo Trace distillery by itself produces not only its namesake bourbon, but also Eagle Rare, Blanton’s, George T. Stagg, Elmer T. Lee and dozens of others, including the Old Rip Van Winkle brands. (Although, just to be clear, those are all made to the Van Winkle family’s minute specifications.)
The fact that so much small-batch spirit is made at a few large distilleries should come as no surprise, given how many independent outfits had to give up their stills during Prohibition and subsequent calamities. But it does take something away from the artisanal mystique to think of many singular bottles coming from the same factory. Likewise, some of the best bourbons, including Black Maple Hill, don’t really exist as a single liquor with a single recipe: They’re mixed from different bourbons acquired from multiple sources, and aged and bottled by the Willett Distilling Co. (which has its own line of superb whiskeys, some of which are labeled Willett, some of which aren’t). There’s nothing shameful about the practice; Johnnie Walker Blue Label is a blended whiskey, too, and better by far to my taste than any single-malt. You can see how a person might get confused, though, what with the hand-numbered bottle and the “limited edition” boast on the label. Still, there’s no doubt these bourbons are worth the cost. “The best of these are incredible values for what they are,” said Astor’s Mr. Ansari.
——
February, 2013, Control State Results
Source: NABCA
Mar 22nd
During February, nine-liter spirits case sales in the control states fell 0.4% compared to same month last year sales. Rolling-twelve month volumes were up 3.5% compared with January’s 4.0%. Maine reported a monthly growth rate exceeding its twelve month trend.
Control state spirits shelf dollars were up 2.6% during February while trending at 6.4% during the past twelve months. Maine and Wyoming reported growth rates exceeding their twelve month trends.
Price/Mix for February is 3.0% lagging January’s 3.6%.
Control State spirits sales during February as reported appear to be sluggish. During analysis recall that 2012 was a leap year, and February had an extra day. This year’s February has 3.4% fewer selling days than last year’s.
During February, Irish Whiskey, with 0.8% share of the control states spirits market, was the fastest growing category with 16.4% growth reported and a twelve month growth trend of 19.6%. Vodka, with 35% share, grew during the same periods at -0.8% and 4.7%. During February no category reported a growth rate exceeding its twelve-month trend.
February’s nine-liter wine case sales growth rate was 2.7%. Pennsylvania, New Hampshire, Utah, Mississippi, Montgomery County Maryland, and Wyoming reported 3.4%, 6.7%, 3.8%, -4.7%, -7.2%, and 4.0%, respectively. February’s rolling-twelve month wine volume growth, 4.3%, mirrors January’s.
——
Anheuser, Modelo Merger Will Be Tipping Point, Suit Warns
Source: Law 360
By Kurt Orzeck
March 22, 2013
Anheuser-Busch InBev NV, the world’s biggest beer brewer, will have a virtual monopoly on beer sales in the U.S. if federal authorities approve its proposed $20.1 billion acquisition of top-selling importer Grupo Modelo, warns an antitrust suit filed Friday in California federal court.
The plaintiffs – nine beer drinkers who live in Missouri and California – claim the proposed merger violates the Clayton Antitrust Act. With MillerCoors owning a roughly 30 percent share of beer sales in the U.S., the merger would mean that two companies would control between 85 and 95 percent of the market, the complaint alleges.
“If Modelo goes, the dam breaks on prices and quality,” Joseph M. Alioto of Alioto Law Firm, which is representing the plaintiffs, said Friday.
The lawsuit comes one week after AB InBev and the U.S. Department of Justice announced that they had made “substantial progress” in talks to settle the DOJ’s antitrust suit, raising prospects for the approval of the merger.
In June, U.S.-Belgian-based AB InBev and Mexico-based Modelo announced their plans to create a global powerhouse in the ever-consolidating beer world. Together, the companies would hold 46 percent of the U.S. beer market, according to the DOJ said in June.
But in late January, the DOJ sued to block the combination. At the time, Antitrust Division chief Bill Baer warned that removing Modelo from the competitive landscape would make it even easier for AB InBev and the other “remaining beer companies to engage in coordinated leader-follower pricing strategies in the future.”
Just two weeks later, AB InBev agreed to send more of Modelo’s U.S. assets to Constellation in a bid to secure the DOJ’s approval. Now, in addition to getting full ownership of Crown, Constellation will pay another $2.9 billion for Modelo’s Piedras Negras brewery in Mexico, as well as perpetual licenses to Modelo’s brands.
Following the revision of the proposed merger’s terms, AB InBev and the DOJ last week requested an extension of their antitrust battle from Mar. 19 to Apr. 9, saying the stay would likely allow them to resolve the dispute. A D.C. federal judge granted the extension Wednesday.
The extension of the stay prompted the filing of the Friday antitrust suit, according to Alioto.
“When we found out about that, we knew they were going to lay down,” he said.
The customers allege the merger would mean higher prices for lower-quality beer. Modelo provides a check on top beer brewer AB InBev from raising its beer prices, but the check would vanish if AB InBev doubles its 50 percent controlling interest in the third-largest brewer of beer sold in the U.S.
Representatives for AB InBev and Modelo did not immediately respond to requests for comment Friday.
The lawsuit said Modelo has resisted price hikes in the past, providing a competitive constraint on AB InBev and MillerCoors. If the latter companies were to raise the price of their premium beers, consumers would defect to Modelo’s premium plus beers, the suit argued.
“If the Modelo merger goes through, beer prices will go through the roof, and there won’t be any more quality control,” Alioto predicted.
The antitrust lawsuit seeks a declaration that the proposed merger violates the Clayton Antitrust Act, and preliminary and permanent enjoinings from the defendants finalizing the acquisition. The plaintiffs also requested attorneys’ fees, court fees and additional relief if deemed appropriate by the court.
Plaintiffs are represented by Joseph M. Alioto, Theresa D. Moore, Thomas P. Pier and Jamie L. Miller of Alioto Law Firm.
Counsel information for the defendants was not immediately available Friday.
The case is Steven Edstrom et al. v. Anheuser-Busch InBev SA/NV et al. case No. 3:13-cv-01309 in the U.S. District Court for the Northern District of California.
——
PERNOD RICARD : USA Issues Allergy Alert on Undeclared Sulfites in New ‘TUNE’ Product
Source: 4-Trader
03/22/2013
Pernod Ricard USA is voluntarily recalling Absolut TUNE, a sparkling fusion of wine and vodka, because its label neglected to disclose that the product contains sulfites.
The sulfites in TUNE are safe for the vast majority of people, and sulfites are present in many other food products and beverages, such as wines. A small portion of the population is allergic or sensitive to sulfites. To date, the company has not received any reports of adverse reactions associated with this product.
TUNE has been distributed in retail stores in 10 U.S. states (Arizona, California, Florida, Hawaii, Illinois, Massachusetts, Nevada, New Jersey, New York and Washington) since being launched in late 2012. Pernod Ricard USA, which markets and distributes TUNE in the U.S., voluntarily initiated the recall today after learning of the labeling error. New corrected labels are being produced, and it is expected that TUNE will be restored to U.S. shelves as quickly as possible.
The company is cooperating with the appropriate authorities, including the U.S. Alcohol & Tobacco Tax & Trade Bureau, on the recall. “This is not a product quality issue. Rather, it is an issue involving the need for labels to inform susceptible sulfite sensitive individuals. Providing correct information for consumers always has been a top priority for Pernod Ricard USA,” said Bryan Fry, the company’s President and Chief Executive Officer.
Consumers who purchased TUNE and wish to obtain a refund should contact the company’s consumer hotline at 1-866-220-8713. That line is answered live Monday – Friday, 8 am to 5 pm (ET).
——
Not all craft beers are created equal. The most expensive brands are driving the majority of growth for the craft beer segment
Source: GuestMetrics
March 25, 2013
According to GuestMetrics, based on its database of POS sales in restaurants and bars, the most expensive tier of craft beer brands are responsible for the majority of the growth in the craft beer segment. “As is widely known, craft beers displayed strong growth last year, taking about 1.3 points of unit share in on-premise at the expense of premium light, import, and premium regular beers. In addition, during the first 2 months of 2013 the craft beer segment continued its momentum, gaining 1.2 points of unit share in on-premise despite a slowdown in the overall beer category due to pressure on low and middle income consumers, which has pressured overall growth in restaurants and bars. To better understand what drove the strength in craft beers, we identified four broad price tiers across the roughly 3,000 craft brands sold in on-premise,” said Bill Pecoriello, CEO of GuestMetrics LLC. “Similar to the premiumization taking place in the wine and spirits categories, the most expensive tier of craft brands drove a disproportionate share of the growth in craft beers.”
“The most expensive price tier, which we are calling Tier I, had an average price $6.65, which is 20-50% greater than the other three tiers’ average prices, and accounted for about 19% of all craft beers sold last year,” said Peter Reidhead, VP of Strategy and Insights at GuestMetrics. “However, despite being significantly more expensive, Tier I grew unit sales by 27% versus the much more modest 3% unit growth among the other three tiers, which accounted for 81% of craft beers sold.” Based on GuestMetrics’ price segments within the craft beer segment, Tier I accounts for 19% of unit sales, Tier II for 36%, Tier III for 26%, and Tier IV for 20% of unit sales. “Based on the significant difference in growth rates, of the 1.3 points gained in unit share by craft beers last year, 0.7 points of the gain was due to share gains by Tier I brands. To put that in perspective, even though Tier I only accounted for 19% of craft units sold, it accounted for 54% of the share gains.”
“It’s important for restaurant and bar operators to understand the specific brand dynamics in their local market in order to maximize revenue and profits,” said Brian Barrett, President of GuestMetrics. “Within Tier I, the three brands that gained the most in share were Lagunitas India Pale Ale, Karl Strauss Red Trolley Ale, and Stone India Pale Ale. As we progress further into 2013, we will be able to monitor whether this trend of premiumization within the craft segment continues to take place, and which brands lead the charge. This also has implications for the mainstream brands that have been losing the most share, Bud Light, Miller Lite, and Budweiser.”
——
Pennsylvania: Pa. liquor bill likely to be pulled over in Senate
Source: AP
PETER JACKSON
Saturday, March 23, 2013
The confetti has been swept up and the empty champagne bottles cleared away. The hubbub of news releases, tweets and Facebook postings trumpeting the pros and cons of Pennsylvania’s latest liquor privatization bill has culminated in its passage by the House.
In a nearly straight party-line vote, the Republican majority handed Gov. Tom Corbett a victory that he and his allies fought hard for, even though the bill differs radically from his original plan to auction off the 600 state liquor stores.
The compromise plan is designed to phase out the state-run stores county by county, as private operators , beer distributors only for the first year , and others buy at least 1,200 liquor and wine licenses. It also would allow grocery stores to sell wine.
GOP leaders fast-tracked the bill in the House, where privatization efforts collapsed last summer without reaching the floor. The Liquor Control Committee endorsed the compromise Monday and House passage on a 105-90 vote followed three days later , despite warnings from a united Democratic minority that the measure would put thousands of state store employees out of work and fail to generate the revenue that supporters anticipate.
Such speedy action is unlikely in the Senate.
For one thing, the Republican chairman of the Senate Law & Justice Committee, Sen. Charles McIlhinney, and its ranking Democrat, Sen. Jim Ferlo, have competing proposals that would keep the state stores open and preserve thousands of union-represented jobs.
McIlhinney, R-Bucks, has introduced a bill to expand the number of liquor and wine stores by making a license available to each individual or company that currently holds a hotel or restaurant liquor license. It also would establish a process that would make it possible for beer distributors to also be licensed to sell liquor and wine.
Ferlo, D-Allegheny, is seeking co-sponsors for a bill to allow distributors to sell beer in six-packs other quantities smaller than a case and allow direct wine shipments, more liberal state store hours and the opening of additional state stores.
Signaling expectations that the Senate would take a deliberative approach on the issue, Senate Majority Leader Dominic Pileggi said hearings on the House bill would be held within 30 to 60 days. Senate President Pro Tempore Joe Scarnati said he anticipates Senate action sometime before the end of December.
“Clearly there’s going to be a major debate in the Senate,” said Scarnati, R-Jefferson, pointing out that Republican senators hold only a four-seat majority.
“We start in the Senate with 23 `no’ votes from the Senate Democrats on any bill, so it’s going to certainly take us some time to digest what the House sends us,” he said.
Said Pileggi, “The House has been working on this issue for over two years. … It’s not something that’s been an item of active interest and discussion in the Senate.”
Faced with a sagging job-approval rating and more than a half-dozen potential Democratic challengers to his re-election in 2014, Corbett is pursuing an ambitious, three-pronged agenda as he enters the second half of his term.
He says ending the state’s monopoly over the sale of liquor and wine will help pare state government to “core functions” like education and public safety. His legislative trinity also calls for cutting future pension benefits of state and school employees to reduce the cost to taxpayers and increasing gas-tax revenue to accelerate highway and bridge work.
Corbett has plugged the privatization proposal tirelessly, injecting it into speeches other topics. In remarks to a Pennsylvania Farm Bureau luncheon this week in downtown Harrisburg, he likened privatization to the colonial-era Whiskey Rebellion.
“It’s time for another rebellion,” he said.
In the Senate, “the governor will take this one step at a time,” said his spokesman, Kevin Harley.
Pileggi, R-Delaware, said he expects no less.
“The governor has shown … a great deal of flexibility and pragmatism” in negotiating details of the House bill, Pileggi said. “I would expect that he would continue to show that flexibility and pragmatism as the issue is considered in the Senate.”
——
Pennsylvania: Local police chiefs worried about expanding booze sales, increasing enforcement duties
Source: CentreDaily.com
By Matt Carroll
March 22, 2013
As the state House on Thursday approved a bill to privatize liquor sales in Pennsylvania, local law enforcement officials were warning of negative impacts the legislation could have locally.
State College Police Chief Tom King cautioned that privatization of beer, wine and spirits sales could also lead to more alcohol-fueled crime and further stretch budgets of police departments tasked with keeping alcohol abuse in check.
And those issues could be exacerbated in a college community with a youthful population, said King.
“It’s a big concern,” he said.
In essence, the bill would create 1,200 wine and spirit licenses that beer distributors would get the first shot at obtaining. It would also give grocery stores the opportunity to sell wines. The state stores would eventually be phased out.
Proponents of the plan said it would generate tens of millions of dollars for the state. It also figures to lead to more stores being able to sell alcohol and for longer hours during the week.
For King, that greater access goes hand-in-hand with increased risk for abuse.
He pointed to a study conducted in 2011 by the U.S. Centers for Disease Control that recommended against further privatization of alcohol sales. The study found “strong evidence privatization results in increased per-capita alcohol consumption, a well-established proxy for excessive consumption.”
“Based on density and increased hours of operation, you also increase alcohol-related crime,” King said. “That’s my experience, but that’s also based on research.”
And if there is an increase in alcohol-related crime, there must be an increase in enforcement. Local police chiefs are worried that responsibility will fall on their already-stretched budgets.
“I believe the enforcement will fall more to local police,” said Ferguson Township Police Chief Diane Conrad. “I’m always concerned about our ability to provide sufficient services, certainly that’s one concern.”
Conrad suggested some money generated by the plan be sent to police departments.
“It’s a drug, and it creates a lot of behavior and health issues” King said. “It’s used in apartment buildings, streets and fraternities. Our local taxpayers pay all the bills for that and get nothing out of the sale of alcohol.”
For King, another potential issue is increased competition between new vendors who have shelled out large sums of money for the right to sell alcohol.
“Most will be responsible, but others might take some chances. They might roll the dice,” King said. “There is more of a motivation to sell illegally if you get the wrong owners, and we know a certain percentage will be.”
Bellefonte Police Chief Shawn Weaver said he is concerned that could lead to more underage drinkers being able to purchase alcohol at stores.
And the local police chiefs are not alone. The 1,200-some members of the state Chiefs of Police Association sent a letter last week to the General Assembly expressing “significant concerns” about the bill.
In the letter, the association said the bill would creates public safety concerns and taxes the resources of local law enforcement without providing funding to address the issues.
——
Pennsylvania: Public Opinion of Liquor Privatization
Source: Commonwealth Foundation
Mar 22nd
A strong majority of Pennsylvanians favor ending the government sale of wine and spirits according to a comprehensive poll conducted by nationally-renown pollster Fairbank, Maslin, Maullin, Metz & Associates (FM3). From January 22-27, 2013, FM3 polled 800 randomly-selected Pennsylvania registered voters. The margin of error for statewide results is 3.5%.
http://www.commonwealthfoundation.org/research/detail/public-opinion-of-liquor-privatization
——
Competition?
Wall Street sees opportunity in marijuana
Hoping to cash in if pot becomes legal nationwide, entrepreneurs pitch their ideas to potential investors.
Source: LA Times
By Andrew Tangel, Los Angeles Times
March 23, 2013
Amid the whir of fans and the glow of soft white light, workers tended to bright green seedlings sprouting in a giant greenhouse.
Located about an hour’s drive from Manhattan in the hills of northwestern New Jersey, the facility produces basil, chives, oregano and other herbs that are sold in grocery stores around New York City.
But if Ken VandeVrede has his way the facility will one day be growing a much more valuable plant: marijuana.
VandeVrede is chief operating officer at Terra Tech, a hydroponic equipment maker based in Irvine. The small company wants to double the five-acre New Jersey greenhouse operation. The aim is one day to supply the exploding U.S. medical marijuana trade and to prepare in the event that recreational marijuana ever becomes legal nationwide.
“We can scale this thing very, very quickly,” said VandeVrede, clad in blue jeans and a pumpkin-colored sweater as he surveyed his indoor fields of produce and flowers. “When hemp and cannabis become legal, we’re ready to rock and roll.”
To do it, Terra Tech needs to raise $2 million. And like a number of small businesses in the burgeoning U.S. cannabis industry, it’s trying to enlist Wall Street’s help. Business owners have been pitching their ideas to potential investors, coming to New York in some cases to meet with would-be financiers.
Wall Street has good reason to smell potential profits.
Washington, D.C., and 18 states, including California, have already legalized medical marijuana; there are formal measures pending in 10 additional states, according to the National Cannabis Industry Assn.
Colorado and Washington legalized recreational marijuana use in November. In addition, a measure allowing “adult use” of pot has been proposed in Maryland, according to the association’s tally. Various bills to legalize marijuana and hemp have been proposed in Congress too.
Although pot remains contraband under federal law, some entrepreneurs see marijuana heading down the same path as Prohibition, which banned the manufacture, transportation and sale of alcohol from 1920 until it was repealed in 1933.
“More and more people see the inevitability,” said Brendan Kennedy, chief executive of the Seattle private equity firm Privateer Holdings, which targets cannabis-focused start-ups. “They see that the Berlin Wall of cannabis prohibition is going to come down.”
Privateer is raising $7 million to acquire small companies that have a hand in the trade but don’t grow or distribute marijuana. Its first acquisition: Leafly, a Yelp-style online rating site in Seattle for dispensaries and varying strains of marijuana.
With pot still federally outlawed, others are making similar bets – funding firms that supply equipment or ancillary services while steering clear of marijuana farming and sales.
Take Lazarus Investment Partners, a $60-million hedge fund in Denver, for example. One of Lazarus’ investments is in AeroGrow International Inc., a maker of hydroponic kitchen appliances geared toward growing herbs, lettuce and tomatoes.
Lazarus, which owns 15% of AeroGrow’s shares, has suggested that the company tweak its products to accommodate taller plants, including marijuana, said Justin Borus, the fund’s managing partner.
“We want to be selling the bluejeans to the gold miners,” Borus said. “We don’t want to take a bet on which state is going to get legalized and which dispensary is going to succeed, or [which] cannabis growers are going to be successful. We want to just make a bet on overall legalization.”
In California, MedBox, a West Hollywood maker of automated dispensing machines for doctors’ offices, pharmacies and pot dispensaries, is on the hunt for funding.
Vincent Mehdizadeh, MedBox’s founder, said the company is actively exploring raising $20 million in equity to boost staffing and fund research and development, acquisitions and marketing.
Mehdizadeh said he’s seen a “major spike” in interest from potential financiers looking to invest in the small company since Colorado and Washington legalized recreational pot use last year.
“Everybody’s loosening up a lot because they realize the momentum has shifted and the financial world is going to have to make room for this industry,” he said. “Wall Street and investment banks are going to have to come along for the ride, eventually.”
Derek Peterson, president and chief executive of Terra Tech, is working to get his company’s shares listed on a stock exchange by the end of the year. The company may try for NYSE MKT, which was formerly known as the American Stock Exchange and is geared toward smaller companies, or perhaps the Nasdaq Stock Market, he said.
“The stodgier Wall Street types are starting to realize there’s money to be made here,” said Peterson, who worked in wealth management at Wachovia Securities and Morgan Stanley Smith Barney.
The company has taken steps to get the word out to investors. It tapped Midtown Partners, a small New York boutique investment bank, to help it explore financing options as it planned the New Jersey greenhouse expansion. Terra Tech is merging with the farm’s owner, NB Plants, and retail gardening center and nursery. Both are owned by VandeVrede’s family.
Initially, the vast majority of Terra Tech’s revenue will come from cultivating fresh herbs and flowers from the New Jersey farm, with the rest coming from equipment sales. The idea is to first feed urban consumers’ growing appetite for pesticide-free produce, then add pot or hemp when the legal climate is right.
“There is this huge demand for organic food,” said Prakash Mandgi, Midtown Partners’ director of investment banking. “Marijuana cultivation, in my opinion, is a potential driver in the future, but it’s so tied to government rule and regulations…. Federally it’s illegal.”
Estimates for the marijuana industry’s size range widely, since much of the trade remains on the black market. Bloomberg Industries recently pegged it at $35billion to $45 billion.
Still, Wall Street is by no means opening the floodgates of capital.
Companies in this space are still quite tiny, not to mention risky, compared with large corporations trading on the New York Stock Exchange or the Nasdaq.
Moreover, Wall Street firms face a significant disincentive to investing in the industry: federal law. Growing and distributing marijuana can still lead to raids by federal agents – not to mention prison time and huge fines.
Major banks have come under intense scrutiny by the federal government in recent years for violating laws aimed at preventing money-laundering. The British banking giant HSBC paid $1.9 billion to end a U.S. investigation into its role processing cash for drug cartels and customers in rogue nations.
Marijuana dispensary owners have complained of difficulty opening bank accounts, forcing them to operate in cash only.
“This is messy,” said Dan Richman, a former federal prosecutor who handled narcotics cases and now teaches at Columbia Law School in New York. “This might be complex politically. It’s not complex as a matter of federal criminal law.”
Investors in businesses involved in growing or distributing cannabis could face civil forfeiture actions to seize their investments or other assets, Richman said.
“I would think the prospectus would have to say: ‘The government might come and take all of your money and possibly go after you,'” Richman said.
Federal law may not deter all investors. After all, the government can choose what laws to strictly enforce, and it’s unclear how the federal government will ultimately treat legalized recreational pot in Colorado and Washington.
Alan Valdes, a floor trader on the New York Stock Exchange, expects some of Wall Street’s more adventurous investors to put up money for a project he’s involved with called Diego Pellicer Inc.
The business idea is to open a dozen Starbucks-like high-end shops for pot in Colorado and Washington. Valdes said he and his partners might begin tapping investors – wealthy individuals, family-run funds – later this year.
“These are more mavericks – these are gunslingers,” he said of potential investors. “The big houses are off the table right now.”
——
Kingway Brewery Holdings posts FY loss as sales slump (Excerpt)
Source: Just-Drinks
By Andy Morton
22 March 2013
Kingway Brewery Holdings has posted a marked fall in sales, pushing the Guangdong brewer into the red ahead of its acquisition by SABMiller’s China JV.
Net losses totalled HKD168.5m (US$21.7m) in the 12 months to the end of December compared to a HKD34.8m profit in 2011, Kingway said this week. Net sales fell by 12% to HKD1.55bn over the same period while operating profits dropped by 95% to HKD11.2m.
——
Treasury Wine Sees China as World’s Largest Market in 10 Years
Source: Bloomberg
By Kevin Hamlin & David Fickling
Mar 22, 2013
Treasury Wine Estates Ltd. (TWE), the world’s second-largest wine company, expects China to overtake the U.S. by 2023 as the biggest wine market globally.
Chinese wine sales will rise to about 500 million cases a year in a decade, from 150 million cases at present, Chief Executive Officer David Dearie said in an interview in Beijing today, citing company estimates. That will put China ahead of the U.S., which will sell about 450 million cases, he said.
Treasury, whose brands include Penfolds and Rosemount, is hoping to boost sales to about 60 cities in China within five years from less than 16 at present as it tries to capitalize in Asia, its fastest-growing and highest-margin market. Revenue at the Melbourne-based company’s Asian unit rose about 10 percent for the six months ended December from a year earlier, according to data compiled by Bloomberg.
“Where the track record has been in terms of growth for the last two or three years has definitely been in Asia,” Paul Rayner, Treasury’s Chairman, said in the interview. “There’s a huge opportunity for us to take market share with premium wines.”
The Melbourne-based company’s board is visiting China.
Treasury has gained 46 percent in the past 12 months on speculation a long-term global glut in wine will turn to a deficit because of growing demand, bad harvests and as some producers cut output. The stock closed 0.7 percent lower at A$6.05 in Sydney trading today.
Satisfying Demand
Treasury hasn’t been affected by a frugality drive by the government of President Xi Jinping even though about 40 percent of purchases are for business occasions, Dearie said.
“The challenge we have now is we just don’t have enough supply to satisfy demand,” he said.
Treasury’s focus in China is to sell premium mass market wines to consumers between the ages of 20 and 45 with annual disposable income of 150,000 to 200,000 yuan ($24,100 to $32,100) a year, Dearie said.
“We see Asia contributing nearly A$200 million ($208 million)” to Treasury’s earnings before interest and tax by 2016, David Errington, an analyst at Bank of America Corp.’s Merrill Lynch unit, wrote in a note to clients March 19.
2008 Vintage
Treasury’s 2008 Penfolds Grange Shiraz received a “perfect” 100-point score from Robert Parker’s Wine Advocate review. The vintage will also get a boost in sales in Asia because it was the same year as the Beijing Olympics and the number eight is considered lucky in China, Errington wrote.
Asia is Treasury’s smallest market by volumes, with sales of 600,000 12-bottle cases in the six months ended December. Earnings before interest, tax, and adjustments for the value of the company’s vineyards were about A$13.5 million in Asia, compared to A$5.9 million in Europe where the company sold 3.4 million cases.
Treasury added 25 staff in the country in the past year, bringing the total to 40, Dearie said.
——
Raising A Glass To Jim Barrett, Who Put American Wine On The Map
Source: NPR
by NPR Staff
March 23, 2013
If you’ve ever had a glass of California chardonnay that was not from a box, you can give a toast of thanks to Jim Barrett. The 86-year-old vintner passed away last week, after an interesting and varied life that left a lasting legacy in American wine production.
“The guy went from being an attorney to being on a submarine in the Korean War to owning one of the best American wineries,” says Scott Wilson, one of the 3 Wine Guys, a podcasting trio of wine experts. “I mean it’s a pretty amazing life.”
When Barrett showed up in Napa Valley in the 1970s, he says, the place was hardly the lush green countryside we see today.
“It definitely was a different world than it is now,” Wilson tells NPR’s Don Gonyea. “I mean you drive down Napa [now] and it’s winery after winery. It was actually real farm country and the Chateau Montelena had been in disarray for decades.”
Barrett bought the chateau and set about transforming it. He had a lot of work ahead of him – not just to revitalize Chateau Montelena, but to defy the stereotype of domestic wines as mass-produced swill, says Wine Guy Stevo Anthony.
“In the ’60s, there was a real bad connotation for wines in general,” Anthony says. “We didn’t think of wines from Napa or Sonoma as having any cache whatsoever.”
Serious wine dealers completely ignored American products, but Barrett changed all that when his Chateau Montelena chardonnay put America on the wine map in a dramatic way.
In 1976, a British wine merchant organized a blind taste test pitting some of the up-and-coming American wines against some of the biggest names in French wines, in what became known as the Judgment of Paris.
“He thought it would be funny in our bicentennial year … to basically put egg on our face,” Anthony says. “And lo and behold we shocked the world.”
Barrett’s American wine took first place among the white wines, and it was a huge controversy.
“One of the judges grabbed her ballot and wanted to tear it up,” Wilson says.
“I mean it was a situation where not only did the little guy beat up the bully, but ended up dating his sister as well,” Anthony says. “It was awesome.”
The story of this huge upset was told in the movie Bottle Shock, starring Bill Pullman as Barrett and Alan Rickman as British wine merchant Steven Spurrier.
——
Corton-Charlemagne White Wine on Sale at Hart, Christie’s
Source: Bloomberg
By Guy Collins
Mar 22, 2013
Corton-Charlemagne white wines from the past 20 years are among Burgundies leading auctions by Christie’s International Plc and Hart Davis Hart Wine Co. this month and next, according to their online catalogs.
A 12-bottle lot of Corton-Charlemagne Coche-Dury 2005 carries an upper estimate of $28,000 at Hart’s Chicago sale today, while older vintages of Corton-Charlemagne Bonneau de Martray dating from 1990, 1992 and 1997 feature in mixed lots at a Christie’s auction in Amsterdam next month.
White Burgundies have benefited from increased investor demand for wines from the region in the past four months, as the London-based Liv-ex Fine Wine 50 Index has rallied 11 percent since November. Bordeaux vintages, which were sold off during the 16-month market slump starting in July 2011, have started to recover again this year.
“The fine wine market has entered a period of rising prices,” Chris Smith, investment manager at the Wine Investment Fund in London, said in a market commentary this month. Gains on Liv-ex this year “allay our concerns that the upturn which began in December may have been mostly seasonal,” he said.
The fund, which has about $50 million under management, is focused on Bordeaux, partly because the larger wine production from that region’s estates makes them easier to trade.
Among prominent white Burgundy lots in recent auctions, six bottles of Montrachet 1993 Domaine de la Romanee-Conti Grand Cru Burgundy fetched top price at a Sotheby’s (BID) sale in London last month, selling for 21,150 pounds ($32,060).
Today’s Hart sale also contains 175 lots of Domaine de la Romanee-Conti spanning 33 vintages from 1966 onwards, including three bottles of 1999 Romanee-Conti DRC estimated to fetch as much as $35,000 and another three-bottle lot of the 1991 vintage with a top estimate of $32,000.
Here is a list of global wine auctions scheduled so far this year. Dates may be subject to revision, and links are to auction house sale catalogs and websites.
——
How to Out-Bordeaux Bordeaux in Silicon Valley
Source: WSJ
By JAY MCINERNEY
Mar 22nd
LOVERS OF TRADITIONAL Bordeaux sometimes complain that the wines being produced in that region today resemble Napa Cabernets more than they do the clarets that made it famous in the 19th and 20th centuries. Detractors point to global warming, as well as to an infusion of technology and the influence of American taste.
Ironically, Ridge Monte Bello, the Cabernet-based wine that some of us believe resembles old-school Bordeaux more than most of what’s being produced under that name today, comes from a steep ridge in the Santa Cruz Mountains overlooking Silicon Valley. Indeed, a recent issue of the French magazine Vigneron calls Ridge Vineyards’ longtime winemaker, Paul Draper, “le plus ‘Bordelais’ des wine-makers Américains.” Daniel Johnnes, wine director of Daniel Boulud’s restaurant group in New York and host of a dinner for Mr. Draper at the restaurant Daniel this past Tuesday, calls Ridge “the greatest American winery.”
Although it’s located just 8 miles from the headquarters of Apple, AAPL +2.03% Ridge Vineyards feels extremely remote, on a wooded limestone ridge high above the Pacific, reached via a series of switchbacks that climb 2,000 feet in less than 5 miles. It looks much as it must have after a San Francisco physician named Osea Perrone planted the upper vineyard in the 1880s. Monte Bello fell into desuetude during Prohibition, and a portion was replanted in the ’40s by William Short, a Unitarian minister jailed as a conscientious objector throughout World War I.
In 1959, four scientists from the Stanford Research Institute bought the property and made wine, initially for their own consumption, from the surviving vineyards. By 1969, the partners decided they needed a full-time winemaker and turned to Mr. Draper, a 33-year-old Stanford grad who had been making wine in Chile. (Long story.) Although he grew up on a farm in Illinois, Mr. Draper was a multilingual epicurean who’d spent time in the vineyards of France and Italy by the time he arrived at Ridge.
A philosophy major with no training in chemistry, Mr. Draper turned to a 19th-century treatise on winemaking by Raimond Boireau, as well as an 1883 work, “The Wine Press and the Cellar,” by pioneering California winemaker Emmet H. Rixford. In retrospect, Mr. Draper’s isolation and his distance from the North Coast winemakers and their academic advisers at UC Davis seems to have been a blessing. While winemaking in Napa became increasingly reliant on high technology, Mr. Draper was essentially making wine the same way it had been made for centuries, with minimal additions of sulfur as a preservative and not much else.
Starting with the 2011 vintage, Ridge labels will list all the ingredients in its wines, perhaps as a way of showcasing its minimalist approach at a time when ingredients like the grape concentrate Mega Purple and the chemical sterilizer Velcorin are widely used in domestic and foreign wines. (Mr. Draper’s Santa Cruz neighbor Randall Grahm of Bonny Doon started listing ingredients five years ago.) Mr. Draper thinks the practice should be strictly voluntary, but hopes to set an example. “We’d like to see people not use the full toolbox of products available to them,” he told me this week at dinner.
“I tasted those early wines when they offered me the job, and those wines convinced me to join Ridge,” Mr. Draper says. “They were totally low-tech. They picked the grapes, stomped them, put them in barrels. No nothing. I tasted the ’62 and the ’64, and they were comparable in complexity and depth to the great vintages of Bordeaux. These guys were doing nothing to the wine, so I figured it had to be the piece of ground.”
Forty years ago, the French concept of terroir, the idea that wines are an expression of the soil and the unique microclimate of their origin, was regarded in California wine circles as folklore. Today, the skeptics are in the minority. For all its traditional Bordelaise character, Ridge Monte Bello is ultimately a wine of the rugged Santa Cruz Mountains, not quite like anything else in France or California. The Monte Bello vineyard could safely be called precipitous, rising from 1,300 feet to 2,700 feet above the nearby Pacific.
“We have a cooler climate than Napa and we are as cool as Bordeaux,” Mr. Draper told me when I surveyed the vineyard with him a few years ago. “Our nights are cooler and our days are warmer than Bordeaux. Acidity is part of what we have, which makes the wines refreshing.” Mr. Draper also thinks the limestone soils, common in French vineyards but rare in California, may contribute a mineral character to the wines, including the Monte Bello Chardonnay, which is less well-known than the Cabernet-based wine but every bit as exceptional.
The cool Santa Cruz climate helps to keep grape yields very low, less than 2 tons an acre as compared with 4 or 5 tons in some Northern California vineyards, which contributes to an intensity of flavor. But unlike most modern Napa Cabs, with alcohol levels of 15% or more-which tend toward black-currant and blueberry-jam flavors-Monte Bello Cabernet usually clocks in around 13.2%. “At that level of ripeness, you’re going to get red-currant as well as black-currant flavors,” Mr. Draper says. Soaring alcohol levels are a hot-button issue in the wine world, but one thing is certain: The older, long-lived Bordeaux and Napa classics, such as Inglenook, were in the 12% range.
Like those wines of old, Monte Bello is very slow to show its charms but ages brilliantly. At the 30th-anniversary restaging of the famous 1976 Judgment of Paris tasting, judges on two continents picked the 1971 Ridge Monte Bello as the top red wine. (In 1976, it placed fifth.) Among the wines Mr. Draper poured at Daniel this week, the ’84 and the ’78 drew raves from the assembled oenophiles, while the ’95 was judged to be promising; old enough to drive in most states, but still a little young to drink.
For those who don’t have the patience to age their Cabs 30 or 40 years, Ridge makes a range of complex but accessible Zinfandels. The Ridge team started making Zinfandel from old vines at the bottom of the hill in order to improve cash flow while replanting more of the abandoned vineyards, eventually seeking out heritage vineyards all around the state, including Lytton Springs, in Sonoma, which they eventually purchased from the owners. Ridge almost single-handedly rehabilitated the reputation of that grape, creating bold, spicy reds. It turns out they age well, too: The 1997 Geyserville poured at Daniel on Tuesday, from an old vineyard on the western edge of the Alexander Valley, was bursting with primary fruit. The prevailing house style is less jammy and alcoholic than the high-octane fruit bombs that some producers made popular in the ’90s, but Ridge Zins are inevitably exuberant and congenial. Geyserville and Lytton Springs, made from a vineyard in the Dry Creek Valley which was planted in 1904, have become iconic American wines, but they’re also the kind of wines that should probably be enjoyed while wearing jeans, preferably Levi’s.
Happily, the eloquent and erudite Mr. Draper, who celebrated his 77th birthday last week, has no intentions of retiring, though he shares winemaking duties with Eric Baugher and John Olney, both of whom have been with him since the ’90s. I suspect he will still be presiding over blending sessions at the winery when that 1995 Monte Bello is finally ready to drink.
——
Australian Shiraz
Source: FT
By Jancis Robinson
Mar 22nd
The verdict after tasting 48 vintages made from some of Australia’s oldest vines? ‘Hill of Grace deserves its pinnacle’
Australian Shiraz is not the most timid of wines. In fact, it’s the sort of wine I would choose to keep me warm on a polar expedition, so an ambient temperature approaching 100F seemed far from ideal for a recent celebration of 50 years of Hill of Grace Shiraz at the Henschke family winery in South Australia.
For various logistical reasons, we 16 tasters first met up in the Hill of Grace vineyard itself and I still have the burn marks on my shoulders to prove it. It was almost too hot to talk, but Stephen and Prue Henschke, who met as science students at Adelaide University in the early 1970s and are now in charge of this celebrated eight-hectare vineyard, were determined that we should see the fat, gnarled “Grandfather” Shiraz vines responsible for Hill of Grace.
The story begins with a mid 19th-century precursor of the boat people, an influx of Lutherans escaping religious persecution in Silesia in what is now southwest Poland. Like dozens of other families, the Henschkes made their way north from Port Adelaide to the Barossa Valley but, crucially, they settled not on the baking hot Barossa Valley floor but a few hundred metres higher up in the rather cooler Eden Valley.
In 1860 the Henschkes and their kin built themselves a pretty little church, called Gnadenberg after a place left far behind. Just in front of the church, in the same year, Nicolaus Stanitzki planted a vineyard. He called it Hill of Grace, the English translation of Gnadenberg. By 1891 the vineyard belonged to a Henschke and Stephen and Prue’s children will be the sixth generation to have custody of some of Australia’s oldest vines, up to 150 years old. Most unusually for Australia, they thrive without any irrigation. Indeed it was the oldest vines that coped best with this year’s punishing drought while others were left looking desiccated and droopy.
In the 1950s, when the Australian wine industry was devoted to producing fortified wines, Stephen’s father Cyril thought that the family’s vineyards, in the not-too-torrid heights of the Eden Valley, would be well suited to producing table wines. So he launched a very unusual wine, one carrying not just the name of the grape but also the name of one of his vineyards, Mount Edelstone Shiraz. It was a huge success, and is still highly regarded, but it was the Hill of Grace Shiraz, launched a few years later with the 1958 vintage, that really established the name Henschke with wine cognoscenti.
We had been summoned to the Eden Valley to taste every vintage of this wine that had ever been released, including the 2008 that will be launched at the beginning of next month. Wilting under the heat in the vineyard, I was worried about how the temperatures of wine and tasters was to be managed, but I’d forgotten that the Henschke winery had been built and designed by astute, hardworking Lutherans. A large, airy stone barn was part burrowed into the hillside. Insulated rafters and a modest evaporative air-conditioning system was enough to keep both us and the wines comfortably cool.
We tasted from old to young and the 48 vintages (three were not made) really did tell the Hill of Grace tale with its quirks of winemaking. The wines from the 1950s and 1960s were remarkable – perhaps not exactly subtle but still wonderfully vigorous and so obviously from the same vineyard. The trademarks were a certain saltiness and dried spice character – five spice, volunteered one seasoned Hill of Grace taster. The grapes had been allowed to get pretty ripe. Perhaps, suggested Stephen, his canny forebears had been in the habit of picking as late as possible for their fortified wines so that they wouldn’t have to pay for too much fortifying spirit.
Then came the 1970s. The fashion was for “elegance” and the grapes were picked much earlier. Stephen recalled how, regrettably, during that era some of the really concentrated pressings were sold off to the Henschkes’ friend Murray Tyrrell in the Hunter Valley, who was prepared to pay for this welcome extra stiffening. Cultured yeasts, rudimentary temperature control and some smaller, newer oak casks were introduced in the 1970s but the wines in general lacked the heart of their predecessors.
Stephen and Prue returned from their postgraduate studies at Geisenheim wine research institute in Germany in 1977 and, when Cyril died two years later, Stephen took over the winemaking. “We young turks thought then we could control everything,” he recalled, admitting that he might have applied a bit too much squeaky clean white winemaking technology to his first few harvests. I found the early years of the 1980s some of the least exciting wines in the line-up but then came 1986, a year Prue described as “nature’s gift to the winemaker”. It inspired her, always particularly interested in viticulture, to try to replicate that perfection by manipulating the vineyard of which she assumed control in 1990 on the death of Cyril’s brother Louis. She realised the dry-grown vines would benefit from mulch that would retain moisture in the soil, and also embarked on a painstaking process of identifying and propagating the best ancient plants.
In the winery, Stephen started to study oak in just as much detail, seasoning it for much longer than had been the norm, and experimenting with small French instead of large American oak. (Today, large French is favoured.) But they always retained the concrete open fermenting tanks that are now the height of fashion.
In our line-up of giant Riedel glasses, the Hill of Grace wines really took off from 1986 and the wines of the 1990s were seriously impressive – savoury with flavours of dried herbs yet much fresher than the Australian Shiraz norm. The wines made this century continue to demonstrate the fine tuning process in both cellar and vineyard but are still very youthful. I was convinced at the end that Hill of Grace deserves its pinnacle, and that it could not be in more appreciative hands.
——
Campari picks Italian to head Lascelles
Source: The Gleaner
March 22, 2013
Gruppo Campari, the Italian firm which acquired the spirits and merchandise business of Lascelles deMercado and Company three months ago, has appointed one of its own to replace Fraser Thornton as group managing director.
Stefano Saccardi, an Italian and the general counsel and business development officer for Gruppo Campari, has been appointed the new chairman and managing director of Lascelles.
He replaces Gerald Yetming as chairman. Both Scotsman Thornton, who has headed Lascelles since July 2011, and Trinidadian Yetming were appointees of the former owner, the Trinidad government
Saccardi, who was born in Milan, joined Gruppo Campari in 1985 and has held various positions in the legal, corporate and public affairs departments. He holds a law degree.
Lascelles was taken over by CL Financial of Trinidad in 2008. The Jamaican company fell into the hands of the Trinidad government months later in January 2009 when it mounted a rescue of CL Financial and its insurance subsidiary, CLICO.
Trinidad eventually placed Lascelles on the market. The company was snapped up in December by Campari, the sixth-largest spirits company in the world.
The takeover consists of Lascelles’ spirit business including Appleton Estate, Appleton Special and Appleton White, Wray & Nephew White Overproof and Coruba rums.
Campari said the acquisition added ?220m in mostly rum assets to the group. The most-prized company in the acquisition is the 187-year-old Wray & Nephew Limited.
Davide Campari-Milano SpA, together with its affiliate Gruppo Campari, is a major player in the global beverage sector, trading in more than 190 countries, with leading positions in Europe and the Americas.
Headquartered in Sesto San Giovanni, Italy, Campari owns 14 plants and four wineries worldwide and has its own distribution network in 16 countries.
The group employs more than 4,000 people. The shares of the parent company, Davide Campari-Milano SpA, are listed on the Italian Stock Exchange.
——
Five years in, Fresh & Easy markets are a flop
The grocery chain, owned by Britain’s Tesco, has failed to gain American shoppers’ loyalty. Several missteps contributed to its estimated $2-billion loss.
Source: Los Angeles Times
By Shan Li
March 21, 2013
British supermarket giant Tesco thought it had the Yanks all figured out.
Determined to crack the U.S. market, it dispatched executives to live with American families, peek into their refrigerators and trail them on trips to the grocery store. It boasted of revolutionizing how Americans shopped.
But slightly more than five years after it opened its first Fresh & Easy Neighborhood Market in California, Tesco is considering selling the money-losing chain and leaving the United States altogether.
An email sent to shoppers recently acknowledged that the grocer doesn’t know “if Tesco will continue to own the company.” The 200-store operation in California, Arizona and Nevada represents an estimated $2-billion flop: a $1-billion investment on top of about $1 billion in cumulative annual losses.
“Tesco’s failure will rank as one of the biggest among food retailers in modern supermarket history,” said Burt Flickinger III, managing director at retail consulting firm Strategic Resource Group in New York.
With headquarters in El Segundo, Fresh & Easy touted itself as a European version of the Trader Joe’s chain, offering an assortment of groceries with an emphasis on fresh products to go. The plan was to slide into neighborhoods close to busy customers and win them over with convenience and tasty takeout meals. Stores were mobbed in the early days as curious customers rushed to check out the new kid in town.
But problems soon appeared.
Labor organizers targeted the non-union chain aggressively; shoppers often had to cross informational picket lines to get into the stores.
Fresh & Easy’s cost-saving business model of using only self-service checkout aisles was a hard sell with some customers who missed the ease of having checkers ring up their purchases.
Then, in 2011, the California Legislature threw a wrench into the works by requiring grocers to keep at least one aisle manned by a checker if alcohol was being sold. The legislation was designed, supporters said, to keep teens from buying alcohol and to preserve supermarket clerk jobs. But Fresh & Easy contended the law was intended to pressure the company into recognizing a union and signing a labor contract.
Industry watchers say Tesco also dug itself into a hole by sinking millions into an 850,000-square-foot distribution center in Riverside County, which put enormous pressure on the chain to quickly expand.
In addition, Tesco failed to customize merchandise by neighborhood, which is why its British stores are so popular. Fresh & Easy offered a limited variety of packaged goods, didn’t carry some well-known brands, was slow to restock popular items and often charged more for its private-label products than for name-brand counterparts, analysts said.
“They offered a uniform assortment in all their stores, meaning a store in upscale Scottsdale, Ariz., would have the same products as in Compton,” said Jim Prevor, an industry analyst who is editor of the food retailing website Perishable Pundit.
Fresh & Easy spokesman Brendan Wonnacott declined to comment beyond noting that the company was focused on “delivering a great shopping trip for our customers.” Tesco is still reviewing its American chain, he said, and will make an update in April as part of the company’s full-year results.
Many customers say Fresh & Easy promised a lot and delivered little.
“It really felt like aliens that crash-landed here in their Tesco-mobile and didn’t even look around to see what Americans liked,” said Gerry Carr, 51, of Venice.
Carr, a longtime vegetarian, said he was annoyed to find few salad options and little choice in herbal teas. Shoppers can’t inspect vegetables, or buy just one tomato or bell pepper, because produce is packed on trays and wrapped in cellophane. The self-checkout stands, which are common in Britain, also made him miss the human touch found at other supermarkets.
“They are teaching you their system, but you don’t want to learn their system,” said Carr, who shopped at Fresh & Easy several times before giving up on the chain.
Fresh & Easy underscores the pitfalls foreign companies with hefty muscles can face when trying to conquer the American market, analysts say. But it also highlights the folly of trying to capture market share by copying established chains such as the beloved Trader Joe’s.
“The two were clearly similar, and their stores are often located near each other,” Prevor said. “But there are only two concepts in the United States that are successful as small-format stores, and that is Trader Joe’s and its corporate cousin, which is Aldi.”
After checking out the first Fresh & Easy stores in Southern California, Joe Coulombe, the founder of the Trader Joe’s chain, concluded the British newcomer was doomed. Coulombe had heard that Fresh & Easy was trying to mimic the homey warmth of Trader Joe’s. What he saw, he said, was anything but.
“It did not resemble Trader Joe’s in any way,” recalled Coulombe, who in 1988 left the chain he envisioned as part gourmet purveyor and part discounter. The chain has a preternaturally friendly non-union workforce kept that way by generous pay and benefits. “I don’t think their management had any idea of what Trader Joe’s was all about.”
Coulombe said he was puzzled by how badly Tesco misjudged what the market wanted.
“Somehow their research got it all wrong,” said Coulombe, who no longer has any connection with the Trader’s Joe’s chain – it is owned by the Albrecht family in Germany, which also controls the discount grocery chain Aldi.
Tesco “spent two years doing market research, which I thought was admirable,” Coulombe said, “but it wasn’t translated into action.”
Ultimately, Fresh & Easy didn’t inspire much loyalty, although it did provoke some strong emotion in Frank Glaser, 79, of Rancho Palos Verdes.
After Fresh & Easy set up shop half a mile from his home, the retired aerospace executive said he worried that his normal neighborhood supermarkets would be hurt. So he and his friends launched an informal boycott of the new store.
“It’s like a small town, and at Trader Joe’s and also Ralphs, you meet your friends and you decide where to go to dinner together,” Glaser said. “I don’t know anybody that goes to Fresh & Easy.”
——
Darden: Specialty group outperforms flagship brands in 3Q
Source: NRN
Erin Dostal
Mar 22nd
Same-store sales at Olive Garden, Red Lobster and LongHorn decline as forecasted
Darden Restaurant Group Inc. reported on Friday positive third-quarter sales at brands in its specialty restaurant group amid declines at its three largest brands.
In an otherwise bleak quarter for the casual-dining restaurant segment, Darden reported a same-store sales increase of 2.3 percent at its Specialty Restaurant Group, which is composed of Seasons 52, Eddie V’s, Yard House, The Capital Grille and Bahama Breeze. Group revenue for the quarter ending Feb. 24 increased 61.1 percent to $287 million.
“The environment is very positive for the group,” said Eugene Lee, president of Darden’s Specialty Restaurant Group. “We’ve seen strong business travel. We’re seeing luxury growth in other aspects in retail, in hotel. We had a very strong holiday season with private dining.”
Darden’s chief executive officer, Clarence Otis, Jr., noted during a call with analysts that the company plans to expand the Specialty Restaurant Group.
Meanwhile, same-store sales fell 4.6 percent at Olive Garden, Red Lobster, and LongHorn Steakhouse, the company’s three largest brands, just over the 4.5-percent drop that the company estimated in a revised forecast released in late February.
“Certainly some of the external factors we’re all aware of including the payroll tax increase, the spike in gasoline prices and more severe winter weather this year contributed to that [decline],” said Andrew H. Madsen, president and chief operating officer at Darden. “Our priority now is regaining same-restaurant traffic momentum.”
A new era for dining out
Madsen noted that in the current market, Darden would have to appeal to different types of consumers: both those who are financially strained, and those who aren’t.
“For many guests, affordability is a particularly important need,” he said. “These guests want to visit casual-dining restaurants in particular more often than they do today, but they feel they cannot afford it. There are also economically secure guests who are looking for distinctive higher-quality dishes and are willing to pay a little more for them.”
Otis said that as a result, the company would focus on tempering average check growth across the larger brands while expanding its Specialty Restaurant Group. “We think that’s what it takes to support same-restaurant traffic growth,” he noted. “We are, for sure, in a new era for dining out,” he said.
The key, he said, is to evolve guest experiences in a way that keeps Darden’s brands interesting and relevant.
One example of how Darden is attempting to meet guest needs is its new fast-casual lunch test at Red Lobster. Running at two Orlando-area locations, the lunch service offers customers quicker dining at a lower price point.
“The lunch daypart, in particular, is one where we know that for a large number of guests, affordability, speed and convenience are very important,” Madsen said.
Stephen Anderson, senior analyst, restaurants at Miller Tabak + Co., LLC, wrote in a report that the most important take away from today’s earnings call was that although same-stores sales declined in February, March numbers are looking up.
“We think many of the macroeconomic risks affecting the sector may be receding at an accelerated pace,” he wrote. “We anticipate above-peer traffic growth [for Darden] in the next few quarters.”
New units drive revenue
Orlando, Fla.-based Darden reported an 18-percent decrease in net income for the third quarter to $134.4 million, or $1.02 per share, compared to $164.1 million, or $1.25 per share, in the prior-year period.
The company’s revenue increased 4.6 percent year-over-year to $2.26 billion during the third quarter.
The opening of 42 net restaurants each at LongHorn Steakhouse and Olive Garden drove revenue increases during the third quarter for the brands despite decreases in same-store sales, the company said.
Olive Garden reported third-quarter revenue of $962 million, a 0.6-percent increase compared to the prior-year period. Same-store sales at the brand’s U.S. locations dropped 4.1 percent during the quarter.
LongHorn Steakhouse reported a 6.9-percent increase in revenue to $332 million, and same-store sales fell 1.6 percent for the brand during the quarter.
At Red Lobster, revenue fell 6 percent to $669 million and same-store sales decreased 6.6 percent during the quarter.
During the fiscal year 2013, the company said it anticipates overall sales growth of 6 percent to 7 percent. For the year, net earnings per share should be between $3.06 and $3.22, which includes about 9 cents in costs associated with the company’s August acquisition of Yard House.
Darden operates more than 2,000 company-owned restaurants systemwide.
——
DRI: March progress may drive 4Q13 upside, but still see risk to 2014
Source: Goldman Sachs
Mar 22nd
What’s changed
DRI reported adjusted fiscal 3Q13 EPS of $1.04 moderately ahead of its prior preannouncement. In terms of composition, restaurant margins were 100bp worse than expected (-$0.17), but lower SG&A provided a full offset (+$0.19). We adjust our 2013-2015 estimates to $3.30/$3.02/$3.18 with the lower out-years to reflect reduced restaurant level profitability.
Implications
We maintain our Neutral rating on DRI shares:
(1) SSS at DRI’s primary brands remain challenged, and we see a lack of visibility towards a fundamental improvement. DRI referenced improved March industry trends, which we presume also translates to DRI. However, it is unclear if this simply reflects easier weather compares rather than real traction with respect to DRI’s ongoing turnaround efforts.
(2) As per DRI’s P&L dynamics this quarter, we believe profitability will remain under pressure from sales deleverage and value investments to re-stimulate traffic growth. The lower SG&A run-rate provides a partial offset, but a rebound of incentive comp will likely limit this counterbalance going forward.
(3) We are below consensus in 2014 where we take a more conservative approach on a brand turnaround than management’s guidance implies. This said, we do note that our 4Q13 EPS estimate is meaningfully above consensus (GS $1.10 vs. consensus $1.03). This may provide room for near-term upside, but we believe any resulting rally may prove short-lived.
Valuation
We raise our P/E and DCF based 12-month target by $5 to $50. Improved sentiment towards dividend stocks may make a 4% dividend yield a floor.
Key risks
Upside/downside risks relate to industry growth and DRI share shifts.
——
Connecticut: Terrified, inept Republicans, and Malloy intent on secrecy
Source: Darien Times
By Chris Powell
March 24, 2013
Alcoholic beverage price competition, proposed by Governor Malloy, is dead in the current session of the General Assembly. Since Sunday openings of liquor stores were legalized last year, most legislators are said to feel that liquor retailers have sacrificed enough already.
The sacrifice of Connecticut’s public, which pays the highest beer, wine, and liquor prices in the country on account of the state’s minimum-pricing law, is, as usual, taken for granted. The policy here is that government should drive up alcohol prices to subsidize small stores in the name of preserving jobs there, a sort of tax whose proceeds go not to the government itself but to a special interest. Of course no one would dare apply this principle anywhere else in the state’s economy. Just think of the jobs that could be created if Connecticut outlawed price competition in everything – food, gasoline, clothing – jobs created, that is, in other states.
Maybe the small liquor stores can’t be blamed for defending their historic privilege; most would be out of business otherwise. And maybe Democratic legislators can’t be blamed too much either, their party being the parasitic party, the party of the government and welfare classes and everyone else with his hand out, the party determined to turn every aspect of life into political patronage.
But strangely the most ardent defenders of forbidding liquor price competition seem to be Republican legislators, making a mockery of their party’s supposed belief in free markets. Here is an issue where 10,000 people are exploited for every person who benefits, an issue of enormous political potential, and still most Republican legislators are terrified of articulating the public interest.
Connecticut is full of issues like that – and full of silent Republicans or Republicans whose contribution to debate is only to complain that state government spends too much before they go silent about exactly where to reduce spending and about identifying the policies that drive up costs to taxpayers only to subsidize special interests that support Democratic campaigns.
This lack of intelligent opposition doesn’t just leave the Republicans as an irrelevant minority in Connecticut. It leaves Connecticut with the impression that there is no alternative to its decline – and thus it makes the Republicans most responsible for that decline.
——
Scotland: Moves to lower Scottish drink-drive limit
Source: The Courier
22 March 2013
Scotland’s drink-drive limit will be reduced after almost three quarters of people surveyed supported the policy.
The analysis also revealed 87% of those who want a lower limit agreed with the Scottish Government’s proposal to drop to 50mg of alcohol in every 100ml of blood from the current 80mg of alcohol in every 100ml of blood.
Just 135 people responded to the survey.
Justice Secretary Kenny MacAskill confirmed the Scottish Government will start the process to cut the drink-driving limit in Scotland.
He said: “Drink-driving can shatter families and communities and we must take action to reduce the risk on our roads.
“On average, 30 families every year have to cope with the loss of a loved one and around 900 people are treated for injuries caused by someone who thought it was acceptable to drink alcohol and get behind the wheel and drive. We cannot let this continue.
“Lowering the drink-drive limit will help make Scotland’s roads safer and save lives. The evidence is clear and the vast majority of those who responded to our consultation support the Scottish Government’s plans for change.”
The Scotland Act 2012 transferred the power to set the level of the drink-drive limit from Westminster to the Scottish Parliament.
Kathleen Braidwood, road safety officer for the Royal Society for the Prevention of Accidents (RoSPA) in Scotland, claimed lowering the limit would make roads safer and have a positive effect on society as a whole.
She said: “Far too many people are being killed on our roads as a result of people who drink and drive, so RoSPA is delighted to see that a clear majority of people are in favour of the Scottish Government’s proposal to reduce the current drink-drive limit.
“People need to realise that any amount of alcohol impairs a driver’s ability to judge speed and distance while behind the wheel.”
——
Scotland: Tennent’s owner takes 50% stake in Wallaces Express
Source: The Scotsman
By DOMINIC JEFF
23 March 2013
TENNENT’S owner C&C Group has taken a 50 per cent stake in wine and spirit wholesaler Wallaces Express.
Irvine-based Wallaces will be run independently, delivering products from other drinks firms as well as C&C, which also brews Bulmers and Magners cider. Brian Calder, who took control of the company in 2002 after a career in the business, continues as managing director. The value of the deal was not disclosed.
He said: “This is a major development for Wallaces Express and represents a great opportunity for all our staff and customers. In terms of strategic aims and culture, the two businesses are well aligned and I am confident that both will continue to move forward to the benefit of the Scottish licensed trade.”
Wallaces was established in Ayr in 1875 as a retailer and evolved in the mid 1980s into a wholesaler to the on-trade.
David McCorquodale at KPMG, who advised Wallaces, said Calder had built up a business with six depots and about 6,000 customers across Scotland and Cumbria by concentrating on customer service.
He said: “From C&C’s point of view, it gets a tie up with a business with a good reputation and I’m sure management hope that some of those customers will start buying more C&C products. Brian gets a partner that’s going to help him grow the business and provides further scale.”
——
Scotland: BenRaich ‘delighted’ to buy Glenglassaugh
Source: the drinks business
by Andy Young
22nd March, 2013
The managing director of the BenRaich Distillery Company has said he is delighted with the company’s acquisition of the Glenglassaugh whisky distillery.
Edinburgh-based BenRaich today completed the purchase of Glenglassaugh for an undisclosed sum from Dutch company Lumiere Holdings. Glenglassaugh produces a range of single malt whiskies and currently has the capacity to produce 1.1 million litres of whisky a year.
Mr Walker said: “We’re really delighted to buy Glenglassaugh, a renowned Highland single malt with a rich and distinguished heritage. It’s an excellent complementary fit with our existing BenRiach and GlenDronach brands. Part of its attraction to us is that it isn’t too large for our portfolio but its potential in contributing to the group certainly is.
“It’s our intention to bring this iconic distillery fully back to life by giving it the investment, commitment and care it deserves. I believe our whisky expertise, proven brand-building ability and strong routes to market will help take Glenglassaugh to the next level.”
Glenglassaugh is one of Scotland’s oldest distilleries, dating back to 1875 and is situated on the Banffshire coast close to the village of Portsoy. Distilling operations stopped in 1986 and re-started in 2008.
Glenglassaugh’s managing director Stuart Nickerson said: “It’s great to be back in Scottish hands. Glenglassaugh is a fantastic brand that was unheard of five years ago and today is exported to over 25 countries worldwide.
“It’s highly regarded as a premium brand and has won numerous top awards. We’ve grown the business significantly and today’s announcement means continued investment and will also allow the business to grow further and more rapidly.”
Mr Walker added: “The timing is good as there is no doubt we are currently in a golden age for scotch whisky. There’s unprecedented demand for high-end brands like ours in places like Taiwan, Scandinavia, USA, China, India, Russia, the Middle East, South Africa and South America, and we now have the fantastic opportunity to re-introduce Glenglassaugh to these markets.”
April 25, 2013 at 7:04 pm |
Wow, superb blog format! How lengthy have you been
running a blog for? you made running a blog look
easy. The total glance of your website is wonderful, let alone the content material!