Beverage Bulletin February 2010

California Beverage Retailers Association

P.O. Box 56686

Sherman Oaks, CA 91413

(818) 788-8120

 

www.cbraliquor.org

February 1, 2010

 

 

 

Industry News

 

How has drinking changed? John Beaudette, President of MHW Ltd. spoke at an industry seminar recently saying that the recession has not changed the number of drinkers in the country and how much they consume. But, what and where they drink has changed dramatically. They are drinking more at home and less in bars and restaurants. They are trading down to value brands of beer, wine, and spirits. Domestic brands have been doing business at the xpense of imports. Consumers are mazking more buying decisions at the point of sale and taking advantage of discounts. Retailers and distributors are both continuing to reduce inventory to free up dollars and increase turns.

 

What are importers doing? Chateau and Estates, the biggest US importer of Bordeaux wines for the past 35 years, has abruptly stopped all purchases in France. Falling sales have left the company holding over $100 million in inventory. C&E is cutting prices on top labels in order to unload. Some well below landed cost. Discounts range up to 40%. This move by C&E is making bargains available to retailers and consumers, but leaves the long term outlook for the Bordeaux wine industry very uncertain.

 

Total U.S. Beer sales fell by 2.2% in 2009. This is the biggest loss since the 1950's and the first since 2003. The sales decline puts pressure on Anheuser Busch Inbev and SAB Miller Coors to reconsider their price increases. Both industry giants took price raises of about 5% after their mergers. They also took the opportunity to consolidate operations, reduce expenses including advertising, and layoff redundant employees. Both companies are in a situation where they have to increase profits and reduce expenses in order to reduce the debt incurred in their mergers. But the weak economy and slow job market are turning consumers away from beer drinking. Meanwhile retailers are pushing craft beers in order to increase their own profits. AB's sales decline was 2.1%, Miller Coors 1.9%.

 

Heineken has purchased the Femsa beer business for $5.4 Billion plus the assumption of $2.1 Billion in debt. The buyout gives Heineken a presence in Latin America as well as increasing its sales base in the U.S. Femsa will get a 20% stake in Heineken as well as two seats on the board. The deal also includes a 10 year exclusive agreement to sell beer in Femsa's Oxxo convenience stores in Mexico. Originally SAB Miller Coors had been expected to ink the deal. Heinekens move surprised the industry. This will put Heineken, Newcastle, Tecate, Dos Equis, and Bohemia in the same sales portfolio.

 

We note with sadness the passing of Joe Huskins. Joe was an integral part of the industry for decades, representing breweries and soda companies, first as a rep and later as a broker. He will be missed.

 

Asahi and Suntory Distilleries will both be making a major push to sell premium whiskies in the U.S. During 2010. The test will be whether the American consumer is willing to put dollars on the line for new top-of-the line products in this economy.

 

Silicon Valley National Bank has issued its annual wine report saying that Napa Valley is facing its worst downturn since the early 1980's. Wines selling for $10 to $20 have dropped 8% in sales while wines in the $50 and up bracket “were in a dead zone.” Many high end Napa wineries experienced sales declines of more than 40%. According to the report Constellation Brands, the industries largest producer, had a 47% decline in 3rd quarter profits. Some wineries are selling top wines under new secondary labels in order to maintain the brand image of their traditional wines. It is important to note that wine quality is the the same or better. Bargains abound and many prices are negotiable. This is a time retailers and restaurants can make bargains that will add to profits while still making consumers happy.

 

Brands and Comments

 

The CBRA Newsletter has not accepted any payment from any of the brands mentioned in this edition. The editor, Ron Ziff, welcomes comments at ron@cbraliquor.org

 

CBRA Membership Remains Open

Now, more than ever, access to your industry is important. The CBRA is California's only statewide association of licensed retailers, and our membership continues to be open for the first time in 20 years.

 

At CBRA we deal with licenses and regulations that affect the beverage business on a daily basis. That's why CBRA offers practical solutions, unique products, services, information, and timely advice for both large and small beverage businesses. With reasonable fees, superior service, and associates that are easy to reach, CBRA helps you to run your business better and easier.

California Beverage Retailers Association – We know how to get it done.