Beverage Bulletin January 2012

California Beverage Retailers Association

P.O. Box 56686

Sherman Oaks, CA 91413

(818) 788-8120

Ron Ziff, Editor

www.cbraliquor.org

 

January, 2012

 

This month's stories:

French AOC Legal Battle

An Amazon.com Wine Division?

Mail Order Regulations

The Latest Chinese Wine Trend

Economic Trends Changing the Marketplace

Big Companies on the Edge

Stricter rules considered for wine labels

Robert Mondavi Estate Sold

Marketing Trends

9 Food and Beverage Trends for 2012

What's in Your Glass?
Immigration Enforcement
and as always Notes from recent tastings, Industry Calendar, and new Legislation for 2012.

 

French Legal Battle Will set the stage for AOC rights

A battle is shaping up between French Appellation Controlee regulators and wine producers that want to produce “natural” wine. Over the past 30 years AOC regulations have been adjusted first to allow, later to require, the use of hundreds of chemicals and natural additives that standardize the wines of each region. The wines are then tested and judged as to whether they have met the local standards. Over the past few years a number of small vintners have opted to return to the old ways of winemaking. They plow the rows with horses instead of tractors, fertilize with manure instead of chemicals, and make the final product without the use of a dosage or sulphites. The resulting wines are the wines of yesteryear. They have years that are great, good and not-so-good; bottles that are good, great, or bad and flavor profiles that distinct and individual. The AOC forbids them from using regional designations. For the past 6 years, wine maker, Olivier Cousins has made natural wine and labels it “Anjou.” He dropped out of the certification system and refused to pay an annual fee of $2600. This Fall he was sent a notice that he was guilty of fraud. He can be fined up to $50,000 and ordered to re-label his wine as “French Table Wine.” He will have to meet with a public prosecutor to determine the exact penalty. Cousins says whatever the outcome he will refuse to pay and take his case to court. He feels the centuries old ways are better and he is right in letting customers know the origin and terroir of his wines.

 

In 2009 Amazon.com was attempting to set up an online wine division, but has been running into delays. The difficulty? Amazon may have to get licenses in every state. Retail licenses in the states will give Amazon a presence in each state. That is a problem Amazon has dodged up until now. A presence in a state means Amazon will have to charge sales tax and remit it to the tax taxing agency. Selling online without sales tax has been the advantage that has driven Amazon's growth. In some cases consumers have been saving 10% or more on sales tax even when Amazon's price is the same as local retailers. Now that Amazon has reached an agreement with the State of California to pay Sales Tax will the company move to get a share of the mammoth Wine and Liquor California Market?

 

Mail Order Regulations? U.S. law requires that cigarette sales through mail order over the internet only be made to age verified buyers and sales tax be charged and remitted to the states. California law goes further by requiring sellers to verify purchases by requiring a minimum 2 carton purchase and phoning the buyer after 5 pm to verify the purchase. The extra conditions are meant to insure that minors are not faking verification to buy tobacco. This year there will likely be a push to extend the laws to other products including alcohol.

The Latest Chinese Wine Sales Trend

Chinese Wine Producers are doing one of the things their countrymen do best. That is copy, reproduce, and fake it. The product in question is the hottest selling commodity in China; wine. Some famous vintages are actually refilled bottles. An empty Lafite bottle can sell for $325. Refilled it can bring $3500. If the labels are scraped off, the bottles can still bring a hefty price because they will be relabeled. Some of the wines are from merchants that just refill. While others are from legitimate wineries that are producing look-a-like second labels. “Benfolds” instead of Penfolds; “Barons de Lafite cellar collection”; and wines from the “Nava Valley” in place of Napa Valley.

Economic trends

US Wine drinkers moved the country into the number 1 position as a consumer of wine. In 2011 our consumers popped the cork on 3.7 Billion bottles! Italy dropped to second place, and France was third.

 

Beer Sales fell worldwide for 2011. Shipments were down 2.9 million barrels or 1.4%

as compared to 2010 according to trade paper, Beer Marketer's Insights. This is the lowest level since 2003.

 

Shoplifting or a five finger discount is one of retail's biggest problems every day. According to Ad Week 1 out of 11 customers steals at lest one item. Total theft for 2011 was about $119 Billion. 75% was taken by adults and 25% by kids. What were the top items shoplifted? #1 Expensive cuts of meat; #2 Hard Liquor.

 

US consumers reduced their credit card debt by 11% in 2011. The drop is a combination of paying off card balances and reduced spending.

 

US consumers also continued to hold back on major purchases; auto sales among them. The age of the average car on the road is now 10.8 years.

 

Today's shopping patterns were the subject of a report by Acosta. Shoppers are taking an extremely prepared and educated approach to the grocery trip. 72% are making a list, 54% buying more items on sale, and 33% are going online or using apps to save money.

Acosta expects conservative spending behavior to continue. They advise businesses to develop strategies for consumers at both ends of the spectrum. "There are two economies, one for under $50K and one for more than $50K. Understand the increasing divide between low-to-middle income households and higher-income households, and what it may mean for your brand." Approximately 10% of households generated less than $45,000 in annual income or are on food stamps, and one-third matched their primary shopping trip to their paycheck. Due to increased gas prices, they are consolidating trips, buying more items on sale, buying more store brands, switching to less expensive brands, buying fewer groceries overall, and doing without some products. Households earning more than $100,000 in annually are not looking to spend less, but they are pre-planning shopping trips. They are clipping coupons and buying what’s on sale. In store, they are more likely to comparing the price-per-oz. and reading the label in detail.

Dining Out. The U.S. Census Bureau reports that only 49.3% of Americans dined out during 2010. That's less than half. According to the bureau the average American had $1315 less in disposable income than in 2008. Half of all jobs paid less than $27,000 last year. 48.8 million were hungry or “food insecure.” That is an increase of 12 million since 2007.

Price forecast for 2012. The Department of Agriculture predicts modest food price increases in the 2.5% to 3.5% range. This is lower than 2011 when food price increases were 5.9%. The one exception is the price of meat. Drought conditions and feed grain increases will keep upward price pressure on beef and pork. Price increases in the 6.5% to 7.5% range are expected.

Coffee prices are a major economic indicator. The outlook there is mixed and uncertain. Prices were down 7.4% in 2011. Colombian farmers will be forced to replant 10% of their fields due to a fungus infestation. The world output of premium Arabica beans will be down more than 4% in 2012 against an increase of 2.5% in world demand. Meanwhile increased production for the coming year in Brazil could be as much as 20% .

 

Champagne Sales are rising as part of the buoyancy of the upper end of the economy. Louis Vuitton Moet Hennessy showed a 15% sales growth for the first 9 months of 2011. Competitor Pernod Ricard reported similar growth with sales of Mumm and Perrier-Jouet nearing pre-recession levels. Consumers are willing to pay more and the “price-mix effect”, an indicator of prices paid, increased 5.6% in the first 9 months. In 2008 and 2009 much of the champagne industry cut production in order to avoid a glut and sliding prices. At the time grapes were left to rot in the fields. Now with sales recovering some producers are facing allocations and shortages. This is the situation at this writing. When you read this story New Year's sales will be history.

The U.S. Army lab is experimenting with new foods. They are planning changes in standard field rations known as Meals Ready To Eat (MRE). Among the changes beef jerky sticks with caffeine added to keep soldiers awake, Omega-3 oils added to some foods to make them healthier, Maltodextrin added to give applesauce an energy boost. It is uncertain if the new MRE's will be any more popular than those of yesteryear. The rations have to be able to withstand storage temps of 80 degrees, air drops, and have a shelf life of 3 years. There is a rumor that the changes could mean soldiers will no longer have to complain about “mystery meat.”

Big Companies on the Edge

U.S. News & World Report listed 11 big firms that are struggling as the recession grinds on. None of these are in foodservice or food retail. But surely our industry has its share of companies under pressure.
EastmanKodak. Problem: Slow to innovate and keep up with new technology. (Correction: Just after this was written the company filed Chapter 11)
Research In Motion. Problem: The company makes Blackberry. Customers are switching to SmartPhones.
Office Max. Problem: Too much competition from Staples, Office Depot, Costco, and Walmart.
Monster Worldwide. Problem: Not enough jobs going through the company and lots of new competition entering the niche.
Bank of America. Problem: The company is still choking on bad loans it took over by buying Countrywide. Government regulators are keeping the pressure on despite the fact that the government pushed BofA into the purchase.
Netflix. Problem: The company stumbled when it tried to split in two. Customer growth stopped abruptly. New competition looms from Amazon and HBO.
KB Homes. Problem: Company rode the wave in the housing boom. In the recession it has lost more than $2 Billion with no relief in sight.
Hewlett-Packard. Problem: Company has lost market share to competition. Has not found a turnaround strategy with 3 new CEO's in 2 years.
Sears (includes KMart). Problem: The company has lost money for several years. It has cut costs but can't save its way out of trouble. There is still no turnaround strategy. Late news: the day after Christmas the company announced it would close up to 120 stores due to disappointing holiday sales.
Best Buy. Problem: Cash poor customers. Relentless price pressure from online competition.
Washington Post. Problem: Despite declining newspaper revenue, the company has made a profit through subsidiary Kaplan Education. Now government pullback on student loans will take that away.

Stricter rules considered for wine labels

According to The Miami Herald a new federal regulation for wine labels is under consideration in the U.S. The regulation proposes stricter definition on terms such as “estate,” “reserve” and “vineyard.” According to the regulators, consumers are not familiar with terms used in wine labels and advertisements, which could mislead and confuse them.  The regulation would control the use of those words, guaranteeing consumers reliable information about the wine origin. The Wine Institute points out the impositions could undermine U.S. dealings with the European Union, as their labels typically use traditional expressions. There is also a proposal that states labels should have “serving facts” information concerning fat, calories, carbohydrates and protein. Winemakers argue that the extensive and costly process of testing and relabeling wines would undermine industry growth and innovations.

Boisset, Gallo Revealed As Buyers Of Robert Mondavi’s Home

Wine Spectator reports that Robert Mondavi's estate was bought by Jean-Charles Boisset and his wife Gina Gallo. The 56-acre property in Yountville, where Mondavi and his wife Margrit resided, came on the market in 2010 for $25 million. The price was reduced to $13.9 million in a sealed bid auction last fall. The living room in the main house features an Olympic size swimming pool. No, it's not filled with Napa Cab!

Marketing Trends

Despite the economy, the wedding industry has remained strong during the last few years. Brides and grooms are "committed to planning a luxurious, memorable event and are willing to spend despite the state of the economy," editor in chief of the The Knot Inc. The company's 2010 Real Weddings Survey, released in March, reveals that the average wedding cost is just under $27,000. Invitations, floral arrangements, decor, jewelry and favors total about $8,000 of that figure. Home accessories and gifts retailers can benefit greatly from these brides. Display simple, themed vignettes geared toward brides during the wedding season to boost your bottom line. On the rise in 2011, the themed wedding/reception trend will continue throughout 2012. Not only does a themed wedding allow the bride and groom to personalize their ceremony, it helps them make choices when finding decor and accessories as well. Nautical, carnival and garden themes are popular, but the number one choice is “vintage”. The vintage theme pulls inspiration from a range of periods. For example, Victorian dresses with long, full skirts paired with corsets, chokers and high necklines is the top choice for 2012.

Food and Beverage Trends for 2012

There are several trends to be aware of as we enter 2012.

  1. Yesterday's family meals were set by Mom. Today's family meals are decided in a democratic process. The entire family joins in deciding what where and when to eat.

  2. Eating alone. 44% of adults eat alone. If you're advertising only for group meal you are missing nearly half the market.

  3. Snacking. 48% of eating takes place between meal. If you are offering only “sit at a table” meals you are missing nearly half the market.

  4. Eating is trending toward no advance planning. More than 10% of food and beverages are purchased, taken home, and eaten within an hour of purchase. This means customers may like aged wine. But they want to buy it at 4PM and age until 6PM.

  5. Are you appealing to the family in “Father Knows Best?” Today's family may be unmarried, a single Mother, is ethnic, or could be multi-racial.

  6. Many consumers want a healthy life style with healthy food. They work out at the gym, read labels at the grocery store, and don't want it greasy at a restaurant. When ordering at that restaurant they are concerned about the vegetables on the side and don't just accept them as a given. They may even be reading the calorie counts and other notes if you put them on the menu. In 2010 mass market retailers 54% of organic foods. That's more than other industry segments. Natural food retailers only sold 39% of the organics in 2010. The figures are not in for 2011, but all indications are that the market shifted further. Overall organic foods grew 9% in 2010 – in a bad economy!

  7. Tell Me What I can Eat, Not What I Can't! Consumers are tired of hearing cautions and want to positives about foods and beverages.

  8. Integrity and Transparency. Customers may not tell you but they are aware when the menu or label contains too much hyperbole or fluff. You just may not see them again. Customers are more loyal if they are convinced they are getting a healthy meal and a good value and you are telling the truth.

  9. A new food trend, ingredient, or concept can start anywhere at any time. Be aware of what your customers are reading and what they are buying every day. By this time in 2013 they may be paying for something that isn't even being offered today.

 

What's in Your Glass?

A bottle of 55-year-old Glenfiddich Scotch made to honor the oldest living Scot sold at an auction in Edinburgh to an unidentified Internet bidder for £46,850 ($72,632), breaking a European record. The bottle, sold by Bonhams, was one of 15 bottles of the Glenfiddich Janet Sheed Roberts Reserve (named for Janet Sheed Roberts, who is 110). The Scotch, which was put into casks in 1955 and bottled last month, had a list price of £30,000-£35,000 ($46,500-$54,000). The record that it broke came from a 64-year-old bottle of Glenfiddich that sold for £25,200 ($39,000) in Edinburgh in 2010.

The U.S. beer market continues to struggle, according to the latest numbers from Nielsen. Off-premise volumes declined 1.9% in the most recent 52-week period (ending November 12) to 1.38 billion cases. The outlook appeared brighter on a value basis, as dollar sales inched up 0.6% to $28.6 billion during the same time period. The average price of beer in the off-premise increased 2.4% to $19.82 a case.

Craft and specialty brews continue to be the most vibrant segment in the beer category, surging 16.6% by volume in the 52-week period, with even stronger value growth (+17.8%) on an average price of $31.80 a case. The craft/microbrew segment is priced higher, on average, than imported brands ($27.59), yet imports fell 0.6% by volume during the same time span. Mexico continues to be the largest-selling origin for imported brews off-premise, at 78.7 million cases (+0.4%), but the fastest-growing source was Belgium (+28.9%). Is there a Craft Beer that you want to find? Go to http://www.craftbeer.com/pages/style-finder. This website lists hundreds of specialty beers and everything about them.

Domestic beer sales posted a 2.1% decline in the 52-week period, with the super-premium ($24.12 a case) and below-premium ($14.71) segments falling 4.5% and 4.2% by volume, respectively. Even domestic light beers fared worse than the industry average, down 2.9% during the same period. Nielsen tracks beer sales in food/drug/liquor/convenience stores and other channels, with volumes accounting for just over half the size of the total U.S. beer market, as measured by Impact Databank.

 

Immigration Enforcement

The Immigration and Customs Enforcement Agency (ICE) cracked down on Chipotle Mexican Grill several months ago. The restaurant chain that employs 30,000 workers is the highest profile target as the Obama Administration has moved against companies employing illegal immigrants. It had to discharge over 1000 employees. Chipotle is opening 145 new outlets this year and 165 planned for 2012. It expects to hire 100,000 workers in the next 3 years. Chipotle's CEO, Monty Moran, has now gone on the offensive for his company and the foodservice secotor in general. The industry is dependent on low skilled immigrants for its labor force and Moran's chain considers them vital to its survival. He has launched a campaign to get Congress to fix the immigration problem. He is convinced that temporary guest workers won't do it. He needs workers with permanent status. He has met with Senators Michael Bennet and Mark Udall (Colorado), Charles Schumer (New York) and Representatives Darrell Issa (California) and Lamar Smith (Texas). All of these lawmakers chair or sit on committees that are responsible for immigration reform. Meanwhile ICE has audited 5900 companies and could be coming to a restaurant near you. Want to help solve the problem? Write a letter to one of the above Senators or Representatives and send a copy to Monty Moran.

ICE and the US Attorney recently completed enforcement action here in California. Michael Malecot, owner of The French Gourmet in San Diego was convicted of hiring illegal immigrants. He was sentenced to 5 years probation and fined $396,575. His restaurant manager, Richard Kauffmann was also fined $2500 and given 3 years probation.

Industry Calendar

1/26 Stars of Santa Barbara Tasting-Beverly Hills

1/28 Pinot Days -LA

1/30 Jetro Sake Seminar & tasting-Santa Monica

2/7 Santa Lucia Highlands San Francisco

2/11 Sysco Show-Pomona

2/20 President's Day

3/8-13 Natural Products Expo West-Anaheim

3/11 Family Winemakers Tasting – San Diego

3/13 Family Winemakers Tasting - Pasadena

 

Tasting Notes

During December we participated in a tasting of rose' champagne and sparkling wines hosted by The Tasting Panel. The wines were quite varied. Some light, some with fine bubbles and others with dramatic effervescence. Some very dry and others that ranged to extremely sweet. The prices ranged from retails of $14 to $300 per bottle. As always, our challenge is to find “good buys”; wines that offer exceptional quality and value that can be sold at reasonable levels and make customers very happy. The wine we found was exactly what we were looking for. Roederer Estate NV Brut Rose' from Philo in the Anderson Valley retails for about $27, yet beat the wines in the $200 to $300 range for style, taste, color, and overall value. This is sparkling wine in the French Champagne style. It is soft, mellow, and tastes of the champagne yeast. It is a pink and peachy color and light in character. At only 12% alcohol it is a wine that can be enjoyed on a summer afternoon. Roederer has done its very best to recreate a taste of France in the Anderson Valley.

New Legislation for 2012

Our industry has more laws controlling it than most industries. The State Legislature and the ABC give us license privileges and can take them away. 2012 has several new laws that you must follow. New alcoholic beverage laws are being introduced that will be effective in 2013. Many critical issues are pending. Is your business safe? Members are encouraged to look through the Legislative Bulletin. If there is a new law that is a problem for your business, call the association office now. The CBRA is your voice in Sacramento. If you are not a member, join today. The CBRA is your only voice when it comes to new beverage laws.

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. One of the most valuable services we offer is that call to the ABC to ask your question. We can ask that question and keep you anonymous. That's something you just can't do yourself.

Join or renew your valuable membership today. You can't afford to delay.

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

 

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