Beverage Bulletin June 2012

California Beverage Retailers Association

P.O. Box 56686

Sherman Oaks, CA 91413

(818) 788-8120

Ron Ziff, Editor

www.cbraliquor.org

 

 

June 2012

 

This Month's Stories:

A Quote from Margaret Truman

Olympic Size Prices

Wine Prices Going Up

Clothing Made From Wine

More Wineries Bought by Gallo

Celebrities in Wine

Marketing Changes in Grocery Chains

Paper or Plastic? ...Forget it!

No More Super Size in New York

Marketing Changes in Restaurant Chains

What's good for the goose...

AB/Inbev to buy Modelo

Craft Beers Grow

AB to Introduce 15 New Beers

Changes in Consumer Spending on Alcohol

What do you do when a “celebrity chef” gets it wrong?

Spirited Politics in an Election Year

An Apple Martini a Day Keeps the Doctor Away

 

and as always Tasting Notes and the Industry Calendar

Akvavit! It gets better by the glass. Skoal! -Margaret Truman

 

Olympic Size Prices

The London 2012 Olympic Games Have released copies of their menus and are already getting consumer complaints even though it will be months to the games. What's causing the fuss? Beverage prices! A 330 ml(11 oz.) bottle of Heinekens will be £4.20($6.50 US); a 500ml of Coca Cola £2.30($3.55US); £4.80 for a glass of Red Wine($7.40US); and £2($3.10US) for a cup of tea. The people complaining say the prices are more than double prices outside the stadiums. The organizers expect to serve 14 million meals to visitors and insist that their prices are equivalent to prices at other sports venues. Visitors will be allowed to bring their own food and drink (but no alcoholic beverages) to the events if they use paper or plastic bags.

 

Wine Prices on the rise

With the U.S. slowly coming out of recession, consumption on the rise, and the oversupply of grapes ending, wine prices are seeing an increase not seen for a decade. Wine grapes were planted in 543,000 acres in 2011. Down from 570,000 acres in 2001. Cabernet grapes are selling at double last year's price. Other varietals are showing similar increases. Thompson seedless are at four times their 2001 price. Consumption of California wines rose 5.6% last year; its 18th straight year of increases. Look for tighter supplies, higher prices, and more imports going forward. With most of the California crop already contracted out, Don Sebastiani's Smoking Loon brand will be crushing grapes shipped from Chile in the coming year. This seems to be a trend. Bottled Imports showed a 2.7 % increase in 2011 to 75.3 million cases, while Bulk Imports rose 25.1%. The bulk imports when bottled were 23.4 million cases.

 

Wine Clothing!

 

The University of Western Australia has come up with a way of making clothing, seen above, out of Red Wine. Scientist Gary Cass treats the wine with Acetobacter bacteria. The bacteria turns the wine into a cellulose fabric. The fabric is the wrapped around a mold to form the garment. Since it is molded there are absolutely no seams. The only problems so far are that the fabric retains the bouquet of the wine and the fabric lacks flexibility, making it difficult to get on and off. The advantages are that the garments produced by this method are cheap because there is no labor in cutting and sewing; and

when you are done with them, they are biodegradable.

More Wineries Bought by Gallo

Gallo now gains its first Washington wine brands by buying Covey Run, which sells around 200,000 cases, down from 310,000 in 2005; and Columbia, which sells around 100,000 cases, down from 180,000 in 2008. Both are positioned in the premium-and-above range. Roger Nabedian, senior vice president and general manager of Gallo’s Premium Wine Division, said, “We’ve been watching the Washington wine industry grow for a number of years and consider these wine brands to be a key part of our premium wine strategy moving forward. This purchase will help us expand our footprint and offer our customers wines from the Columbia Valley and Yakima Valley Appellations.”

 

Celebrities in Wine

 

 

Retired NBA Houston Rockets player, 7 foot 6 inch, Yao Ming, has sold out the first vintage of his “Yao Napa Valley Reserve Cabernet Sauvignon.” The first year's production of 300 cases of purchased grapes vinted and bottled under contract was all sold in China. The price a whopping $625 per bottle – wholesale. Chinese consumers are paying $1175 a bottle.

 

Marketing Changes in Grocery Chains

Southern California's Grocery Industry is undergoing one of its periodic profit shifts. One player is increasing profits while others are experiencing severe difficulties. This time it has been caused by three big factors: inflationary cost increases, the inability to pass all of the increase to the consumers, and increased competition from new rivals. The new rivals include a robust Ethnic Sector; Costco, Target, and Walmart; and other retail channels using food and household cleaners as loss leaders. The result has been a lot of pain for most players.
Ralphs: Kroger has just posted its highest profit quarter in history and moved to wring more profits out of sales. Unable to take additional price increases; Ralphs discontinued doubling manufacturer coupons, converted its rewards program to a discount on gasoline that most of its customers can't or won't use. In order to mask the reductions in rebates and coupon redemption, the chain is now offering deep pricing on 1 to 6 major items each week. The gas rebate program is being advertised as “temporary” and may disappear as well.

Vons: This Safeway branch has discontinued double coupons and is offering deep pricing on a few items each week to those customers that register their loyalty cards to get the low pricing. Others pay full price.

Albertsons: Supervalu's retail stores have been having volume problems. Without double coupons, rebates, or other frills there is nothing left to cut. On June 6 Albertsons announced coming layoffs of up to 2500 employees. With 247 stores that means about 10 employees per store will be laid off. It is likely that there will also be some store closings. The chain says the adjustments will be completed by July 1.

Fresh and Easy. This is a division of UK's Tesco with 187 stores in Southern Cal, Arizona, and Nevada. The company has spent $2 Billion opening the stores and lost another $1.5 Billion on operations over the last 6 years. The CEO is under stockholder pressure to stop the bleeding. He has promised a turnaround by next February. Two things seem to be underway: the buyers and operations management are virtually isolated until at least the end of July for “an internal project”; The company has announced it will be adding in-store bakeries in 100 outlets. This bakery project is somewhat of a mystery. In-store bakeries are labor intensive, require lots of supervision, and tend to lose money...lots of money.

 

Paper or Plastic? ...Forget it!

The Los Angeles City Council has voted to ban plastic bags from being used by all Supermarkets, Convenience and Liquor Stores, and Drug Stores. The ban will go into effect later this year. At the same time customers will be charged 10 cents per paper bag. The Council exempted restaurants and other stores. Also exempted is the L.A. Times; the city's biggest user. The Times uses 800,000 plastic bags a day.

 

No More Super Size in New York

If you think this is a Nanny Law, be glad you don't live in New York. Mayor Bloomberg is asking for a ban on soft drink sales in cups larger than 16 oz. This doesn’t mean New Yorkers can’t drink more than 16 ounces of soda at a time. If they choose, they can get refills — even free refills if the restaurant offers them — or buy two smaller drinks instead of the extra-large one. Critics of the ban argue that if people want to drink an enormous amount of soda, they’ll find a way to do it anyway; but Bloomberg hopes that eliminating the convenience of having all that soda in one big cup will stop people from consuming as much. More than half of New York adults are overweight according to the New York Times.

 

Marketing Changes in Restaurant Chains

Chevy's, Chilis, Applebees, and Uno Chicago Grill are experimenting with table top computer terminals that allow diners to order meals, pay for them, and play electronic games until a waiter delivers them to the table. Chilis already has the systems installed in over 100 restaurants. Early indications are that over half of the patrons use the new systems rather than deal with a waiter. And about 1/3 play the games while waiting.

 

What's good for the goose...

As of July 1 California will become the only state in the country where it will be illegal to sell Foie Gras. The new law goes into effect despite protests of over 1000 restaurants in the Bay Area and white tablecloth restaurants statewide. It will also Sonoma Artisan Foie Gras out of business. It is one of only three goose farms in the U.S. The legislature passed the law in 2011 in response to animal rights activists. The law doesn't stop consumers from buying in other states and having goose liver shipped in. It just stops grocers, restaurants, and farmers from dealing in this now illegal product. People may wonder about a state where you can buy marijuana but can't buy goose liver.

 

Brews, Beer, and Suds

AB/Inbev is near to buying control of Mexico's Grupo Modelo for about $15 Billion. AB/Inbev has owned a non-controlling interest in Modelo that it acquired along with U.S. brewer Anheuser-Busch. The brands involved in this deal include Corona Extra, Corona Light, Negro Modelo, Modelo Especial, Pacifico, and Victoria. Currently the brands are distributed in the U.S. by Constellation Brands. Other ramifications of the deal: If AB/Inbev and Constellation terminate the deal it is estimated that Constellation will be paid $3.5 Billion. The U.S. Justice Department will likely ask for some divestitures due to anti-trust considerations. Possible divestitures include Natural Light, Busch, Busch Light, and Michelob.

 

While total beer sales fell 1.4% in 2011, craft beer sales increased 13%, and seasonal craft beers were up 18%. The total seasonal beer sales were $245 million. $61 million of that came from Samuel Adams, a brewer that has been producing them for over 25 years. Anheuser Busch's Goose Island produces four a year; Summer, Fall, Winter, and Christmas. Goose Island seasonal sales were up 22% last year. Miller/Coors Blue Moon label will have two seasonal beers this year that are being selected from several by voting on Facebook.

 

Anheuser Busch has lost volume for 23 straight years. In 2011 volume dipped below 100 million barrels. On the bright side operating margin rose from 30% to 40% from 2008 to 2011. AB is attacking the volume problem by introducing new beers. There will be 19 of them by year end. They include a high alcohol light beer, Bud Light Platinum (a sweeter beer), Shock Top (wheat IPA), and Bud Light Lime-a-Rita (8% Malt Beverage), and 15 others.

 

Changes in Consumer Spending on Alcohol

The Bureau of Labor Statistics reports that of every $100 Americans spend $1 is spent on alcohol. This has remained unchanged for over 30 years, but where this $1 is spent has gone through a dramatic change. In 1982 the split was 76% in stores and 24% in bars and restaurants. In 2011 it was 60% in stores and 40% in bars and restaurants. There are a number of factors involved 1) The price in stores dropped 39% over the 30 years while the price in restaurants went up 79%. 2) The population of people spending has risen dramatically. The breakdown by product type has also changed. While beer was nearly unchanged, wine and spirits spending shifted dramatically. See below.

 

 

In 1982 Beer got 48.9% of the consumer alcohol dollar, in 2011 it was 47.7%.

Wine was 16.2% in 1982 and 39.7% in 2011. Spirits 34.6% in 1982 and 12.6% in 2011.

 

What do you do when a “celebrity chef” gets it wrong?

Rachel Ray appeared on The View on June 6 and showed hamburgers. Whoopi Goldberg questioned whether the burgers were cooked enough because they looked “too red.” Rachel said “Absolutely, 100 per cent; we made that grind ourselves. If you know the quality of your meat and buy something that says organic or grass-fed, you’re going to be fine if you like your burger a little pinker... know where it comes from … a lot of the ground beef scares we’ve had are from pre-made patties and mass produced hamburgers.” Meat industry expert Sarah Hubbart at meatingplace.com disagreed “Whether the beef is fed grass, hay, corn, soybean meal, or Krispy Kreme donuts also has nothing to do with the safety of the hamburger. Whether the beef is processed in a large facility, local butcher shop, or at home the same rules apply. All ground beef must be cooked to reach an internal temperature of 160F in order to kill bacteria and that color is a lousy indicator of safety.” Would you rather eat a burger cooked by Rachel Ray or Sarah Hubbart?

Spirited Politics in an Election Year

In North Carolina off-sale hard liquor is only sold through state stores. Beer and Wine is sold through other stores. Alcohol sales in all of these outlets are prohibited Sundays and Holidays. Bars and restaurants are allowed to serve alcohol, but buy it through retailers. In a rare bi-partisan move the Republican controlled state legislature has voted to allow sales over Labor Day weekend as the Democratic National Convention gets underway in Charlotte, NC. The emergency rule will apply to the entire county. Democratic Governor Beverly Perdue said “The legislation helps North Carolina be a good host.” Republican State representative Bill Brawley sponsored the bill saying “Let's face it, it's just good manners.” It is heartening to see both parties agreeing on something that affects our industry!

 

An Apple Martini a Day Keeps the Doctor Away

Dr. Harvey Finkel of Boston University Medical Center has done a study of 5400 Canadians age 50. The study determined that moderate drinkers enjoyed a better quality of life than non-drinkers. Quality of life was measured by dexterity, emotion, cognition, and mobility. Moderate drinking was defined as no more than 14 drinks a week – 3 a day for women and 4 a day for men.

 

Tasting Notes

This month we had the opportunity to attend the Rhone Rangers Tasting held at the Vibiana. The Vibiana is always a fun place for an event. You can taste, enjoy the patio and gardens, then use the Confessional! There were many good to great wines at this tasting. Also many healthy prices. We found Eberle Wines to be both consistently good and have reasonable pricing in a rising market. Our favorites were their red blend '08 Cote-du-Robles (Grenache, Mourvedre, Sirah) with deep color, full body, and a good nose $22; '08 Cabernet/Syrah a 50/50 blend full body, good nose, deep color, and very dry $28. Contact Stacy Miller, Sales Director at stacy@eberlewinery.com or (805) 238-9607. Eberle Wines are distributed in Southern California by San Antonio Winery. Contact Michael Riboli winery@sanantoniowinery.com or (323) 223-1401.

 

We ranked J Lohr Vineyards 2010 Syrah as a best buy. This Paso Robles wine has a good nose, full body, deep garnet color, and is very soft. It will age well for another 4-5 years. At a retail of only $15 it should make customers very happy. Contact Southern California Manager, Mike Bell at mbell@jlohr.com or (310) 266-6002.

Industry Calendar

7/4 Independence Day

7/17 FPFC Fresh Produce Expo - Anaheim

7/27-29 Produce Marketing & Foodservice Expo - Monterey

8/9-12 Los Angeles Food and Wine Festival

8/12-14 Comida Latina - Anaheim

8/12-14 Western Foodservice Expo-Anaheim

8/17-19 Sta Rita tasting at La Purisma Mission

9/3 Labor Day

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 – California's Only Association of Licensees. We're #1!

 

If you would like to be removed from this email list, please email to
ron@cbraliquor.org with UNSUBSCRIBE in the subject line.