Beverage Bulletin June 2015

California Beverage Retailers Association

Beverage Bulletin

P.O. Box 56686

Sherman Oaks, CA 91413

(818) 693-5561

Ron Ziff, Editor

www.cbraliquor.org

June 2015

This Month's Stories Include:

 

Headline News Stories - Tax Relief for Beverage Makers, “Small Brew Act”, “Fair Beer Act”, “Aged Distilled Spirit Competitiveness Act”, Aged Spirits Act”, Wine Expo Canceled, Chardonnay and Cut It Close Around the Ears, AB/Inbev Helps Flood Victims, Drought Update - How the Lack of Rain is Changing Our Lives

 

Celebrities in the Industry - Jancis Robinson, Miley Cyrus, Congressman George Radanovich, Congressman Mike Thompson, Prince Robert of Luxembourg

 

Popular Culture - It's the Real Thing

Books - The Art of American Whiskey, Vodka Distilled, Bourbon Empire, Wines of Eastern North America from Prohibition to the Present

Movies - Wine Diamonds: Uncorking America's Heartland, Somm: Into the Bottle

 

Wine - Ancient Wine Press Found, Election Promises, What Kind of Wine Goes with Titanic?, Wine Programs Expand, Diageo Sells Out, Gallo Buys Vineyards, Wine Fraud Rocks Chablis, Canadian Wine Tax Evasion, Wineries and Butterflies, Wine for Your Best Friend, Latest Planting Numbers, Prosecco Shortage, Early Harvests

 

Beer - Craft Brewers Set Records, Changing Beer Tastes, New Beer Labels, Dessert and Beer

 

Spirits - No Relief for Bourbon Shortages, Suntory Eyes Expansion, Cognac Pushes to Recapture Volume, Whisk(e)y Making Goes Worldwide, We Card Everyone!

 

Other Foods and Beverages - Milk Brand Goes National, Who's Crying?, Grocery Consolidation Continues, Bird Flu Hits Hard, Companies Cut Use of Chemicals, New Machines Hurt Coffee Sales, Cocoa Prices Fall, Berkeley Soda Tax, Restaurants Give VIP's TLC

 

The Changing Market - Target Changes Strategy, Target Breach Losses Continue, Sysco Could Lose $1 billion on U.S. Foods Deal, 9 Retail Trends for 2015

 

Health - Snack on Beer Lose Weight, Snack on Wine Lose Weight, Red Wine Good for Diabetes

...and as always Tasting Notes and the Industry Calendar

 

"Claret is the liquor for boys; port, for men; but he who aspires to be a hero must drink brandy." -Samuel Johnson

Headline News Stories

 

 

Tax Relief for Beverage Makers

Congress has been active this session on issues affecting the beverage business. The 12 Nation Pacific Trade Accord that will open Asian markets to California wines appears to be on its way to approval. U.S. wineries had faced retaliatory tariffs in Canada and Mexico because our laws require country of origin labeling on beef. The 3 countries had fought out this dispute in the World Trade Organization and the U.S. had lost. Congress is now in the process of repealing the law.

 

Congress is also considering three tax relief bills. The “Small Brew Act” would lower federal tax by 50% on the first 60,000 barrels and will be reduced from $18 to $16 on up to 2 million barrels for breweries producing less than 6 million barrels a year. The “Fair Beer Act” is competing legislation. It would completely eliminate all federal tax on the first 7,143 barrels of beer produced by breweries of any size. Why 7,143? Because that is the definition of a small brewer.

 

There are two bills that would help the distilled spirits industry. The “Aged Distilled Spirit Competitiveness Act” and the “Aged Spirits Act.” Both laws would allow distillers to deduct interest costs involved in financing aging of spirits in the same year the excise tax is paid. Current law requires the excise tax to be paid in the year spirits are sold or at 12 years, whichever comes first. For a distillery aging Bourbon longer this is a burden. For instance, if a Bourbon is aged 23 years that means the excise tax is paid at the end of the 12th year, but the interest has to be paid every year, but not deducted until the product is sold at 23 years.

Wine Expo Canceled

Sacramento's 14th annual Grape Escape has been canceled. The Sacramento Tourist and Visitor's Bureau usually runs the event that draws over 5,000. It has been sponsored by Savemart Markets and has 40+ wineries and a number of breweries. The ABC had warned wineries that they could not donate wine to a retailer sponsored event and most pulled out. The bureau had offered to pay for the wine, but most of the wineries did not want to take the chance of losing their licenses.

Chardonnay and Cut It Close Around the Ears

The California State Assembly has passed a bill that would make service of beer or wine in beauty or barber shops without a license legal. Many shops serve now, not realizing they are violating the law. The bill AB1322 by Assemblyman Tom Daly (D – Anaheim) has now been sent to the Senate. If passed, a shop could serve 12 ounces of beer or 6 ounces of wine without charge. Opponents object because it would add 20,000 outlets that could serve.

AB/Inbev Helps Flood Victims

AB/Inbev has stopped production of Bud and Bud Light at its Georgia plant and is canning drinking water for flood victims in Texas and Oklahoma. 2000 cases were sent to the Red Cross to distribute.

 

Drought Update How the Lack of Rain is Changing Our Lives

As the 4th year of drought wears on, many unexpected effects on our daily lives are appearing. Read the list below and you will be just as shocked as we are that you just can't get away from the drought. - And it may just get a lot worse. At the end of May the Sierra snow pack is at Zero.

 

California will likely have a very bad fire season. The entire state is covered with tinder dry brush.

 

Yosemite is open to hikers three weeks earlier than usual because there is no snow. Half Dome is a prime hiking area. The California Highway Patrol has been called on to rescue hikers stranded on the Pacific Crest Trail in Alpine County. The reason: springs and other water sources have dried up.

 

Ants are invading homes throughout San Francisco. The dry weather has caused a population explosion. The ants are looking for water. Throughout the state wild animals are being forced into the cities to search for food and water. Most animal migration is happening at night when there is no human intervention.

 

California agencies have issued $28.8 billion in water bonds since 2010. These municipal bonds have always been considered the safest in the country. Over the last 3 months water bond interest rates have been going up and values have been going down faster than they could be flushed.

 

Farmers in the Central Valley are desperate for water and are drilling new deeper wells. 1900 wells have dried up. The demand is so great, out of state drilling companies have been hired to do the work. They are paying up to $300 a foot to go over 3,000 feet. That's more than a million dollars to reach water. Meanwhile, they valley floor is sinking faster than ever. The sinking is damaging infrastructure. Rail tracks, canals, pipelines, and roads are all cracking and breaking because they aren't flexible.

 

Curtailment orders were sent to 1500 water rights holders in the San Joaquin and Scotts River Watersheds the last week of April ordering them to discontinue all use of water. now some orders have been sent to pre-1914 senior rights holders. Farmers in the Delta will voluntarily cut usage by 25% rather than have cuts ordered. The mandated and voluntary cuts will cause farmers to leave fields unplanted this year. Fresno area farmers will get no canal water deliveries for the first time in 100 years. Jobs for migrant farm workers are drying up along with planted fields. With the farm land laying fallow, there is no need to hire.

 

Orange County usually opens “Splash Pads”, water play areas, in many of its parks for the summer starting on Memorial Day. This year most have been canceled. A new splash pad at Frontier Park in Tustin was opened and shut down after just one week. The closure of the water play area at Pioneer Park is projected to save 1.5 million gallons of water.

 

Last year the California Legislature passed the Sustainable Groundwater Management Act. The act created Groundwater Sustainability Agencies(GSA). The local agencies are charged with planning for and preserving groundwater. The Sonoma GSA is studying the problem. 14 groundwater basins in Sonoma's Valley of the Moon have been designated as at medium risk. So far none have been designated high risk.

 

The Scripps Institute of Oceanography says the drought won't kill California. But, it will cause us to re-plan our future; and we need it. The mean temperature in the state will rise by 3 degrees Celsius by the end of the century. A lot of water comes in precipitation. It has been stored as a snow pack to even out the flow from the mountains. That is not in our future.

 

The New York Times reports that the average American consumes more than 300 gallons of California water each week by eating food that was produced here. California farmers produce more than a third of the nation's vegetables and two-thirds of its fruits and nuts. To do that, they use nearly 80 percent of all the water consumed in the state.

In California it takes this much water to produce:

1 sliver of avocado – 4.1 gallons

16 almonds – 15.3 gallons

2 ounces of rice – 15.1 gallons

2 olives – 1.4 gallons

1 thin slice of cantaloupe – 1.1 gallons

1 bowl of cooked tomatoes – 9.1 gallons

4 broccoli florets – 2.2 gallons

1 orange slice – 6.2 gallons

1/3 of a head of lettuce – 4.1 gallons

1 ounce of Marijuana – 34 gallons

 

Nestle Waters is under fire by critics for bottling millions of gallons of water and selling it back to the public at a huge profit. Nestle bottles Pure Life Water from municipal supplies at its Sacramento plant. Arrowhead Water from Napa is also bottled there. A group called Crunch Nestle has been formed. Bob Saunders, the leader, says “We’re in a drought, and we find it extremely egregious for a company to be bottling water and being charged a pittance for it and selling it back to the public.” The Desert Sun reports that Nestle Waters has been transporting water out of the San Bernardino National Forest on a permit that expired in 1988. The company claims it's four plants only use about 1 billion gallons of water a year. That's only .008% of the total state consumption.

 

Crystal Geyser is also under fire for opening a new bottling plant at the foot of Mt. Shasta. The plant is projected to bottle 365,000 gallons a day. The springs currently feed into the Sacramento River. Since it is groundwater, it doesn't come under the current regulations.

 

Aquafina and Dasani Water are bottled from municipal water supplies and sold back to consumers. In 2012 the bottled water industry packed over 10 billion gallons nationally and took in more than $12 billion dollars.

 

Ethos Water, owned by Starbucks, announced that it is concerned about the drought and will transition its bottling plant to Pennsylvania over the next few months. Starbucks also says that its stores have reduced water use in California by 26% through conservation practices.

 

California's aquaculture is undergoing a severe change. The states' 144 fish farms are short of water. Some have had to close completely. Others are changing the species raised. Trout, Black Bass, and Sturgeon require fresh cold water. With the shortage, the water temperature has been in the 80's. The farms still operating have switched to catfish and are considering perch and other varieties. Restaurant and retail menus and wine pairings will have to change. State hatcheries usually release baby salmon to be carried downstream to the ocean. That won't happen this year because the streams are dry. Instead 30 million fingerlings will be trucked to the sea in “Operation Fish Lift.”

 

An article in the New York Post points out that some of California's wealthy and liberal celebrities are continuing to guzzle huge quantities of water while the rest of the population is being pushed to cut back. The Las Virgines Water District northwest of LA has to cut usage by 36%, but can't get these people to stop watering lush landscaping with a paltry $100 fine. Among them are Kim Kardashian and Kanye West, Jennifer Lopez, and Jessica Simpson. According to the article a neighbor says “It's disgusting.” An official says 70% of the district's water goes to lawns. Also criticized was Barbra Streisand. A spokesperson claims she has cut usage by 50%. When shown photos of the green landscaping and asked about the star's advice to others on conservation, he refused to comment. The shaming of the rich and famous spread as the LA Times, Yahoo Online News, and others took up the story.

 

Governor Jerry Brown wants to raise the fine for wasting water to $10,000 per day. The current cap in state law is $500.

 

The LA Dodgers credit the drought for their batting average. The team had 33 home runs in April. Andre Ethier says it's because “there's no moisture in the air.”

 

WeatherBell, a private meteorology company, says the sea surface temperature off the coast is higher than normal. At this time, they feel it is too early to tell if the temperature will continue to rise and give us a wet winter or level off and repeat the pattern of the last 4 years. Australian scientists disagree. They say an El Nino pattern has started and the storms will be significant.

Celebrities in the Industry

Jancis Robinson is the cellarmaster and sommelier for Queen Elizabeth II of the UK. She describes herself as a “Wine, food, words, and family loving workaholic.” She is all that and more. She has a Twitter account with 236,000 followers; a weekly column in The Financial Times; a subscription website called Purple Pages; is editor of The Oxford Companion to Wine; and has written several books on wine. Her husband, Nick Landers is a food columnist for The Financial Times and her son, Will Landers, co-owns two of London's top restaurants.

 

 

Miley Cyrus just bought a 5.5 acre Hidden Hills estate that includes a vineyard planted with Cabernet Sauvignon and Merlot grapes. The estate also has a 1,000 bottle wine cellar.

Retired Congressman George Radanovich (R- Mariposa) has returned to his vineyards in California. He planted his land with Sauvignon Blanc and Merlot in 1982. At the time he called the wine “Radanovich Winery.” Now it's been renamed “1,000 Vines”, even though there are only 952. In 1999 Radanovich, the only winemaker in Congress, established the bi-partisan Congressional Wine Caucus along with Mike Thompson (D – Napa, Sonoma).

 

Prince Robert of Luxembourg has taken over the family business. It's a winery, of course; Chateau Haut-Brion.

 

Popular Culture

It's the Real Thing

In one of the biggest pop culture moments in some time, the finale of Mad Men featured a reprise of a 1971 Coca-Cola commercial and 3.3 million people watched. The story line has followed the adventures and misadventures of ad writer, Don Draper. In the ending episode he does New Age yoga meditation on a hilltop and gets the inspiration for this ode to world peace “I’d like to teach the world to sing / In perfect harmony / I’d like to buy the world a Coke / And keep it company / That’s the real thing” The real “Hilltop” commercial was written by Bill Backer, now 88 years old. His inspiration came when his flight to London was diverted to Ireland due to fog. In the airport cafe he saw his weary fellow travelers enjoy camaraderie and laughter as they shared some cokes. The moment went on to make ad history – now twice. Coke is taking advantage of the publicity. They donated 100,000 cokes to the troops overseas to “share” on Memorial Day.

Books

The Art of American Whiskey by Noah Rothbaum, 10 Speed Press. 192 pages, $19.95. A visual history of American whiskey, as told through hundreds of whiskey bottle labels, from early, pre-Prohibition era days to the present.

 

Vodka Distilled by Tony Abou-Ganim, Agate Surrey, 208 pages, $22.95. The author is a beverage consultant after having worked as a top bartender in New York, San Francisco, and Las Vegas. In this books he gives tips on mixing a plethora of drinks. He also details the differences between American Vodka and the Eastern European originals.

 

Bourbon Empire by Reid Mitenbuler, Viking, $27.95. This book examines the history of Bourbon as it developed in the Colonies and became a substitute for Rum in the late 18th Century. It takes the reader through backwoods moonshine, Prohibition, and gangsterism to present day search for subtleties of taste.

 

Wines of Eastern North America from Prohibition to the Present by Hudson Cattell, Cornell University Press, 400 pages, $40. Cattell's book represents a lifetime of association with the wineries of the Eastern U.S. He follows the restoration of 200 wineries after Prohibition through the crippling legislation of the next 40 years. He shows how scientific development of techniques to prevent the vines from freezing and the work of enthusiasts have resulted in more than 3,000 wineries today; all this with native North American grapes.

Movies

Wine Diamonds: Uncorking America's Heartland. Producer, Jeff Zahrt is crowdfunding a new film about the building of a new wine industry in the Midwest. The feature length documentary will cover the farmers and winemakers that are planting the Upper Midwest with “cold hardy” grapes. These varieties could not grow in California or France, but will withstand and thrive in winters as cold as 40 degrees below zero.

 

Somm: Into the Bottle. A movie about sommeliers and how they fit into the restaurant industry and the wine culture. Director, Jason Wise, started out tending bar and he admits that he rarely interacted with somms. He now believes that every restaurant should have one and it's important to have someone who is excited about the prospect of giving diners a memorable dining experience. He knows that foodies want to know everything about the pedigree of their food and wants to extend that to wine. On this journey he takes us into some of the most prestigious cellars of Europe.

Wine

Ancient Wine Press Found

A group of 12 and 13 year old boys, who are amateur archaeologists, dug up a 1400 year old wine press in Jerusalem. The press is about 12 feet by 12 feet in size and dates back to the 6th or 7th century AD. The amateur dig was discovered by authorities who stopped the boys from digging. Digs that are not registered and supervised are illegal in Israel. The regulations are enforced so valuable historic evidence will not be destroyed. The boys will not be prosecuted.

Election Promises

George Osborne, Chancellor of the Exchequer in the UK, made promises during the recent election campaign in order to get votes from the UK's 30 million wine drinkers. He said after the election the duty on wine would be frozen instead of being increased 2%. Critics felt cheated. The UK's wine duty is already the second highest in the European Union. Ireland is the highest.

What Kind of Wine Goes with Titanic?

Theaters are increasingly getting into the alcoholic beverage business. Moviegoers can order a meal and enjoy a glass or bottle of wine, or even a cocktail. Some theaters have lounge chairs in upscale settings with ushers serving as waiters. AMC, the nation's second largest chain, operates 18 dine-in theaters and serves as many as 4,000 plates on a Saturday in some locations. The bonus: the movie brings them in; the menu can be profitable; a bottle of wine or a bucket of iced champagne can complete the sale.

Wine Programs Expand

Starbucks has applied for Beer & Wine licenses at 15 of its San Francisco Bay Area locations as it continues to roll out its “Starbucks Evenings” program. The stores have a daily happy hour starting at 4 PM. It looks like Amazon will be expanding its wine business. The company has applied for three licenses around the Seattle area.

Diageo Sells Out

The word coming out of the UK is that Diageo may be interested in selling its California wine business. Wine only amounts to 4% of total sales and is more work intensive and less profitable than the beer and spirits that make up the rest of its portfolio. Brands here include Beaulieu, Acacia, and Sterling. Just the brands and inventory would be sold. Most of the properties were divested some time ago.

Gallo Buys Vineyards

Gallo has purchased part of the Palisades Vineyard and Cypress Ranch in Napa Valley. The properties total 642 acres and adjoin Gallo's 100 acre Sun Lake Vineyard.

 

Wine Fraud Rocks Chablis

Jean-Claude Fromont, CEO of Maison Fromont, has been arrested and accused of buying cheap wine and blending it with Chablis and then selling it as the real thing. Chablis is legally required to be 100% Chardonnay grown in the Chablis region. The cheaper wines are suspected to be from the Rhone and Provence. Fromont has been under investigation for the last 6 months by authorities from French customs, tax, and fraud agencies. The fraud may have been going on for over 10 years. Fromont's cellarmaster and truckers are also under investigation. The Federation of Defense of the Appellation Chablis represents almost 700 growers and wineries that produce more than 40 million bottles of wine a year. They are troubled about damage that may have been done to the quality image of their wine.

Murray Marshall the former CEO of Diamond Estates Winery

Canadian Wine Tax Evasion

Thirteen members of a Canadian crime ring have been arrested in connection with a tax fraud investigation. Montreal Police Squad ran “Operation Malbec” and uncovered a scheme that bottled and sold 1.8 million bottles of contraband wine over four years. Murray Marshall, the former CEO of Diamond Estates Winery, was among those arrested. The wine was brought into the Port of Montreal in 24,000 liter bulk containers. Then sent to Ontario to be bottled and labeled with counterfeit labels. Finally, it was shipped to Quebec and distributed. Those arrested included an accountant and several distributors.

Wineries and Butterflies

Washington State wineries have been planting sage around their vineyards to attract tiny wasps that prey on other insects that harm grape vines. It turns out the practice has an ecological bonus. The sage plants have been helping 50 varieties of butterflies on the endangered species list.

Wine for Your Best Friend

Chateau La Paws slogan is “Good Wine Helping Good Dogs.” A portion of the profits from the winery goes to the North Shore Animal League in Port Washington, NY. The organization is the world's largest no-kill animal shelter. This year Chateau La Paws and Diageo Chateau and Estates are partnering to donate $100,000 to the charity. The winery has pictures of rescued dogs on the labels of its Pinot Noir, Chardonnay, and Red Blend. Winemaker Marty Spate honors his 16 years making fine wines and a lifetime of loving dogs to his project. Do you want to help or sell some wine? Read about it on www.ChateauLaPaws.com or contact Marty Spate at ChateauLaPaws@consumercare.net or (800) 392-8570.

Latest Planting Numbers

The USDA reports that in 2014 there were 928,000 acres in California planted in grapes. The breakdown is 615,000 acres of wine grapes, 121,000 acres of table grapes, 192,000 acres of raisin grapes.

Prosecco Shortage

The Italian Wine Observatory reports that Prosecco has overtaken Champagne in sales. The 2013 sales of Prosecco were 307 million bottles versus 304 million for Champagne. Now the bad news. Prosecco grew again in 2014 and there was a light crop. Shippers are predicting there may be a shortage before the end of the summer.

Early Harvests

The Australian Wine Research Institute reports that because of climate change and heatwaves, farmers are harvesting wine grapes 8 days earlier every decade. They recommend a number of techniques to protect the grapes. Most important is changing the orientation of planting. They recommend planting on South facing slopes instead of North facing slopes. (It's the Southern hemisphere.)

 

 

 

 

 

 

Beer

Craft Brewers Set Records

In 2014 California's 560 Craft Brewers produced 3.4 million barrels of beer worth $6.5 billion to the economy. In the smaller breweries it takes 26.2 barrels of water to make one barrel of beer. High efficiency brewing systems can save up to 35% of that water.

Changing Beer Tastes

A recent survey by the Wall Street Journal found that 44% of drinkers age 21 to 27 say they have never tried Budweiser. In 1988 the brand was selling 50 million barrels of beer a year. Today that has dropped to 16 million barrels as sales continue falling for all traditional brands. Millenials consider lagers too bland and tasteless and are switching to Craft Beer and drinks made with Spirits. Wine has garnered few of these new drinkers.

New Beer Labels

Craft Brewers are delving into a new kind of competition as the segment continues to evolve. With over 3,500 brands competing for shelf space, label design, slogans, brewing style, and ingredients have become important. San Francisco's Down to Earth IPA changed its can to show a chimp in a space suit lounging on a tropical beach. Sales are running at a pace twelve times previous.

Dessert and Beer

It doesn't have to be sweet wine and cheese for dessert anymore. Marlo Scott at the Sweet Revenge Dessert Restaurant and Bar in New York pairs desserts with drinks. Pear Cider goes with chocolate truffles; red velvet cupcakes with ale; and apple cake with Sauvignon Blanc.

 

Spirits

No Relief for Bourbon Shortages

The big news in the Bourbon segment is a looming shortage. Now it looks like there's little relief in sight. The reason: barrels are short, white oak to make them is short, and experienced barrel makers can't be found. Six major distillers and over 300 new craft distillers are competing for every barrel that's available. Law requires Bourbon to be aged in new charred white oak barrels. Production increased by 50% from 2010 to 2013. In 2013 the industry filled 1.2 million barrels; 200,000 more than 2012. The logging industry contracted from 2007 to 2013 and white oak availability went with it. Many loggers left the business. Now white oak prices are up 20% and buyers are offering to pay $200 for barrels that list at $150. The Independent Stave Company in Missouri, one of the biggest in the industry, is buying oak in Kentucky, Ohio, West Virginia, and Pennsylvania, bought a plant in Ohio, and has opened a new plant in Kentucky. Brown Forman, maker of Jack Daniels, has opened a new plant in Huntsville, Alabama to cover a 50% increase in its needs. Meanwhile, many skilled barrel makers retired during the slow years.

Suntory Eyes Expansion

Suntory bought Jim Beam in 2014 for $16 billion including debt. The purchase made Suntory the world's number three spirits company behind Diageo and Pernod Ricard. The company currently sells 10 million cases of bourbon and 5 million cases of Japanese whiskey a year. The plan is to double that by 2020. With the bourbon market growing 5% a year, Suntory will have to outrun the rest. Sales increases will have to come from the U.S. and Japan and from new developing markets. Beam TV ad campaigns in Japan feature Rola, a Japanese fashion model, and others feature Leonardo DiCaprio. Brands include Jim Beam, Knob Creek, Maker's Mark, Suntory, Courvoisier, Sauza Tequila, Pinnacle Vodka, and Teacher's Scotch.

Cognac Pushes to Recapture Volume

Cognac sales have been down the past two years. The biggest cause was China's austerity campaign. The producers have had to shift to the U.S., other big market to maintain volume. The difference is that Asian customers go for high end Cognac. The U.S. market consumes a lot of low priced Cognac. The situation cost Hennessy and Remy Martin volume and profit. Profit was down 39% for Remy in 2014. Hennessy is pushing hard and using celebrities LL Cool J, Nas, and NFL player Michael Strahan. For its 250th anniversary Hennessy is sending two 250 liter barrels on a sailing ship that will retrace Lafayette's journey from Rochefort, France to Yorktown, Virginia in June.

Whisk(e)y Making Goes Worldwide

Whiskey from Kentucky and Whisky from Scotland used to be the only choices. Not any more. Now it's being distilled in a growing array of venues. Suntory, Nikka, and others come from Japan; and then there is English Classic from Norfolk; Sullivan's Cove from Australia; Mackmyra from Valbo, Sweden; Brenne Single Malt aged in Cognac barrels from France; Kavalan King from Taiwan; and Amrut from India. The names and stories are colorful. Amrut is Sanskrit and means “Nectar of Life.” Kavalan King is named for the indigenous people that inhabited Taiwan before the Chinese. And then there's Bowen's Whiskey made right here in Bakersfield, California. Bowen's proudly traces its origins to five generations of moonshiners.

We Card Everyone!

In closing, a young sea lion wandered into the Beach Ball Bar in Newport Beach. Bar patrons kept him occupied while bartender, Todd Garbella, called for help. Local police turned the animal over to the Pacific Marine Mammal Center. The center's director, Mary Steen, said the sea lion was tired, hungry, and dehydrated. It would be treated and fed and then returned to the wild. The bartender said “We card everyone.” He had to turn the animal in because it had no ID.

Other Foods and Beverages

Milk Brand Goes National

Dean Foods markets milk under 31 different brand names across the country and controls 36% of the market. But, the dairy market has been shrinking. Dean will replace all 31 brands with one, DairyPure, in order to launch a national ad campaign in an effort to maintain volume.

Who's Crying?

KRON-TV reports that a tanker carrying milk overturned on a winding road near Tomales Bay. 6,000 gallons of milk were spilled. If it had made it to San Francisco, it could have made 96,000 Lattes.

Grocery Consolidation Continues

Two U.S./European grocery chains are talking merger. If Netherlands based Royal Ahold and Belgium based Delhaize Group consummate their merger, they will be the 4th largest grocery chain in the U.S. Walmart ranks #1 with 4,500 stores; Kroger #2 with 2,600 stores; and Albertsons-Safeway #3 with 2,200 stores. The combined company would have 2,000 stores and $46 billion in U.S. business. Ahold owns Stop & Shop, Giant Stores, and Peapod Online Grocery. Delhaize owns Food Lion and Hannaford. The two operate on the East Coast and have little overlap. The merger would give them economies in purchasing, back office operations, and management.

Bird Flu Hits Hard

The bird flu continues to ravage poultry flocks in the Midwest. Well over 39 million birds have already died. Turkeys will be scarce and expensive this Thanksgiving. Egg laying chickens in the Midwest are being seriously affected, with 10% of U.S. egg layers dying. One third of Iowa's birds have died. The situation is particularly bad in this epidemic because of industry consolidation. In the 1970's there were 10,000 egg farms. Today there are only 200 with the smaller ones averaging 1.5 million birds each. The government is helping the devastated farms, but many will still go out of business because of the high costs of re-populating their flocks. The price of eggs is escalating. Eggs used in manufacturing of packaged foods are getting scarce and there is no substitute for the ingredient. Manufacturers will be outbidding consumers for what is available. The price of broilers should not be affected. Most are grown in the South, which hasn't been hit by the epidemic.

 

Companies Cut Use of Chemicals

Tyson, the country's biggest poultry producer plans to eliminate the use of human antibiotics in chickens by 2017. Panera Bread says it will remove all artificial color, flavor, sweeteners, and preservatives from its menu foods by the end of 2016. Panera operates and franchises 1900 restaurants nationwide. Yum Brands owned Taco Bell and Pizza Hut plan to do the same. Taco Bell says it will remove all artificial ingredients by the end of the year. Pizza Hut says it has already removed Trans-fats and MSG; artificial colors and flavors will go by the end of July.

New Machines Hurt Coffee Sales

Single Cup Coffee Machines are hurting overall coffee sales. The reason: people used to brew a whole pot and then dump the unused portion down the drain. Now they only brew what they drink.

Cocoa Prices Fall

There has been a lot written about the decline in wine and liquor sales in China because of the austerity program. But, cocoa and chocolate demand is also down in China and there is no government program tamping down demand. Cocoa and chocolate sales in China are down 9.3%. This decline has caused a 13% reduction in world producer prices for cocoa.This comes just as world cocoa supplies recover after the West Africa Ebola epidemic.

Berkeley Soda Tax

The first figures are in for Berkeley's Soda Tax. The city took in $115,000 in March, its first month. That put the tax returns on track to bring in about $1.5 million a year. The tax is a penny an ounce. The proceeds are supposed to go to health programs for children. Berkeley stores say it makes business more difficult for them. They're not sure it will do anything for kids. Merchants across the border in Albany say their soda business is way up because people are crossing the border to save $1.44 a 12 pack.

Restaurants Give VIP's TLC

The country's top white table cloth restaurants take good care of their VIP diners. Some of these restaurants get as much as 70% from their top customers. How do they do it well? Like everything else these days the secret is a computer app. Popular apps are Table8, LDV Lifestyle, or Open Table. Part of the computer program is available to customers to make reservations and part is only visible to restaurant managers who record details about diners food and beverage preferences; where they like to sit; the names of their wives, kids, and executive assistants; their birthday, and any other info they can glean to make every dining experience personal and memorable. App Seven-Rooms does all the above and adds profiles from LinkedIn and photos from Facebook so the customer is instantly recognized as he/she walks through the door.

 

 

The Changing Market

Target Changes Strategy

Brian Cornell, CEO of Target, has announced a major shift in food and beverage marketing. In a meeting with its top suppliers; Campbell, Kellogg, General Mills, and Kraft; he broke the news that Target would be shifting its emphasis to emerging food and beverage categories and downplaying brands and categories that were on downward trends. Target is one of the nation's top 10 retailers of edibles. Grocery accounts for 20% of its $73 billion in sales. His aim is to put Target in a market leading position for edibles like it is for wearables. Edibles will be divided into three categories: Signature, that includes things for baby, children, style, and wellness; Outperform, which includes natural, organic, craft foods and beverages, and emerging foods; Perform, which is traditional packaged foods that will have to justify their shelf space with sales instead of promotion. Promotions in Outperform will aim at trend setting millenials with Greek yogurt, bag specialty coffee, and craft beer. Look for culture shock and stumbles among Target's buyers and suppliers, the buyers are used to dealing big company to big company, the mid-size and small suppliers are not used to dealing with the needs of a major retailer.

Target Breach Losses Continue

Banks have objected to the settlement between Target and Mastercard. The settlement called for a $19 million payment by Target to the Mastercard issuing banks and all further claims being dropped. The banks claim losses were $160 million. About half from fraud and half from the cost of replacing customer cards. The banks that did not accept a portion of the settlement by May 20 will have to pursue legal recourse on their own. Meanwhile the entire banking system is running millions of cards behind the planned replacement of all cards with chip and PIN by the October deadline.

Sysco Could Lose $1 billion on U.S. Foods Deal

Sysco stands to lose about $1 billion if it doesn't close the deal to buy U.S. Foods. Compare that to its 2014 profit of $932 million. This is the breakdown: It has already spent $400 million in legal and court costs defending the deal and interest on loans; $300 million breakup fee to U.S. Foods; $25 million breakup fee to Performance Foods Group, who would buy some of the assets that have to be divested; and $265 million in costs of redeeming $5 billion in bonds that were to be used in the acquisition if the deal doesn't close by October 8. U.S. Foods is currently controlled by KK&R and Clayton, Dubilier, & Rice LLP.

9 Retail Trends for 2015

  1. More consumer spending as the economy continues to improve. This should be a good year for retailers and those that serve them.

  2. Black Friday and discounting will start earlier. In 2014 some retailers started as early as November 1. Planning, margins, and inventory will all have to be re-figured. Consumers will expect to pay less than the listed retail price.

  3. Meaningful relationships with consumers will grow as retailers learn that its easier and better to bind themselves with existing customers than to get new ones.

  4. Millenials, those born between 1980 and 2010 are coming of age and making their own buying decisions. They are adept at technology; will compare prices with their smart phones, discuss their decisions on social media, and help their older family members with their tech skills.

  5. Omnichannel sales will grow as consumers use digital devices to research price, service, and features. The lines between brick & mortar and online are blurring; the lines between manufacturing and selling direct to consumers are blurring.

  6. Security and privacy have become key issues. Hacker attacks on companies have resulted in identity theft, raids on bank accounts, and massive fraudulent purchases. Companies that don't protect themselves will die from financial losses, liability, and loss of customer confidence. As the giants protect themselves, the mid-market companies become more vulnerable. With the shift of fraud liability to unprotected retailers later this year with new chip and PIN credit cards, the hackers and banks will combine to kill many mom 'n pops and other small sellers.

  7. Capital Investment will have to continue. Consumers are looking for new shopping experiences. The stores will need new glitz; the online feel has to improve; the blend has to be seamless.

  8. Mergers and acquisitions are heating up as investors look for targets and good buys. Companies are preparing themselves for a sale as they look for a better return when that sale happens.

  9. Globalization will continue. Retailers will face expensive uncertainties as they try to expand into foreign markets with unfamiliar customs and laws. Foreign companies trying to expand to the U.S. will face the same problems. The lesson of Tesco's run at the U.S. grocery market should be heeded. The company thought this market would work just like the UK, and overpaid for locations, continued to pour money into a blind attempt to make the failing foray work; and finally had to buy its way out. The $4 to $6 billion dollar loss cost management their jobs and nearly drove the company to its knees.

 

Health

Snack on Beer – Lose Weight

Professor Tim Spector, of Kings College London, has done a new study that found Belgian Beer, Coffee, Garlic, Leeks, and Celery help keep people slim. They feed the natural bacteria that make up 90% of the living cells in human bodies. He says our recent ancestors ate about 150 separate natural foods a week. Today people eat about 20 different food items a week, but most of what we eat comes from processed foods that are made from 4 ingredients: wheat, corn, soy, and meat. Junk food made from these four ingredients kills good bacteria, leading to weight gain.

 

Snack on Wine – Lose Weight

Harvard University has completed a 14 year study of 20,000 women who drank 1/2 bottle of wine a day and found that the women had a 70% reduced risk of obesity compared to non-drinkers. The National Institute for Alcohol Abuse and Alcoholism agree and said that alcohol calories substituted for food calories results in lower weight. The European Conference on Obesity said that a glass of wine daily can reduce diabetes by boosting glucose metabolism.

Red Wine Good for Diabetes

A study at Ben Gurion University in Beersheba, Israel on 224 people with type 2 diabetes showed that drinking a medium glass of red wine every night for 2 years combined with a Mediterranean Diet increased their HDL good cholesterol. The wine was from Golan Heights Winery.

Tasting Notes

Each month we are out there looking for wines that “over deliver”; wines that offer more than others in their category and price level. We search out the wines that you can buy to help build your business; wines that make customers happy and keep them coming back. These are wines we rate as good buys and best buys. Check our notes. The opinions in the reviews are our own and unsolicited. We receive no compensation from wineries or brokers. This month there were several wine tastings that showed some very nice wines available at reasonable prices. The prices shown are approximate retails.

 

At the JFC Japanese Sake and Food Expo we had the opportunity to taste and compare dozens of Sakes, Beers, and Shochus. We found some excellent selections. Hakutsuru Junmai Ginjo Sake and Hakutsuru Organic Junmai Sake, were both smooth and flavorful 14.5% ABV, 720ml $13.99. Komasa Migaki Barley Shochu 750ml, $25.99, 48 proof “Windows Migaki” is aged 3 years in oak barrels to achieve a smoothness and flavor that is comparable to a fine whiskey. The aging mellows and gives the liquor a slight tint and an aroma and flavor reminiscent of vanilla. Contact JFC.

 

At the Wine Warehouse Spring Tasting we had the opportunity to taste many traditional favorites and judge their consistency and development over the years as well as spirits and beers. Jacquart Brut Rose NV was bright, fresh, with lively bubbles and complex flavors. $47. Louis Martini Cabernet Sauvignon Monte Rosso 2011 750ml good color and nose, full body, $75. Louis Martini Lot 1 2011 Napa Cabernet Sauvignon, deep purple color, big nose, overwhelming flavors. The winemakers at E&J Gallo taken a wine that was great and improved it. Unbelievable results! 1.5L $299. Pedroncelli showed Three Vineyards Cabernet Sauvignon 2012, dry, fruity, good food wine $19.99 and “Wisdom” a 2012 blend of 90% Cabernet Sauvignon and 10% Malbec, aged 14 months in the barrel and 12 months in the bottle, good color and nose, a big wine. Well worth $35.99. Brinley Gold Shipwreck Rum had delicious tones of aged rum and was blended with a variety of compatible flavors; Mango, Spiced, Coconut, and two favorites Vanilla and Coffee, $14.99. Solleil Mimosa was a delicious effervescent drink made with a white wine base. 240Ml can or 750 ml bottle. Natural Citrus or Pomegranate flavors A delightful and refreshing drink. Enjoy on a summer afternoon. For all of these contact Wine Warehouse.

 

At the Southern Wine Taste of the Best there were many favorites that we classify as Best Buy. Havemeyer Piesporter Michelsberg 2012, bright, fresh, fruity, semi-dry, $10.99. Charles Krug Carneros Chardonnay 2013, clean, clear, light oak, $19.99. Charles Krug Napa Cabernet Sauvignon 2012, good color and nose, full body, everything you would expect in this Napa wine that sets the bar, $29.99. Charles Krug Sauvignon Blanc 2013, clean, clear, delightful fruity flavors, $17.99. Ferrari-Carano Fume Blanc 2013, clean, fresh, semi-dry, complex, $15.99. Mionetto Prosecco NV, bright, fresh sparkling wine, $19.99. Contact Southern Wine.

 

The Plough Wine Group gave us the opportunity to taste a number of wines for the first time. Plough is to be complimented. These are well selected with excellent taste. Groundwork Grenache Blanc 2014, Paso Robles, crisp, good nose, fruity, refreshing, $15.99. Fiction Pinot Gris 2014, crisp, good color and nose, flavorful finish, $16.99. Neighborhood Vineyards Tide & Travel Pinot Noir 2013, 100% Pinot Noir, true to type, good color and nose, mellow, $23.99. 5Q Wines Obscurity Pinot Blanc 2014, good color and nose, clean, good fruity finish, $21.99. Contact Andrew Major majorwine@gmail.com or Chris Lobo (760) 580-9463 lobo@nativewines.com in Southern California or Shannon Burke in Northern California (415) 497-7212 shannon@burkewinebrokerage.com.

Industry Calendar

Featured Tasting: La Nuit en Rose'. This wine tasting will leave you tickled pink! Rose' from Bordeaux, Champagne, Spain, and California will all be there for you to taste and compare. Over 40 booths will be manned by winery reps to give you all the details of what kind of grapes and love went into the bottle. Their will be food pairings and entertainment. Get there early to take advantage of the trade only time. This is a good way to find wines to kick off the summer season. June 21 in LA.

 

6/5 Cal-China Wine Forum - Sacramento

6/8 Ramadan

6/11-13 National Homebrewers Conference – San Diego

6/14 Taste of Latin America Food Festival - LA

6/20 Pinot Days – SFO

6/21 Fathers Day

6/21 La Nuit Rose' – Hollywood

6/22 Grand Opening of the MOTAC Whisky Gallery - LA

7/3 Independence Day Observed

7/4 Independence Day

7/14 Southern California Fresh Produce Expo - Anaheim

7/23 Fresno Food Expo – Fresno

7/24 Pinot Noir Shootout - Reno

 

New Legislation for 2015

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. New alcoholic beverage laws were passed that are effective in 2015. Many critical issues are pending. Do you know about them and are you prepared for the changes. 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 Statewide Association of Licensees. We're #1!

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