Beverage Bulletin October 2011

California Beverage Retailers Association

P.O. Box 56686

Sherman Oaks, CA 91413

(818) 788-8120

Ron Ziff, Editor

www.cbraliquor.org

 

October, 2011

 

This month's stories:

Chateau Lafite and Bin Laden

Review of Prohibition

Has the Chinese Bubble burst?
The Economy
Health News
Global Warming and Wine Production
Marketing
Celebrities and Beverages (and celebrities that started in the business)
How Bacardi Kept its Business from a Takeover

Washington Voters to Decide the Fate of Liquor Wholesalers
Retail in the News

Restaurant Trends
and Tasting Notes and the Industry Calendar

Chateau Lafite and Bin Laden

New Year's Eve 2010-11 Restaurateur Ted Balestreri hosted a dinner party at his Sardine Factory in Monterey. Among the guests was CIA Chief Leon Panetta. One of the guests quipped “When are you going to open that Lafite?” Balestreri has owned an antique bottle of Chateau Lafite Rothschild 1870 for 30 years. Its estimated value is over $10,000. Ted responded “When Leon catches Bin Laden.” Pinetta jumped up and said “You're on!” Balestreri said “You can't find your golf ball. How are you going to find Bin Laden?” In May Panetta had his wife call Balestreri and tell him to turn on CNN. The President was about to “make an announcement, and get ready to open that bottle.” Balestreri says the bottle will be opened this New Year's Eve with Panetta as the honored guest.

 

Prohibition

It is this Prohibition that makes anything precious.” Mark Twain.

Ken Burns series “Prohibition” was factual, gave the public an overview of the law and its effects. But, was far too long. It connected too many dots and brought in so many other things going on at the time, that it was confusing. Yes, the Depression, FDR's election, the Womens' Movement, and the Charleston were all contemporaneous. But, were not an integral part of Prohibition and its enforcement.

 

Has the Chinese Bubble burst?

This month China stepped in to support shares in the country's banks. Investors in Chinese stocks showed concern about accounting practices and truthful reporting of profits. Chinese internet companies like Baidu and real estate firms may be in debt beyond their means, just as western firms were a few years ago. How does this affect the wine industry? Read on...

In a two-day wine sale held October 1-2 in Hong Kong, Sotheby's could not sell out its offered lots for the first time since the Hong Kong auctions started in 2009. All 504 lots in the first day of the sale moved, but 59 of the second day’s 821 lots remained without bids, including several lots of Chateau Lafite Rothschild. Highlights included a case of 1988 Domaine de la Romanée-Conti selling for the top price of $116,346.

The Economy

In mid-October Deloitte released some disappointing news for retailers who were hoping that consumer spending might get a boost in the months leading up to the holiday season. The Deloitte Consumer Spending Index dropped in September to its lowest level since May 2009, primarily due to a significant fall in home prices and deterioration in real wages.

Holiday Shopping is going to look different this year. Comparison shopping using a smart phone or tablet is catching on. Some consumers will be spending, but price will be driving sales. The National Retail Federation conducted a survey and found that 32% of all shoppers will be comparing prices online. 31% of smart phone users and 51% of tablet users will research product and price online. The big question is how much of actual selling will be online and how much in brick and mortar stores.

Walmart CEO Mike Duke says consumer shopping is gravitating more to “paycheck cycling” and customers becoming permanently frugal. Some consumers are staying frugal, even as they recover economically. A Citibank survey reports 75% shop with lists (45% in 2008), 20% of grocery sales are private label (15% in 2008), 44% are shopping more in bulk, 72% believe things will get worse.

Health News

This month the Center for Disease Control reported that heavy drinking costs $220 Billion annually in lost work productivity, health care, and crime systems. Heavy drinking was defined as more than one drink a day for women and two for men; or more than four on a single occasion or five for men; or any consumption by pregnant women; or any consumption by minors.

A study published in the Journal of Wine Research found that organic wines have higher antioxidant and resveratrol activity, with total polyphenol levels up to 30 percent higher. Resveratrol is a powerful whole-body antioxidant found in the stems, seeds and skins of red wine grapes and has been proven in clinical studies to support the SIRT1 ‘longevity gene,’ which could possibly inhibit cellular aging and help maintain overall health.

Global Warming and Wine Production

A new federal study claims that within 30 years much of California's wine growing regions could become inhospitable to fine wine production. This could be caused by an average temperature increase of as little as 2 to 4 degrees. While California would take a hit, Washington's Puget Sound and Oregon's Willamette Valley are already seeing the start of a wine industry. Other areas hosting increased production are New York's Finger Lakes, Southern England, Tasmania, New Zealand's South Island, and British Columbia. Will our children be drinking wines from Iceland and Greenland?

Marketing

Single malts have been growing sharply, while blended Scotch in the U.S. market had a sales decline. Scotch priced between $15 and $22 a 750-ml. bottle were down 5% last year, while the value brands below $15 slipped 4%,Total Scotch volumes in the United States fell 3.7% to 7.52 million nine-liter cases last year, according to Impact Databank, with blends accounting for virtually the entire decline. In the 52 weeks ended September 4, single malt Scotch sales grew 10.6% by value while blends declined nearly 6%, according to Symphony IRI.

Blends like Cutty Sark and J&B led the retreat. J&B’s annual volume is around 270,000 cases today, down from about 2 million cases in the 1970s. Cutty Sark sold 155,000 cases in the United States last year compared to 1.8 million cases in 1980. Last year other blends including Clan Macgregor (-6.8%) Grant’s (-16%), and Passport (-5.6%) declined. One exception was Buchanan’s, with a 27% increase to 202,000 cases. Buchanan's is riding the Hispanic population wave.

The lone bright spot is Johnnie Walker, with a 2.5% increase in 2010 to 810,000 cases. Chivas Regal sold 402,000 cases in 2010, down from 484,000-case total in 2005.

Beam Inc. became a separate company this month as Fortune Brands continued its breakup. The company is estimated to be worth $6.4 billion at its opening price of $41.56 per share. Beam's sales last year were $5.4 billion at retail and $2.67 billion at the factory door. Brands include Beam Bourbon (#1 in the U.S.), Sauza Tequila, Courvoisier Cognac, Maker's Mark, Canadian Club, Teacher's Scotch, and Skinny Girl Cocktails. Although Beam is planning on operating independently, there is speculation that it could be a takeover target in 2012. Possible buyers are Diageo and Pernod Ricard.

 

Celebrities and Beverages

In July Chelsea Clinton married Marc Mezvinsky. Wedding guests received a bottle of Clinton Vineyards Tribute, a white wine. Sparkling 2007 Blanc de Blanc from Kluge Winery in Charlottesville, Virginia was served at the reception.

Since 2007 Actor Kurt Russell has made red wines at Ampelos Cellars in Lompoc. The grapes are Syrah and Pinot Noir from Santa Barbara's Santa Rita Hills. The wines are on the wine list at restaurants frequented by Russell and Goldie Hawn in Palm Springs, Palm Desert, and Indian Wells.

Celebrities that started with first jobs in foodservice: Rachel McAdams, Seal, Macy Gray, Jay Leno, Sharon Stone, Shania Twain, and Jeff Bezos (founder of Amazon) all worked at McDonalds. President Obama worked at Baskin-Robbins scooping ice cream. Madonna at Dunkin Donuts. Gwen Stefani at Dairy Queen. Eva Longoria at Wendys. Amy Adams at Hooters. Brad Pitt got his start in acting by wearing a chicken suit on Sunset Blvd. for Pollo Loco.

 

How Bacardi Kept its Business from a Takeover

Bacardi owes its light bodied rum to a special yeast that is proprietary and highly guarded to make sure it is only used and owned by Bacardi alone. All rum is made from molasses. Other rums are heavier in body and flavor owing to the yeast is used for fermentation. This light body makes Bacardi flavorful, yet light enough for mixing drinks like Daiquiri or Rum Martinis. The yeast was first used 150 years ago by family patriarch Facundo Bacardi. In 1960 Cuba's rum distilleries were nationalized by Castro. Daniel Bacardi had prepared for this. He already had starters of his yeast in secret storage in the U.S. and Mexico. In the early morning of October 14, 1960 Cuban Marines were sent to take over and occupy the Bacardi plant. Fortunately, they took over the wrong building. The marines secured Bacardi's Havana office and warehouse. The rum making yeast was in the factory in Santiago, at the far end of the island. The mistake gave CEO Daniel Bacardi time to kill all the starter yeast at his Cuban plant. This left Castro with a nearly useless factory. It also allowed the Bacardi family to start over in a new country.

Washington Voters to Decide the Fate of Liquor Wholesalers

Washington voters will decide by November 8 with mailed ballots whether to privatize hard liquor sales. Wine and Beer are currently sold in retail stores, while distilled spirits are sold only in state stores. The ballot measure would allow about 1400 licenses to be issued to stores of 10,000 feet or more, shutting out mom and pops. The state of Washington estimates revenues of $400 million from taxes and license fees over the first 6 years. Retailers would have a choice of buying through distributors or going manufacturer direct. The pro campaign, costing over $22 million, has been funded primarily by Costco, with a smaller contribution coming from Safeway and Trader Joe's. The con campaign of $12 million has come from the distributors with $9 million of that from the WSWA. The WSWA fears that passage would lead to moves in other states to buy manufacturer direct. Would the mammoth California market would be first on the list?

Retail in the News

A group called Warehouse Workers United has filed a class action suit against Walmart and four Inland Empire warehouse and Logistic companies. The California Department of Labor has joined in the suit. The suit alleges that workers were paid less than minimum wage, had to do work off the clock, worked in sub-standard conditions, and had hours cut or were fired for complaining about the problems. The California Department of Labor suit additionally claimed that the companies refused to show records or reveal pay formulas. The suits also claim that the employers took advantage of immigrant workers with little English language skills or knowledge of the system.

Retailers Most Annoying Habits were noted in a recent survey of supermarket customers. Here's the list:
Running out of sale items-62%
Requiring a purchase to get a free item-46%
Giving coupons at checkout with a short use-by date-32%
Not enough cashiers-44%
Items on the top shelf too high to reach-35%
Displays blocking the aisles-28%
Items moved around-27%
Narrow aisles-25%
Not enough baggers-20%

The US Food and Drug Administration, California Department of Food and Agriculture, Los Angeles and Ventura County Health Departments, and the L.A.P.D. recently participated in one of the largest 10 agency food busts in history. The operation took over a year and included hidden cameras, round the clock surveillance, the use of decoys, and thousands of pages of reports. The target was a group of people involved in a private club that shared raw goat's milk. Three arrests were made; Sharon Palmer, farmer; Eugenie Bloch, her helper; and James Stewart, health food store owner. They were accused of “endangering the lives of people.” The defendants and their attorney, Matthew Bromund, say the whole situation is a “waste of government resources and overkill.”

Restaurant Trends

The top 20 trends in restaurants for 2011 include sustainability, locally sourced meats, locally grown produce, sustainable seafood, organic produce, artisan cheeses and nutritionally balanced children’s dishes according to an annual survey of chefs by the National Restaurant Association.

 

A report from market research firm Mintel Group showed that 43 percent of American consumers who have visited an independent restaurant in the past month said they sought them out instead of chains. 52 percent - say they visit independent restaurants to support their local community, while 51 percent say that independent restaurants do better at supporting their local communities. 42 percent of those surveyed said independents have better food quality and are more able to customize orders. On the other hand, 21 percent said chains are more convenient, and 20 percent say chains have faster service.

 

Restaurants have been infusing appetizers, entrées, and desserts with alcohol for a long time. A June Datassential Menu Trends DIRECT report showed that more than 44 percent of restaurants use alcohol in main dishes. Beer is used on 20 percent more entrée menus than three years ago. Stout and ale are also on more menus as operators have been naming brand and type of beer. Beer has long been used as an ingredient in battering fish and French fries. Now it's showing up in sauces, marinades, and glaze on meat, seafood, or ribs. Some restaurants have even started employing cicerones; the official title of a beer “sommelier.”

 

Tasting Notes

At Food and Wine LA held at LA Live there were wines from over 200 wineries available to taste. This was definitely a consumer event. There were thousands in attendance at $200 a ticket. There were also a dozen booths from LA's trendy restaurants serving foods that ranged from comfort food to the unusual. We sampled short ribs, duck confit tacos, seafood salad, and s'mores. Wolfgang Puck stayed traditional with sliced turkey, mashed potatoes and gravy. We bravely tasted one of each. But, when we came to a table serving alpaca chorizo, we felt we had to draw the line. Some of the wineries were taking customer orders for direct delivery, while others were showing their best to attract loyal consumers. Stella Artois was pouring lager brewed domestically at AB in custom designed glasses. Consumers who paid $200 to get in seemed overjoyed to get a free glass.

Industry Calendar

11/11 Veteran's Day
11/16 Stars of Cabernet – Beverly Hills
11/24 Thanksgiving

 

Legislation

Our industry is more controlled by laws than most others. The State Legislature and the ABC give us license privileges and can take them away. New alcoholic beverage laws are being introduced, passed, and sent to the Governor. 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.

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

 

MEMBERSHIP APPLICATION
California Beverage Retailers Association
If you are not already a California Beverage Retailers Association member, please join, Print this form, and mail with a $50.00 check to: CBRA PO Box 56686, Sherman Oaks, CA 91413. You may also renew your membership. Dues are not a charitable contribution, but may be deductible as an ordinary business expense.

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