Wells Fargo's Weekly Economic and Financial Commentary

Source: Wells Fargo

Sep 10th

U.S.

•  Disappointing data this week reaffirms the notion that economic growth will remain sluggish in 2H12.
•  While the unemployment rate fell from 8.3% to 8.1%, the drop was largely attributed to a decline in the labor force participation rate as nonfarm payrolls increased by just 96,000, far below the consensus expectation.
•  The ISM Manufacturing Index remained below the demarcation line for the third consecutive month, declining to its lowest level since July 2009.
• Construction spending unexpectedly fell 0.9% in July with broad-based declines.
• Nonresidential spending contracted by 0.6% and residential outlays shrunk by 1.6%; contrarily, single family expenditures improved 1.5%
• Next week's key data points:
• Consumer Price Index (Friday) - Consensus forecast: 0.5% higher; the downward trend in consumer price inflation may finally be over.
• Retail Sales (Friday) - Consensus forecast: 0.6% increase; slightly slower than the 0.8% improvement in July.
•  Industrial Production (Friday) - Consensus forecast: 0.1%; a disappointing ISM Manufacturing Index report likely precedes a weaker Industrial Production report than last month (0.6%).

International

•  Mario Draghi, ECB President, seems to have developed a new plan for bond buying that will likely help solve the economic issues in the Eurozone.
•  China continues to watch Europe, its largest export market, closely; the results of the bond buying efforts proposed by the ECB will likely determine any economic action of the Chinese government.
• The effects of the Eurozone crisis on commodity prices and commodity exports is negatively effecting the growth prospects in emerging markets.
•  Strong growth is not expected to resume in the near-term, but improved expectations are on the horizon.

China's Online Alcohol Sales to Reach $2 Billion in 2014

Source: www.wines-info.com

2012-9-11

Well, that's a lot of booze. Chinese consumers are expected to buy 13 billion RMB - a full $2 billion - in wines, beers, and spirits on the country's specialist B2C alcohol e-tailers by 2014. That's the same as the GDP of the west African nation of Guinea-Bissau. The estimated figure for the whole of this year online in China is a relatively small 3.7 billion RMB ($584.4 million), indicating this sector is still young and has a lot of room for growth.

Those figures come from Beijing-based Analysys International, who reckons that there'll be growth of 200 percent from 2011 to the end of this year (see graph below). Afterall, offline channels still account for about 99 percent of booze sales in the nation, so there's a lot left to shift online.

Indeed, if you break down that $2 billion figure for 2014 by the number of adults of legal drinking age, then each person is only spending about $3 per year online for alcoholic beverages.

This alcohol online sales vertical - perhaps when everyone has drunk too much it becomes a horizontal - covers everyone from China's top online store, Tmall, to the Walmart-controlled food e-tailer Yihaodian, to very specialist B2C wines and beers sites like Jiumei and Jiuxian. The fact that those latter two startup sites recently wrapped up some major funding - $15.8 million for Jiumei; $32 million for Jiuxian - shows that well-focused e-commerce sites have a good chance of beating the big boys. There are other smaller contenders too, like the VIP sales site TasteV, and the wine-only Moooton.

In terms of what kind of good stuff folks are buying in China, the research firm reckons that 2012 will see a 60:30:10 split between spirits (including Chinese rice wine), red wine, and other booze, respectively.

Source: www.techinasia.com

Arnault fury at 'vulgar' headline

Source: FT

By Scheherazade Daneshkhu in Paris

Sep 10th

The controversy over Bernard Arnault's application for Belgian citizenship showed no signs of dying down on Monday after the French billionaire said he had filed a legal complaint against a daily newspaper over an offensive headline.

Mr Arnault, head of LVMH, the luxury goods group whose brands include Louis Vuitton, Dior and Moët & Chandon, said in a statement that he had no choice but to lodge the complaint for public insults against him because the headline of the left-leaning Liberation was "extremely vulgar and violent."

Libération posted a full page picture of a smiling Mr Arnault holding a suitcase with the words, loosely translated: "Get lost, you rich jerk!"

The phrase appeared a deliberate echo of one uttered by former president Nicolas Sarkozy - regarded as a friend of Mr Arnault - to a worker who refused to shake his hand. Mr Sarkozy was caught on camera telling the worker: "Get lost, you pathetic jerk."

Mr Arnault repeated on Monday that he would continue to pay his taxes in France. He said at the weekend, when the controversy broke, that his application for Belgian citizenship was not linked to President Francois Hollande's controversial 75 per cent marginal tax rate on incomes over ?1m but related to his personal business interests in Belgium - where he has extensive ties with Albert Frère, the billionaire Belgian industrialist.

Mr Hollande said in a television interview on Sunday night that Mr Arnault: "should have thought hard about what it signifies to ask fro another nationality. We are proud of being French."

The Socialist president has had to defend his flagship tax measure against the centre right opposition and big business which have argued that it will lead to an exodus of talent.

It was the second time in a week that France's richest man has resorted to the justice system, after filing a counter-complaint against Hermès, the Birkin bags and silk scarves group, alleging "slander, blackmail and unfair competition".

This followed immediately the disclosure by Hermès of a legal complaint it had filed with the Paris relating to LVMH's purchase of its shares in 2010. LVMH holds a 22 per cent stake in the family-controlled smaller group, which opposes the shareholding, regarding it as "unfriendly" - something LVMH denies.

Czech: Growing concern over public safety as police investigate bootleg liquor deaths

Source: Radio.cz

Daniela Lazarová

10-09-2012

The Czech Republic is in the grip of a methanol scare after 11 people suffered acute methanol poisoning from bootleg alcohol. As the number of fatalities rises police around the country are trying to trace the source of the contaminated liquor and issuing urgent warnings to the public.

CTK Police are out in force in the Moravian town of Havirov making sure the methadone warning reaches those who need to hear it most -homeless people and those out on the street likely to buy cheap bootleg alcohol. Three of the seven people who bought cheap brandy on tap at a stall in Havirov last week are dead, three others are in a coma on life support, another has gone blind. All suffered acute methanol poisoning which is known to have fatal consequences. The town hall's spokeswoman Ewa Vojnarova says they are dealing with an emergency situation.

"The situation is grave and there is considerable danger to citizens' life and health. The police have closed down five stalls which sold bootleg liquor and are now trying to trace the source of the contaminated batch."

The owner of one of the stalls has been charged with causing grievous bodily harm resulting in death and is in custody awaiting trial but he does not appear to have produced the home-made brandy and it is still not clear how much of it was put on the market or where it may surface. Over the weekend two other cases appeared in the towns of Znojmo and Kyjov, both located in south Moravia at a considerable distance from Havirov. Although one of the men is employed in Havirov and admitted to having consumed cheap brandy bought in the street, the other had no apparent connection to the place. He had consumed alcohol at a local disco and pub the previous night. With the source of the contaminated alcohol unclear the mayors of Kyov, Znojmo and nearby towns are holding crisis meetings with doctors and police to consult preventive measures and an effective information campaign.

Monday morning confirmed the worst fears - an acute case of methanol poisoning was reported in Pribram, central Bohemia. A sixty-five year old man is in critical condition and has gone blind after drinking seven shots of vodka bought at a local store.

Vladimir Steiner from the Czech Association of Spirit Producers and Importers says that while 15 to 20 percent of the liquor consumed in the Czech Republic annually is home made this particular batch is something entirely different.

"In my view this is a criminal offense. The health problems we are seeing could not have been caused by home-made brandy which often contains small traces of methadone that could make people sick but would not be fatal. If you ask me I think that someone producing bootleg alcohol had access to the methadone that is imported to the Czech Republic for industrial use. It comes at half the price of ethanol and I think someone intentionally substituted it looking to make a quick fortune and knowing that by its colour, taste and smell it is indistinguishable from ethanol."

With the methanol threat now nationwide, police are out in force around the country checking out street stalls and small mixed goods stores that sell cheap liquor. The Health Ministry is sending out inspectors restaurants, canteens and eateries around the country. People are repeatedly being warned not to consume unlabelled alcohol or order spirits on tap. Although the shocking reports on the case have now made most people highly cautious about what they consume, the police fear that those who are at real risk of buying cheap bootleg liquor are not likely to be listening.

Sapporo Confirms $2.5bn Investment Plan

Source: KamCity

Sep 10th

Japanese brewer Sapporo has announced plans to invest up to $2.5bn over the next five years, saying the money will be used for expanding capacity and acquisitions. The group also said it will continue to look for ways to grow its presence in the food and soft drinks categories, reducing its dependence on beer.

President Tsutomu Kamijo said the group is sticking by its investment plans despite lowering full-year profit and revenue forecasts in August. Sapporo had cut its operating profit forecast by 20%, citing higher marketing costs, but Kamijo said it "won't have a big impact" on the investment plan.

Kamijo added that he is "watching with interest" for possible acquisitions in the domestic yogurt or milk industries. Last year, the group acquired local food & beverage maker Pokka, and earlier this year, it picked up a 51% stake in US beverage firm Silver Springs Citrus.

Rum producers in small Caribbean countries say they're hurt by US subsidies

Source: Associated Press

September 10

Rum, the sugar-based liquor that has fueled the development of the Caribbean for centuries, has become the focus of an increasingly bitter dispute with the U.S.

Small producers in countries such as Antigua, Guyana and Jamaica complain they are being punched by unfair trade and marketing advantages for global beverage corporations operating in U.S. territories, and say U.S. rum subsidies threaten to drive some beloved top-shelf Caribbean labels out of business, or force them to sell out.

 "The amounts that are being doled out now are staggering," said Frank Ward, chairman of the West Indies Rum & Spirits Producers' Association. "We were able to live with the level of U.S. subsidies as they once were. But the massive increases, we believe, have skewed the market."

It's a high stakes battle because rum, first developed on Caribbean sugar plantations in the 17th century and deeply engrained in local culture and history, is one of the few competitive industries for the tourism-dependent region's tiny, vulnerable economies. The tipple, which can range from colorless to coppery, from almost tasteless to richly layered, generates roughly $500 million in foreign exchange for independent Caribbean countries and more than $250 million in tax revenue.

The subsidies come from money raised through an excise tax on liquor sold in the United States. Under an obscure federal law, almost all of the money generated by rum goes to the treasuries of Puerto Rico and the U.S. Virgin Islands. Those tropical territories in turn hand a share of it to the producers as a subsidy to do business there.

Distillers in other countries say they lived fairly comfortably with the U.S. subsidies for decades, even if they thought the rebates gave advantages to rum giant Bacardi Limited in Puerto Rico and Cruzan Rum, a U.S. Virgin Islands brand now owned by Beam Inc., the U.S. maker of spirits such as Jim Beam and Maker's Mark.

But they are alarmed by recent deals that sharply increased the subsidies for already powerful corporations in the two territories.

In the Virgin Islands, London-based Diageo PLC signed a long-term lease in 2009 to build a rum distillery on St. Croix making the Captain Morgan brand in exchange for a chunk of the excise-tax revenue estimated at $2.7 billion over 30 years. It will start full production next fiscal year. Diageo also gets government marketing support and generous subsidies for molasses, the syrupy byproduct of sugar refining that is a key ingredient in most rum.

Puerto Rico, in response, has increased the amount it spends to promote its rum industry, from 10 percent to 25 percent of the excise tax money it gets back. It has also awarded Bacardi a $95 million grant to renovate its production plant in exchange for maintaining a minimum level of production for the next 20 years. That translates into more than $230 million in yearly revenue from excise taxes

The moves have prompted some competing Caribbean distillers to urge their governments to complain to the World Trade Organization, fearing that the U.S. subsidies may undermine age-old rum operations in the Caribbean, the global center of production, and motivate other multinational distillers to relocate to U.S. territories.

"Our Caribbean distilleries need to export rum in order to survive. But bigger subsidies in the U.S. islands means we don't get a level playing field for our exports, and it's going to affect both small and large producers here," said Anthony Bento, managing director of the 80-year-old Antigua company that makes English Harbour Rum in copper stills and ages it in oak barrels.

Clifton Shillingford of Shillingford Estates Ltd, a small Dominica distiller that makes its Macourcherie rums from local sugar cane juice instead of molasses, said the subsidies for big global brands in the U.S. islands will "destroy" his rum business.

Diageo argues the complaints of smaller producers are overblown. Spokesperson Brooke Lawer says the subsidies the British company receives are similar to incentives from U.S. states or other countries to attract industry and do not create a competitive disadvantage.

Quoting figures from the Geneva-based International Trade Center, Diageo says Caribbean Community rum exports to the U.S. increased by 18 percent in the first half of 2012 over the same period last year.

New Zealand: Alcohol reformers keep pushing

Source: NZ Herald

By Isaac Davison

Saturday Sep 1, 2012

MPs and lobby groups say once-in-a-generation alcohol reforms must be salvaged after one of the core measures was defeated in Parliament.

Justice Minister Judith Collins said yesterday that Parliament's decision not to raise the alcohol purchase age in a conscience vote had denied the Government an effective way of curbing alcohol-related harm.

But she felt there were many more effective tools in the bill.

National MP Tim Macindoe, who tabled the amendment to raise the purchase age to 20, said it was now crucial "to get the rest of the bill right".

Asked whether the legislation needed stronger amendments to make up for the drinking age being kept at 18, he said he had confidence in the Justice Minister's proposals.

The minister has proposed banning alcohol advertising that targets young people and requiring parents to give express consent - verbal, written, or by text message - for the private supply of alcohol to people under 18.

Health experts, including the Prime Minister's science adviser, Sir Peter Gluckman, had strongly supported a purchase age of 20.

University of Otago head of preventive and social medicine Jennie Connor said the bill had already needed more robust measures to curb alcoholism - with the age option defeated, it was absolutely essential.

She did not believe the bill in its present form would limit alcohol-related damage.

MPs will now consider the remainder of the bill, which includes banning late-night alcohol sales and limiting where alcohol can be displayed in stores.

They will also consider 18 amendments put up by MPs who have proposed a minimum price for alcohol, warning labels for liquor bottles and stricter rules on alcohol sponsorship and advertising.

The purchase age was the only amendment on which all parties had a conscience vote.

The National Party plans to vote as a party for the remaining proposals, while Labour will allow a personal vote for all amendments.

Mrs Collins has confirmed that National would vote against all 18 amendments proposed by other parties.

This meant National needed two more votes to defeat the other parties' amendments, and the key votes would fall to coalition partners Act and United Future.

Both Act leader John Banks and United Future leader Peter Dunne said they would not support any of the amendments.

Labour spokeswoman Lianne Dalziel said the fact that National was "whipping" its vote meant the bill was no longer in the hands of politicians.

She urged constituents to lobby their MPs for stronger measures.

Ms Dalziel felt the bill was out of tune with what the public wanted and was "disrespectful" to submitters who called for changes to alcohol pricing, sponsorship and availability.

A Herald-DigiPoll survey showed 80 per cent of New Zealanders supported a higher purchase age. But the DigiPoll also showed just 40.6 per cent of the public supported a minimum price on alcohol.

Hospitality Association chief Bruce Robertson welcomed the vote on the purchase age but said the industry was awaiting the rest of the reforms with some trepidation.

He was most concerned about a law change giving communities the power to set their own local alcohol policies, which he felt would create new, complex systems which would inevitably increase licensing fees.

Other proposals

MPs want 18 amendments to the Alcohol Reform Bill. Here are some, and what the Ministry of Justice thinks.

Set a minimum price for alcohol

MoJ: Too early for a minimum price as officials are investigating whether it works.

Ban alcohol advertising and sponsorship

MoJ: Strong public support but would penalise many clubs and organisations.

Ban alcohol advertising on radio and TV

MoJ: Strong public support but little evidence it works.

Remove industry exemption from providing nutritional and warning labels

MoJ: Needs approval from Australia, which shares food safety standards. Should not be part of this bill.

Is underage drinking ever OK?

Source: CNN

By Allison Gilbert

Sun September 2, 2012

Editor's note: On Labor Day and other holidays that call for cheerful gatherings, many parents wonder whether to allow their underage children a celebratory sip of beer or wine. Allison Gilbert asks experts if giving kids a taste of alcohol is asking for trouble or preparing them for the real world.

Before dropping off his son at Colgate University a few days ago to begin his freshman year, New York advertising photographer Robert Tardio went on one last summer vacation with his family. While his wife and youngest son were out exploring the quaint streets of Montreal, Robert took his eldest, college-bound teen out for a beer. "My son is an incredible, conscientious young man. But at 14, 15, 16 -- alcohol was out of the question. We made it very clear what our expectations were and that he would not be drinking."

The rules shifted for Tardio's son Ames when he turned 18. Now, a beer here or there was no longer out of the question.

"In our minds, he became somewhat of an adult, and we were willing to set new limits. He understood that if he was going to have a drink he had to be responsible and in control at all times. We also had many discussions with him about the consequences of his actions if he wasn't under control."

So the Tardios did what many parents across the country do: They made up their own rules, inside their own home, when it came to alcohol consumption and their underage children. As a mother of a 10-year-old daughter and a 12-year-old son, I've often wondered if it's OK to give my children a sip of wine at dinner. Would I be sending an irresponsible message, or demystifying alcohol and thereby weakening its allure later on?

Are 40% of college students alcoholics?

Alcohol use in movies and teen drinking

U.S. government agencies insist no amount of underage drinking is acceptable. "If parents have a liberal idea about alcohol, kids may get the wrong message," says Dr. Vivian Faden, director of the Office of Science Policy and Communications at the National Institute on Alcohol Abuse and Alcoholism at the National Institutes of Health. "Underage drinking can lead to injuries, fatal car accidents, risky sexual behavior, and there's also potential risk to the developing brain."

According to the NIAAA, every year nearly 2,000 college students between the ages of 18 and 24 die from alcohol-related injuries. The question parents often wrestle with is whether they can help their children make better decisions about drinking on campus if they allow experimentation at home before they leave for college. Tamar Abrams, a senior communications manager at a global development firm in Virginia, says she never allowed her daughter to drink when she was in high school. "The line for me was what was legal versus what was illegal. It seemed like a slippery slope to bend the rules, and I was not going to break the law." Her daughter is currently a rising sophomore at Drexel University and hasn't had any alcohol-related problems.

Dr. Westley Clark, director of the Substance Abuse and Mental Health Services Administration's Center for Behavioral Health Statistics and Quality, would agree with Abrams' approach. "Statistics show children who start drinking at a younger age have more problems later on. We also know that, particularly for males under 21, they are still developing what we call executive function -- meaning, how they make decisions and how they deal with risk. At 21, the brain is simply more mature and the ability to control impulses is much stronger. The legal age is 21. The message to parents is to buy time and delay the onset of any consumption."

At Yale University's School of Medicine, Meghan Morean, a postdoctoral fellow in the department of psychiatry, has been studying substance abuse in adolescence and early adulthood for nearly a decade. While she agrees with Clark that early drinking is associated with "heavier drinking as children age," Morean says what could be a key in helping children avoid alcohol-related trouble is often the willingness of their parents to talk. "The piece of the puzzle that's likely missing is arming underage drinkers with real, concrete information. It's too easy to say 'Don't drink and drive,' and that's generally where parents stop talking. Instead, they should be quizzing their kids to see if they really understand how many drinks it takes to get drunk. Do they know what binge drinking really is and what it looks like? These are the type of questions that need to be talked about openly and honestly."

Having those kinds of candid conversations is something the Tardios made sure to do with Ames before -- and after -- they offered him his first beer at home. And it's the reason that, when they said goodbye to him at Colgate -- the same campus where the couple met 34 years earlier -- they drove off with perhaps less anxiety about alcohol than many parents of college freshmen are feeling right now. "We've built a trusting relationship with our son and we know he'll make the right decisions without us watching over him," reflects Tardio. "We've allowed him to play a little with alcohol at home and we're not worried that suddenly, without our supervision, he'll make the wrong decisions. We've always had high expectations about his behavior and that hasn't stopped now that he's in college."

Beer drinkers' speed tied to shape of glass

Source: CBS News

By Michelle Castillo

Aug 31st

If you really want to nurse your beer, you may want to ask for it in a straight glass instead of a curved one.

A new study shows that the shape of one's beer glass affects how fast people gulp down the beverage.

"People often talk of 'pacing themselves' when drinking alcohol as a means of controlling levels of drunkenness, and I think the important point to take from our research is that the ability to pace effectively may be compromised when drinking from certain types of glasses," Dr. Angela Attwood, a research assistant at the School of Experimental Psychology at the University of Bristol in Bristol, England, said in a press release.

The study appeared Aug. 17 in the journal PLoS ONE.

Researchers asked 159 social drinkers between the ages of 18 to 40 who did not have a history of alcoholism to drink a lager or a non-alcoholic soft drink from either a straight or curved glass.

On average, it took people drinking beer out of a straight glass 11 minutes to finish 12 oz. Those drinking out of the curved glass only took seven minutes. There was no difference in time for people consuming soft-drinks out of either glass.

"Drinking time is slowed by almost 60 percent when an alcoholic beverage is presented in a straight glass compared with a curved glass," the scientists wrote.

The subjects were also asked to look at partially filled straight and curvy glasses and say if they were more or less than half full. They were more likely to get the answer right when the glass was straight.

Researchers believe that people had a hard time judging and pacing themselves with the curvy glass because of the shape. They suggested that changing the shape of the glass beer is served in may "nudge" people to make better alcohol consumption choices. Attwood told the BBC that the lack of difference among the soda drinkers was probably because they weren't as concerned about how fast they drank the soft drinks.

"Due to the personal and societal harms associated with heavy bouts of drinking, there has been a lot of recent interest in alcohol control strategies," Attwood said in the press release. "While many people drink alcohol responsibly, it is not difficult to have 'one too many' and become intoxicated. Because of the negative effects alcohol has on decision making and control of behavior, this opens us up to a number of risks."

The study only looked at the time to finish only one drink, so researchers are curious to see if the effect lasts throughout a night of drinking.

Anheuser-Busch InBev in legal dispute over "bow tie" trademark

Source: Just-Drinks

James Wilmore

31 August 2012

Anheuser-Busch InBev has spoken out over a trademark dispute with San Antonio Winery involving its Budweiser brand.

The case centres around A-B InBev's claim that the Los Angeles-based winery's Bow Tie brand, the use of the words, and a bow tie image, could lead to "consumer confusion" with its Budweiser brand mark, featured on the neck of bottles.

However, after legal action from the brewer, San Antonio has reportedly filed a separate complaint against A-B InBev arguing that its use of the words is not a copyright infringement and does not constitute "unfair competition".

With port strikes looming, Maine businesses plan for the worst

Source: Bangor Daily News

Whit Richardson

Friday, August 31, 2012

The union that represents dock workers at East Coast ports, including Portland's, is threatening to strike if it's not successful in renegotiating its contract with port operators.

A strike could impact several Maine businesses and produce a ripple effect throughout the state's economy.

The recent round of negotiations between the International Longshoremen's Association and the U.S. Maritime Alliance, which represents container carriers and port operators in the negotiations - including Port Americas, which operates the Portland Marine Terminal - broke down last week. No new talks are scheduled, both sides told the Associated Press. The current contract expires at the end of September.

Meanwhile, the ILA chapter at the Port of New York and New Jersey, the East Coast's busiest port, authorized a strike on Tuesday if the contract deal isn't reached, according to the AP.

The Portland Marine Terminal handles between 3,000 and 5,000 containers a year, on average, Jack Humeniuk, the ILA's representative in Portland and an employee of Port Americas, told the Bangor Daily News. There are 45 members in Portland's ILA chapter, he said.

But it's not just a disruption of container service in Portland that would impact Maine businesses. A strike at ports in New York, Newark, Baltimore, Philadelphia and other East Coast ports would disrupt the entire nation's supply chain and create a ripple effect throughout the economy.

Another user of Portland's container service is White Rock Distilleries, the Lewiston liquor company purchased last year by Beam Inc., the producer of Jim Beam bourbon. It receives raw vodka from France at its Lewiston facility and ships out cases of Pinnacle brand vodka.

"We're definitely monitoring the situation," said Paula Erickson, a spokeswoman for Beam Inc., "and we definitely have contingency plans in place if something should occur in terms of a strike or disruption at the ports."

Shifting supply chains and seeking alternative shipping routes would increase costs for White Rock, which employs more than 150 people, but that would be a secondary consideration, Erickson said. The company's "No. 1 priority" would be to ensure 100 percent uninterrupted production and shipment of the company's product.

While no new negotiations between the ILA and the U.S. Maritime Alliance are scheduled, Humeniuk expects the parties will sit back down together. "If [the issues] get solved, they're not going to get solved until the 11th hour," he said. "Unfortunately for shippers, it's uncomfortable because you don't know what to do, but that's the nature of the beast."

If a strike or lockout did occur, Humeniuk expects it would be "very short-lived" because the economic impact would be so dramatic that President Barack Obama would likely get involved.

Corby Distilleries Announces Quarterly Dividend and Reports Fourth Quarter & Year End Results

Source: CNW

Aug 28th

Corby Distilleries Limited ("Corby" or the "Company") (TSX: CDL.A) (TSX: CDL.B) today reported its financial results for the fourth quarter ended June 30, 2012. The Corby Board of Directors today also declared a dividend of $0.15 per share payable on September 30, 2012 on the Voting Class A Common Shares and Non-voting Class B Common Shares of the Company to shareholders of record as at the close of business on September 15, 2012.

Net earnings for the fourth quarter and year ended June 30, 2012 totaled $4.9 million (or $0.17 per share) and $46.0 million ($1.62 per share). Year over year, net earnings increased $17.1 million. Two disposal transactions, the sale of certain non-core brands and the subsidiary that owned the Montreal plant on October 31, 2011 and the sale of the Seagram Coolers brand on March 16, 2011, had a substantial impact on the financial results in both the current and prior years (hereafter the "Disposal Transactions"). The following provides a comparison on a like-for-like basis as it excludes the impact of the aforementioned Disposal Transactions:

-    Case good shipments grew 3% on an annual basis; quarterly, shipments grew 1%

-    Revenue increased 7% on an annual basis; 3% during the quarter

-    Net earnings increased 11% on an annual basis; net earnings decreased 5% during the quarter

Fourth quarter case goods shipments showed modest growth, despite being impacted by the exceptional results experienced in the third quarter where shipment phasing was significantly ahead of consumer trends. Corby's commission business and its continued sale of bulk whisky combined to improve revenue this quarter. Given these shipment phasing impacts, our full year results are a better reflection of actual performance. The growth in net earnings for the year was driven by encouraging volumes and reflected the delivery of strong advertising and promotional ("A&P") programs which drove market share growth in our key focus areas. The Company continues to increase its A&P investment and new product innovation. Net earnings for the year (and fourth quarter) also benefited from increased commissions from the representation of Pernod Ricard brands in Canada, higher interest on cash deposits, and having lower statutory rates of corporate income tax. In addition, bulk inventory sales continue to have a positive impact while we continue to invest in our route to market capabilities.

Without adjustment for the Disposal Transactions, Corby's fourth quarter revenue decreased $7.7 million when compared with the same three month period last year, while on a year over year comparison basis, revenue decreased 8% (or $12.9 million).

"I am pleased to report excellent progress in a year where we have clearly made great strides in implementing our core strategy of focusing our investments on, and leveraging the long-term growth potential of, our key brands. We continue to achieve growth ahead of category in our areas of focus, deliver new products to market on schedule, increase investment behind key brands and re-shape our route to market capabilities. What is particularly pleasing, is achieving all this while delivering strong growth to our bottom-line", noted Patrick O'Driscoll, President and Chief Executive Officer of Corby.

For further details, please refer to Corby's management's discussion and analysis and consolidated financial statements and accompanying notes for the year ended June 30, 2012, prepared in accordance with International Financial Reporting Standards.

About Corby

Corby's portfolio of owned-brands includes some of the most renowned brands in Canada, including Wiser's Canadian whisky, Lamb's rum, Polar Ice vodka and McGuinness liqueurs. Through its affiliation with Pernod Ricard S.A., Corby also represents leading international brands such as ABSOLUT vodka, Chivas Regal, The Glenlivet and Ballantine's Scotch whiskies, Jameson Irish whiskey, Beefeater gin, Malibu rum, Kahlúa liqueur, Mumm champagne, and Jacob's Creek, Wyndham Estate, Stoneleigh and Graffigna wines.

The existing Voting Class A Common Shares and Non-voting Class B Common Shares of the Company are traded on the Toronto Stock Exchange under the symbols CDL.A and CDL.B, respectively.

Spirits deals- Rum

Source: FT

Sep 3rd

Rum is going up in the world. Or so Gruppo Campari hopes. The Italian company is spending $414m on a Jamaican maker of the spirit in the hope that rum can become a whisky-like drink for the more discerning (and wealthier) customer. Lascelles deMercado, the target, has the brands to match that ambition via its Appleton range.

The premium rum market is growing at 3 per cent per year, which is behind vodka but ahead of most other spirits segments, and Campari has a reputation for working acquired brands hard. It will also be hoping to improve Lascelles' lacklustre 7 per cent operating margin by pushing Appleton through its own distribution system.

It is certainly paying enough for the opportunity. A multiple of 15 times historic earnings before interest, tax, depreciation and amortisation is ahead of the 11 times that Diageo paid for Turkish raki maker Mey Içki last year, but closer to the 16 times that Diageo paid for Ypióca, a Brazilian cachaça maker, this year. Campari justifies the price by saying that synergies should bring the multiple down to 10 times. But most of those synergies are on the revenue side, so far less reliable than cost savings.

Investors should take note of the rising prices. While Diageo and Campari differ in the rationale for their deals - the former wants new markets for its existing brands, while the latter wants new brands for its existing markets - they are paying up for relatively small makers of niche spirits. Prices are unlikely to fall. The global spirits market is far less consolidated than beer, with the top 100 premium brands representing just 20 per cent of the market by value. Given the fat margins on offer, the families that control many spirits makers have little incentive to sell. But their resolve is being increasingly tested by multinationals with little debt and a growing taste for something unusual.

Campari Buys Jamaican Rum Maker

Source: WSJ

By MANUELA MESCO

Sep 3rd

Gruppo Campari SpA, CPR.MI +0.76% maker of the iconic red Italian spirit, Monday became the latest European drinks maker to snap up a local producer in the Americas with the acquisition of Jamaican rum maker Lascelles deMercado & Co.

The Italian company has acquired 81.4% of Lascelles, whose brands include Appleton Estate, Wray & Nephew and Coruba, from Trinidad and Tobago-based conglomerate CL Financial, and plans to buy the rest by the end of the year. The entire deal will cost $414.8 million and should lead to a profit from next year, Campari Chief Executive Bob Kunze-Concewitz told a news conference.

Mr. Kunze-Concewitz said the move will mean the Americas contributes 40.4% of the company's global revenue.

Lascelles marks Campari's third-biggest acquisition, after its 2009 buy of Wild Turkey from French rival Pernod Ricard SA and that of Skyy Spirits in 2001-and its first rum brand-and the latest in a string of deals over recent years.

In 2011, the company bought Brazil's Sagatiba, which produces the country's best selling spirit cachaça, and in 2008 Argentina-based distributor Sabia SA, of which Campari now owns 100%. Mr. Kunze-Concewitz said that although there is still financial capacity for more acquisitions, the company will more likely spend the next few months to "digest" the latest operation.

The string of acquisitions shows how global beverage companies are competing more fiercely than ever for a leading position in the Americas, a crucial growth region, partly in reaction to the torrid conditions they face in Western Europe where recession and government austerity measures are forcing drinkers to spend less.

The U.K.'s Diageo DGE.LN -0.29% PLC, owner of Guinness stout and Johnnie Walker whiskey, last month said it remains in close talks with Mexico's Beckmann family over a reported $3 billion deal for tequila giant Jose Cuervo. And in May, the company bought Ypioca, one of Brazil's biggest producers of cachaça, for £300 million ($476 million). Diageo expects developing economies to contribute half of its global revenue by 2015, up from almost 40%.

Brewers are also being drawn to the region. Anheuser-Busch InBev NV ABI.BT +0.19% has so far this year acquired the 50% stake in Mexico's Grupo Modelo SAB de CV that it didn't already own for $20.1 billion, and gained control of Dominican brewer Cervecería Nacional Dominicana SA for over $1 billion.

"It's important to have local brands in emerging markets, as these are brands that already have their own distribution lines, which companies can use to expand the market for their own brands. As for Campari's acquisition, this is significant as it marks the company's access to the rum market. Campari continues to expand its portfolio without overburden its financials," said Giulio Lombardi, senior analyst at Fitch Ratings. He also calculated that Lascelle's market share in the U.S. accounts for roughly less than 10%.

Mr. Kunze-Concewitz said spirits will account for more than 80% of Campari's annual revenue following the deal.

The price is at a historic multiple of 15 times the company's earnings before interest, tax, depreciation and amortization for the 12 months to June 2012.

Liquor Buyers Cross State Line

Source: WSJ

By JOEL MILLMAN and MIKE ESTERL

Sep 3rd

Washington residents are pouring over the Oregon line this summer to buy liquor after Washington state privatized the sale of hard alcohol-and made the booze more expensive by raising state fees.

Sales at Rainier Liquor Store, the lone liquor outlet in this town of 2,000 residents, are running $2,000 a day higher than last summer, said proprietor Traci Brumbles. Every day "is like a holiday" now, she said.

Ms. Brumbles can thank "liquor sticker shock," the term Washington residents use for a big price rise since June.

Washington residents are pouring over the state line to buy liquor in Oregon towns such as Rainier, as changes to liquor sales drive up prices in Washington state this summer.

"You see something over there that costs $20, and when you get up to the cash register, it's $28," said Matt Phillips, a Longview, Wash., resident who was on his weekly trip across the Columbia River to buy alcohol in Rainier. He bought a fifth of Windsor Canadian whiskey for $19.95 that sells for about $24.50 back home.

Washington is the 33rd state to fully privatize liquor sales, but it is believed to be the first to do so since immediately after the end of Prohibition. That is turning the state into a rare study of how-or how not-to manage such a transition at a time when several other states are weighing exiting the liquor business.

Until this summer, Washington by law owned all distributors and sellers of alcoholic spirits; nongovernment stores could sell only undistilled alcohol, such as wine and beer. Last November, state voters passed a measure to hand distribution and sales to the private sector. The measure's biggest financial backer was Costco Wholesale Corp. COST -0.73%

Many residents assumed that privatization-and ensuing competition-would drive down liquor prices. Opponents warned that falling prices would foster alcohol abuse and sales to minors.

Instead, prices have shot up. The state Department of Revenue said the average price of liquor rose 17% in June from a year earlier and that sales by volume at stores, bars and restaurants fell 9% to 2.9 million liters.

Some say prices could come down somewhat after distributors and retailers work through start-up costs and become more efficient. But much of the blame is being laid on taxes.

Even before privatization, Washington had some of the nation's highest liquor taxes and fees, at $26.70 a gallon. The national average is $7.02 a gallon, said the Tax Foundation, a research group. Washington state's levies included government stores' 52% markup, a 21% liquor sales tax and a $3.77-per-liter excise tax.

And while those sales and excise taxes remain under privatization, new fees further raised prices: Liquor distributors must pay an additional 10% levy, and retailers another 17%. Distributors also are on the hook for any shortfall to the state if they don't generate $150 million from the 10% fee by April.

"It's astronomical and confiscatory for the consumer,'' said David Ozgo, chief economist at the Distilled Spirits Council of the United States, which represents U.S. liquor suppliers.

The spillover could potentially damp privatization elsewhere. "It's slowing down the process in others states. It's turning into a negative,'' said Craig Wolf, president of Wine & Spirits Wholesalers of America, a national industry group for wholesalers.

Costco and other supporters of Washington's move say they expect prices to drop as more competitors enter the market. "It's remarkable how smoothly this has gone. None of the fears of the opponents of this change have materialized," said Joel Benoliel, chief legal officer for Costco, based in Issaquah, Wash.

Opponents say the law is too new to determine its impact. "As far as social costs, like sales to minors and increased DUIs, it's too early for these things to materialize," said Karina Shagren, a spokeswoman for Washington Gov. Chris Gregoire, who opposed the measure.

Washington consumers now can turn to more than 1,500 retailers licensed to sell liquor, compared with only 328 government-owned outlets before.

But with prices up, many Washington buyers-or at least those within driving distance of Oregon or Idaho-are shopping across the state line. Figures released this summer by Oregon's Liquor Control Commission said June and July liquor sales in 12 stores it tracks along the state line with Washington were about $1.5 million above sales in the year-ago period.

In Rainier, the Oregon liquor commission said sales jumped 60%, compared with the same period last summer. Ms. Brumbles, of Rainier Liquor, added staff and store hours to meet demand from Washington shoppers. "You know how the week is before Christmas? It's like that every single day," she said.

Across the Lewis & Clark Bridge in Longview, Wash., business was barely stirring at Darshan Brar's Boondox Liquor Plus one recent Friday evening. The 50-year-old Mr. Brar paid $250,000 in an online auction for the store, formerly state-owned, but didn't anticipate the price penalty: He sells a fifth of Herradura Tequila for $49.76, versus $39.95 across the river at Rainier; Captain Morgan's spiced rum at $47.52 a half gallon, versus $33.95 for the same bottle in Rainier.

"Everybody that comes in and looks at the price, they compare to Rainier. They just say, 'I am going to Rainier,' " said Rup Brar, the owner's daughter.

Bordeaux braces itself for 'winemaker's vintage'

Source: Decanter

by Jane Anson in Bordeaux

Thursday 30 August 2012

The Bordeaux 2012 harvest will be several weeks later than in recent years - and the smallest since 1991, according to the agriculture minister.

Difficult climatic conditions during the growing season, from a rainy spring and early summer to a searingly hot August, have meant that 2012 looks to be another 'winemaker's vintage' - as difficult vintages are usually dubbed.

Rain during April, May and June put heavy pressure on the vineyards, and the cold temperatures meant flowering was inconsistent.

Most winemakers report that the warm end of July, and hot August, salvaged what was looking to be a disastrous year.

But with temperatures reaching 40 degrees over several days in August - the 9th, 10th, 25th, and 27th were particularly hot - meant that some grapes shut down entirely, and others were scorched by the sun.

Meanwhile the damp spring and early summer meant widespread mildew has also caused problems, with many winemakers reporting treating their vines up with protective sprays (usually sulphur-based) up to ten times over the growing season.

Jonathan Ducourt, of Vignobles Ducourt, which owns 13 chateaux and 440ha across AOC Entre deux Mers and AOC Bordeaux, told Decanter.com ripening has been 'inconsistent'.

'This period was very stressful, although we were able to keep the vineyards in good shape.

Ducourt expects to start the young vines of Sauvignon Blanc on 11 September, followed by the older Sauvignon vines from 14 September. Semillon should follow the week after, then Merlot by the end of September.

By contrast, the first grapes of the 2011 vintage were harvested during the week of 15 August.

'It is too early to have an idea about the Cabernet Sauvignon, as it is still not ripe,' Ducourt said. 'We will wait as long as weather allows, then we will have to harvest block by block.'

After that,'depending on what comes in', there will be a lot of 'different processes' to do in the winery.

'It's another winemaker's vintage,' Ducourt said.

Across France, similarly challenging conditions means winemakers are expecting the smallest harvest since 1991, according to agricultural minister Stéphane Le Foll.