The financial press was falling over itself in the revelation by the Wall Street Journal on page one that Wal-Mart and Diageo are working together to increase the chain’s liquor sales, despite the priggish culture of Wal-Mart (they can’t buy alcohol on corporate credit cards, even at supper, and no alcohol is allowed to be consumed at any corporate events or at their headquarters. Sounds like a fun place to work). “We’re putting hard liquor in our stores where we can,” says John Westling, Wal-Mart’s senior vice president for nonperishable food to the WSJ. “This is an area where we are focused on growing sales.” Target is also looking to expand the number of stores that carry liquor.
A few points about this: While an interesting and well-researched piece, this is not new news. Diageo has been the liquor category captain for Wal-Mart for a year, and it’s no secret that spirits companies are seeking wider and deeper merchandising opportunities.
Wal-Mart is facing an image problem compared to Costco and Target, similar to the image problem our domestic mainstream beers face compared with imports. Wal-Mart is getting a down-at-heal, dowdy, linoleum image, and it no doubt thinks it will move its image upscale by putting premium spirits on the shelves.
However, we don’t think it helps the image of premium liquor brands to be sold ubiquitously in Wal-Mart. This is a positive for short-term liquor volume, but it could pose risks for long-term brand equity.
Also, this story didn’t come out of nowhere, and it’s unlikely Wal-Mart is seeking publicity about its liquor aspirations. Diageo is very good at communicating their strategy and their successes. And the fruits have already arrived: Diageo’s stock was upgraded by Morgan Stanley this morning on this news and its aggressive share buyback program.
DARK PLOTS, REPACKING, BASEBALL, AND SECRET MEMOS. The Maris case, or cases, have it all, (except the dead prostitute in the hotel room, of course). After nine years of almost constant litigation, the Maris-A-B relationship may be on the wane. I think it’s safe to say that A-B now regrets Gussie Busch’s decision to award the home run king the Florida distributorship if he would play one more year.
A-B president Pat Stokes and former vp sales Mike Brooks arrived in Gainesville Tuesday to face off against Rudy Maris in his multibillion dollar defamation case against A-B. Pat told the jury of six women that he terminated Maris after seeing proof that the distributor was up to alleged shenanigans, like repacking old beer. Pat read from one of “about a dozen” affidavits from Maris route drivers who said they repacked beer, according to the Gainesville Sun.
Rudy Maris testified that each driver was befriended by an A-B employee in a secret scheme to terminate the company, based on a memo marked “confidential” that detailed the alleged dark plot to take over 155 distributorships and reassign them to A-B friendlies. (Ironically, the Marises themselves originally got the distributorship in this fashion). Pat said he had never seen the memo before, but acknowledged his own son is scheduled to become owner of one of the other companies on the list, Grey Eagle in St. Louis, said the Sun. That’s quite an unfortunate coincidence for A-B.
Rudy said that he was threatened in a meeting with A-B to either sell for $20 million or face termination. Former vp sales Mike Brooks testified that, in essence, A-B actually gave Maris three choices, not two: Sell, fix your problems, or face termination. Sounds like semantics to me, but that’s what lawyering is all about.Sell Days This Month: 23 Sell Days This Month Last Year: 22
This month ends on a: Wed. Last Year this month ended on a: Tue. YTD Sell Days over/under: -1
