Holiday Champagne Sales Expected to Fizzle

‘Tis the time of year for lots of parties, food and celebrations which usually gives a huge boost to Champagne sales. In fact, the bubby vino generates about 25% of overall volume in November and December annually. However, this year is expected to be different in the face of the current economic downturn and weakened U.S. dollar, which has managed to drive already pricey Champagne bottles even higher. In addition, Champagne is typically consumed on premise but Americans are going out less and trading to the off-premise in effort to save money. According to an article in AdAge.com, Champagne marketers are bracing themselves for a slump in sales.

Before the stock market crisis in September, Champagne shipments to the U.S. were already declining -17% through July, according to the Office of Champagne. Data from TNS Media Intelligence shows that first-half measured media spending by Champagne fell sharply this year, says the article. Moët & Chandon (the top Champagne marketer) spent nearly $500,000 in the first half of 2007 but cut that in half this year.

Interestingly, beverage marketing consultant Brian Sudano told Ad Age that Champagne companies “need to spend a lot more” if they want to drop their celebratory stigma and build more usage occasions.

To gain some press, the Champagne industry is launching an ad campaign for the fourth quarter that highlights the various Champagne regions and pokes fun at “American Champagne.” It will include billboards (including one in Times Square that will be visible on New Year’s Eve broadcasts) and airline tray tables, as well as print ads. A spokeswoman for the Office of Champagne, the U.S. arm of the Champagne industry’s trade group, said the campaign was meant to further protect the Champagne region in France and prevent non-Champagne producers from using the name on its wine labels.

INDUSTRY COMBATS STUDY IN FAVOR OF HIGHER ALCOHOL TAXES

A study claiming higher taxes on alcohol can help save lives created quite a controversy last week. Researchers said the number of alcohol-related deaths – such as alcohol poisoning and alcoholic liver disease – dropped in Alaska each time the state raised its alcohol taxes. The study did not look at deaths caused by alcohol-related collisions or violence. Lead by Dr. Alexander Wagenaar, a professor at the University of Florida’s Department of Epidemiology, the study examined 28 years of data. When Alaska raised its alcohol tax in 1983, deaths caused by or related to alcohol dropped 29%. A 2002 tax increase was followed by an 11% reduction.

An article in CNN.com also cites a study in Finland that claims consumption levels increased 50% after the country significantly lowered taxes. Arrests for drunken and disorderly conduct also rose 11%.

George Hacker, director of Alcohol Policies Project for the Center for Science in the Public Interest, called for state governments to re-examine their alcohol excise taxes and consider raising them to combat consumption.

Here’s what the alcohol beverage industry trade groups had to say:

In response, American Beverage Licensees (ABL) executive director Harry Wiles said, “raising taxes on alcohol beverages would have a highly negative impact on the economy.”

“Any across the board tax increase would not target the problem drinker but would simply penalize those who enjoy wine and spirits and drink responsibly,” Wine and Spirits Wholesaler of America ceo Craig Wolf said.

“Repeated studies have shown that chronic alcohol abusers are unaffected by price.
Furthermore, according to the Federal Dietary Guidelines, moderate consumers of alcohol have the lowest death rate of anyone in the population – including non-drinkers,” said senior vp of Discus, Frank Coleman.

DIRECT TO CONSUMER WINE SHIPPING UPDATE

TENNESSEE. According to the Specialty Wine Retailers Association (SWRA), the Tennessee Senate Alcohol Beverage Sub-Committee is holding hearings on the issue of Direct Shipment of wine into Tennessee today (Monday, November 17). Earlier this year a bill was considered that would have allowed direct shipment of wine to Tennesseans by both retailers and wineries in and outside of Tennessee. The bill was set aside for further consideration which is taking place today.

OKLAHOMA. Earlier this month (November 4), Oklahoma voters passed State Question 743 (SQ 743) by approximately a four to one margin. As a result, in-state and out-of-state wineries producing less than 100,000 gallons a year are allowed to distribute their wines to retailers and restaurants with some restrictions. All wineries are required to own or lease the vehicles used to transport wine to retailers and restaurants in OK, which is clearly an obstacle for out-of-state wineries. The use of common or private carriers is prohibited.

State Questions 743 also states: “If any part of this measure is found to be unconstitutional, no winemaker could sell wine directly to retail package stores or restaurants in Oklahoma.” The SWRA’s director Tom Wark argues that wholesalers could use this clause by arguing that it is discriminatory, according to Ship Compliant.

DIAGEO: HIGH-END SCOTCH SEES SURGE IN U.S.

Scotch is making a comeback in North America, says Charles Allen, global brand director of malts and Scotch heritage at Diageo, particularly super-premium brands, according to an interview with the TaiPei Times.

“The Scotch whisky category in North America, as a result of all the trends I mentioned earlier, that market has been coming back,” said Charles. “I think we are going to see some switching between categories in North America, but our North American business is very robust.”

He said “the top end of whisky is doing very well because these luxury consumers are people who will always have disposable income.”

Charles claims consumers that purchase mid-priced whiskey, such as Johnnie Walker Black, are the ones that “feeling the pinch in the current economic downturn. They are the ones who are most likely to trade across into a different category.” But he pointed out that if the company has declines in Scotch it “will see increases in vodka or Baileys.”

North America continues to be Diageo’s most valuable market and is where the drinks company is investing the most heavily.

A TALK WITH JOSEPH GALLO: TEQUILA AND CHINA

In an interesting interview with The Seattle Times, Joseph Gallo of E&J Gallo gives a snapshot into the company, its history and secrets of success. Most interestingly, Joseph said the company will continue to focus on wine but is considering expanding into tequila after taking on a gin brand last year.

Here are some quick facts: Annual sales (over $2 billion); Annual volume (76 million cases); Second to Constellation Brands in global volume; and about 5,000 employees worldwide.

Joseph said much of the company’s success comes from staying “relevant” and having “an ability to spot opportunities.”

Besides the tequila, the company sees “terrific potential” in China. “We would ship our cases over there and have people distribute it. That’s our current plan,” Joseph told the paper.

LARGE AUSSIE WINERIES PUSH FOR CHANGE

Leading Australian winemakers are reportedly pushing to reduce the number of producers by 60% and overall winegrape production by 20%. The industry is reportedly concerned that the average Australian harvest is now about 1.9 tons but demand falls around 1.5 million tons. Recall that the industry has faced gluts for years now, which has increased bulk wine exports and pushed wine prices way down. Under the plan, smaller vineyards and wineries would be replaced with bigger operations, mainly in the warm, inland regions of the country where high volume, inexpensive wine is produced. This category is falling fast in the UK and particularly the US which has inspired the Aussies to reevaluate their marketing strategy. The plan is not expected to go into effect soon, since the 2009 grape crop is projected at 1.93 million tons, according to Lawrie Stanford, manager, information and analysis with the Australian Wine and Brandy Corporation.

WSD BRIEFS:

ADMIRAL IMPORTS GAINS NEW LIQUEUR. Admiral Imports has been appointed Berentzen Gruppe AG’s U.S. distributor, effective January 1, 2009. Berentzen Gruppe AG is a Germany-based producer best known for its Berentzen Apfel liqueur brand which covers a range of fruits, including apples, pears, wild and black cherries, plums, blackcurrants and red fruits.

JACOB’S CREEK HAS JOINED WITH 20TH CENTURY FOX’S “Australia” movie, opening in theaters November 26. Pernod Ricard’s wine brand “will achieve global reach with the film’s international release across participating markets including Australia, North America, Europe and Asia.”

BEAM GLOBAL LAUNCHES UPDATED CRUZAN BOTTLE. Beam Global issued a statement today says it’s re-launched Cruzan Rum “with a fresh logo and sleek bottle shape.” The portfolio includes a light rum, several dark rums, a single barrel and ten flavored rums. The brand sold approximately 750,000 cases of premium rum worldwide in 2007 and grew by 23% last year in the United States, Cruzan’s largest market.

VIÑA CONO SUR, a subsidiary of Chilean wine group Concha y Toro, has bought Chile’s leading producer of Fairtrade certified wine, Viña Los Robles.

CORRECTION. In Friday’s issue there was a typo in headline story titled “Wine Labels (Almost) Everything to Shoppers.” A sentence in the second paragraph should have read: “Just for the sake of comparison, wine spent about $43m on advertising in the first half of 2007, while spirits spent $233m and beer spent $516m.”

Until tomorrow, Megan

“The forceps of our minds are clumsy forceps, and crush the truth a little in taking hold of it.”
H. G. Wells

——— Sell Day Calendar ———-
Today’s Sell Day: 11
Sell days this month: 19
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YTD sell days Over/Under: +1

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