Beverage Bulletin December 2009

California Beverage Retailers Association

P.O. Box 56686

Sherman Oaks, CA 91413

(818) 788-8120

 

www.cbraliquor.org

December 1, 2009

 

Discounts on Liquor have become a way of life for some of the industry's top players. The question is can they give them up and return to profitability? Spirits gallonage for the year is up 1.4%, but total revenue is flat. Name brands cut their prices in order to maintain market share, while drinkers shifted to lower priced labels and private label. The average price for Smirnoff and Tanqueray are down 2.3%, Absolut down 1%, Grey Goose down 1.6%, Stolichnaya and crown Royal off 1.7%, and Sauza Tequila is off a whopping 8.7%.

 

Large bottles like 1.75 Liters probably took the biggest hit pricewise. In some areas Smirnoff 1.75's are selling for about $1 more than 750's. Some brands like Patron have refused to participate in the cuts, while Diageo and Pernod Ricard, the world's two largest spirits producers, have kept the price cuts, rebates, and coupons rolling so as not to lose share. Source: Wall Street Journal

 

As we end this year, consumers are still being careful about where they shop, what they buy, and what they pay. While they may be eating and drinking more at home, they are still interested in eating out, buying prepared meals, and other convenient options. What is trending is clipping coupons, buying from new sources including discounters, actively searching for deals, and switching to lower cost products. These changes are widespread and significant creating radical shifts in where the dollars are going. Restaurateurs and retailers have to constantly monitor their promotions to keep up.

 

Amazon.com is attempting to set up an online wine division, but has been running into delays. The difficulty? Amazon may have to get licenses in every state. Retail licenses in the states will give Amazon a presence in each state. That is a problem Amazon has dodged up until now. A presence in a state means Amazon will have to charge sales tax and remit it to the tax taxing agency. Selling online without sales tax has been the advantage that has driven Amazon's growth. In some cases consumers have been saving 10% or more on sales tax even when Amazon's price is the same as local retailers.

 

A really big On-Sale account. The Royal Caribbean's cruise ship, Oasis of the Seas, is the world's largest ocean liner. Five times the size of the Titanic, its food and beverage consumption is staggering. On each weekly cruise it uses 750 pallets loaded with 700 tons of eats and drinks. Each week its 8,600 passengers get 20 gallons of maraschino cherries in their drinks and guzzle 80,000 bottles of beer. The number one beer is Corona, followed by Budweiser, and Bud Lite. The food is prepared in 26 kitchens and served in 24 restaurants and a cafeteria. Three full time ships doctors treat hangovers!

 

ABC Warning

The Department of Alcoholic Beverage Control has issued a warning to retailers and wineries selling by mail order and the internet. Many of these sellers use third party agents to facilitate the sales, shipping, and to comply with rules in other states. Since these agents never touch the wine many had assumed they didn't need licenses. The ABC has issued a warning that “persons or businesses that operate web sites for the purpose of promoting, marketing, or selling alcoholic beverages” must have a license if they participate in the sale or share in the revenue that comes from it. Retailers and wineries could possibly face fines or loss of their licenses for working with unlicensed agents.

 

Quick Shots

Archaeologists have excavated London's Globe and Rose theatres and traced what was served to theatergoers. Commoners paid a penny to stand in the yard. They ate oysters, mussels, blackberry pies, dried raisins, figs, cherries, and nuts. The gentry classes paid more and sat on cushions. They ate crab and sturgeon. Everyone drank lots of Ale. In Elizabethan theatre the audience participated in the play by shouting jeers, insults, and questions at the actors. A few rounds of Ale just added to the rowdy activity.

 

Mark Anderson, the man accused of starting a fire in the Wines Central warehouse goes on trial this month. He is charged with arson, fraud, and other felonies. The fire took place on October 12, 2005 and blazed for seven hours. The warehouse was a former Navy torpedo storage facility with 3 foot thick concrete walls. The warehouse was good for storing wine, but turned out to be tough for the 80 firefighters sent to battle the fire. 6 million bottles of wine were destroyed. They were owned by 43 collectors and over 90 wineries. The wines included Saintsbury, ZD, Whitehall Lane, Viader and Justin, Long Meadow Ranch, Silver Oak, Heitz, Pride Mountain, Turley, and French imports.

 

Anderson ran a wine storage business, Sausalito Cellars. He is accused of selling many of his clients wine in out of state auctions and setting the fire to cover up the theft. Local and federal investigators found that the fire started in a locked storage area leased by Anderson. His attorney, Mark Reichel, admitted that he had embezzled and stolen his client's property, but denied that he was guilty of arson.

 

Femsa, the Mexican company that makes Dos Equis, Sol, Tecate, Indio, and Bohemia is considering selling its beer business in Mexico and concentrating on its convenience stores and Coca Cola bottling. Possible buyers include SAB Miller and Heineken.

 

Merchandising Opportunities

 

The coming month brings Christmas and New Year's. The last 2 weeks of the month is the biggest sales period of the year. This is the time to pick the wines, spirits, and beers that will bring the most sales and profits during this critical time.

 

 

Coming:

1/15-18 California Gift Show LA. CBRA members are able to attend. Please contact the association office for details.

 

Tasting Notes

In November we had the opportunity to taste wines at the Stars of Napa Valley event in Beverly Hills. There were many outstanding wines being offered from 39 Napa vintners. There is no doubt that most were priced at levels justified by tradition. But this is not a traditional time. Consumers are resisting those price levels. As always our focus was on finding great wines at great prices that our members can offer to delight their customers. We found that in a new label from Pine Ridge Vineyards. “Forefront” Cabernet Sauvignon 2007 was billed by Pine Ridge as being an “affordable” Napa wine. It is very affordable at a retail of about $20. It has traditional Napa cab character, just needs a little aging. Our judgment is no one will wait and this one will all have met the glass while it is young. To order contact Kristin Muhly at (707) 253-7500. www.pineridgevineyards.com

 

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.