VOLUME VI, ISSUE 13

JUNE 24, 2009

CURRENCY TALK since June 10, 2009

℮ = $1.3883us ↓0.65%      £ = $1.6431us ↑2.80%       Cn = $0.8747us ↓2.16%

INDUSTRY - A study was released recently by Morgan Stanley analysts Michael Steib and Eveline Varin after asking 2500 U. S. households about their beer consumption habits, spending trends and brand preferences. Not much of a surprise on the key results - personal income is still under pressure and still has a predominant effect on drinking habits. Drinkers continue to cut back from off-premise drinking. More than half surveyed stated they have less money to spend this year than last, so they are going out less and reducing the number of drinks they have. Other reasons surfaced for people cutting back on beer consumption such as dietary changes (28%) and health concerns (18%). So overall, beer was not perceived as an expensive luxury. However, the survey did show price as a factor when deciding what brands to drink. For example, imported beers were seen as higher quality for less of a value as compared to domestic beers. This could explain the recent dramatic drop-off of imported beers. All told, Morgan Stanley says the U.S. beer market remains one of the most stable beer markets globally, but is not immune to the problematic economy. They are predicting that total beer sales (measured in liquid) will decline roughly 2% in 2009. The U.S. is representative of 42 percent of earnings for AB-InBev (before interest and taxes) and 14 percent for London-based SABMiller.

BUFFALO, NY - After New York-based private-equity firm, KPS, bought Labatt USA last winter, many feared that the U.S. headquarters located in downtown Buffalo would be relocated. KPS vowed that would not happen and it seems they are keeping their word. Labatt USA has 20 people working out of the downtown Buffalo office. Richard Lozyniak, CEO of North American Breweries, Inc (the KPS affiliate that owns Labatt USA and High Falls Brewing Co., LLC), stated Labatt USA is expected to hire 16 more people in the downtown Buffalo office to focus on sales, marketing and administrative support. That means that half of the company’s total workforce will be based in Buffalo. Lozyniak said. “Buffalo is absolutely critical to Labatt’s future in the United States.”

The Buffalo Niagara region accounts for 3.3 million cases of a total estimated 21 million cases sold of Labatt in the U.S. each year. It was also listed as the ninth most popular beer in the country by Beer Marketers Insights.

DELAWARE - House Bill 193, which would allow Delaware supermarkets to sell beer and wine, has been tabled by a House committee. One objection was the concern of how to keep alcohol away from minors. Another objection was the cost to the state for enforcement. The Division of Alcohol and Tobacco Enforcement stated it would have to hire 12 new agents at a cost of $700,000 in order to enforce the bill. Lastly, other legislators opposed the bill because they claimed it would take customers away from the package stores which could potentially drive the small business owners out of business.

If the bill had passed and signed into law, it would have made Delaware the 46th state to allow the sale of beer and wine in stores other than package stores. In addition, with the hefty licensing fees, $100,000 for the first year and a $5,000 biennial renewal fee, the bill could have brought in nearly $10 million the first year in additional revenue.

EUROPE - It has been well reported that AB-InBev has been selling off assets in order to reduce the debt taken on after the $52 billion take over of Anheuser-Busch last year. What’s next on the for sale list? AB-InBev will be putting its Central and Eastern European operations up for auction. This will include 11 breweries that cover 7 countries, Bulgaria, Romania, Hungary, Croatia, the Czech Republic, Serbia and Montenegro. Total combined production is 329 million gallons of beer per year and together they employ 6,000 people. The sale is predicted to get AB-InBev about $2 billion. It is thought that some interested parties could be rivals SAB Miller and Heineken. However, Heineken has already stated its focus in 2009 will be on cutting debt and costs due to its part-acquisition of Scottish & Newcastle last year and though SABMiller has more funds, its strong position in some markets, such as Romania, could cause competition issues. Of course, there are still private-equity firms like Kohlberg Kravis Roberts & Co., the private equity group that recently bought A-B InBev's Oriental Brewery for US$1.8bn, Warburg Pincus, Cinven, TPG and CVC Capital Partners who have reportedly been taking some interest as well.

AB-InBev raised nearly $700 million by recently selling a 20 per cent stake in China’s Tsingtao brewery to Japan’s Asahi, and raised another $100 million from the sale of the American brewing and distribution business of the Canadian beer brand Labatt. A spokesman for AB InBev declined to comment.

MILWAUKEE, WI - In efforts to tap into the ever increasing wheat beer segment, Anheuser-Busch will be introducing a wheat version of Bud Light this fall. Bud Light Golden Wheat will use unfiltered wheat, orange and coriander to give it the new twist. It is the second extension of A-B’s most popular brand, the first being Bud Light Lime. Look for the new Bud Light Golden Wheat to be on shelves in early October.

DELAWARE - Delaware state law makers introduced two bills in early June that could increase state revenues. One could raise taxes on alcoholic beverages while the other could change the licensing fees for businesses that sell alcoholic beverages. The first bill proposes a tax hike of two cents per 12 ounce beer, three cents per 5 ounce glass of wine and 15 cents per bottle of liquor. It is projected these tax hikes would bring in $5.3 million dollars in additional the first year. A second bill would change licensing fees and would also have those businesses with Sunday alcohol sales pay an additional fee in order to continue selling alcohol on Sundays. This bill is projected to generate an additional $600,000 in annual revenue. If approved the bills would go into effect September 1st.

CALIFORNIA - A new Zagat survey found that Bay Area consumers are falling in line with other major market trends in dealing with the recession. The survey was conducted with 2,200 consumers who reported they go out 1.8 times per week, consume 2.9 drinks, and spend $40.08. According to the survey, 48 percent of those polled said they go out less; 34 percent claim to be more price conscience; 30 percent are going to cheaper spots and 27 percent aren’t ordering as many drinks.

JAPAN & AUSTRALIA - Kirin Holdings recently received the official approval from Australia’s Foreign Investment Review Board to take over the Australia’s second largest brewer, Lion Nathan, Ltd. Kirin had already agreed in May to purchase the 53% of Lion Nathan, Ltd it did not already own; however, Australian regulations require government approval when local companies are being bought out or taken over by overseas companies. The cost is estimated to be $2.5 billion. Both brewers are expecting to close the deal by October 2009.

UNITED KINGDOM - Jon Collins, chief executive of market analyst group CGA Strategy, says the number of pubs closing has now reached more than 50 per week. This is well above the previous peak estimate of 46 per week. CGA tracks the pub closure rate on behalf of the British Beer & Pub Association. At 53 per week, the pub closure level would equate to about 2,750 per year - almost 5% of the UK pub market. The number of pubs shutting their doors has escalated to the current, alarmingly high level as the pub industry as encountered what has been dubbed the “perfect storm” - a potent cocktail of rising costs coupled with an extremely challenging trading period.

U.S. & MIDDLE EAST - MillerCoors is donating 8,000 cases of beer that will be shipped to U.S. troops in the Middle East in time for the Fourth of July. The donation is being made as part of program launched by Pizzas 4 Patriots, a nonprofit organization created to support service men and women that is in its second year of delivering food and beverages to the troops overseas.

IRELAND - Diageo Ireland, owners of Guinness and several other international brands, announced it will cut 107 jobs (5%) of its 2,000 Irish workforce as part of a cost-cutting exercise. The majority of cuts are expected to be made the St James's Gate Guinness brewery in Dublin, mostly in back-up services such as sales, marketing and business support, and it is thought that the production area will not be affected at this time. Management said that cross-border trade has affected sales while worldwide beer sales have also been falling due to the global downturn.  Diageo’s Irish chairman Brian Duffy said the decision to cut jobs was extremely hard, but was necessary to maintain a sustainable and competitive business in Ireland.

On the other side, is Guinness staff union general secretary, Sean Mackell, is condemning the proposed job losses. He calls them "unnecessary" since the group made profits of €200 million last year and €1 billion in the past four years. When the job cuts come before the Labor Relations Commission, Mr. Mackell said he would be fighting to get the best possible redundancy deal for his members.

INDUSTRY - Diageo signed a deal with French-based Marnier-Lapostolle to distribute the group's Grand Marnier liqueur across Europe. Diageo will distribute the brand in 61 markets across Western and Eastern Europe. Diageo will start distribution in 26 markets, including Germany and Spain, on July 1st. Diageo will start distribution in France and an additional four markets in 2009. Pan-European distribution is expected to start when existing contracts start to expire over the next three years. Financial details were not disclosed.

VOLUME VI, ISSUE 12

JUNE 10, 2009

CURRENCY TALK since May 27, 2009

℮ = $1.3973us ↑0.07%     £ = $1.5984us ↑0.59%     Cn = $0.8940us ↑0.59%

CHINA - On June 5th, Anheuser-Busch InBev completed the deal to sell its remaining minority share in China’s brewery Tsingtao. The final share sale to Chen Fashu, a Chinese national and private investor, was announced last month. Fashu paid $235 million for 91.6 million shares. Remember, too, that AB-InBev earlier in May had completed the sale of a 19.9% stake in Tsingtao to Asahi Brewers Ltd for $667 million. This last stake in Tsingtao sold to Fashu equated to about 7%. It is well known that AB-InBev is selling off some of its assets in order to pay off debit it incurred for its $52billion acquisition of St. Louis based Anheuser-Busch late last year.

INDUSTRY - Trade data suggests off-trade boomed during April - Trade data suggests that the volume of beer sold through the off-trade rose by 19.5% in April, compared with a rise of 2.8% in the on-trade.  The off-trade took a 44% share of all beer sold and, with New Year’s Eve (and increasingly many Friday’s) already lost to the off-trade, this could be taken as a sign that both Easter and the first warm weather of the year may be going the same way.

INDUSTRY -- New Vine Logistics, known for assisting wineries with shipping direct to consumers, suspended operations on May 29th and informed winery clients via email that it would not be processing any new orders. This came as a shock to many investors and customers. There was intent for Amazon.com to enter into the wine business and to partner with New Vine once the new website was launched. This was originally thought to happen in October 2008 but then was changed to later this summer.  New Vine spent millions to upgrade their technology and hire employees over the past 18 months in order to meet Amazon’s needs but there was never any formal launch date set.  It was implied that Amazon felt the deal was never solid enough for them to move forward. With the closing of New Vine, it’s now looking like Amazon will not be entering the wine business at all or at least no time in the near future. New Vine tried to off set al the costs by laying-off a big chunk of its employees and cutting salaries over the past couple of months. This effort proved to be futile. New Vine has around 200 wine shipping customers and of those the small wineries will take the biggest hit since they rely more on direct to consumer shipments.

On the other hand, some people don’t feel this is the end of New Vine. Jason Eckenroth, chief of Ship Compliant, spoke to Wines & Vines and was quoted stating "I think this took everybody by surprise." But he believes they are "not out of business. They are looking for more capital.  It's not a dead horse."

UNITED KINGDOM - Molson Coors (UK) and Cobra Beer have joined together to form a new joint venture, Cobra Beer Partnership Ltd. The new company will own, produce and market the Cobra Beer brand. As part of the agreement, Cobra Beer Partnership Ltd will own the rights to Cobra Beer, but Molson Coors (UK), which holds 50.1% share of the new joint venture, will manage the company. Cobra beer was originally launched in 1989 and marketed as an “exotic, less gassy beer”. It is currently one of the UK’s fastest growing brands, at 200,000 barrels, and can be found in over 6,000 restaurants. Lord Karan Bilimoria, Cobra founder, will chair the new venture while the board will be primarily made up of Molson Coors executives. Adrian Davey, formerly MD Molson Coors Off-trade, is appointed as Managing Director of Cobra Beer Partnership Ltd.

MAINE - Bill HB696 would allow Maine residents to order wine directly from in-state or out-of-state wineries - up to 12 cases per year and it would allow Maine wineries to take advantage of direct out-of-state shipments. The bill passed easily through The House of Representatives on May 28th by a 107 - 39 vote. Only wineries licensed to do business with Maine residents would be allowed to ship direct to consumers, and the packages will have to be conspicuously labeled and must only be delivered to someone with a valid id showing they are over the age of 21. HB696 is now waiting for Governor Baldacci’s signature before becoming a law.

 US & SOUTH KOREA - According to reports, Kohlberg Kravis Roberts & Co (KKR) may be searching for investors to sell a minority stake in Oriental Brewery. This comes just weeks after finalizing a $1.8 billion acquisition of the South Korean company from Anheuser-Busch InBev. The Financial Times quoted sources as saying that KKR fund investors and other private equity firms had been offered the opportunity to co-invest in the deal, in order to take on part of the financial burden. These sources also added that any potential sale would depend on a suitable price being agreed upon by KKR and any other party. As South Korea’s second largest brewery, Oriental Brewery has one of the country’s two beer licenses and a 40 per cent share of the market.

INDUSTRY - Reuters reported earlier this month that MillerCoors, U.S. second largest brewer and brewers of Miller  Lite and Coors Light, expects beer sales growth to decline less rapidly during this economic downturn than wine and spirits. They are projecting the U.S. annual beer market growth to decline only 0.3% (0.6% from 0.9%) in 2009-2012 compared to 2004-2008 while they expect spirits growth to decline 1.6% (1.1% from 2.7%) over the same period.

Tom Long, President and Chief Commercial Officer of MillerCoors, stated their premium light beers Miller Lite, Coors Light and Miller Genuine Draft 64 have increase market share by 1% point over the last nine months, and its Blue Moon beer is now the leading craft beer in the U.S. market. In addition, the group's two economy brands Miller High Life and Keystone Light were both gaining share as the trend of consumers trading down to cheaper brands continues. Early in May, MillerCoors reported their first-quarter net profit was $68.5 million with a net sales increase of 3.8%.

NEW YORK - Anheuser-Busch InBev recently signed a 10 year lease for over 31,000 square feet, the entire 2nd floor, at 250 Park Avenue. The current rental rates in that particular building run $90 per square foot, equating to roughly $2.84 million per year. AB-InBev is stating that this space will become the company’s day-to-day management office. But they clarified again… the space is not the company’s global headquarters (located in Belgium), nor is it a North American regional headquarters (located in St. Louis).

Anheuser-Busch InBev has said in the past that it wanted a New York office because more than 40 percent of the combined company’s revenues come from the U.S.

DELAWARE - Rep. John J. Viola, D-Newark, is sponsoring a bill that will allow Delaware grocery stores to sell beer and wine in grocery stores. Currently Delaware is one of only five states that do not permit beer and wine to be sold in grocery or convenience stores. The bill specifically targets beer and wine sales only in stores with 6000 square feet or more whose primary business is food sales. Another caveat is that of the food sales, 90 percent would have to be food that is not immediately consumable - i.e. frozen food and canned goods. The bill has the potential to generate over $10million the first year alone via new alcohol licenses required. This license would have a one-time fee of $100,000 per store with a biennial renewal fee of $5,000. Viola has already been in contact with major grocery store chains and was pleased to find out that there was no opposition to paying the fee since it gives consumers additional choices while shopping in their stores.

 GERMANY - After finding traces amounts of cocaine in Red Bull Simply Cola German authorities instructed retailers in nearly eleven states to pull the product from their shelves. A study was released on May 19th by the German state North-Rhine Westfalia after testing the drink and discovering minor amounts of cocaine. The cocaine levels found came from de-cocainized coca leaf extract which is commonly used as a natural flavoring in foods worldwide. The trace levels found are not enough to prove harmful or addictive but still qualify the drink to be considered a narcotic under German law. To calm any impending consumer fears, Red Bull had the product analyzed by an independent accredited institute which confirmed that alkaloids (cocaine) from the coca leaf are not detectable in the product. The German Federal Institute for Risk Assessment followed up by publicly confirming the ingredients in Red Bull Simply Cola present no risk to human health and absolutely no risk of potential narcotic effects.

ALABAMA -- Less than a week after Gov. Bob Riley signed the a new law raising the alcohol limit on beer to 13.9% specialty, craft and gourmet beers are already popping up on store shelves. Harry Kampakis, president of Birmingham Beverage, stated he already had agreements with small breweries lined up well before Riley signed the law May 22. Once it was signed, he went straight to the state liquor agency for approval of the beers. Birmingham Beverage began distributing more than 20 new domestic and foreign beers to retailers in the Birmingham area almost immediately.

 NEW ZEALAND - Constellation’s Nobilo brand seems to have landed the top spot when it comes to being the U.S.’s biggest selling Sauvignon Blanc. Constellation acquired the brand in 2003 and since then has developing its Marlborough vineyards and its associated infrastructure. Nobilo has reportedly surpassed Kendall-Jackson and Clos du Bois Sauvignon Blancs. Constellation NZ CEO Joe Stanton stated that Constellation is expecting to ship nearly one million cases of New Zealand wine, 90% being Marlborough sauvignon blanc, into the U.S. in 2009. This one million cases accounts for about 40% of New Zealand’s total wine exports to the U.S.

INDUSTRY - Based on Nielsen data sales in the United States of imported rosé wines increased by 42% for the 52-week period ending April 4. During the same period, sales for all table wines increased only 5%. This new data seems to support Vinexpo projections that worldwide consumption of rosé wines will continue to rise. They projected a 10% increase from 565 million bottles in 2008 to 620 million bottles in 2012. France currently produces 28% of all rosé wines by volume and still sets the standards for rosé wines

 AUSTRALIA - More speculation on a Foster’s purchase has Credit Suisse analysts feeling that Pacific Beverages, the alcohol joint venture between Coca-Cola Amatil and SABMiller, would be the most likely acquirer of Foster's. If Pacific Beverages did make the buy, the combined effort between the two companies could be considered a good thing because it could help ease some of the funding pressures. It is also thought that help from Amatil’s largest shareholder, Coca-Cola, could provide a little boost. Coca-Cola Amatil has said that it makes sense to combine soft drinks and beer, but recently said that Foster’s is not currently attractive because of its relatively high share price.

Credit Suisse previously turned its attention to Foster's due to a dispute in the United States where there was the possibility of Grupo Modelo, the owner of the Corona brand, could fall under the control of AB-InBev. If that were to happen, it could affect Foster's right to local distribution, but it also showed implications that AB-InBev may not be willing to allow rival SABMiller to maintain control of Corona in Australia. The broker estimates Foster's rights to distribute Corona and Stella Artois locally is worth 50 cents per share to its $6.25 valuation of Foster's, compared with 80 cents per share of potential cost savings from an Amatil/SABMiller merger.

ALABAMA - It's official. The sale of draught beer has been approved in Muscle Shoals, Sheffield and Tuscumbia counties. As a result, restaurants are gearing up to be able sever their customers which means that distributors will have to gear up to meet the increased demand. This effort, though just approved recently, was initiated back in July of 2007 after the city of Florence got the approval for draught beer sales.

Kegs at the Budweiser Distribution Center in Muscle Shoals are stacked and ready to go. General Sales Manager, Greg Matthews, is expecting the recent approval in Muscle Shoals, Sheffield, and Tuscumbia will open up whole new distribution areas for the company and begin increasing sales immediately. Now that draft beer sales are allowed, local businesses aren't wasting any time. Matthews says they've already received pre-orders that are substantially higher than expected. Sheffield businesses can immediately start selling keg beer; however, in Muscle Shoals and Tuscumbia, the ordinance will have to be posted or advertised before the law goes into effect.

NEW YORK - It has been well reported across the country and the world that consumers are trading down in their alcoholic choices. This trend is now being recognized in the Big Apple as well.  Owners of retail outlets and wholesale distributorships say drinkers are more cost-conscience these days and are choosing less expensive value brands instead of premium brands. The cost cutting trend, however, does not necessarily equate to lower sales volumes. Most retailers and wholesalers say sales are running from steady to better than last year.

VOLUME VI, ISSUE 11

MAY 27, 2009

CURRENCY TALK since May 13, 2009

℮ = $1.3963us ↑2.55%              £ = $1.5890us ↑4.76%             Cn = $0.8887us ↑2.55%

ALABAMA - Gov. Bill Riley signed legislature allowing beer up to 13.9% alcohol by volume to be sold in the state of Alabama. The new law is effective immediately, so new specialty and imported beers should available for sale by the summer. Brewers will still have to go through the normal processes to assign distributors and register the brands with the state ABC.

JAPAN & PHILIPPINES - As of May 22^nd, Japanese brewer, Kirin Holdings, completed its 48% stake purchase of Philippines-based San Miguel Brewery (43% purchased from San Miguel Corp and the additional 5% from publicly owned shares). The deal also included the rights for Kirin Holdings to negotiate exclusively with San Miguel Corp. over sale of the group’s beer assets beyond the Philippines.

INDUSTRY - Morgan Stanley analyst, Michael Steib, has rated AB-InBev and SABMiller, the world’s two largest brewers, as the industry’s best positioned due to the fact that the majority of their sales is done in the United States versus Carlsberg or Heineken whose sales are mainly in the European markets. Before interest and taxes, Heineken’s earnings from the U.S. are only 7%, while AB-InBev’s and SABMiller’s is 40% and 15% respectively. Over all, he states, drinking hasn’t suffered as much in the U.S. as it has in Europe where beer volumes are falling faster. It is expected that U.S. beer volumes will only decline 2% in 2009.

MEXICO - Beer exports, combined for Grupo Modelo and FEMSA, for Q1 2009 have decreased 5%, to 3.866 million hls, the lowest level since 2003. The decline can be attributed to not only the suffering economy, but from the strong competition from the U.S. market as consumers are looking for more mainstream brews versus premium selections

INDIANA - On May 18^th, the U.S. Supreme Court decided to NOT hear a case challenging the state’s face-to-face purchase requirement for alcohol. The face-to-face law gives the right to those selling alcohol to require identification in order to ensure those purchasing alcohol are at least 21 years old. NBWA President, Craig Purser, stated this decision was a “victory for state-based alcohol regulation.”

INDUSTRY - The Nielson Company recently presented results from a new U.S. consumer survey that show more than half of consumers (56%) are opting to eat dinner at home versus dining out and more than one third (37%) are going out to bars and night clubs less often. Though alcohol is many times viewed as recession-proof, new consumer trends of stay at home entertaining versus going out, and leaning more toward value brands versus premium, will surely have some impact.

ILLINOIS - Legislative leaders are considering increasing the tax on beer by 2.6 cents per six-pack to raise $1 billion for a proposed multibillion-dollar statewide construction program. This will be the first increase in ten years. Also, under consideration will be increased taxes on liquor and wine, 80 cents and 13 cents per bottle respectively.

BELGIUM -    Belgium’s competition authority ended the informal probe into AB-InBev’s supply chain practices. The probe was initiated when suppliers complained that the brewer was abusing it’s dominance in the market to force supplier to accept unfair terms. AB-InBev has already confirmed that they will change their payment deadline to suppliers to 120 days from receipt of invoice.

INDUSTRY - SABMiller PLC has announced it plans to reduce investment expenditures and increase cost cutting after posting a 7% decline in annual profits. According to CEO Graham Mackay, capital spending will be reduced 30% to $1.5 billion and some Columbian distribution depots will be closed saving $37 million annually by the year 2011. Mackay states that the company is taking appropriate short term measures in certain countries to cut costs in order to offset less consumer demand.

UNITED STATES - How will President Obama’s $1.2 trillion healthcare plan be funded? Some recommendations from a Senate Finance Committee included reducing tax exemptions on employer-provided health care benefits based on employee incomes or value of their plans - or both. Another suggestion was to eliminate or put a limit on the amount employees can contribute to tax-free flex spending accounts. Inevitably, there were tax suggestions tied to healthier behavior. For example, a proposal to increase tax on alcohol, eliminate the tax variances between wine, liquor and beer. It was also proposed to begin levying tax on sugary drinks such as sodas, energy and sports drinks, fruit and vegetable drinks, as well as iced teas and iced coffees. Sounds like the only item on the non-taxable list are drinks sweetened with no calorie sweeteners.

℮= $1.3151us ↓0.61%

£ = $1.4615us ↓0.71%

Cn = $0.8233us ↑0.78%

ITALY / UNITED STATES -- Birra Dolomiti, a beer popular in the north of Italy, is now being imported by Distinguished Brands International of Littleton, Colorado. The brand is brewed in the village of Pedavena, nestled at the base of the Dolomite Mountains, sometimes called the Italian Alps. The Dolomite region was once occupied by Austria, and retains a strong Germanic influence, which extends to the region’s brewing traditions. “Birra Dolomiti is a 100 percent Italian Pilsner boasting a snow-white, rocky head, bold golden hue, noble hop character, and sticky lace finish. Its herbal, floral malt compliments its mildly hoppy nose,” said Ty McCaffrey, marketing manager for Distinguished Brands International. “It is robust and thirst-quenching for the most advent adventurer and beer enthusiast alike. “It has a bold, refreshing flavor that captures the taste of alpine adventure. It’s the rugged purity of the Alps,” Mr. McCaffrey added. “Maybe that’s why it doesn’t come in a 12 oz, but rather a big 16.9 oz bottle only. Made exclusively with locally grown hops and barley and the pure mountain spring waters of the Dolomites, this is European beer at its finest.” Birra Dolomiti is available in 16.9 oz singles or colorful 12-packs of 16.9 oz big bottles. The retail price per 16.9 oz bottle ranges from $2.39 to $2.99. Look for the colorful case touting the Italian Dolomites. Birra Dolomiti is in immediate USA distribution.

COLORADO - The Boulder based Brewers Association announced on the annual Top 50 craft brewing companies. Rankings for the top 50 list are based on 2008 sales volume. The top 5 are:

Boston Beer Co. - Boston, MA

Sierra Nevada Brewing Co. - Chico, CA

New Belgium Brewing Co. - Fort Collins, CO

Spoetzl Brewery - Shiner, TX

Pyramid Breweries, Inc. - Seattle, WA

You can find the entire list at http://www.beertown.org/ba/media_2009/Top_50_Release.html

BELGIUM / UNITED STATES - Belgian antitrust authorities have been asked to start an informal investigation to find out if Anheuser Busch-InBev is making use of its dominance in the market to make unfair deals and contract changes with its suppliers. The Wall Street Journal also reported that AB-InBev is supposedly pressuring its suppliers into new purchasing contracts which could state a new policy of the company taking up to 120 days to pay suppliers after goods have been received. The brewer reportedly also cut back on its malt purchases which prompted some European malt suppliers to complain that AB-InBev is breaking its contracts with them. Its no secret that AB-InBev has planned on cutting $2.25 billion in costs in order to help pay for the $52 billion A-B purchase last year, and the brewer says that  savings from suppliers will account for some of those cost savings. In the U.S., a federal judge too has been asked to hold a hearing to review the merger settlement with U.S. antitrust regulators.

IRELAND / UNITED STATES -- The Official Beer of St. Patrick's Day has long been Guinness. But 2009 was different - based on the beverage trades and consumer media, the new St. Patrick Irish darling was O'Hara's Irish Stout.  The chatter was much the same on beer blogs, "WOW! That's a good stout! Smokey chocolate dominates and the sweetness rounds it out nicely. We know it's not, but it's almost a little oaky with some tannins."  O'Hara's Irish Stout enjoyed its best St. Patrick's Day sales, up 43% over 2008.  And O'Hara's St. Pat's success has it further trending upward as it is now regularly the feature beer of the week at finer establishments up and down America's East Coast.

O’Hara’s U.S. products are imported and represented by Distinguished Brands International based in Littleton, CO. Visit their website at www.distinguished-brands.com.

PENNSYLVANIA -- Philly Beer Week and Beer Advocate.com was a buzz as Fuller's shipped in its cask ales for Philadelphia's just concluded "Philly Beer Week."   While there were many outstanding reviews by the many beer aficionados in attendance, none were more glowing that those for Fuller's, especially Fuller's 1845 Bottle-Conditioned Ale.

Fuller’s U.S. products are imported and represented by Distinguished Brands International based in Littleton, CO. Visit their website at www.distinguished-brands.com.

INDUSTRY - Nielsen data shows domestic tables wines are continuing to out perform imported table wines. In the four weeks leading to March 7, dollar sales for domestic table wines increased 6.7% and volumes increased 4.6% while imported table wines grew 3% in dollars sales and 0.5% in volumes. Of the “big three” importers, France, Australia and Italy, Italian table wines performed the best with dollars sales increasing 1.8%, but volumes declined -1.5%.  French and Australian table wines declined in both dollar sales and volumes.

ILLINOIS -- The Anheuser-Busch InBev distribution center in Mount Vernon is set to close by the end of the year. The brewer announced it decided to contract third-party vendors to manage direct premium and point-of-sale fulfillment business needs. It is believed that there are around 80 people currently employed at the facility. Nearly 30 workers were already let go during layoffs this past winter.

CALIFONIA - The latest proposal for a dime-a-drink tax in California, AB 1019, failed to pass through the Assembly earlier this month. The bill proposed increases of $1.07 per gallon of beer, $2.56 per gallon of wine for those up to 14% alcohol content, $4.27 per gallon of wine, sparkling hard cider with greater than 14% alcohol content and a whopping $8.53 per gallon of distilled spirits. Unfortunately, the committee only voted to take another vote on the bill on April 28th…More to follow.

INDUSTRY - It was reported by The Sunday Telegraph that Brown-Forman hired investment banker Lazard to explore different opportunities with Bacardi. Options could range from selling individual brands to a complete merger. The two companies have already worked together in the past in a series of distributor partnerships. It is thought by other industry people that now would be a good time for the two companies to start seriously considering a deal.

UNITED STATES - The Wall Street Journal reported in early April that U.S. beer imports fall 19% the first two months of 2009, the largest decline in recent years. The Beer Institute located in Washington D.C. reported that imports from Mexico and the Netherlands, the two largest beer importers to the U.S., dropped 13.5% and 26% respectively.  More trouble on the horizon for imports comes in the way of competition from domestic “craft” beers like Sierra Nevada Pale Ale. Last year imported beer shipments fell only 3.4% - the first drop since the early 1990’s.

UNITED STATES - Wine giant Constellation Brands has spent much of its time over recent years buying up wine businesses. After news that Constellation shares dropped after the company released proposals to cut debt and costs which included a plan to cut 5% of jobs globally, it looks like the shopping spree is now over. In 2008, the company faced a US$301 million net loss. Constellation must now make the decisions on which brands it will keep and which may need to go.

WORLD INDUSTRY -- Mintel has suggested that some six out of ten consumers are cutting back on visits to the pub in light of the recession. The differential in pricing between the on-trade and the off-trade could also have a role to play and a Mintel spokesman said that ‘fear along can cause major spending adjustments’.  The polling organization believes that ‘it is evident that consumers are changing their spending behaviour and adapting’. Trade body the ALMR focuses more positively on the 41% of consumers who are not considering cutting back and says that ‘the pub remains the last bastion for many consumers’.  

NEW YORK - Rumour has it AB-InBev is looking for office space in the Big Apple. Supposedly the company is in negotiations for a 30,000 square foot space on Park Avenue. AB-InBev has not confirmed the exact location for their new space, but did state it should be fully functional by the end of the year and is expected to have more than 100 employees working out of it. AB-InBev did emphatically state that New York will not be the company’s U.S. headquarters - that will remain in St. Louis.

POTTSVILLE, Pa. - Speculation abounded among distributors today over rumors that America's oldest brewery, D.G. Yuengling & Sons, may soon be part of MillerCoors for the USA. At press Yuengling Brewery owner, Dick Yuengling Jr., could not be reached. Yuengling Brewery, with 20 years of positive growth, produces nearly 2 million barrels per year between their Pennsylvania and Florida brewing operations. The Brand is widely distributed, with its core distribution and volume in the Northeast and Mid-Atlantic states.

KANSAS - Legislation was signed by Kansas Gov. Kathleen Sebelius legalizing direct wine shipping to residents. Residents are now allowed to purchase up to 12 cases of wine per year direct from wineries and retailers. The new legislation will also allow wine producers to sell their products at farmer’s markets, as long as the market has proper approval from state alcohol control, and restaurants will now be allowed to store unfinished bottles of wine for customers.

INDIANA / WISCONSIN - Fat Tire beer is now available in Indiana and beginning May 4th it will be available in Wisconsin, mainly in the Milwaukee and Madison areas. Mothership Wit Beers and 1554 are other New Belgium brands that will be available in Wisconsin after May 4th. New Belgium Brewing, Co. was founded by husband-wife team Jeff Lebesch and Kim Jordan and is in the top five of the nation’s largest craft brewers. The brewery now produces six other craft beers besides Fat Tire and four seasonal beers.

INDUSTRY -- Another “secret deal”, a.k.a rumor, being reported by British media is that Diageo is in discussions to make a bid for LVMH’s 66% stake in Moët Hennessy. Supposedly plans have been in the works for weeks, but no official approach or bid has been made.

UNITED STATES / MEXICO - Brown-Forman announced the company plans to cut 250 employees - mainly from U.S. and Mexico operations, however, Europe and Asia Pacific regions will also see some positions eliminated. Company spokesman, Phil Lynch, said some employees in the Louisville operations may be affected as well and another 60 employees have opted to take early retirement. The company has a global workforce of 4,100 people.

NEW YORK - Based on a notice that was filed with the New York state Department of Labor, Malibu-Kahlua International Co., A Pernod Ricard subsidiary, plans to lay off 50 employees in White Plains during a two week period in July.  The report stated the reason for the layoffs is "economic".  Pernod Ricard had just recently announced that it would be combining Malibu-Kahlua with The Absolut Co. beginning in July.  The consolidated group will be headquartered in Stockholm. 

WISCONSIN -- MillerCoors has reformulated its Miller Chill brand by reducing calorie and carbohydrate content and introducing new packaging. The new Miller Chill has 100 calories per 12-ounce serving, 10 calories less than the original and only 4 grams of carbohydrates, 2.5 grams less than the original brew and about half that of Bud Light Lime, it’s main competitor. Miller Chill will also now be found in a new clear glass bottle versus the green glass bottle. The new Miller Chill should be available country-wide in early May.

INDUSTRY - Based on food, drug and liquor store scan data from Nielsen, the dollar sales for spirits increased 4.2% and case sales jumped 3.3% in the four weeks leading to March 7. Value priced spirits had the largest spike in dollar sales at 6% and volumes grew 4.6%. Not far behind were mid-priced spirits with an increase of 4.6% in sales and 2.8% in volume. In third place, were ultra-premium spirits growing at 3% in sales and volume.

WASHINGTON -- For the first time in over 50 years, U.S. consumer prices for goods and services are, on average, lower than they were one year ago.  The Labor Department stated the consumer price index decreased 0.1% in March compared to February. Additional March price data from the governments suggests that risk of sustained deflation is fairly remote due to the fact that most of the price drops are focused mainly in energy and energy-related products.

INDUSTRY - The TTB has under review a current proposal that would require all alcohol beverages to display serving facts to include carbohydrate, calorie and fat content as well as ingredients. The current proposal does not, however, require producers to display the amount of alcohol per serving or the definition of a standard drink. The standard drink definition is a 12 oz serving of beer at 5% alcohol, a 5 oz glass of wine at 12% alcohol, and 1.5 oz drink of distilled spirits (straight or mixed) at 40% alcohol or 80 proof.

INDUSTRY -- The M&C reports that the US Beer Institute suggests that beer imports into the US fell by 16.1% in February compared with a year earlier. A part of the reduction is thought to be due to de-stocking but underlying consumption would also look to be markedly lower. Mexico and the Netherlands, the two largest exporters into the US, saw volumes fall by 13.5% and 26.0% respectively.

CHINA - Y.R. Cheng, the head of AB-InBev in China has resigned after 15 years. Y.R. Cheng cited personal reasons for the resignation. 

INDUSTRY - According to a survey of 3500 U.S. wineries, tasting room, wine club, internet, and mail order direct wine sales increased 7% in 2008 to a record $3 billion. Those surveyed stated that although some larger established wineries reported declines in wine club membership and tasting room visits in 2008, there were many small and mid-sized wineries that reported solid gains in wine club, online and mail order sales. As the consumer spending trends continue to move to the off-prem, small and mid-sized wineries remain "cautiously optimistic" in 2009 as consumers increasingly shift to wine clubs and online sales.

TENNESSEE -- A proposal to allow Tennessee grocery stores to sell wine was withdrawn from a House subcommittee due to a lack of support from lawmakers and failure to reach a compromise with retailers and wholesalers. The final result? Grocery stores can't sell wine, and liquor stores can't sell beer.

Two other separate measures have passed the Tennessee Senate and have moved on to the next vote. The one that would allow internet sales from out-of-state wineries up to three cases per year is awaiting a House vote. The other that would allow consumers to transport wine from licensed out-of-state wineries into the state in their cars, which is currently illegal, has cleared the Local Government Subcommittee.

CALIFORNIA - Reports from The Press Democrat state that E&J Gallo is facing a $73,000 fine for illegal diversion of Russian River water into a vineyard reservoir near Healdsburg. The complaint came from the state water board. Gallo can opt to go ahead and pay the fine or they can fight it in court. However, if they choose to fight the complaint in court, they will risk an increased fine of $500,000 if they it doesn’t go their way.

WEST VIRGINIA -- The previously announced April release of Yuengling beer into West Virginia is now being postponed, likely until May. West Virginia state law requires a franchising agreement between the company and the distributor and labels on packaging must be submitted approved by the West Virginia Alcohol Beverage Control Administration prior to hitting stores. At the time of this release The ABCA had not yet received the proper documentation from Yuengling. Once the company completes its paperwork, West Virginians could expect to see Yuengling on the shelves within a month,” Gig Robinson said a spokesperson from the ABCA.

TEXAS / COLORADO - Dallas based Ben E. Keith distributors will be distributing beers from Ska Brewing Company in Texas. Ska Brewing Co. is an award winning Colorado based craft beer brewer. Their beers became available in Texas bars and restaurants in early April, as well as package stores. The brewery’s sales grew 26% last year, and it recently released its newest beer, The Modus Hoperandi India Pale Ale.  This same brew is also Ska’s second beer to be made available in cans. The brewery’s first canned beer was Ska Special ESB, was released to rave reviews in 2003.

OREGON - The Oregon Liquor Control Commission (OLCC) endorsed a resolution asking state legislature to reconsider raising tax on beer and wine. Lawmakers previously cut the OLCC’s budget while raising the surcharges on bottled spirits only by 50 cents. Their point is that the beer tax in Oregon, $2.60 per 31-gallon, is one of the lowest in the entire country and that it is unfair to expect the increased surcharge on spirits to carry the entire burden. There is a bill pending in the House that would increase the tax on beer to $49.61.

INDUSTRY - It is rumored that Kohlberg Kravis Roberts (KKR) has been in discussions with United Spirits regarding purchasing a minority stake in the company which would put KKR in direct competition with Diageo and Bacardi. Both Diageo and Bacardi have been “eyeing” a stake in USL for the last several months. It seems KKR is interested in buying the company’s treasury stocks which would give it a 14.8% stake in ownership. Diageo is vying for equal stake and management rights in USL while Bacardi is possibly looking to buy brands and may consider equity ownership.

WORLD INDUSTRY - Estimates for 2009 barley production released by Coceral at the end of last month are as follows:

Germany - total barley acreage expected to make 1,951 thousand ha versus 1,969 thousand ha in 2008. Production is forecast to decline to 11,921 thousand tons in 2009 from 12,031 thousand tons in 2008.

France - total barley acreage expected to make 1,823 thousand ha in 2009 a 1.44% increase over 2008. Production is forecast to decline 4.67% to 11,758 thousand tons in 2009 versus 12,309 thousand tons in 2008.

Spain - total barley acreage in 2009 will be down by -11.68% to roughly 3,100 thousand ha. Production is forecast to decline 25.12% to 9,000 thousand tons versus 11,261 thousand tons in 2008.

INDUSTRY - Pernod Ricard has a deal to sell its Wild Turkey brand for $575 million to Campari Group. It was also reported that the company could sell off other “important but not indispensable” brands and possibly other assets such as real estate. The overall plan is to raise about $1.3 billion in new capital by selling non-strategic assets in order to pay down debt after purchasing Vin & Sprit for $8 billion last year.

In addition, Pernod Ricard's founding family has agreed to buy out the 3.74% stake Kirin Holdings previously held in Pernod Ricard for an undisclosed sum.  The Ricard family is already Pernod Ricard's largest shareholder, and its stake will rise to 16.17% of the capital and 22.02% of the voting rights following the purchase of Kirin's stake.

• 63% stated consumers are sticking with brands they are familiar with, and shy away from unfamiliar specialty brands.
• 49% stated consumers are ordering fewer drinks, but are ordering stronger drinks.
• 67% stated consumers are ordering lower priced brands and not requesting specific named brands.
• 53% stated consumers are more often ordering a beer versus a mixed drink. 
• 78% stated that consumers are more often asking about the cost of drinks, and
• 85% stated that more consumers are requesting drinks that are on special
  

VOLUME VI, ISSUE 5

MARCH 4, 2009

CURRENCY TALK since February 18, 2009

℮= $1.2592us ↓0.5%    £ = $1.4165us ↓0.9%   Cn = $0.7806us ↓2.0%

BELGIUM & UNITED STATES -- On February 23rd, Anheuser-Busch InBev agreed to sell its InBev USA, LLC unit (Labatt USA) to KPS Capital Partners, a New York City based private equity group. Labatt USA has been the exclusive U.S. importer of Labatt branded beer brewed by Canadian Labatt Brewing Company Limited. If you recall, InBev put the New York-based business up for sale last autumn as part of a requirement to gain U.S. regulatory for its US$52bn takeover of Anheuser-Busch. The recent deal, which still needs approval from the U.S. Justice Department, also includes an exclusive license to brew, market and distribute Labatt beer for the US. For now, a transitional supply agreement will be put in place allowing Labatt Canadian operations to continue to brew and supply Labatt beer for the U.S. for another three years. KPS Capital Partners also recently acquired Rochester, NY High Falls Brewing Co., maker of Genesee and Dundee brands.

 TEXAS - Robert (R.L.) Glazer passed away Wednesday, February 25 in Dallas, Texas, at the age of 71. He was the Chairman of the Board of Glazer's Distributors. He joined the family business in 1958 and worked there for more than 50 years.  R.L. was a supporter of many social and charitable causes. He is survived by his wife, Phyllis, of 31 years, his mother, three sons, two daughter-in-laws, five grandchildren, his brother and sister and their spouses. 

COLORADO - Southern Wine & Spirits was named the exclusive Colorado distributor for Pernod Ricard effective April  1st. Southern Wine & Spirits is Pernod’s distributor/broker in over 20 US markets which include Illinois, New York, Arizona, Florida and California. This is the latest move in their strategic realignment of their U.S. distributor network.

CALIFORNIA - William Foley, of Foley Family Wines, is purchasing 70% controlling interest in Napa winery Kuleto Estate. The agreement will give Foley 70% interest in not only the brand, but in the winery, inventory and part of the vineyard which consists of approximately 150 acres. The winery produces nearly 7,500 cases per year and plans on increasing to 12,000 - 14,000 cases per year. The deal is expected to close in early to mid-March. Winemaker David Lattin will remain with the winery.  Foley also recently purchased Merus winery and Sebastiani Vineyards in Napa.

CALIFORNIA - California legislature approved Gov. Schwarzenegger’s state budget proposal which included increases in personal income tax, sales tax, and higher vehicle license fees. What it did not include was the wine tax proposal to add 5 cents per drink or 50 cents per bottle. It is felt that this possible short-term victory was achieved in part by efforts of a coalition called Sink the Drink Tax. They fought and lobbied to kill the plan and donated tens of thousands of dollars to each of the legislative leaders in the past two years. The Wine Institute also lobbied state leaders during negotiations.

JAPAN -- U.S. fund Steel Partners announced on February 17th, they withdrew its proposal to acquire 33.3 percent of Japanese brewer Sapporo Holdings. The company cited the firm's performance and refusal to negotiate as the reasons for the withdrawal. Steel Partners, which has an 18.6 percent stake in Sapporo, had offered to buy the firm's shares at 875 yen per share. Prior to the announcement, shares of Sapporo fell 9.7 percent to 381 yen.

 CZECHOSLOVAKIA - Heineken NV, largest Dutch brewer, may want to look into buying Prague-based brewer Staropramen from Anheuser-Busch InBev NV. Staropramen was founded in 1869 and is still located in Prague’s Smichov area, near the city’s medieval center. The brewery exports about a fifth of its output and has about 15 percent of the Czech beer market. A purchase like that would expand Heineken’s local market share and even more importantly, Heineken would gain a premium Czech brand for export purposes. Czechoslovakia has the largest annual per capita beer consumption of 159 liters. With little room to grow in local sales, exports would be a key play for increased sales. In late February, the publication The Czech daily Hospodarske Noviny reported Belgium based AB InBev was considering a Staropramen sale. AB InBev spokeswoman Gwendoline Ornigg stated the company is reviewing its brand portfolio for disposals, but no specific transactions were commented on. AB InBev has been reviewing asset sales for ways to reduce debt. It is already auctioning off its South Korean business for as much as $2.5 billion. Analysts suggest that Heineken would be the one to benefit the most from a deal because they would be the second largest in the Czech Republic. Heineken already has 6% of the current Czech market - much of this coming from acquiring brands after last year’s split of Scottish & Newcastle Plc.

DENMARK - On February 24th, Carlsberg announced it was extending current distribution for Modelo beer brand  Corona Extra to nine new countries: Russia, Kazakhstan, Uzbekistan, Ukraine, Belarus, Kirgizstan, Turkmenistan, Tajikistan and Moldova. Previously, Carlsberg had only distributed Corona in Italy, Switzerland, Malaysia and Singapore. Baltic Beverages Holding (BBH) among other Carlsberg subsidiaries will have exclusive importing, promotion and selling rights of Corona Extra in these countries. Carlsberg won the Russian deal from a local importer of super premium beers. Carlsberg’s Russian subsidiary, Baltika Breweries, leads the market with a share of approximately 38%.

 BOULDER, COLORADO - The Brewers Association, a group that tabulates industry growth data for U.S. breweries, announced February 23rd that estimated sales by craft brewers increased 5.8 percent by volume in 2008 compared to 2007. They reported that of total share of the beer category, craft brewers held 4% of production and 6.3% of retail sales. Nearly half of the more than 1 million new barrels of beer sold in 2008 came from craft brewers. The BA estimated, that of the $100 billion plus beer industry, craft brewer’s 2008 actual sales were $6.34 billion (an increase of nearly 10% over 2007 sales). These increases in share and barrels come at a time when, according to the Brewers Association, the cost of operating a small brewery increased over 39 percent in the period of November 2007 to November 2008.

INDUSTRY -- The Wine Institute recently released data that U.S. wine exports, 90% coming from California, surpassed $1 billion in revenue for the first time - this is a 6% increase over last year. Almost half of the U.S. wine exports, worth nearly $486 million in revenue, were sent to the European Union countries (EU). Likewise, 2008 volume shipments to the EU increased 9%.

IDAHO - Good news for Idaho residents, the Idaho House committee killed the proposal that would have increased sales tax on wine and beer on February 25th. If the proposal had passed it would have bumped the wine tax to $1.56 per gallon from $0.45 cents and the beer tax to $0.52 per gallon from $0.15.

INDUSTRY - According to a Reuters report, Pernod Ricard is launching new vodka, rum and gin extensions with hopes to spark some growth during this recession. In contradiction to previous statements that it would minimize further releases of Absolut flavor extensions, Pernod will supposedly be adding an Absolut Mango in the upcoming months. In addition to the new Absolut Mango extension, will be a Brazilian rum by Seagram's, and a higher end version of the brand Beefeater called Beefeater 24. Absolut Mango will be originally launched in the United States and will have a global roll-out next month. The Beefeater 24 brand, already available in Britain and Spain, is coming to U.S. shelves now. The Seagram's Rum will be introduced only in the U.S. in May.

PHILIPPINES - Kirin Holdings announced on February 20th its agreement to buy 43% of the Philippines-based brewer, San Miguel Brewery (SMB), for US$1.2billion. This would increase Kirin Holdings stake in the brewery to 49%. The transaction is a good strategic move for Kirin enabling them to expand beer operations outside of Japan and into other markets like Asia and Oceania. SMB reported an 11% increase in revenue and 25% increase in net income for 2008. The company has a 95% share of the Philippines beer market. SMB brands include San Miguel Light, Red Horse and Gold Eagle.