Wednesday, 09 September 2015 14:14

9-9-2015 ABL Update from RBC

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Heineken buys 50 percent stake in U.S. craft beer maker Lagunitas

Source: Reuters
September 8th

Dutch brewing company Heineken NV (HEIN.AS) has bought a 50 percent stake in U.S.-based beer maker Lagunitas Brewing Co to expand into the craft beer industry.

Lagunitas, whose brands include the popular India pale ale Lagunitas IPA and pale wheat ale Little Sumpin' Sumpin', is one of the best-known and fastest-growing craft beer makers in the United States.

Financial terms of the deal were not disclosed.

Dealmaking in the craft brewing sector has increased as companies seek to capture the frothy valuations that have accompanied the industry's boom.

In 2014, barrel volumes in the $19.6 billion craft beer industry rose 18 percent, according to the Brewers Association. By comparison, Lagunitas' barrel volumes jumped 50 percent in the same year.

Earlier this year, California craft brewery Firestone Walker Brewing Company announced its merger with Flemish-family owned brewery Duvel Moortgat.

Private equity firm Fireman Capital Partners purchased a majority stake in Oskar Blues Brewery, maker of Dale's Pale Ale, in May.

Last year, Pabst Brewing company was acquired by Blue Ribbon Intermediate Holdings, a partnership between beer entrepreneur Eugene Kashper and private equity firm TSG Consumer Partners.

Heineken said Lagunitas will continue to be led by Tony Magee, its founder and executive chairman, and operate as an independent entity.


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Molson Coors Brewing- Gavin Hattersley Named CEO of MillerCoors

Source: Cowen and Company
Vivien Azer
September 8, 2015

Insight
Today it was announced that the Gavin Hattersley will serve as the permanent CEO of MillerCoors. Hattersley was previously serving a dual role as interim CEO of MillerCoors since July 1, following Tom Long's retirement, in addition to his role as CFO of Molson Coors.

Key Highlights
Seasoned Veteran to Run JV. Today the MillerCoors BOD named Gavin Hattersley the third CEO of MillerCoors, following Tom Long's retirement on June 30. Prior to the appointment, Hattersley was serving a dual role as interim CEO of MillerCoors since July 1, in addition to his role as CFO of Molson Coors.

We view this as a positive for the MillerCoors JV, as we have previously spent time with Gavin and believe in his ability to lead MillerCoors amid a changing industry and consumer landscape in U.S. beer. We feel his previous industry and executive experience in serving as the CFO of Molson Coors make him the ideal person to take over on a permanent basis. Indeed, Hattersley wasted no time as he assumed the interim position, having replaced key leadership in marketing and sales, as he aggressively moves to reinvigorate volume growth for the JV.

As a reminder, MillerCoors is structured as a joint venture between TAP (42%) and SABMiller (58%) and accounts for the entire U.S. business of both respective companies. Last year MillerCoors accounted for roughly 50% of TAP's EBIT.

Previous Role as CFO of MillerCoors Should Benefit the JV. We find it encouraging that prior to his role as CFO of TAP, Hattersley was EVP and CFO of MillerCoors, which should provide a more seamless transition and add to his ability in understanding the operations of MillerCoors.

TAP Begins New Search for CFO. While Hattersley's appointment to CEO of MillerCoors is effective immediately, he will remain CFO of Molson Coors until mid-November. The process of identifying Hattersley's successor as CFO is currently underway.


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Nomura BEVERAGES

Source: Nomura
September 9th

Heineken
Neutral, TP EUR 72, Magnificent Mundy

Have bought 50% of a craft brewer in the US - Languinitas - the no5 craft brewer - for a nosebleed multiple (looks like 25x EBITDA). Not big in the scale of Heia's business but they can push it into Canada and Mexico and makes the point that all the focus in North America remains around craft and import.

The company has announced the acquisition of 50% of Laguinitas Brewing Company #5 craft brewer in the US. Financial terms are not disclosed however Insights Express newsletter points to a valuation for 100% of the EV at USD 1bn which we would estimate is close to 25x EBITDA. Asuming an estimated interest coupon of c.3% we would view the deal as broadly earnings neutral. We estimate that it pushes Heineken F15E net debt to EBITDA from 2.3x to 2.4x.

The business will continue to be run separate to Heineken USA, therefore there is limited risk from integration of wholesalers. The existing Laguinitas management team will stay on and Heineken will not have operating control of the business. For Heineken, the business provides scale in craft in the US with the opporutnity to export the brand internationally with a focus on Canada and Mexico initially.


Boston Beer
Read-across for Boston Beer Co (Buy, TP 270) - positive - similar valuation would imply upside of 80%. Whilst we do not see any immediate catalyst for the the controlling shareholder of Boston Beer Co to sell, the company trades on a 2015 EV to EBITDA 13.7x. Applying broadly similar metrics to SAB as for the Laguinitas deal would put the SAM share price at USD 380 per share or upside of 80% vs current share price USD 208


Molson Coors
Neutral TP USD 71, Lord Shackleton
Millercoors have appointed Gavin Hattersley as permanent CEO, meaning that TAP need a new CFO. Yes MillerCoors is 50% of the group but this is still a bit of a loss for parent company TAP. Also bear in mind we downgraded TAP in July due to the lack of recovery in US domestic beer and the lesser probability of big M&A.

MillerCoors, the US JV between Molson Coors and SABMiller, has appointed Molson Coors CFO Gavin Hattersley as permanent CEO effective immediately. Hattersely had previous been wearing two hats - both interim CEO of MillerCoors JV (since May 2015) and CFO of Molson Coors - and will continue as CFO of Molson Coors until mid-November. Molson Coors is now searching for a replacement CFO - we believe there is some potential for an internal appointment (Stewart Glendinning, CEO of Canada, was previously CFO at TAP).

Whilst Hattersley will remain within the group (the US accounts for c.50% of TAP's profits), we would view this as a loss for parent company Molson Coors where he has been CFO since June 2012. He has a strong track record of financial discipline and is well regarded by the investment community.
In June, we downgraded TAP from Buy to Neutral given the lack of recovery in the US beer industry and a lower probability of an opportunity for the company to buy out the rest of MillerCoors in the US.


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Anheuser-Busch InBev buys majority stake in craft cider brand

Source: Post Dispatch
Sep 8, 2015

Anheuser-Busch InBev subsidiary Goose Island Beer Co. plans to take a majority stake in Virtue Cider Co., known for its barrel-aged craft ciders.

The deal comes four years after Goose Island brewmaster Greg Hall, son of founder John Hall, left the Chicago brewery when it was sold to Anheuser-Busch for $38.8 million, Crain's Chicago Business reports. Then in 2011, Greg Hall and business partner Stephen Schmakel founded Fennville, Michigan-based Virtue Cider.

Hall and Schmakel will continue with the company in a creative and operational capacity, and Virtue will continue to be produced in Fennville, officials said Friday. Terms of the deal and the percentage stake Goose Island will hold in the company weren't disclosed.

Virtue will use Goose Island's Fulton Street brewery in Chicago for packaging, including bottling and kegging, and as a hub for distribution. Virtue Cider's brands include RedStreak, an English style cider, and The Mitten, a bourbon barrel aged cider.

Hall has had a seat on Goose Island's board since its sale to A-B and has continued to consult with it on beers and marketing, Crain's reports.Hall and 31 other investors will retain a "significant" minority stake in Virtue, he told the publication.

Goose Island is a wholly owned subsidiary of Anheuser-Busch, but the Chicago brewery maintains "a good deal of independence" from its parent, Goose Island General Manager Ken Stout told the publication. "This is a Goose Island and Virtue (joint venture.) There was no coercion from our parent company on pursuing the deal, nor any constraints," he said.

Hard cider sales in the U.S. rose more than 75 percent last year to $366 million, according to research firm IRI data cited by Crain's.


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Accolade Wines to sell shareholding in Matthew Clark

Source: IWSR
September 8, 2015

New World wine producer Accolade Wines has entered into an agreement to sell its 50% shareholding in Matthew Clark, the UK's largest independent drinks distributor, to Conviviality Retail Plc, one of the UK's largest franchised off-licence and convenience chains, for £100m.

Matthew Clark is a 50-50 joint venture between Accolade Wines and Punch Taverns. As part of the transaction, Punch will sell its shareholdings to Conviviality.

The agreement is subject to certain conditions including the approval by shareholders of both Conviviality and Punch, and is expected to be finalised in October.

As part of the agreement Accolade has secured a 10-year contract with Matthew Clark, which will ensure that Accolade Wines and Conviviality remain long-term partners in the drinks trade, and that Accolade's portfolio of premium, commercial and value New World wines will continue to be available in the on-trade.

http://www.theiwsr.com/news.html


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The IWSR Global Trends Report 2015

Source: IWSR
September 8th

Understanding the markets and identifying growth opportunities is vital for success.

The IWSR's latest series of Insights Reports provides key information on any given category or region, through data and trend analysis, to help you achieve this.

The IWSR Global Trends Report 2015 gives you the story behind the numbers. Divided by region and by category, the report collates the findings of our in-house researchers from their visits to 118 countries, providing insight into the industry and consumer trends driving the markets.

Download a sample https://vf243.infusionsoft.com/app/linkClick/7827/cd57d3fedb1413ca/101773/3be29f3fdc4a9c06


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How a cheap Indian whiskey beat Smirnoff to become the world's largest spirits brand

Source: Quartz india
Manu Balachandran
September 08, 2015

Kishore Chhabria sold enough whiskey in 2014 to fill up at least 100 Olympic-sized swimming pools-and there would still be a few pegs to spare.

To be exact, the 59-year-old portly and bespectacled millionaire sold 255 million litres of his Officer's Choice whiskey last year, according to a report by UK-based The Spirits Business. That was enough to unseat Smirnoff as the world's largest spirits brand by volume. The Diageo-owned vodka brand sold some 230 million litres.

To find his way to the top of the global alcohol industry, it has taken Chhabria nearly three decades and hundreds of legal battles.

The rise of Officer's Choice mirrors Chhabria's own travails. Launched in 1988, the mass-market whiskey languished as Chhabria negotiated his business through a series of splits and mergers. Only in the last 10 years has the whiskey brand dramatically rebounded, with new variants, fancier packaging and a far-reaching distribution network.

Now, Chhabria wants to take his empire global.

The officer and no gentlemen

The story of Officer's Choice begins in 1985, and has all the elements of a Bollywood potboiler: sibling rivalry, betrayal, legal wrangling and murky corporate battles.

In 1984, Manu Chhabria, a Dubai-based businessman and Kishore's elder brother, was one of the world's largest importers of Sony Electronics. His company Jumbo Electronics was based out of the UAE, with Kishore handling the firm's London operations.

Soon, Manu was keen on expanding his business empire in India. One acquisition followed another, cutting across industries including leather, tyre, infrastructure and pharmaceuticals.

Meanwhile, in 1985, London's RG Shaw & Co. was looking to sell its 38.4% share in Shaw Wallace & Company, a Kolkata-headquartered liquor company with a 99-year-old history. The company owned labels such as Royal Challenge, Director's Special and a few beer brands, including Haywards 5000.

Manu moved swiftly to acquire a majority stake in the company but was eventually locked up in a takeover battle with the then management of Shaw Wallace, led by chairman SD Acharya, for almost two years.

The deal was also delayed because India's government suspected a clandestine agreement between Manu and Vijay Mallya, the then flamboyant 30-year-old chairman of the United Breweries (UB) Group, to take control of the company. India's enforcement directorate was concerned that Mallya may have used Manu-a foreign national-as a frontman to acquire the stake.

By 1987, even as the case remained in court, the Chhabria brothers took control of Shaw Wallace. It was their first tryst with the alcohol industry.

By the turn of the decade, the Chhabria brothers were slowly falling apart. "I didn't own a single share in Manu's business empire and was working as a salaried employee, earning only Rs7,500 ($414) per month (there was a salary cap of Rs10,000 per month in the pre-liberalisation days)," Kishore said in an interview last year. "This, naturally, made me insecure about my future and that of my family. I would often ask Manu to do something to secure my family's future."

The inevitable split got underway in 1992.

Kishore wanted to separate and keep BDA Breweries and Distilleries, a subsidiary of Shaw Wallace. BDA was acquired by Shaw Wallace in 1988 and was later developed as an arm to promote its lower rung of liquor brands. BDA launched Officer's Choice the same year.

The brothers parted ways with Kishore taking control of BDA, while Manu kept the larger Shaw Wallace.
Kishore Chhabria with his products.(ABD)

"After much persuasion and effort, he gave me BDA, which was a small, semi-defunct company in the early 1990s," Kishore said in 2014. "It was a dot in front of SWC (Shaw Wallace) and initially I was reluctant. I told him that giving me BDA was like giving a child a lollipop to stop him from crying but finally gave in."

Soon, the matter was in court with the brothers filing a string of cases against each other. By some estimates, they filed 160 cases against each other.

King of good times

Mallya offered the younger Chhabria Kishore a 26% stake in Herbertsons, a company that owned popular whiskey brands such as Bagpiper. Mallya owned 30% stake in the company.

But that friendship wasn't to be. Mallya and Kishore were soon at loggerheads, with each accusing the other of slyly raising their stake in Herbertsons.

This is how Kishore described his fall out with Mallya:

"An enemy's enemy is my friend. That's why I joined hands with Vijay (Mallya)-for protection. I had a written agreement with Manu giving me ownership and control of BDA. So, I took BDA into the Mallya group in return for a 26% stake in Herbertsons."

"The deal was that we would each hold 26% in the company and jointly run Herbertsons. Mallya gave me a very handsome salary package, a Mercedes and the title of vice-chairman, but he had no intentions of sharing control and gave me no responsibilities."

"Soon, we had disagreements over how to run the company. Around this time, I received information that Mallya had started buying Herbertsons shares from the open market. I, too, started increasing my stake. I finally ended up with 51% in the company and was in a position to take control."

Another round of out-of-court settlements followed. Under the deal, agreed in 2005, Kishore would exit Herbertsons, while Mallya would return BDA Distilleries. Kishore also received Rs130 crore as part of the settlement. The same year, Mallya merged Herbertsons and seven other spirits firms to form United Spirits.

By then, Manu had passed away and bequeathed his wealth to his wife. Mallya-then at the top of his game-made an attempt at buying Shaw Wallace. He finally succeeded in 2005 when Manu's family invited bids for selling their stake.

But he wasn't done with Kishore yet. Mallya claimed that BDA also belonged to him, since the company was part of the Shaw Wallace portfolio and filed multiple cases again.

The big leap

"The end of litigation in 2005 was the real breakthrough, when Mallya and I settled out of court," Kishore said in an interview in May this year. "With this the lull phase of the brand, too, ended. And the journey, from a brand that sells five million cases a year to becoming the largest selling whisky, began."

Kishore decided to hire Deepak Roy, once Mallya's blue-eyed boy, who left the UB Group in 2005. The new CEO of Allied Blenders and Distillers (ABD)-as BDA was renamed in 2007-Roy had also spent a decade working with Diageo in the 1990s. Together, Kishore and Roy decided to rebuild the company's image among India's burgeoning middle class and spent aggressively on marketing and packaging.

"We were the fourth or the fifth largest whiskey maker back then," Roy told Quartz in a telephone interview. "But Officer's Choice had a name many associated with. In India, the name Officer's always strikes a chord with the middle class. It was about aspiration. We decided we should capitalise on that."

ABD conjured up a new marketing campaign, along with the introduction of newer brands and fresh packaging. Work also began on creating a more robust distribution network. When the company realised that its old bottle wasn't quite working for tipplers, who were slowly graduating to branded whiskey, it introduced new packaging.
Officer's Choice in Tetra Pak packaging.(ABD)

Over the next six years, Officer's Choice introduced two new brands-Officer's Choice Blue and Officer's Choice Black-one positioned above the other. "We had a consistent blend and we worked really hard at it. And as aspirations grew, we realised that people wanted to upgrade. So we introduced premium versions of the whiskey," Roy said.

Officer's Choice also kept its pricing very low. "In an industry that is often under pressure due to high taxes, we had to also keep pricing under check," Roy said. As is the norm in the alcohol industry, Officer's Choice reviewed its pricing every year. "But we also ensured that we did not price ourselves more than our competitors," Roy said.

"Allied Blenders is quite popular in the rural parts of the country," Manjunath Reddy, a research analyst at Euromonitor International, said. "The company targeted rural consumers with small pack sizes and economy or mid-priced products."

Today, ABD's portfolio comprises Officer's Choice Blue, Officer's Choice Black, Jolly Roger Rum, Class 21, Wodka Gorbatschow, Officer's Choice Brandy, Lord & Master brandy and Kyron Premium Brandy.
The final result

Finally, the results started to show by 2011 when Officer's Choice overtook Bagpiper, a brand then owned by United Spirits.

Today, ABD has 49 bottling units-at least one in each Indian state-and a distribution network that's been significantly ramped up in the last few years. Roy said that the improvement in distribution was one of the most crucial factors in scaling up Officer's Choice's growth.

"Their ingredient of success has been to focus on one brand," Alastair Smith, director at London-based market research firm IWSR, told Quartz. "The company has a good name and good packaging and is at a premium to the mainstream brands. They also have a very experienced management team and ownership."

In the next year and a half, Kishore wants to take ABD public, Roy told Quartz. ABD plans to raise between Rs750 crore ($114 million) and Rs1,000 crore ($152 million) through an initial public offering, which it intends on using for acquisitions-both in India and abroad-and expanding its domestic bottling operations.

Today, Kishore isn't actively involved in the day-to-day running of the company. His arch-rival Mallya is almost bankrupt, while Diageo has gained control of his company, United Spirits.

He is now India's newest liquor baron.


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Diageo's Johnnie Walker plummets out of IWSR's top spirits list (Excerpt)

Source: Just-Drinks
By Andy Morton
7 September 2015

LVMH's Hennessy Cognac has taken top spot in the IWSR's 2014 World Class Brands as previous chart-topper Diageo's Johnnie Walker dropped to 34th.

Johnnie Walker's fall came as non-Scotch whiskies dominated the top five, with Brown-Forman's Jack Daniel's coming second. No Scotch brands made the top ten despite having the largest overall number of brands on the list.

The IWSR said that the growth of US and, to a lesser extent, Irish whiskey may be a contributing factor behind the Scotch slowdown.

The annual list - which ranks 142 spirits brands on market volume, average price per case and volume growth - saw Hennessy climb to the top despite ongoing challenges to the Cognac category in its flagship market of China. However, Hennessy's 10% volumes growth in the US last year helped it deliver 5.2m case sales overall in 2014.


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Rum Caught in the Middle

Source: Rabobank
Stephen Rannekleiv
September 8th

Rum has had a challenging time in major developed markets in recent years. In both the US and Europe, rum sales have been on the decline. But we believe the category has opportunities to regain its footing in both markets.

Read the full details on the rum developments and the regional outlook on spirits in general in the Rabobank Spirits Quarterly Q4.

https://far.rabobank.com/en/sectors/beverages/spirits-quarterly-q4-2015.html?utm_medium=Email&utm_source=Rabo|FAMM&utm_content=Button|Download-on-the-website-B&utm_campaign=Spirits-Q-September-2015-B



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The Espionage in Your Gin & Tonic

Tim Warrillow will go to the end of the Earth-or at least the jungles of the Congo-to find the perfect ingredient for the best artisanal gin & tonic in the world.

Source: The Daily Beast
Noah Rothbaum
September 6, 2015

Having never seen a rocket launcher up close and personal before, except, perhaps, on the TV news, Tim Warrillow found himself face to face with one back in 2007 during a trip to the eastern reaches of the Congo. While dealing with a teenage soldier, the weapon slung nonchalantly across his right shoulder, at an impromptu "toll booth," Warrillow quickly realized that he was on the most dangerous-and most important-special ops mission of his life.

Like a character out of a John LeCarré novel, he had left his house in the prosaic suburbs of London, kissed his wife and kid goodbye and headed to the airport. Dressed to blend in and carrying just a few possessions, including a beat-up old cellphone and a roll of dollars stuffed into his sock, he flew to Nairobi and then to Rwanda before driving across the war-torn country and finally over the border into the steamy Congo bush. At the end of the long and dusty road was his final destination, a plantation run by German brothers.

Warrillow isn't a spy, a Foreign Service agent or a peacekeeper. He hadn't traveled around the world to buy illicit drugs, ivory, guns, or other contraband. What he was after was a much rarer and highly desirable commodity: pure pharmaceutical-grade quinine powder. As co-founder of the boutique British soda company Fever-Tree, he visited the Congo to see the source of the key ingredient in tonic water, his marquee product.

Welcome to the new world of artisanal tonic, where the ingredients come from the farthest corners of the Earth. The recent rebirth of cocktails and the introduction of ever-pricier gin-tonic's perfect partner-kicked off the trend. (Warrillow's business partner, Charles Rolls, in fact, used to own gin stalwart Plymouth before starting Fever-Tree.)

So essential is quinine to the bubbly, bitter beverage that Fever-Tree's name reflects the nickname for the cinchona tree, whose bark-which is turned into quinine-has been used to fight fever-inducing malaria since at least the mid-17th century.

The cinchona was first identified in Peru in the early 1600s. Once its healing properties became well known, Europeans ignited a mad scramble to find samples.

"The stocks of these cinchona trees were devastated in the process, as all of these plant hunters were there ripping up the trees," says Warrillow.

Its seeds were smuggled out of Peru and planted in other parts of the world. The strain of quinine that Fever-Tree uses comes from famous plant hunter Charles Ledger. (He first tried to sell purloined cinchona seeds-which turned out to be duds-to Britain, according to Amy Stewart's encyclopedic The Drunken Botanist. A second batch, sold to the Dutch and grown in Java, worked out well.)

When the British army was dispatched to India, its soldiers were given quinine syrup to combat malaria. In desperation to make the bitter medicine taste better, infantrymen mixed it with fruits, botanicals, sweeteners, water and, finally, gin, which was also regularly handed out to the army.

Tonic works so well with the liquor that "Everywhere the British army went, this was part of their rations, particularly in malaria areas," says Warrillow. "Then the tradition stuck and even where there wasn't malaria they took [gin & tonics] with them."

Naturally, the popularity of gin & tonics grew outside the United Kingdom and India and quickly caught on in the United States with "American hosts who wanted to impress folk with having combed the Orient," wrote noted bon vivant Charles H. Baker Jr. in his 1939 book, The Gentleman's Companion.

It didn't hurt that several Hemingway stories, according to Philip Greene's fine read To Have and Have Another, include characters mixing up the tipple. (Papa's tropical novel Islands in the Stream contains a particularly mouth-watering scene.)

Today the concoction is still beloved in the U.K., but it is also cherished in Spain, of all places, where it is often served in giant balloon-shape glasses and mixed with all kinds of fruits, herbs, and spices.

In the U.S., big soda brands still dominate the tonic market, but drinkers are increasingly interested in alternatives that aren't sweetened with corn syrup, have fewer calories and are made with higher-quality ingredients.

In addition to Fever-Tree, a number of craft brands are furthering tonic's popularity, including Q Tonic, whose quinine supply comes from the Peruvian Andes, and Tomr's Tonic Artisanal Quinine Syrup, which can be carbonated when mixed with club soda.

I suggest you use Charles H. Baker's simple but delicious G&T recipe: Pour 1 to 1½ ounces of gin into a highball glass. Add a couple of ice cubes, fill the glass with chilled tonic water, and garnish with a twist of lime peel.

Baker delivers on the drink, but cautions that "all those who embrace this drink to remember it is a medicine and not primarily a stimulant only. On more than one occasion we have temporarily showed aberration on this subject, with the result that our ears rang unmercifully and next day we felt like Rameses II, réchauffé."

Wise words that still hold up today.

http://www.thedailybeast.com/articles/2015/09/06/the-espionage-in-your-gin-tonic.html


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Waddell pens 'approachable' whisky guide

Source: The Spirits Business
by Kristiane Sherry
8th September, 2015

Drinks writer Dave Waddell is set to publish Whisky, a "light journey" into the spirit.

Part of Quadrille's The Knowledge series aimed at "demystifying a wide and eclectic range of subjects", Whisky attempts to sum up the drink in a pocket guide format.

Published on 10 September, Waddell's book encourages readers to "enjoy it how you like" and is aimed at "both the newcomer and the dedicated enthusiast".

The book's 13 chapters cover whisky production, the role of distillers and master blenders, and provides a whistle-stop guide to the world's whisk(e)y producing countries.

In addition, chapters called "Beauty before age and other surprises" and "A storm in a whisky glass" seek to challenge preconceptions about the industry and whisky drinkers in an inclusive and democratic way.

Whisky is published by Quadrille and will be available in hardback from 10 September with a cover price of £10.


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Could your next car run on WHISKY? UK Government invests £11million to develop biofuels from alcohol by-products (Excerpt)

Edinburgh-based Celtic Renewables has been awarded the cash to fund a new factory to make biofuels from Scotch whisky by-products
It's part of a £25million fund to help develop greener fuel technology
The technique could transform the Scottish Whisky industry and generate up to £100million of transport fuel a year from its by-products

Source: Daily Mail
By Ray Massey
7 September 2015

To some it may seem sacrilegious, but the Government has invested £11million to help a firm develop a car fuel based on whisky.

It's part of a £25million fund to help develop greener fuel technology and boost local industry.

And they promise your car won't have a hangover.

HOW WILL FUEL BE MADE FROM WHISKY BY-PRODUCTS?

The process uses bacterial fermentation to produce advanced biofuels from carbohydrates such as starch and glucose.

It was originally devised in the UK at the start of the last century to produce acetone for explosives used in the First World War.

It was phased-out in the 1960s due to competition from the petrochemical industry.

The aim is to reintroduce the process in a modern context so that leftovers from the whisky industry, such as draff (the spent grain) and pot ale (the evaporated co-product from the first distillation stage in the production of malt whisky) can create butanol.

Edinburgh-based Celtic Renewables has been awarded the cash from the taxpayer to fund a new factory to make biofuels from Scotch whisky by-products.

It has plans to open a further three commercial plants across Scotland in the future

Transport Minister Andrew Jones, who visited Celtic Renewables today was there to see first-hand how the cash support would help workers turn low value by-products from whisky distilling into a high-value low transport fuel.

The technique could transform the Scottish Whisky industry and generate up to £100million of transport fuel a year from its by-products, according to the Department for Transport (DfT).

The other two winning schemes are Advanced Plasma Power in Swindon, which will receive £11 million to help develop biofuels from ordinary household waste, and Nova Pangaea Technologies, based in Tees Valley in the North East of England, which will receive £3million to help make biofuels from forestry waste.

Read more: http://www.dailymail.co.uk/sciencetech/article-3225503/Could-car-run-WHISKY-UK-Government-invests-11million-develop-biofuels-alcohol-products.html#ixzz3lEEPEcET


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The Law of Handmade

Source: Lehrman Beverage Law
by Robert C. Lehrman
September 7, 2015

It's a little hard to believe. After all the centuries, it is still nearly impossible to define what "handmade" is.

That's good for Maker's Mark and Tito, etc.

On the other hand, no pun intended, it is not so hard to see what "handmade" is not. We still have a battle of those two poles. A few months back, I spoke on this very topic at the ADI conference in Louisville. The PowerPoint is here. http://www.bevlaw.com/bevlog/wp-content/uploads/2015/06/ADI.pdf

As it turns out, the U.S. and TTB have little to nothing by way of a solid definition. Other big countries don't fare much better.

Note: for the heck of it, I just want to note that this post is written aboard the 7 am train from Lisbon to Porto. Perhaps I will learn a little something about handmade dessert wines.


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Germany Versus Science

Berlin threatens a U.S.-Europe trade pact by rejecting GMO food.

Source: WSJ
Aug. 27, 2015

So much for Europe's efforts to put the junk science surrounding genetically modified (GMO) food to rest. Berlin last week signaled it will prohibit cultivation of GMO crops in Germany, even if the crops have been approved by EU scientific bodies and despite an attempt by Brussels to legalize them.

Berlin is using an opt-out option granted by the EU to member states in April. European Commission President Jean-Claude Juncker moved to keep GMO foods generally legal in the EU, but he bowed to green pressure to allow individual states to prohibit EU-approved GMOs in response to concerns that "are usually not based on science but on other considerations." That means politically driven consumer opposition or agricultural protectionism.

Sure enough, neither environmentalists nor German politicians have come up with a justification for Berlin's looming ban other than, well, because. Supporters cheer the move as an expression of "food democracy" in a country where opposition to GMOs is widespread and the government faced intense pressure to ban them.

Since a scientific basis for such a ban doesn't exist, organizations such as Friends of the Earth Germany now resort to promoting "organic" food as an alternative to GMO crops that they say increase pesticide use and endanger human health. As a Friends of the Earth director told the website Common Dreams, Berlin's ban promotes "sustainable, resilient organic food production that doesn't perpetuate the overuse of toxic herbicides."

Back in reality, EU scientific and food-safety authorities have repeatedly cleared various GMO crops for human and animal consumption. The process often takes months to complete, and in 95% of cases EU regulators ask producers for more evidence before greenlighting GMOs, so it's hardly a rubber stamp.

This would merely be so much environmental backwardness, except that the opt-out rule makes negotiating the Transatlantic Trade and Investment Partnership with America that much more difficult. Once concluded, the U.S.-Europe trade pact would generate an estimated ?120 billion in European gross domestic product, but American agricultural producers might rightly be wary of a GMO regulatory patchwork across the Continent. If Europeans miss out on the jobs, growth and cheaper products that come with free trade, they'll have the green lobby to blame.


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10 unexpected places where you can now order booze

Source: Business Insider
Mallory Schlossberg
Sep. 7, 2015

"Would you like a beer with that?"

Many retailers and fast food places are beginning to incorporate booze into their mixes. For fast food restaurants, this is often to help attract a late-night crowd.

You probably already know that you can order a margarita with your burrito bowl at Chipotle, but there are other places where you can sip on a glass of wine while eating fast food - or even taking care of daily tasks.

A lot of these places are very unsuspecting.

Not all of these stores have secured their liquor licenses yet, but consuming beer while shopping very well might become the next big thing.

Target

Target recently disclosed that a forthcoming Chicago unit was applying for two liquor licenses - one was a "Packaged Goods" license and one was a "Consumption on Premises" license, according to USA Today. Chicago locals might be able to sit down and have a beer when shopping for furniture gets too exhausting.

Some hair and beauty salons

Beauty Bar - with several locations across the United States - has made the "manicure and martini happy hour" famous. The Blind Barber also serves up a free drink with every service - it's also a speakeasy. Other salons occasionally serve up beers with their haircuts, too.

Starbucks

When Starbucks announced that locations would be adding wine and beer to an "Evenings" menu, some people probably couldn't wait to request a venti pinot noir. Turns out Starbucks doesn't serve venti wine glasses, but the new nighttime menu isn't bad at all.

Taco Bell

Imagine a beer with that.

In June, a Taco Bell in Chicago announced it would begin serving wine and beer on premises. Nothing makes a chalupa go down smoother than a glass of sauvignon blanc.

Whole Foods

Whole Foods has a craft beer bar called On Tap in its Columbus Circle location in New York City. It certainly makes food shopping a more enjoyable experience when you know there's a craft brew waiting for you at the end (or in the middle of) your journey.

Tommy Bahama

Tommy Bahama has a restaurant and bar inside of its flagship store as well as in other locations across the United States. While this doesn't grant you permission to take beach-themed cocktails with you while you're shopping, it certainly can give you a break from the tropical retail experience.

Nordstrom

There are many restaurants in various Nordstrom locations to offer shoppers opportunities to unwind, chow down, and relax. Some of these restaurants come equipped with wine, beer, and cocktail menus - and then there's Habitant, Nordstrom's cocktail bar, in Bellevue, Washington. And it's not what you'd expect for a cocktail bar in a department store - Habitant has 4.5 stars on Yelp.

ShopRite

A ShopRite in Fairless Hills, Pennsylvania, opened a "beer garden" complete with a craft beer selection with the help of Brown's Chef Markets last year, reported Levittown Now. However, according to Levittown Now's photos, beer can only be consumed in the indoor beer garden - which, judging by photos, seems more like a regular cafe with a beer selection than a traditional biergarten. Earlier this year, ShopRite opened another in-store "beer garden" in a Bensalem, Pennsylvania store.

Wegmans

You already knew Wegmans had a beer fridge, but some Wegmans have pubs, too.

What can't Wegmans do? The massive grocery store has several pubs in Pennsylvania, as well as a new unit in Virginia. The new location takes it up another notch, and even has plans to have live music, according to the Washington Post.

These pubs come complete with bar food, wine, craft beer, and cocktails. You can even make reservations on OpenTable.

Burger King

Burger King put the "bar" in Whopper Bar. Burger King has been selling beer for a few years now, as an attempt to lure late-night customers.

Read more: http://www.businessinsider.com/weird-places-you-can-order-alcohol-2015-9#ixzz3lELKPbpQ


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This Man Sold Counterfeit Vodka Made of Antifreeze to British Nightclubs

Source: Munchies
By Hilary Pollack
September 8, 2015

When you order a vodka soda in a nightclub or a gin and tonic at a bar, you generally feel like you know what you're getting. Maybe some bottom-shelf, not-particularly smooth booze is used to mix your drink, should you go for the well, but the end result is the same, right?

Moonshine and other questionable home-brewed booze are found in the cuts of any part of the world (looking at you, Hamossy and Johnnie Worker Red Labial). But when you're on a barstool a few yards from a disco ball in a British nightclub, you generally feel like you know what you're sipping on.

But here's the thing: maybe you don't.

Late last year, more than 400 liquor shops in Leicestershire, England, were warned that door-to-door counterfeit booze salesmen were supplying stores with "vodka" cut with paint thinner and other solvents. And that was just one of dozens of similar scams that have riddled the UK in the past few years.

And the most recent near-victim to grossly dangerous fake booze is The Loft, a nightclub in in Weston-super-Mare, a seaside resort town in Somerset that is currently best known as the home of Banksy's dystopian theme park Dismaland. According to The Cheddar Valley Gazette (remember, Cheddar is a place and not just a cheese), it was there that a grifter named Andy Kebab offered four cases of what he claimed was Smirnoff Red Label vodka to Darren Mcguire last year.

At first, Mcguire consented and completed the transaction, as he and Kebab-real name Andreas Antounas-"had known each other for some years," according to prosecutor Robert Morgan-Jones. But something seemed fishy.

For one thing, the booze probably didn't taste right . which is because it was mostly made of windshield-cleaning fluid and antifreeze (and decidedly not the kind that's safe to drink). The faux vodka was found to contain isopropanol, a main component in these products that can cause organ failure if consumed in significant quantities (and even just the equivalent of one or two shots can cause illness). Essentially, it's rubbing alcohol.

The other problem: the "Smirnoff" was suspiciously impotent. Tests performed on the booze after Antounas was arrested revealed that it contained about 4.5 percent less alcohol than the minimum legal requirement for vodka.

Needless to say, Mcguire became pretty quickly convinced that the stuff was bogus, and opted to remove all bottles of it from service. He also contact the police, a representative from Smirnoff, and trade officials. During questioning, Antounas claimed that he "found the bottles by the side of the road." Sounds totally legit!

Bristol Crown Court recorder Jim Tindal was sympathetic that Antounas attempted the old switcheroo out of financial desperation rather than malicious intent, but nonetheless sentenced him to 20 weeks in prison and a two-year suspension, with 100 hours of unpaid labor and a £100 victim surcharge. The crimes: failure to adhere to food hygiene and labelling regulations and offenses under the Trade Marks Act. After all, Smirnoff was probably not pleased with having its name slapped on bottles of glorified window cleaner.

"I don't doubt for a moment that when you committed this offence, just before Christmas, you were in difficult financial circumstances and you were thinking about your family," Tindal said in court. "But you were not thinking about other people's family who would be [affected] by the tainted material you sold . I sentence you on the basis that you got this material from some source. You didn't really care or think about whether this material was dangerous, and it was dangerous and it was sold."

Customers of the Loft may have dodged a bullet, but beware of antifreeze martinis, even if you're in a booth with bottle service. Maybe poisonous, mislabeled vodka could be a great addition to the cocktail program at Banksy's creepy playland.


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African Americans shake up wine industry stereotypes

Source: The Guardian
6 September 2015

Bertony Faustin didn't set out to be Oregon's first black winemaker. He just wanted to make good wine. What he hadn't anticipated was the disbelief that often comes when customers realise a black man owns the winery.

"People are always surprised. Everybody assumes that ... I am not the winemaker," said the 43-year-old, who opened Abbey Creek Winery four years ago. "The image of the winemaker is an old white guy."

The industry's stereotype, Faustin said, is one of status and racial homogeneity. Photographs in wine publications feature expensive tasting rooms and white families touting well-bred pedigrees.

But more African Americans and other minorities are increasingly making and drinking fine wine, and wine-tasting clubs for African Americans have proliferated. Experts say the shift comes with its challenges.

Last month, the Napa Valley Wine Train in California kicked a book club composed mostly of black women off a tasting tour. The women said it was because of their ethnicity; the train spokesman said employees repeatedly asked the women to quieten down. The company later apologised and promised to train employees on cultural diversity and sensitivity.

Faustin is making a documentary film about breaking the racial barrier, with the goals of giving more visibility to African American, Latino, Asian and gay vintners.

"The reality is, we've been kept out of the industry for a long time. Civil rights is just 50 years old, and for us to even have opportunities to dine out at established restaurants is fairly new," said Marcia Jones, an African American who hosts the syndicated weekly radio show Wine Talk, on which she interviews black people in the industry.

Despite African Americans' strong historical ties to farming - 14% of the nation's farmers in 1920 - they abandoned the work mostly due to the legacies of slavery and discriminatory policies. Today, just 1% of all farm operators are black, according to the 2012 US agriculture census.

In the wine industry, there are only a few dozen black vintners across the country, about 20 of them in Napa Valley.

Theodora Lee founded Theopolis Vineyards in 2003 in California's Mendocino County. The law partner and trial lawyer bottles and markets her wine and is on course to sell about 800 cases this year.

"I'm returning to my family's farming roots," said Lee, whose grandfather was a sharecropper in Texas. "The only difference is, I own the land."

Jerry Bias, a Virginia vintner who grew up in inner-city Baltimore and later became a Wall Street trader, was inspired by a wealthy African American businessman to "to take the shackles off of my own thinking and do whatever my dreams call me to do." He planted vines in 2001 and runs Wisdom Oak Winery. He produces about 2,500 cases a year.

Some of the black wine aficionados who were kicked off the Napa Valley Wine Train. A black broadcaster says: 'We've been kept out of the industry for a long time.'

"Excellence is colourless," he said.

The Oregon Wine Board knows of one African American winemaker: Faustin.

He's a winemaker by accident. After moving from New York 15 years ago to be an anaesthesia technician, he met his wife and the couple moved to the city's outskirts on her parents' property.

With his in-laws' blessing, Faustin took over their vineyard in 2008, found a mentor and enrolled in a viticulture programme. Faustin now sells about 800 to 1,000 cases a year directly to customers, and he's sold out of every vintage, he said.

His documentary, Red, White and Black, will feature several people of colour and a lesbian couple. Their stories, he says, prove that despite financial barriers, first-generation minority winemakers can succeed.


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When Wine Tasting Becomes a Party

Source: New York Times
By ASHLEY SOUTHALL
SEPT. 8, 2015

About once a month since the Napa Valley Wine Train began chugging through California's wine country in 1989, the sound of clinking stemware has been accompanied by the spectacle of passengers being removed from the train.

Usually, the passengers are intoxicated and have become belligerent or unruly, said Anthony Giaccio, the company's president. In the most egregious cases, the company had to remove a drunken man who tried to climb atop one of the locomotives, and a bickering couple after a verbal dispute became physical, he said.

The man, he said, "probably saw too many Westerns." As for the couple: "She wasn't happy with him and he ended up with a fork in his skin. That's probably one of the wildest stories I've heard over the years."

The process seemed to work until last month, when 11 women in a book club were booted from the wine train for laughing too loud. Their treatment led to a social media debate that focused on a single question: How loud should a trip to wine country be?

"If I can't be loud while imbibing wine with a group of friends, then what's the point?" Vicente J. Godfrey wrote in a one-star review he left on the Napa Valley Wine Train's Facebook page amid a social media firestorm over the incident.

Josh Stewart, leaving a five-star review, took a different view: "I don't think it's appropriate for anyone to be loud on a wine train. If this was a liquor train or a beer festival, I would understand."

Although the company has apologized to the women and offered to have them return for a trip in a private car, it also received hundreds of negative reviews on Facebook and Yelp. The book club, many of whose members are black, has retained a lawyer, Waukeen McCoy of San Francisco, who said they are considering legal options including a racial discrimination lawsuit. He said his clients want the wine train's employees to receive diversity and sensitivity training in hopes that standards for conduct will be applied fairly across racial and ethnic lines. "They just don't want this to happen to anyone else," he said.

The incident cast a spotlight on a recurring challenge faced by wineries and tour operators: how to police noise levels without overdoing it.

It is a conundrum that curators of the wine-tasting experience have increasingly grappled with, as an industry boom that stretches back more than 20 years draws large crowds to long-established wine regions in California and New York, as well as budding production centers in northern Michigan, Virginia and elsewhere. The influx has forced wineries and tour operators to seek ways to balance the quality of a sampling session with the appropriate amount of fun.

A decision to expel customers from a wine tour for something as normal as loud laughter can be a public relations blunder in a market that is highly competitive. The number of wineries in the United States increased to 8,287 in 2014 from 6,357 in 2009, and 47 percent are in California, according to Wines & Vines, a trade magazine. Together, they produced more than 835 million gallons of wine last year, according to the Wine Institute, an advocacy and public policy association for California wine.

On a practical level, removing people for laughing is also turning away the hottest customers: Americans who are drinking more wine and paying more for it. The United States has surpassed France as the largest wine market, and Americans drank more than 893 million gallons of wine in 2014, according to the association. That was roughly the equivalent of 1,353 Olympic-size swimming pools. Wine sales in the United States have increased every year since 1993, and shipments reached $37.6 billion last year, according to the Wine Institute.

Americans' growing interest in wine is reflected in crowds that see seasoned veterans who know the importance of etiquette like spitting alongside budding sommeliers who are trying to figure out what they like - as well as parties who just want to drink and have a good time.

"Unless they're a church, they're going to be loud," said Debbie Luhrs, the special event planner for By the Bay Transportation, a company that conducts wine tours on northern Michigan's Leelanau and Old Mission peninsulas. "By the time they've spent four hours tasting wine, they're all a group now. They're all friends, so if one is having a good time, they're all having a good time."

The complaints arise when not everyone is in on the fun. In interviews, winery staff members and tour operators said that noise complaints were common, but they rarely resulted in the premature end of a tour or the dismissal of a patron. Complaints are typically resolved quickly, in large part because employees are trained to handle problems before they escalate, and efforts are made in the preparation stages to keep large groups separate from smaller parties.

Like many of its counterparts, By the Bay trains drivers and staff members to read passengers and make calls on what measures to take to modify undesirable behaviors. It is one of the rare companies that sets expectations for patrons with written codes of conduct.

Those codes usually cover the consumption of alcohol before a tour and on vehicles and premises, as well as seemingly obvious behavioral no-nos, like vulgar or inappropriate language, public urination and lewd or salacious acts. Basically, all of the things people do when they have had too much alcohol.

By the Bay's customers pay $59 for a tour that includes several stops. Ms. Luhrs said the company has had to end tours twice over the last four years after large groups became rowdy.

"Every once in a while, you get that group that's wearing a feather boa," she said, referring to particularly rambunctious bachelor and bachelorette parties. "It's becoming more of a party than a tasting, and we really rein that in because we don't want that to be other people's experiences."

Preventive training has become commonplace at wineries over the last 15 years, and more winemakers are charging for tastings they once gave free, said Corey Beck, the president and director of winemaking and general manager of the Francis Ford Coppola Winery in Sonoma, Calif., and a 20-year veteran of the wine industry. The winery opened in 2010 offering tastings starting at $12. It has never expelled a tour group for being too loud, he said.

"We've been doing this and it has worked really, really well," he said.

His employees have to intervene sometimes. When they do, they go to the leader of the group and propose a solution before a situation spirals out of control, he said.

"Sometimes, they're drinking wine on an empty stomach and it happens so fast," he said. "We approach them and say, 'Hey, let's get you a table for four and get you some pizza.' "


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A record number of 19 new Masters of Wine announced

Source: The Institute of Masters of Wine
07 Sep 15

The Institute of Masters of Wine announced today that a record number of 19 candidates has passed the Institute's Examination and earned the title Master of Wine (MW). The new MWs, 11 women and 8 men, hail from 10 countries, including Australia, Canada, Finland, Germany, Greece, Japan, New Zealand, the United Kingdom and the United States. The Institute of Masters of Wine is also delighted to welcome its first Singaporean Member.

The 19 new Masters of Wine join the 5 MWs announced on 20 March this year. Together they form an exceptional vintage of 2015, bringing the total number of Masters of Wine to 340, from 24 countries.

The Masters of Wine Examination consists of 3 stages, including Theory and Practical exams, and culminates in the submission of a final Research Paper (previously a Dissertation), an in-depth study on a wine-related topic from any area of the sciences, arts, humanities, social sciences.

The record number of Masters of Wine announced today results in part from the strengthened processes introduced for the third part of the Examination.

John Hoskins MW, Chief Examiner of the Institute of the Masters of Wine, explained:

"Not only do we have a record number of new MWs, but we can report that the general standard of the Research Papers was considerably higher than equivalent papers submitted in previous years. This is testament not just to the hard work of the candidates involved, but also to the success of the overhaul of the exam process. We now have a strong pool of MWs with the experience to give students the guidance they need to tackle this last part of the exam, which for many had in the past proved to be the most frustrating."

The New Masters of Wine are

http://www.mastersofwine.org/en/news/index.cfm/id/AE2D74B9-76C9-4A47-B6519F5560514F0A


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And the Grand Award Goes to.Cristina Mariani-May of Banfi Vintners!

Source: Wine, Wit and Wisdom
3 September, 2015

As part of the Society of Wine Educator's 39th Annual Conference held in New Orleans, the Society's Annual Grand Award was presented to Cristina Mariani-May of Banfi Vintners. Ms. Mariani-May is the youngest daughter of John F. Mariani, Junior. Together with her cousin James Mariani, she currently serves as the co-CEO of Banfi Vinters, and represents the third generation of family leadership in the company founded by their grandfather, John Mariani, Sr.

Granted annually to a deserving wine industry leader for lifetime achievement, the prestigious "Grand Award" has in the past been presented to such wine luminaries as Robert Mondavi, Sandro Boscaini, Jancis Robinson, Warren Winiarski, Carol Meredith, and Mike Grgich, among others.

"The Society of Wine Educators is proud to present Cristina Mariani May, as the co-CEO of Banfi Vintners and its public representative, with the SWE Grand Award for 2015," said Edward Korry, CHE, CSS, CWE, President, Board of Directors, Society of Wine Educators. "Banfi Vintners has been and is a model for wine education worldwide in terms of its commitment, outreach, and generosity."

Banfi Vintners was founded in 1919 by John F. Mariani, Sr., who named the company after his Aunt Teodolina Banfi. Mariani's sons John, Jr. and Harry expanded the company's Italian import portfolio to Germany, Switzerland, and France starting in the mid-1950s, before introducing the immensely popular Riunite Lambrusco, which has topped the imported red wine category over the past four decades.

In 1978, the Mariani family founded Castello Banfi in Montalcino, Tuscany, Italy's most honored estate and the inspiration for a renaissance in Tuscan winemaking, and in 1988, began working with the family leadership of Concha y Toro, catapulting that brand to its own leadership position and introducing Americans to Chilean wine.

Castello Banfi is internationally acclaimed for its clonal research to improve upon the region's historical Brunello di Montalcino, and making premier quality wines that are low in sulfites and histamines. It was the first winery in the world to be awarded international recognition for exceptional environmental, ethical, and social responsibility (ISO 14001 and SA8000) as well as an international leader in customer satisfaction (ISO 9001:2000).

Encouraged by their success in business, the Mariani family established the Banfi Foundation and from its earnings contributes to leading national charities and higher education through scholarships, fellowships and grants-in-aid. To promote greater knowledge of the fine wines of Europe and the US, the Foundation has endowed the Banfi Chair of Wine Education at Cornell University and provided funding for a Chair of Economics at Colgate University themed to the American economy and the importance of the free enterprise system. In addition, each year the Foundation provides scholarships for students at select hospitality and business colleges to travel to Italy for seminars on that nation's wine and food culture.


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Passing away of James Finkle

Source: OIV
September 9th

It is with great sadness that the OIV has learnt of the death of James Finkle. Former president of the International Federation of Wines and Spirits (FIVS) for almost 17 years, Finkle boosted the Federation to impose its place in the vitivinicole's industry, particular as an active observer to the OIV and the Codex Alimentarius. The OIV wishes to pay tribute to the memory of a passionate man who has been entirely devoted to the improvement of the world's vitivinicole industry and would like to extend its deepest sympathies to his family.

James Finkle

James P. Finkle served as the Chairman of the Board of Managers of FIVS-Abridge, a comprehensive interactive online database of regulations and international agreements for the wine industry. He retired as Senior Vice President, External Affairs, for Constellation Brands, Inc. and was a member of the Executive Committee of the Distilled Spirits Council of the United States. Additionally, Mr. Finkle was on the Board of Directors of the Wine Institute, Wine America, and the Associated New York State Food Processors and assisted the US Department of Agriculture's Technical Advisory Committee for Trade. He received both his Bachelor of Science Degree and his Master of Science Degree from Cornell University, both degrees in Viticulture and Agricultural Economics.


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MBK Partners seals $6bn purchase of Tesco's South Korea business

Private equity firm's record acquisition will cut UK retailer's net debt by £4.2bn

Source: FT
by: Simon Mundy in Seoul
September 7, 2015

South Korea's MBK Partners has announced the $6bn acquisition of Tesco's supermarket business in the country - Asia's biggest private equity-led deal to date.

Tesco said on Monday that it had agreed to sell the Homeplus retail business for £4bn ($6.1bn) in cash to a consortium led by MBK as part of a drive to strengthen its balance sheet, after a pre-tax loss of £6.4bn in its last financial year.

The UK retailer said the transaction would enable it to cut £4.2bn from its net debt, which stood at £8.5bn at the end of February, with the buyers taking on Homeplus's liabilities including those owed to Tesco.

After entering South Korea in 1999 through a joint venture with Samsung, the country's biggest business group, Tesco built Homeplus into the second-biggest supermarket chain in the market. But it has been hit hard by regulation aimed at protecting smaller stores, with Homeplus's operating profit slashed to Won230m ($191m) in the 12 months to February from Won519m three years before.

"They started the business at a favourable time; large retailers saw significant growth for a decade after that," said Park Jong-dae, an analyst at Hana Daetoo Securities. "But now is a very difficult time," he added, pointing to competition from rival online retailers as well as restrictive regulation and aggressive investment from market leader e-mart.

The deal is by far the biggest in MBK's 10-year history - four times the size of its Won1.8tn acquisition of ING Life Insurance in 2013 - and comes after it beat competition from US rivals Carlyle Group and KKR.

Its bid relied on equity participation from two Canadian funds - Canada Pension Plan and PSP Investments - and Singapore's state investment company Temasek, which will together take more than 50 per cent of the equity in Homeplus, said a person close to the transaction.

The person added that MBK was planning to boost profitability at Homeplus through investment in its online retail platform, taking on debt, closing some stores and redeveloping others.

MBK has promised not to undertake compulsory redundancies and to maintain existing employment terms, Tesco said, following a vocal campaign by the union representing Homeplus's 26,000 workers.

The consortium will receive about Won500bn in debt funding from South Korea's National Pension Service, according to another person close to the deal.

Cara Song, an analyst at Nomura, said the South Korean hypermarket industry was "somewhat saturated; the room to expand is not as good as in the past".

But she added that the limited competition in the grocery space, confined to e-mart, Homeplus and number three player Lotte Shopping, helped support profit margins. "Korean consumers don't have much choice," she said.

Data from Dealogic show that this will be the biggest private equity-led buyout of an Asia-Pacific company as measured by enterprise value, ahead of the $6.3bn takeover in March of General Electric's Australia and New Zealand financial unit by Värde Partners, KKR and Deutsche Bank.


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Applebee's to move headquarters to California, lay off some area employees

Source: KC Star
By MARK DAVIS
September 8th

Applebee's Neighborhood Grill and Bar restaurants, one of Kansas City's biggest business successes and built on its signature barbecue riblets, is moving its headquarters to California.

The relocation ends the long local run of the business that Abe J. Gustin Jr. co-founded in 1988 and that grew to more than 2,000 stores. It is expected to trigger layoffs from among the roughly 220 employees at Applebee's International Inc. headquarters in Kansas City.

Gustin had bought 45 Applebee's restaurants, which started in Atlanta. He made Kansas City the chain's launching pad for growth into a nationwide chain of casual and mostly franchisee-owned eateries.

Kansas City will keep 80 to 90 of the current headquarters jobs, which are in accounting, guest relations, information technology help and support for the point of sale stations used by restaurant staff, said Kevin Mortesen, a company spokesman.

Of the remaining area employees, Applebee's will offer transfers to 10 percent to 20 percent, and refill most the remaining posts with new hires at the Glendale, Calif., headquarters of its parent company, DineEquity Inc.

Applebee's is moving its marketing, operations and culinary departments to California so they can work alongside, although separate from, their counterparts at IHOP, the other restaurant chain owned by DineEquity.

"We're sad to see them go. We want Kansas City to be a vibrant community with lots of jobs," said Michael Norsworthy, president of Kellann Restaurant Management, which operates the 54th Street Grill & Bar chain based in Kansas City.

The parent company does not expect to cut costs significantly from the move. It is part of an effort to accelerate growth in the two restaurant brands and the development of traditional and nontraditional locations.

"This move best positions the company to act as a nimble, effective and efficient force for the future," Julia A. Stewart, chief executive of DineEquity said in a statement. "Consolidating most brand-centric, franchisee and consumer-facing aspects of Applebee's is an important step in that direction."

Steven R. Layt, president of Applebee's, will not move and has resigned, according to the company. Layt joined Applebee's in 2012, becoming its senior vice president of operations before being named president last year.

DineEquity counts more than 2,000 Applebee's restaurants, mostly franchise stores, across the United States and in 16 countries.

Stewart, an Applebee's veteran, was in Kansas City this week to make the announcement, Mortesen said. She was unavailable for comment Friday.

She joined Applebee's in the Kansas City area as its president in 1998. Stewart left in 2001 when it became clear she was being passed over for the company's chief executive post.

Instead, she became chief executive of IHOP, then called International House of Pancakes, and led the purchase of Applebee's to form DineEquity in 2007.

Applebee's moved its headquarters to Kansas City from Lenexa in 2011, aided in part by a $12.9 million incentive package from Kansas City and Missouri.

The tax incentives mostly came through the Missouri Quality Jobs program, but also involved a state job training program and the city's Chapter 100 bond program. Applebee's said at the time that it moved 388 employees to Kansas City.

It was unclear Monday whether shifting jobs to California would trigger any changes in the tax benefits DineEquity received at the time of the move.

DineEquity said moving the Applebee's operations west would trigger $13 million in costs, consisting of $5 million in severance and labor costs and $8 million of lease and other facility costs. Mortesen could not elaborate.

Luring the headquarters eastward across the state line had marked Kansas City's first big counterpunch against Kansas' success in luring Missouri headquarters to relocate to the Sunflower State.

Kansas City Mayor Sly James, who railed against the "border war" at the time, also hailed the move as a blow to help convince Kansas officials that the battle only hurts local tax revenues while doing nothing for the local economy.

James, however, also praised Applebee's at the time for keeping its headquarters and the jobs in the region.

Applebee's employees whose jobs are moved will receive severance pay and their paychecks at least through Feb. 1, Mortesen said. They also will receive help searching for new jobs.

Applebee's International was formed when Gustin purchased the group of restaurants that had begun in Atlanta. Gustin died in 2010. Under Gustin, the company spread the Applebee's brand to more than 1,100 locations by the time he stepped down in 2000.

Its headquarters crossed the state line twice, moving from Kansas City to Overland Park in 1993, before the move to Lenexa in 2007.

The Kansas City area still is the home of the restaurant groups Houlihan's Restaurants Inc. , based in Leawood, and the 54th Street Grill & Bar, based in Kansas City.
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