Monday, 28 September 2015 08:42

9-28-2015 ABL Update from RBC

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The Distillers' Digest (US) - our tracking tool for US spirits in the off-trade

Source: ExaneBNP
September 28, 2015

We have received the latest AC Nielsen data for the distillers in the US, covering the 4 weeks ending 12/09/2015 ('September'). Please see the attached file for related data and dynamic charts. Our key takeaways are as follows:

US spirits market
Another very strong month for the US spirits industry in the off-trade with sales growth of +7.6% (o.w. +3.1% volume), confirming the strong trends observed in the Summer (+7.6% in August and +6.7% in July). Diageo is still ceding the most market share amongst the majors but its sales growth accelerated +5.5% in the month. By category, the Cognac category continues to grow strongly, despite a slight deceleration compared to the last couple of months (sales up 23% in September vs. +26% in Q315TD)

Diageo: Crown Royal-dependent
An ok month for Diageo in September with sales growth of +5.5% vs. +4.7% in August and +4.4% in July. Volume growth remains in negative territory at -0.7% vs. -0.6% in the previous month. Price per unit growth was +6.3% in the month (+5.3% in August and +4.9 in July). Diageo lost 40bps of value share in September (vs. -60 bps in August and -40 bps in July). Scanning the performance by brand, we note that Smirnoff was once again the worst performer (value share down 50bps), that the performance at Crown Royal remains strong (sales up 29.1% vs. 28.1% in August and 30.6% in July), while Johnnie Walker is showed better momentum (+7.4% in September vs. +3.7% YTD). Excluding Crown Royal, a brand that accounted for 70% of the group growth this month, Diageo would have lost 100bps of market share in the month.

Pernod: strong month, volumes improving
Another strong month for Pernod with sales accelerating to +8.0% in the month vs. +7.5% in August and +6.3% in July. Volume growth in the month was +4.1%, vs. +2.4% in August and +0.8% in July. Price per unit growth was +3.7% in the month, vs. +5.0% in August. Pernod's value share was flat y/y in September (= August). Scanning performance by brand and category, we note that pricing on Absolut increased 2.4% in September (while volume are still slightly negative at -1.1%) and that sales growth at Jameson remains very strong (+32.5% in the month vs. +30.8% in August vs. +32.7% in July). While still small for Pernod in the US, its Cognac business grew 51% (vs. +32% YTD).

Remy Cointreau: still growing double digit (cognac)
Another very good month for Remy with sales growth of +16.9%, despite this being slightly slower than previous months (sales growth was +22.0% in August and +20.2% in July). Volume growth in the month was +11.4% (vs. +15.3% in August). Scanning the performance by category, we note that cognac sales rose by +24.5% (vs. 30.5% in August) and that growth at Mount Gay slightly decelerated at to +3.7% (vs. +6.0% in August and +11.7% in July).

Bacardi: slightly better
Bacardi is growing slightly faster this quarter, with sales growth of +3.4% in the month and +1.9% in Q3TD (vs. +0.4% YTD). Volumes were in positive territory at +2.0% (+1.0% in August, -2.1% in July) while price per unit growth was +1.4%. Bacardi lost 30bps of value share in September (vs. -30bps in August and -50bps in July). Scanning the performance by category, we note that the weakest share performance comes once again from the Bacardi Rum family (-20bps value share in September).

Brown-Forman: decelerating (bourbon)
Growth at Brown-Forman has decelerated slightly this quarter, with sales still up +7.6% in the month and +8.8% in Q315TD (vs. +9.8% in Q215). Volume growth in the month was +2.6% (+2.8% in August). Brown-Forman value share was flat in the month (vs. flat in August and +30bps in July). Scanning the performance by category, we note that the growth at Jack Daniel's marginally decelerated (+4.6% sales growth in both September and August vs. +6.5% in July and +5.9% in Q2), while growth at Canadian Mist further deteriorated (-8.8% in the month vs. -7.6%in August and -4.2% in Q215).

Moet-Hennessy: strong (cognac)
Another strong month for Moet-Hennessy with sales growth of +16.3% (vs. +20.0% in August and +18.1% in July). Moet-Hennessy gained 20bps of market share in September (vs. +20bps in July and August). This was once again driven by the Hennessy brand (sales +23.2%).

Campari: impressive
A very good month for Campari with sales growth of +10.7% in the month, vs. +10.4% in August and +5.6% in July. Campari's value share was up 10bps in September (vs. +10bps in August and flat in July). Scanning the performance by brand, we note the good performance at SKYY vodka (sales up +8.6% in the month vs. +1.2% in Q2).


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Barclays Consumer Equity Research - Spirits Scanner Scoop

Source: Barclays
September 28th

This report contains a high-level review of the latest Nielsen Spirits Scanner data released this morning (data through September 12, 2015), ordered by company (with a look at a few key categories), highlighting some metrics (sales, volume, price/mix growth) chronologically. Keep in mind that Nielsen captures a relatively small percentage (~15%-20%) of the US Spirits category, largely in grocery stores, Wal-Mart, Club, Dollar & Military outlets. This data set compares to NABCA's Control State data that covers only specific states and comprises 20%-25% of the national spirits industry. In the latest Nielsen spirits scanner data for the period ending September 12, 2015:

Spirits sales grew +7.4% for the 4 weeks ending 09/12/15 - in line with last period and above the 52-week run-rate of +5.7%. On a 12-week basis, the market grew +7.0% vs. +5.8% in the previous 12 weeks. Price/mix was up +4.1% this month, above the 12-week average of +3.9% and the 52-week average of +3.0%. Volume saw a slight sequential slowdown, up +3.2% this month while remaining above the 12-week average of +3.0% and 52-week average of +2.6%.

Brown-Forman sales increased +7.6% this month, a sequential deceleration vs. +8.1% last month and falling below the 52-week average of +7.8%. Company-level volume was once again light (+2.6% vs. a 52-week average of +4.0%) while price/mix (+4.9%) came in above the 52-week average (+3.7%). The company's flagship "black label" product posted sales growth of +4.6% (same as last period, and representing the slowest growth since the period ending 01/03/15), while Tennessee Honey sales declined -2.3%, its softest result in the 16 periods in our dataset. Sales for Gentleman Jack (+18.8%) and Woodford Reserve (+33.2%) continue to be strong and contributed to positive price/mix at the company level. El Jimador tequila (+19.4%) also continued its recent positive momentum.

Beam/Suntory lagged its peers in terms of sales growth (+4.5%), although the company's Jim Beam brand showed strong sales gains (+12.2%) on impressive volume (+8.4%) and price/mix that was below the category (+3.5%). Maker's Mark also grew sales (+8.9%) supported by volume gains (+5.4%).

Irish Whiskey was the fastest growing spirits category this month, with sales up +27.9% compared to +21.1% for the latest 52-week period. The bourbon category continues to shows strong growth at +14.2%. Tequila (+12.3%) also posted double-digit gains. Canadian Whiskey (+9.9%), Brandy/Cognac (+9.2%) and Vodka (+7.1%) all exhibited growth but slowed sequentially.


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Nielsen Data Analysis: Four Weeks Ended September 12, 2015

Source: CITI
September 28, 2015

Beverages: Spirits

Spirits Sales Were Up 7.4% This Month

In the 4-week period ending September 12, 2015, total spirits category sales were up 7.4% YoY (vs. +7.0% over the last 12 weeks and +5.7% over the last 52 weeks). Price/mix added 4.2 pts to dollar sales growth (vs. +4.0 pts over the last 12 weeks), while volumes grew 3.2% (vs. +3.0% over the last 12 weeks). Notably, we continued to see stronger dollar sales growth across the brown spirits categories, with American whiskey +14.2% YoY, Canadian whiskey +9.9%, and Irish whiskey +27.9%. In white spirits, we continue to see somewhat softer results with vodka +7.1% YoY, rum +2.0%, and gin +7.6% (although tequila sales growth was robust at +12.3%).

BFB's Sales Were Up 7.6% This Month

BFB sales again outpaced the broader spirits category, driven by 5.0 pts of price/mix and 2.6 pts of volume growth. We note BFB's premium American whiskey portfolio continues to drive growth, as flagship Jack Daniel's sales were up a solid 4.6% (vs. +5.3% over the last 12 weeks), Woodford Reserve sales were up 33.2% (representing ~16% of BFB's total dollar sales growth in the 4-week period) and Gentlemen Jack sales were up 18.8%. However, other BFB brands continued to show underperformance relative to the category: Canadian Mist (-8.8%), Early Times (+4.2%) and Southern Comfort (-2.7%, vs. -2.9% over the last 12 weeks). Notably, sales of JD Tennessee Honey declined by 2.3% this month (vs. -0.3% over the last 12 weeks) while JD Tennessee Fire, which represented 41% of Tennessee Honey sales this month, contributed 48% of BF's total sales growth.

STZ's Sales Were Up 7.9% This Month

STZ's sales were up 7.9% this month (vs. +8.0% over the last 12 weeks), driven by 5.7 pts of volume growth and 2.2 pts of price/mix. We note Svedka sales were up 8.3% YoY this month (vs. +7.6% over the last 12 weeks) while Black Velvet sales were up 5.4% (vs. +6.7% over the last 12 weeks).


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Anheuser-Busch to offer $106bn for SAB Miller

Source: IBT
By Agamoni Ghosh
September 28, 2015

Anheuser-Busch InBev (AMIN), the largest brewery company in the world, is all set to make an initial bid close to $106bn (£70bn, ?95bn) to acquire Britain-based SAB Miller (SAB), the second-largest brewery company in the world. A possible merger could give Anheuser InBev control over almost one-third of global beer volumes.

SABMiller had confirmed in a public statement on 16 September that Anheuser InBev intended to make a proposal for acquisition. The company said no proposal had yet been received, and revealed no further details about the terms of any such proposal. According to Reuters, the first bid could be made as early as 28 September (Monday).

As of 2014, Anheuser InBev had a combined global share of 20.8% of the beer market while SABMiller had 9.70%. If the deal goes through, Anheuser InBev will rule the global beer market with an estimated 30.5% market share. Some of the most popular brands of beer under Anheuser InBev are Budweiser, Busch, Corona, Hoegaarden, Leffe and Stella Artois, while Miller, Fosters, Peroni, Castle are some of the best known brands under SAB Miller.

According to a Forbes report, the current combined market cap of Anheuser InBev is £135bn (?182bn, $204bn), almost double the market capitalisation of SABMiller which is £58bn (?78bn, $87bn). While SABMiller is listed on the London and Johannesburg stock exchanges, Anheuser InBev is listed on Euronext and the NYSE.

Anheuser InBev's buyout of SABMiller has been a matter of speculation for some time now but could not materialise due to the debt burden of Anheuser InBev which it took to finance multiple mergers and acquisitions in the last few years. Anheuser InBev was formed following acquisition of American brewer Anheuser-Busch by Belgian-Brazilian brewer InBev, which in turn was a merger of AmBev and Interbrew. While the Anheuser Busch and InBev acquisitions cost the company a total of £34bn (?46bn, $52bn) in 2008, for the earlier acquisition of AmBev-Interbrew the company had to shell out £7.5bn (?10bn, $11.5bn) in 2004.

Regulatory hurdles

Agreeing on the sale price will not be the only difficult task. Given the global presence both the companies have, they will have to get regulatory clearances from all associated authorities as well. According to a Bloomberg report, SAB Miller will have to exit its various joint ventures. Among them are its JV with Molson Coors Brewing Co, called MillerCoors in the US, a stake in CR Snow in China and a minority stake in French liquor company Groupe Castel.

The acquisition of SABMiller will be crucial for Anheuser InBev as it looks to spread its reach to emerging and growing markets from the already established and somewhat declining ones. SABMiller dominates the beer industry in Africa and Latin America with over 30% of its revenues coming from there led mainly by South Africa in the last fiscal year. Anheuser-Busch InBev, on the other hand, has negligible footprint in a market like Africa, and this acquisition could drive that growth. Sanford C Bernstein analyst Trevor Stirling in an interview to the Wall Street Journal commenting on a possible deal said: "By acquiring SABMiller, Anheuser-Busch InBev would be buying growth in Latin America and in Africa and buying the opportunity to take a lot of cost out of SAB's back office operations."


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SABMiller has taste for stronger offer

Shares of SABMiller have been depressed in recent months

Source: The Times
Dominic Walsh
September 28 2015

SABMiller will put pressure on Anheuser-Busch InBev this week to lift its estimated £42-a-share offer if it wants to secure a recommendation from the Peroni and Grolsch maker's board.

The figure indicated by AB InBev would value its rival at £68 billion, or about £75 billion including debt, but the SABMiller board is believed to be pushing for a price of at least £45 a share.

There had been suggestions that the world's biggest brewer might make a statement today confirming the price that it had put forward. However, it looks likely to hold fire pending further discussions.

Shares of SABMiller have been depressed in recent months amid tough trading conditions in several markets and some analysts believe that is why AB InBev chose to pounce now. The day before its approach was revealed, the shares were at about £30, but they had been at £37.87 as recently as March.

Shares of SABMiller frothed 84½p higher on Friday to £35.88 amid rumours that the two sides had made contact and were discussing a possible agreed deal.

It is nearly two weeks since the Budweiser and Beck's maker brought more than five years of speculation to a head by confirming that it had made an approach "regarding a combination of the two companies".

From the beginning, it has made clear its desire to avoid the notion that its intentions are hostile, declaring that it wants "to work with SABMiller's board toward a recommended transaction".

However tough a stance the board might wish to adopt, the outcome will probably depend on the attitude of the group's two biggest shareholders, who between them hold 41 per cent of the shares. Both Altria, the tobacco group that has a 27 per cent stake, and the Santo Domingo family, of Colombia, with 14 per cent, are believed to be open to the idea of a takeover at a suitable premium. For tax reasons, the two investors are also tipped to favour a significant paper element.

AB InBev, which has been given a deadline of October 14 to "put up or shut up", is being advised by Lazard. The SABMiller defence line-up comprises Robey Warshaw, Goldman Sachs, JP Morgan Cazenove and Morgan Stanley.

Many of the world's other big brewers are watching events closely because the resultant $330 billion brewing giant almost certainly would have to dispose of SABMiller's assets in the United States and China to avoid competition problems.

None of the parties involved would comment.


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Altria to Play Key Role in Brewer Talks

Tobacco giant is a third player affected by the proposed AB InBev-SABMiller deal

Source: WSJ
By Tripp Mickle
Sept. 25, 2015

Anheuser-Busch InBev NV's ability to strike a deal for SABMiller PLC could rise or fall on whether AB InBev is willing to give a third player-tobacco giant Altria Group Inc. -a big enough stake and enough power to meet its earnings target and keep shareholders happy.

Altria, based in Richmond, Va., owns a 27% stake in SABMiller, which it got in 2002 by selling Miller Brewing Co. to South African Breweries PLC. It has three seats on SABMiller's 16-person board, one of which is held by former Philip Morris chief Geoffrey Bible, who is likely to play an active role in the AB InBev-SABMiller talks.

AB InBev on Sept. 16 said it had approached SABMiller about combining the two companies. It has until Oct. 14 to put an offer on the table.

Altria, which makes Marlboro cigarettes, is SABMiller's largest shareholder.

The ability of Altria to meet its earnings targets depends on the size of the stake it gets in the newly combined company, according to Wall Street analysts. That is because of the way it accounts for SABMiller on its financial statements, according to RBC Capital Markets analyst Nik Modi. Because Altria's stake in SABMiller exceeds 20% and the tobacco company has multiple seats on SABMiller's board, Altria is able to report its share of SABMiller profits as earnings under the so-called equity accounting methods.

Currently SABMiller contributes at least a third of the 7%-to-9% annual earnings growth Altria has delivered since 2008, according to Mr. Modi, a performance he says is "sacrosanct" to management and shareholders.

To continue to use the same accounting method, Altria would need enough equity and board seats to show significant influence over operating and financial policies of the combined brewer, an accounting expert familiar with Financial Accounting Standards Board practices said. The expert added that if Altria failed to show influence, then it would have to use so-called fair value accounting that would show only the market value of its stake in a combined brewer.

Mr. Modi said that accounting for SABMiller that way would factor into the company's balance sheet but not its income statement, so it wouldn't help Altria hit its earnings goal.

Altria declined to comment on negotiations. A spokeswoman said that SABMiller has been an important contributor to the company's earnings growth. AB InBev also declined to comment on talks.

Altria is likely to make complicated negotiations even more complex. Through a network of holding companies, a group of Brazilian and Belgian families owns shares representing 52% of AB InBev's voting rights. A push for equity by Altria could require the families give up some of their stake in a combined brewer or issue additional shares, which AB InBev did in 2008 to raise as much as $8 billion for its $52 billion takeover of Anheuser-Busch.

A push by Altria for board seats could also require AB InBev to revamp its 14-member board. Currently, it has four independent board members and eight who represent the Belgian and Brazilian families. Two more are nonexecutive board members added as part of AB InBev's acquisition of Grupo Modelo in 2013.

Since selling Miller Brewing for $5.6 billion in 2002, Altria has watched the value of its stake in SABMiller swell to more than $20 billion. The beer business has helped Altria diversify its balance sheet at a time when volumes in its core cigarette business have been declining. Between 2009 and 2014, earnings from its investment in SABMiller increased at an 11% compound annual growth rate. Last year, the SABMiller stake contributed $1 billion to its $7.7 billion in pretax earnings.

Cowen & Co. analyst Vivien Azer said SABMiller's performance has helped Altria manage prices on Marlboro, the top-selling cigarette in the U.S. When SABMiller has "strong growth," she said Altria limits price increases, and that helps moderate the pace at which Marlboro volumes shrink.

But earnings from SABMiller fell 15.5% to $359 million through June 30 from $425 million over the first six months of 2014. The brewer has been battling economic slowdowns in many emerging markets, weakening foreign currencies and lower demand for mass-market beer.

A combined AB InBev and SABMiller would have about a 30% share of global beer volumes before divestitures. It would have market-leading positions in many parts of Latin America, Africa and the U.S. AB InBev would likely have to divest SABMiller's stake in the U.S. joint venture, MillerCoors, but it would still lead the market with a 45% share of total volumes.


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Beer drinkers should be feeling queasy at the creation of a monster brewer

Source: The Times
Ian King, Business Editor
September 28 2015

There were plenty of shoulders shrugged in the City two weeks ago when AB InBev, the world's biggest brewer, confirmed that it would make a takeover approach to SABMiller, its biggest rival.

A takeover is inevitable, the argument ran. This is a deal with overwhelming industrial logic that AB InBev has planned for years.

But it doesn't have to be inevitable. And there are many reasons to hope that it isn't.

First, there is the industry trend. Drinkers in mature markets, such as Britain, the United States, the Continent and Australia, are increasingly shunning mass-produced lagers, including Stella Artois and Budweiser, poured out on an industrial scale by AB InBev. They are switching to beers with taste, character and provenance. While, ostensibly, SABMiller is another churner-out of mass-selling lagers such as Miller, it owns more than 200 beer brands globally, many of which sell only in their local markets.

So SABMiller is tuned to the beer zeitgeist. That is no surprise: it is run by people who know the processes involved inside out, who know one hop variety from another and who are passionate about beer. People such as the late, great Graham Mackay, the tough but avuncular chief executive under whom it was transformed from a regional player, deriving 95 per cent of its sales in southern Africa, into a global powerhouse.

By contrast, it is hard to believe that Carlos Brito, the chief executive of AB InBev, would recognise a hop if he stepped on one. He and his colleagues are hard-driving number-crunchers, brilliant at what they do, which is aggressively cutting costs and boosting margins.

That management culture is utterly at odds with SABMiller's business model. Those local brands lovingly built up over many years, such as the Hungarian favourite Kobányai Sör and the Panamanian tipple Balboa, would have their marketing budgets slashed and their distribution channels given over to the purpose of flogging more Bud Light around the world.

Investment in developing new beers, as SABMiller did when it bought Pilsner Urquell, the Czech lager, would become secondary to wringing out economies of scale and peddling more Stella. The value built up in smaller beer brands over the years by Mr Mackay and his colleagues, including Alan Clark, the present chief executive, would be sprayed up against the wall.

For AB InBev, cost-cutting will always take priority over nurturing good beer brands. Hidden at the back of its drinks cabinet, behind bland rubbish like Corona, is Bass Ale, once the world's bestselling beer. When Interbrew, one of the companies from which AB InBev emerged, acquired Bass Brewers in 2000, competition authorities made it divest part of the business, which went to Coors.

The latter went on to prove that American purveyors of mass lagers were not necessarily poor owners of ale brands, successfully relaunching the long-forgotten Worthington White Shield and acquiring and growing Doom Bar, the Cornish beer.

Bass, unfortunately, remained with Interbrew and has since largely vanished. The beer whose name and red triangle logo was the world's first trademark is increasingly hard to find - a scandalous atrophying of a great brand whose time has surely come again.

Boddingtons, another great British beer, has similarly languished under AB InBev's ownership. In an era during which provenance is of growing import in food and drink, AB InBev has eroded the brand equity of both: just as Bass is no longer brewed in Burton-on-Trent, whose water gave it its unique taste, Boddingtons is no longer brewed in Manchester and Boddies has not been advertised on British television since 2005.

Nor have such antics been confined to Britain. A decade ago, InBev ran into a storm in Belgium when it announced plans to shut its brewery in Hoegaarden, home to the famous wheat beer. It backed down.

Rumours have circulated for years that it has even cut spending on brewing ingredients: in a 2012 article, The Plot to Destroy America's Beer, Businessweek cited a former top AB InBev executive by reporting: "The company saved about $55 million a year substituting cheaper hops in Budweiser and other US beers for more expensive ones."

There are other reasons to argue that bigger is not always better. The financial crisis proved that some of the world's banks were too big and too complicated to manage. The catastrophe now engulfing Volkswagen suggests that businesses in other industries are similarly too sprawling and complex.

On that basis, although there might be few competition issues preventing ABI buying SABMiller - apart from the United States, where the latter's existing operations would probably have to be divested - many should be feeling queasy at the creation of a monster brewer accounting for one in every three pints chugged globally. Beer might appear to be a rather more straightforward business than banking, but, until the revelations of VW's "defeat devices", so did carmaking.

Of course, shareholders will reach a decision on financial grounds. Should Altria, the American tobacco group that owns 27 per cent of SABMiller, accept AB InBev's terms, it will probably be game over. But in Jan du Plessis, SABMiller has one of the hardest chairmen around, who, as chairman of Rio Tinto, last year saw off the advances of Glencore's Ivan Glasenberg, another South African fighter, with little difficulty.

Subsequent events proved Mr du Plessis right. Beer drinkers must hope that he can pull off another successful defence.


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Nomura BEVERAGES

Source: Nomura
September 28, 2015

SABMiller
Buy, TP 4000p, Magnificent Mundy

Times suggesting £42 a share, but higher bid could be possible. Times this morning indicating that ABI has tabled a bid of £42 a share (GBP 68bn equity value, GBP 75bn EV) but SABMiller board are pushing for a price £45. The Sunday Times wrote that "friendly" talks have been initiated and whilst SABMiller is playing hardball, it is not unreceptive to a deal. We would expect SABMiller's chairman Jan du Plessis to push for as high a price as possible, but struggle to identify an obvious white knight for SABMiller. We see a high probability of the deal getting done but would not expect a hostile approach - remember, Altria have been brought over the wall ahead of the approach to SABMiller, therefore it would appear that ABI has the support of SABMiller's largest shareholder (27% stake in the business).

Valuation
£42 would imply an ev to ebitda of 17.4x falling to 13.4x after synergies (our estimate is USD 2bn). It would represent a premium of 36% vs the 30-day average share price (£30.82) prior to recent market speculation and a 9% premium to the SABMiller all-time high.
£45 would imply an ev to ebitda of 18.5x falling to 14.2x after synergies. It would represent a premium of 46% vs the 30-day average share price (£30.82) prior to recent market speculation and a 17% premium to the SABMiller all-time high.

ABI read-across
Very difficult to comment on degree of accretion/dilution before further details around financing (split between debt and equity) are known. An all cash deal at £42 a share (assuming disposals of USA and China) would be 15% accretive by year 3 whereas a split of 50/50 debt equity would be 1% accretive.

Timing
ABI must either announce a firm intention to make an offer for SABMiller or announce that it does not intend to make an offer by not later than 5pm on 14 October. We would highlight that this deadline can be extended if both sides agree.


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Constellation Brands (STZ): Expect another solid quarter against a high beer bar; Buy

Source: Goldman Sachs
September 28th

INVESTMENT LIST MEMBERSHIP: Americas Buy List
COVERAGE VIEW: NEUTRAL

What's changed
We maintain our Buy rating on STZ and raise our FY16/FY17/FY18 estimates by 1-2% to $5.07/$6.04/$7.04 ahead of 2QFY16 EPS on October 7. Our estimate for 2QFY16 of $1.31 is in line with consensus. While we believe expectations have been rebased higher based on positive beer scanner data, we do expect STZ to be able to deliver solid fundamental results and again raise guidance for the full year (FY16 EPS guidance is $4.80-$5.00). In addition, we see potential for STZ to outline the next round of brewery expansion, which we now incorporate in our FY17-FY19 capex forecast.

Implications
Raising beer sales growth reflecting recent scanner data - We raise our STZ beer depletions estimate for 2QFY16 to 12% from 10% and our FY16 depletion growth estimate to 10.8% from 9.6%. Nielsen data shows STZ beer sales growth of 17% for the 12 weeks ended 9/5/15, accelerating from 15% during the prior 12-week period.

Incorporating Meiomi acquisition in wine/spirits - We include $6mn in sales/$2mn in EBIT to 2QFY16 and $46mn in sales/$17mn in EBIT from Meiomi (closed on August 3).
Expect a formal announcement on Brewery No. 2 - We see potential for STZ to formally announce its plans to build a new brewery in the western part of Mexico. We estimate total capex of $750bn to add 5mn HL of additional capacity from FY17 to FY19. While this delays the timing of $1bn-plus FCF generation, the new brewery could drive even better margins over time in freight cost savings.

Valuation
We raise our 12-month price-target to $142 from $137, based on 12-24 month P/E (24x) and EV/EBITDA (14.5x, from 14x), on increased visibility on volume growth and higher estimates.

Key risks
Slowdown in volume, weaker margin, dilutive acquisition.


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STZ 2Q16 EPS Preview

Source: The Cowen Insight
September 28th

STZ reports fiscal 2Q16 earnings on Wednesday, Oct. 7. Conference call at 10:30 AM ET; Dial-in: 973-935-8505. We are raising our EPS estimate by 7 cents, to $1.31 to reflect higher growth in STZ's beer segment (and to a lesser extent, their wine and spirits segment), putting us in line with consensus. We continue to expect STZ's beer portfolio to drive total company growth.

Fiscal 2Q16 Expectations
After raising our 2Q16 EPS estimate, we now expect STZ to deliver EPS of $1.31 (+18.3%), which is in line with consensus. We forecast total company revenue growth of 10.1% to be driven by beer growth of 15.0%, while net sales in STZ's wine and spirits segment is expected to increase by 4.0%. We are modeling operating margin expansion of 50 bps, driven almost entirely by the company's beer segment. Operating income growth of 16.9% in beer and 4.4% in wine and spirits should result in total company operating income growth of 12.2% for the quarter.

FY16 Outlook
With the competitive landscape heating up, despite this relative outperformance, we suspect STZ could opt to hold their FY16 guidance unchanged. As a reminder, STZ is currently targeting EPS of $4.80-$5.00, 10% net sales growth in beer and LSD-MSD net sales growth in wine and spirits. STZ is also guiding for beer operating income growth of 13-15% and ~100 bps of operating margin expansion (to 33%). STZ's wine and spirits segment is expected to grow operating income LSD-MSD, with little, to no margin expansion. Management is also guiding for total operating cash flow of $1,150-$1,350 mm, total capex of $1,050-$1,150 mm and total free cash flow of $100-200 mm.

Beer Trends
Total Company. We continue to expect beer to drive total company growth, and recent trends have looked impressive in Nielsen tracked channels. Over the past 3 months, total company dollar sales have grown an average 15.1% on a trailing 12-week basis. What is more, growth has accelerated over the past 2 months, with the company posting +16.6% in the latest period.

Corona. Looking at the composition of total company growth, we have been encouraged by the accelerating growth seen in flagship brand Corona Extra, driven by the relaunch of cans. Over the past 3 months, the brand has averaged 13.2% growth in Nielsen tracked channels on a trailing 12-week basis, accelerating to 14.6% in the most recent month. At the Back to School Conference, management indicated that although Corona is considered almost fully distributed with an 80% ACV, they see further opportunity for growth by gaining shelf space using different pack sizes (18-packs). In addition, with less than 3% total consumption coming from cans, STZ believes this represents a notable growth opportunity for the brand.

Modelo. Sales growth for STZ's other key brand, Modelo Especial has been showing an improvement after 3 consecutive months of decelerating growth in Nielsen tracked channels (trailing 12-week). To be sure, this brand remains a growth driver for the company, with sales growth in the mid-20% range. Over the past 3 months, Modelo Especial has grown 23.4% and management continues to see ample whitespace opportunity with the brand going forward, including trying to build the brand's success with Hispanics (~60% of consumers).

Wine Trends
STZ's wine portfolio continues to lose share in Nielsen-tracked channels (STZ has posted 16 consecutive months of dollar share declines), although we have been seeing an improvement in dollar sales growth. While continuing to underperform the total category, STZ's wine portfolio has reported accelerating dollar sales growth for 3 consecutive months and averaged 4.7% growth over that time frame. We are expecting the segment to deliver LSD sales growth for the quarter.

Estimate Changes
After revising our 2Q16 EPS estimates (to $1.31), we flow through the raise to FY16. As a result, we are now expecting EPS of $5.00 for FY16, which is at the high end of management's guided range. We continue to value the company at 24x FY17 EPS. As we keep our FY17 EPS estimate unchanged at $5.51, we maintain our $132 PT and Market Perform rating on the stock.


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Move over craft beer, single-estate spirits aim to be the next drinks trend

Demand for all things "craft" and local has stretched beyond beer into spirits, offering an opportunity to build a more sustainable industry

Source: The Guardian
Amy Hopkins
28 September 2015

Stretching 2,000-acres to the beautiful Lunan Bay, Arbikie Highland Estate is an arable farm producing crops including potatoes, wheat, barley and rapeseed.

For four generations, the Stirling family has been farming this land, which is currently under the stewardship of brothers David, Iain and John. Having carved out careers in the alcohol, restaurant and financial sectors, the three returned to Arbikie last year to open what has been touted as Scotland's first single-estate distillery.

While not officially defined by the industry, single-estate spirits - also known as "farm to bottle" spirits - are generally understood to be products created using most, if not all, ingredients sourced from a single area of land. The brands producing such spirits are unique in their decision not to use neutral grain spirit (NGS) to bump up volume - a regular occurrence at both large and small distilleries.

NGS is made using grains such as wheat, corn, rye and sugarcane that producers buy in bulk to then redistill, as opposed to distilling all of their base ingredients from scratch, a much more expensive proposition. NGS is used by big distilleries to maintain volume, and by small distilleries to keep costs down and enable them to scale-up production quickly should demand take off.

Single estate distilleries, on the other hand, conduct almost all stages of production on site, including growing, fermenting, malting, distilling, maturing, bottling and labelling.

"We could buy neutral grain spirit in for about 50p, but instead we distill from scratch for about £4 a litre," says James Chase, marketing director and founding family member of Herefordshire-based Chase Distillery, which claims to be the UK's first single-estate distillery, having opened in 2008.

The craft craze spreads

These distilleries represent an emerging category that focuses on provenance, a concept traditionally associated with wine.

"We treat our potatoes in the same way winemakers treat their grapes, noting the aspects of each variety and the vintage," says David Stirling, brand director at Arbikie Highland Estate.

"Historically, consumers didn't really care about where their spirits came from, but the good food craze has prompted people to question the origins of these products," believes Chase.

Producers such as Arbikie and Chase largely credit their success to the ubiquitous craft movement, which has taken the drinks scene by storm in recent years. Soaring consumer interest in locally sourced products from small, independent companies has filtered down from food and beer into spirits. Indeed, the number of applications for distillery licenses in the UK has trebled over the last year alone as entrepreneurs seek to capitalise on demand for boutique bottlings.

Sustainable spirits

As shoppers become more curious about the origins of their drinks, and as corporate and social responsibility policies increasingly dominate business discussions, distillers large and small are exploring how to make their supply chains more sustainable.

In 2008, UK drinks giant Diageo outlined a number of targets to improve its environmental impacts - addressing water use, waste and carbon emissions - and is currently building a £65m bioenergy plant at its Cameronbridge Distillery. Bacardi, one of the most vocal innovators in sustainable spirits production, recently opened a 100-acre blending and packaging facility for its John Dewar & Sons Scotch whisky arm. It features a drainage system that recirculates rainwater to a retention pond and provides wetlands for wildlife. Meanwhile, Absolut Vodka has created a hub made out of recycled transport containers in which designers and engineers are invited to develop sustainable packaging solutions.

However, shortfalls in meeting bold sustainability targets can be steep. Diageo failed to meet all but one of its sustainability commitments, only cutting wastewater pollution by 3.1%, against a 60% target. The distiller and its rival Pernod Ricard have also both been criticised by the Scottish Environment Protection Agency for over-abstracting water in 2013.

While large distillers are able to invest millions of pounds in making their businesses more sustainable, farm to bottle distilleries demonstrate this in the control they have over each stage of production. They claim that their decision not to use NGS, which is imported from all over the world, gives them greater accountability with regards to how their operations impact the environment.

"If these initial processes are left up to other people, how can you guarantee they are sustainable?" asks James Chase.

The potential for farm to bottle spirits to enhance the value and premium position of a range has not gone unnoticed by multinationals. After announcing a write-down of its Absolut vodka brand earlier this year, Pernod Ricard is focused on promoting super-premium brand extension Absolut Elyx - said to be made from single-estate wheat. Meanwhile, as sales of its core rum brand plummet, Bacardi launched the Single Cane Estate Rums range earlier this year. There is currently no widely used certification system for "single estate", leading to a diverse array of products and distilleries that market themselves in this way.

Debate has been raging in the spirits industry for some time over what has been seen by many as an appropriation of the "craft" label by heavyweight companies that want to monopolise the market. Arguably the same could now be said to be happening to small single-estate producers.

"I certainly feel that the larger companies will either buy small, genuine craft brands or look to create fictions and back stories for their own labels," says Will Borrell, founder of Vestal Vodka, described as a "single-village" Polish potato vodka due to the close proximity of its production stages. "This has the potential to damage the craft movement and I think they will see single estate as another badge. I say these people should be happy driving their Ferraris and leave us craft producers with our tractors."


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The social CEO: Pernod Ricard chief Alexandre Ricard to leave his mark on social to unify corporate and consumer branding

Source: The Drum
September 28, 2015

Chief executives are turning to social media more than ever and Pernod Ricard's is no different, with Alexandre Ricard looking to the medium to help align its corporate and consumer brands.

"Corporate brands are boring," says the drinks maker's communications director Olivier Cavil. "A corporate brand is as important as a marketing brand because for the 18,000 staff that work at Pernod Ricard we want them to feel happy and proud to work for the business".

It's one of three main reasons - communication, reputation and business results - why the marketer wants his chief executive to leave his mark in the social space at a time when business leaders are increasingly taking the lead when it comes to fronting corporate marketing. Given the importance of social transparency and direct relationships with consumers now, the business is being careful with how it manoeuvres Ricard to the fore, with initial efforts focused on Facebook and LinkedIn.

On Facebook, Pernod Ricard plans for its chief to have his own page that will push posts out to the group's wider one, documenting moments he thinks are worth sharing or responses to pertinent news stories. "He could share a visit to a bar that he thinks is really cool but is disappointed that they don't stock any Pernod Ricard brands. This won't be a communications department sending messages on behalf of Alexandre, we're really developing this and he's the figurehead," said Cavil.

It won't just be one-way traffic on the social network either. Plans are underway to have Ricard take part in Q&As with both employees and potential candidates. At its essence, the plan is to use the social network as a way to give him additional insights that could help him make big calls when it comes to certain strategic decisions around marketing and recruitment.

Pernod Ricard tested people's reaction to Alexandre online when it ran Operation #MeetAlex on LinkedIn and Twitter last month. With over 130,000 followers on LinkedIn, the company offered seven followers - one from each continent - the chance to visit its headquarters and meet Alexandre if they were able to correctly answer 10 questions about its operations. The randomly selected seven were then flown out and hosted in Paris for a few days, which culminated in them having the chance to ask the chief executive anything during an intimate chat. On the night (see below), topics ranged from Ricard's plans for specific markets to his thoughts on whether there were categories he felt the business need more of a presence.

The event was filmed and could be the first of many if Cavil thinks people like it enough - several thousand people applied to the competition, the company claimed. "This isn't really a strategy yet," cautioned Cavil.

"We're just at the beginning of this shift. We were very surprised by the number of people who applied but at the end of the day, my KPI is whether people think the concept was cool and they believe it's a chief executive wanting to interact with people rather than a communication trick. If that does happen, step two of this process will see us continue that direct relationship through Facebook and LinkedIn."

Ricard, who has set the company's agenda to get closer to people by tapping their digital behaviours, is part of a growing number of social chief executives. As of 2015 the number of chief executives of the world's top 50 companies on social media is still low at 28 per cent, according to Weber Shandwick's 'Socialising your CEO' audit. However, eight in 10 are now engaged online and via social media - a rate which has more than doubled since the audit started in 2010. The most popular social networks used by company bosses are LinkedIn (22 per cent) and Twitter (10 per cent), according to the study.

A stronger social media presence also chimes with Alexandre's bid to be a more consumer-focused business; meaning eventually it will be able to put a Pernod Ricard brand in any consumption occasion for consumers, whether it's partying, relaxing or after-work drinks. The business has been through major structural upheaval to be leaner over the last two years as it looks to unearth new opportunities in Eastern markets where India is fast emerging as ripe for growth, while coming up with ways to overcome slow growth in the US and China.


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Vijay Mallya wants to remain USL chairman

Even as global spirits major Diageo, which holds a majority stake in India's largest spirits company United Spirits ...

Source: Financial Express
By: Mahesh Kulkarni
September 29, 2015

Even as global spirits major Diageo, which holds a majority stake in India's largest spirits company United Spirits (USL), is trying to get chairman Vijay Mallya resign from the board, Mallya on Monday said he would continue to chair it.

"I still hold a significant portion of stake in USL and will chair the forthcoming AGM of the company," Mallya told shareholders at the annual general meeting of United Breweries Holdings Limited (UBHL). Mallya, through his group companies holds 4.09% in USL, while in his individual capacity he owns only a 0.01% stake. Diageo holds a majority stake of 54.78% in the company.

Speaking at the AGM of UBHL, here on Monday, Mallya did not specify when the AGM of USL will be held. The company is yet to file its annual report with the stock exchanges. Mallya said he would also settle cases pertaining to UBHL by end of the current financial year.

He also clarified that the company would soon appoint a new managing director and chief financial officer for UBHL. Both the positions are currently lying vacant. "We have shortlisted a few candidates for the post of CFO and will finalise in a month or thereafter. Also, the managing director position will be filled shortly," he said.

It may be recalled that in April this year Diageo had asked Mallya to resign from the USL board following allegations of fund diversion from USL to UB Group entities. Mallya had outrightly rejected their demand for his resignation.

Diageo had made the demand at an emergency board meeting on April 25, 2015. The meeting was called to discuss a Pricewater-houseCoopers (PwC) report on allegations of fund diversion worth R3,000 crore from USL by the previous management, led by Mallya, who is the current chairman.

According to a deal with Diageo in November 2012, Mallya was to continue as USL chairman for the next five years. Later, in a statement, United Spirits said its board had lost confidence in Mallya continuing in his role as a director and chairman and therefore the board had asked Mallya to resign forthwith as a director and chairman of the board.

The auditor of UBHL has raised concerns over R8,707 crore of corporate guarantees extended by the holding company to the lenders of Kingfisher Airlines. Auditors Vishnu Ram & Co had also warned that the liabilities of UB

Holdings will rise by R7,730 crore because it has not accounted for several disputed liabilities of the company in its accounts.

When a shareholder pointed out the absence of his son and director Sidhartha V Mallya at the AGM and board meetings and raised doubts over his performance as director, Mallya replied that he himself is still fit and fine.

Sidhartha Mallya, who has completed his term as director, is seeking re-election on the board of UBHL.


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Asahi buys Mountain Goat Beer

Source: TheShout
By Andy Young
28/09/2015

Mountain Goat Beer has today announced that Asahi Holdings (Australia) has taken a "100 per cent ownership stake" in the craft brewer.

In a statement owners Cam Hines and Dave Bonighton said: "Over the past 18 years we've been on a determined exploration of good beer. A lot has changed since 1997. Back then we knew that Australian beer lovers deserved more than just bland, yellow fizzy lager, but it was so difficult to find. It's the very reason we started the brewery.

"We are so proud that our loyal supporters believed in us and proved us right, and we're genuinely excited about how the Australian craft beer scene is growing.

"We've been contract partners with Asahi for three years now, and with their expert help our beer has grown in demand, expanded nationally, and found a special place with beer lovers. We are confident that with Asahi on board, we will be able to convert many more people to craft beer than we could do on our own."

The pair went on to say that they will stay part of Mountain Goat Beer.

The statement added: "We're sticking around. We want to ensure focus remains on the beer: on its quality of course, but also to continue to innovate and collaborate with other passionate members of the craft beer community. This was a key aspect of the sale for both sides.

"Mountain Goat will continue to operate as a stand-alone business. Our brewers will continue to brew beer in Richmond, and the bar will remain open Wed & Fri nights as usual."


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Kirin to bolster Japan beer operations, pursue 'craft beers'

Source: Japan Times
Sep 27, 2015

Kirin Holdings Co. plans to concentrate more on its beer business in part by making craft beers, President Yoshinori Isozaki said in a recent interview about the beverage giant's new medium-term business plan starting in 2016.

The new business plan will call for reinvigorating the group's domestic alcoholic beverage operations by bolstering the beer business, which is showing signs of recovery, Isozaki said.

"If Kirin Brewery Co. perks up, the whole group will become vigorous," he said.

Kirin has been enthusiastic about buying foreign companies, and its current medium-term business plan focuses on growing those acquisitions.

While the domestic beer and quasi-beer sectors are unlikely to expand due to the nation's aging population and declining birth rate, Isozaki said Kirin will "offer a wider variety of tastes as consumers want their individuality."

As part of this strategy, he indicated the beverage giant will develop "craft beer products" to address changes in consumer preferences.

Isozaki said that if the company can control marketing costs, which he put at about 10 percent of sales, it can make a profit, though stiffer competition will increase the costs.

Kirin is apparently gearing up to boost profitability by increasing its brand value and avoiding a price war.

Meanwhile, under the new business plan, Kirin will deepen cooperation on research and development within its corporate group to create synergy among its alcohol and soft drink operations and pharmaceutical and biochemical operations, which are led by Kyowa Hakko Kirin Co., Isozaki said.

Kirin also will consider ways to gather researchers to develop new businesses, he said.


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Value growth outpacing volume for global travel retail

Source: The IWSR
29 September

The value of the global travel-retail market for wine and spirits, excluding still light wine and mixed drinks, grew 7.7% in 2014 versus 2013, to almost $9bn, according the IWSR Duty Free/Travel Retail Summary Report 2015.
Volume sales grew at a slower pace of 2% in 2014; an improvement, however, when compared with 0.9% growth in 2013. Including mixed drinks, the total market grew 1.8% to 30.2m cases against an increase of 0.8% in 2013.

In Africa and the Middle East, the fastest-growing region in 2014, volume sales grew 9% and value sales 16.2%.

Market share is much more evenly spread between the three largest regional markets when measured on value sales rather than volume sales. In 2014, Europe accounted for 37.4% of the travel-retail wines and spirits market by value, excluding still light wine and mixed drinks, compared with 31.3% for Asia-Pacific and 21.8% for the Americas. In volume terms Europe's held 52.7% of the global travel-retail liquor market in 2014.

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


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Great American Beer Festival winners 2015 (Excerpt)

Source: Mercury News
by Jay Brooks
September 28, 2015

On Saturday, September 26, the winners of the 34th Great American Beer Festival were announced. A record 6,647 beers were judged in 92 categories by 242 judges, of which I was again privileged to be one. Here are some more factoids on the results and about this year's festival:

Category with the most entries: American-style IPA: 336 entries
Top 5 Categories: IPA (336 entries); Imperial IPA (208); Wood- & Barrel-Aged Strong Beer (179); Session IPA (161); and American Pale Ale (160)
Average number of competition beers entered in each category: 72
1,552 breweries in the competition from all 50 states, plus Washington, D.C.
38 first-time breweries won medals
4 breweries tied for most medals won, with three apiece; Firestone Walker Brewing, Sun King Brewing, Port City Brewing, and Left Hand Brewing.
750 breweries in the festival hall
Over 3,800 beers served at the festival
60,000 attendees
New Categories This Year: Chili Pepper Beer, Session IPA and Mixed Culture Brett Beer.

Medals Won by State:

California = 67 (46 last year)
Colorado = 36 (39 last year)
Oregon = 19 (22 last year)
Texas = 15 (16 last year)
Washington = 13 (9 last year)

California won a whopping 67 medals this year, 21 more than last year, and 31 more than the nearest state. Of those medals, 3 were from San Francisco breweries, 16 from the Bay Area, and 26 in Northern California. A few of our newer breweries won medals this year, including St, Florian's in Windsor, The Rare Barrel in Berkeley (who won two), Fort Point Brewing in San Francisco, New Bohemia in Santa Cruz, Headlands Brewing in Mill Valley, and Morgan Territory Brewing (the former Schooner's, now renamed as a new production brewery).

Of the seven major awards - three brewpub and brewer of the year and four brewery and brewer of the year, divided by size - four of them were won by California breweries: TAPS Fish House & Brewery in Corona won Mid-Size Brewpub of the Year, Rip Current Brewery of San Marcos won Very Small Brewing Company of the Year, Firestone Walker Brewing Co. of Paso Robles won Mid-Size Brewing Company of the Year and Pabst Brewing Co., headquartered in Los Angeles, won Large Brewing Company of the Year.

http://blogs.mercurynews.com/eat-drink-play/2015/09/28/great-american-beer-festival-winners-2015/


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The biggest new trends in craft beer

Source: Fortune
by Chris Morris
September 27, 2015

Yes, IPAs are still big, but at the Great American Beer Festival, a few new styles are apparent.

The IPA's reign as the king of the Great American Beer Festival - and craft beer in general - is in no danger. But that doesn't mean other styles aren't gaining momentum. There are a few trends that seem to be germinating in Denver that could play out in the months and years to come. Though a little context is important.

It's important to note that the IPA is, at present, unassailable in the craft beer world. Sales of the style account for 27.4% of the overall craft beer market, according to the Brewers Association - a number that's increasing annually, thanks in no small part to the rapid rise of lower-alcohol session IPAs. Hops are the mainstay of craft brewers - with the ingredient finding its way into many styles that previously shied away it, such as wheat and brown ales. And, porters and stouts are a bedrock - though there's a bit more diversity among those than you typically find in IPAs. (There are at least two peanut butter porters on the festival floor at the Colorado Convention Center.)

But beyond those old familiars, a few new styles are seemingly starting to break out.

Lighter tasting ales

One sign of the ongoing evolution of craft tastes can be found in the Great American Beer Festival awards categories. This year, the Brewers Association added several new categories, including chili pepper beers, mixed culture Brett beers, and amber light lagers (a craft take on the well-known macro beers). None of those are hop-forward styles. And that trend of beers that forgo hop explosions seems to be gaining steam.

Beyond lagers, lighter tasting ales - like Pilsners and Kolsch - are being poured all over the festival.

Bart Watson, economist at the Brewers Association, says the combination of Blonde, Kolsch and Golden ales is up nearly 60% this year, and (collectively) now outsell stouts, porters or Belgian ales. Sales of Pilsners, meanwhile, are up 123% year to date.

All of these styles generally are lighter-tasting (but not bland) - and can serve as a gateway for people looking to move on from macro beers from Anheuser Busch or MillerCoors. And craft beer fans can enjoy more at a single sitting thanks to the lower alcohol levels.

Brewers are taking note, too. There are 37 Kolsch beers at this year's show, over 60 blondes and 83 pilsners.

Sour beer is getting popular

Sour beers are plentiful as well this year, which isn't really shocking, seeing as the category has been growing steadily for a while. What is surprising is precisely how popular they are at the festival. Several brewers specializing in sours, such as Rare Barrel, regularly run out of beer long before the night is over. Others, like Upland Brewing Co., have opted to ration their beers, only pouring at hourly intervals.

Sours offer a wide range of brewing options, letting beer makers put a personal stamp on them. People are lining up for a chance to taste Russian River's Supplication. And beers with sour cherry and raspberry flavors seem to be very popular this year. (Prison Brewing Co's Cherry Poppins is a standout.)

Sours are temperamental, though - and can be hard to make. So while they're popular, they're less likely to become a real breakout hit. (It's not impossible, though. Scott Whitley, president and CEO of MillerCoors' Tenth and Blake division, told Fortune he planned to give sours a closer look this year at the show.)

Of course, as you'll find at any beer festival of notable size, there are plenty of one-off beers that may not stand any sort of chance at becoming wide scale releases, but they're hard to resist for craft beer fans that actively seek out new styles.

In perhaps a nod to the trends, though, some of the oddball beers being poured this year, take popular and growing styles and put a unique twist on them - such as the cucumber-basil Kolsch from Horse & Dragon Brewing Co. or Magic Hat's grapefruit intense Electric Peel IPA.


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Damages

Source: Lehrman Beverage Law
by Robert C. Lehrman
September 27, 2015

There are something like two dozen class action lawsuits floating around, against beer and spirits companies. Many are in the early stages. But information is starting to accumulate about the damages and fees at issue. For example, the Templeton Rye case is already settled, with about $750,000 in attorney fees going to the plaintiffs. The Maker's Mark and Jim Beam cases are done, with nothing going to the plaintiffs. The Kirin beer case is wrapped up with $1 million in attorney fees going to the plaintiffs.

To get more visibility, about where all this may be headed, I looked beyond the alcohol beverage cases, to food labeling cases more generally. There are a lot of them. It turns out, there are so many, that they have provoked not only a blog, but also a study from The Brookings Institution, about a serious problem with a proliferation of suits about "natural," "nutritious," and "wholesome." The Brookings study is of particular interest to me, not just due to the timely subject, but because I worked there briefly after college as a low level researcher. While researching for Stephen Hess, I sat with such (now) luminaries as Gary Mucciaroni and Robert Katzmann (when they were probably in their twenties).

Nicole Negowetti, a professor at Valparaiso University Law School, surveyed the situation in "Food Labeling Litigation: Exposing Gaps in the FDA's Resources and Regulatory Authority," published in 2014. She tracked down the damages as shown in the table below.

The Activia case in 2010 really got things going, with big damages. Between then and 2014, something like 150 or more similar cases got filed. She explains:

The majority of these cases have been filed in the U.S. District Court for the Northern District of California, now referred to as the "Food Court." This surge in lawsuit filings has led some legal commentators to suggest that "food is replacing tobacco as the new regulatory and class action target." This "unprecedented surge"of deceptive labeling and advertising lawsuits against the makers of products such as Naked Juice, Fruit Roll-Ups, Bear Naked Granola, and Wesson Oil, reveals a trend of regulation by litigation-that is, a turning over of food labeling issues to the courts in light of a lax regulatory system.

The government has been defanged so much that FDA has all but quit policing food labels. She points out that FDA can't even or won't even define "natural," let alone enforce against most abuses. She also points out that, if you think rulemaking is expensive, wait until you see the cost of all these suits, passed along to you, dear consumer.

See more at: http://www.bevlaw.com/bevlog/#sthash.iwUgjtxl.dpuf


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Few college students get alcohol advice from doctors

Government researchers say "deplorably" few college students are warned by doctors about dangers from alcohol and drugs or encouraged to cut down or abstain, according to a study published Monday in JAMA Pediatrics.

Source: The Columbian
By LINDSEY TANNER, Associated Press
September 28, 2015

Government researchers say "deplorably" few college students are warned by doctors about the danger from alcohol and drugs or encouraged to reduce drinking or substance use.

Their survey suggests that most doctors ask college students and other young adults about alcohol or drug use at regularly scheduled visits. But doctors don't go much beyond that initial question less than half of the time.

The study by National Institutes of Health researchers was published Monday in JAMA Pediatrics. Some highlights about the findings:

. THE SURVEY.

About 2,100 college students and other young adults across the country were asked in 2012 and 2013 if they'd seen a doctor in the previous year and had been asked and counseled about their drinking, smoking and drug use.

. DOCTORS & COUNSELING.

Most of those surveyed had a recent doctor visit where they were asked about smoking, drinking and substance abuse. Fewer than half the college students said they'd been counseled about risks of those habits. Only one-third of college students who told researchers they'd been drunk at least six times in the previous month said doctors had advised them to cut down or stop. That advice was slightly less common for college students who were frequent smokers or drug users.

. DRINKING STATS.

Overall, 40 percent of participants told researchers they'd consumed five or more drinks on at least one occasion and 10 percent had been drunk at least six times in the past month.

According to the National Institute on Alcohol Abuse and Alcoholism, alcohol is linked with nearly 2,000 deaths each year among college students, and many more assaults and date rapes.


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The truth about red wine's health benefits (Excerpt)

Source: Vox
by Julia Belluz
September 28, 2015

Health journalism is often filled with conflicting and confusing claims. And there may be no better example of this befuddlement than in the reporting around red wine. One day, a story emerges saying red wine is good for you. The next day, it's bad. The next day, it's good again.

http://www.vox.com/2015/9/28/9408159/red-wine-alcohol-health-benefits


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Italy wine harvest 2015 looking good, say producers

Source: Decanter
Panos Kakaviatos
September 28, 2015

Winemakers across Italy appear confident about the 2015 wine harvest, despite a summer heatwave that forced some to use emergency irrigation.

The Unione Italiana Vini, which represents wine producers throughout Italy, reported 'more or less negligible' disease thanks to a 'favourable climate throughout the season', but reported 'among highest July temperatures' in the last few years.

An absence of rainfall also burned or dehydrated bunches in some vineyards, 'requiring emergency irrigation operations.'

At Castello di Fonterutoli in Chianti, where the 2015 wine harvest is expected to end in two weeks, co-owner Marchese Francesco Mazzei said three weeks of heat provoked a halt to the vegetative cycle of his Sangiovese vines, but the sun and relieving rain at the end of August and September improved things.

'We still have a couple of weeks to go. but it looks to be like a pretty good vintage,' said Mazzei of the harvest, which started on 7 September.

Irrigation equipment was seen along slopes of vineyards in the northern region of Trentino, which produces nearly 75% white wine.

Annual rainfall is typically about 1,000mm, but it was only about 400mm in 2015, with July temperatures reaching up to 40?C (104?F), said Matthias Clementi, winemaker at Villa Corniole in Verla, although he reported very few cases of rot.

Clementi added that the cooler September nights helped retain freshness in his Müller Thurgau grapes, so 'it will not be like 2003.'

Domenico Zonin, Chief Executive Officer of Casa Vinicola Zonin S.p.A, said that his Syrah and Nero d'Avola in Sicily are of very good quality, with good concentration as well as freshness, thanks to the cooler September.

Based on a survey of wine producers from end August until first week of September, the Unione Italiana Vini reported a production of 47m hectolitres for the entire country.

This is a 12 per cent increase on last year's 42m, although the 2014 harvest was deemed 'particularly modest'.

However, the hot summer has limited yields for some vineyards. At Tenuta di Aglaea of Mount Etna in Sicily, the crop is expected to be lower than average given the hot summer, said domain representative Anne-Louise Mikkelsen.

Pickings of Nerello Mascalese should start on 10 October, she said. 'We think that the cooler September month will add elegance to the concentration brought by the hot summer.'

Read more at http://www.decanter.com/wine-news/italy-wine-harvest-2015-looking-good-say-producers-275895/#mQjDjdA5vciFQbQu.99


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FY Bordeaux wine exports turn corner in value terms - figures (Excerpt)

Source: Just-Drinks
By Stuart Todd
28 September 2015

After two years in the doldrums, Bordeaux wines have recorded annual growth in exports, largely due to recovery in the Chinese market, according to recent figures.

Statistics released by trade body the Conseil Interprofessionnel du Vin de Bordeaux (CIVB) late last week showed that sales by value in the 12 months to the end of June were up 1% on a year earlier, at EUR1.83bn (US$2bn). However, volumes in the period fell 4% to 277m bottles.


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Judy Jordan returns to the wine business

Source: THE PRESS DEMOCRAT
BY BILL SWINDELL
September 28, 2015

After selling her J Vineyards and Winery earlier this year, Judy Jordan is back again in the wine industry but with a much different focus this time, using her expertise to shine a spotlight on mentoring youth rather than navigating supermarket shelves and bottling lines.

Using funds from the sale of her Healdsburg winery, Jordan this month purchased two Oregon vineyards and last week closed on the Sage Canyon Ranch in St. Helena, which was owned by culinary entrepreneur Pat Kuleto. Those vineyards will be placed under a new Santa Rosa company, The Capra Co., which in turn will fund a nonprofit arm to mentor youth ages 13 to 17. Financial terms were not released.

"Owning J was an entrepreneur's dream and I could not be more proud of and grateful to the people, the wines and the devoted following that made it what it is today," Jordan said in a statement.

"My next act will be focused on combining my love of the land with my passion for mentoring."

Jordan's announcement marks a quick return to the local industry that she grew up around. Her parents, Tom and Sally Jordan, founded Jordan Winery in the Alexander Valley in 1972. At 25, Judy Jordan broke away from her father and launched her own sparkling wine brand, which later received acclaim from wine critics. She went on to purchase additional vineyards and maintain them throughout the 2008 financial crisis.

But in March, she sold her Healdsburg winery and more than 300 acres spread over nine vineyards to E&J Gallo Winery. One source placed the deal at $90 million.

At the time of the sale, Jordan said in a statement she wanted to "look forward to my new chapter of building a mentorship platform."

At J, Jordan established a mentorship program that even her two children, Robert and Nicole, went through, said her spokesman George Rose. It gave her a taste of what she ultimately wanted to do, he said.

The details of the mentorship program are still to be determined, but it is likely to have a strong viticulture component as Jordan, a Stanford graduate with a degree in earth sciences/geology, was noted for her love of the terrain around the Russian River Valley, Rose added.

"This was an opportunity to get back to the land, kick the dirt and spend more time in the vineyard," Rose said.

Her brother, John, who now runs Jordan Vineyards, also has his own foundation, which he formed in 2012 to fund local education and health programs.

As for the properties, the Sage Canyon Vineyard in the Napa Valley American Viticultural Area (AVA) comes with 60 acres primarily planted to cabernet sauvignon, merlot and cabernet franc. It is a total of 602 acres and had been listed for $11 million.

The purchase also includes the Eola Springs Vineyard in the Eola Amity Hills AVA in Rickreall, Ore., containing 72 acres primarily planted to pinot noir and chardonnay. Planted vineyards go for about $50,000 an acre in that region. The property has 176 total acres.

Jordan also bought the 75-acre Chehalem Mountain Vineyard in the Chehalem Mountain AVA in Newberg, Ore., with 35 acres planted to pinot noir and chardonnay. Planted vineyards go for about $60,000 an acre in that region.

Jordan will establish her own vineyard management company under the Capra umbrella. She has not named personnel who will be heading up that operation, said Rose, who added that Jordan may buy additional properties.

While at J, Jordan had taken trips up to Oregon to explore the increasingly popular wine regions there - Jackson Family Wines has made some investments in the Williamette Valley, known for its high-quality pinot noir grapes - so she had some familiarity with the fruit from the Beaver State, Rose said.

She named the company after the Italian word for goat. "The Capra Co. will strive to embody a goat's sure-footed, independent, high-altitude approach to its surroundings," Jordan said.


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Judy Jordan, former owner of J Vineyards & Winery, purchases Oregon's Chehalem Mountain Vineyard

Source: SF Gate
By Esther Mobley
September 25, 2015

Judy Jordan, who sold her Sonoma-based company J Vineyards & Winery to E. & J. Gallo last March, has purchased Chehalem Mountain Vineyard in Oregon's Willamette Valley.

"I'm excited about Oregon, because I of course have a passion for Pinot Noir," Jordan told Inside Scoop. "Chehalem Mountain is very exciting geologically."

Planted in 1968 by Dick Erath, one of Oregon Pinot Noir's early advocates, Chehalem Mountain Vineyard consists of about 49 acres divided into two parcels, of which 29 are planted, to Pinot Noir, Pinot Gris and Chardonnay. Its owner at the time of sale was George Hillberry, who owns and operates a number of other Oregon vineyards, including La Colina in the Dundee Hills. The parties did not disclose the terms of sale, but the asking price had been listed at $1.25 million.

Jordan's purchase of this historic property is the latest in a series of recent investments by California vintners in Oregon vineyard land.

Jackson Family Wines purchased four Willamette Valley properties in 2013. Evening Land, whose original site is on the Sonoma Coast, now owns Seven Springs Vineyard in Eola-Amity Hills. Foley Family Wines purchased Four Graces winery in 2014. (To say nothing of acquisitions from Burgundy: Domaine Drouhin and Louis Jadot.)

Jordan founded J in 1986 and built its reputation as a high-quality producer of sparkling wine, as well as Pinot Noir and Pinot Gris. (Her younger brother John owns Jordan Winery in Healdsburg.) Gallo's acquisition of J-especially when followed by the purchase of Talbott, in August-seemed to signal a strategic shift for the world's biggest wine company into the premium sphere.

The decision to sell her brand and its 300 acres of vineyards to Gallo, Jordan said, was in part because J's success had forced her into a role more focused on business operations than on winegrowing.

"I miss J so much," she said. "However, the winery kept getting bigger and bigger, and it was more and more pressure with operations, and I was getting further and further away from what I particularly love, which is geology, terroir and the vineyard-because I was running a big company."

Also in the works for Jordan post-J: a mentorship program that will allow her to "bridge the private entrepreneurial spirit that I have into a nonprofit world," but she did not give further details.


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Schaafsma to head up Accolade Wines

Source: Drinks International
By Christian Davis
28 September, 2015

Accolade Wines has appointed Paul Schaafsma as its new chief executive officer, succeeding John Ratcliffe who? will become deputy chairman.

Poached from Australian Vintage (McGuigan Wines), Schaafsma was Accolade's general manager UK and?Ireland. Ratcliffe will continue to advise on strategic?development.

Accolade Wines is one of the world's largest wine businesses delivering more than 35 million cases (9-litre equivalents, 12 bottle cases) in 143 countries totalling AUS$1 billion in sales annually

Following the acquisition of Chile's Viña Anakena, Accolade claims to be the only wine company with a presence in all the major New World wine regions.

Schaafsma has been in the wine industry for nearly 20 years, with extensive experience in the Australian, UK, European and African markets.

For the past three years Schaafsma has headed the largest division of Accolade Wines, the UK and Ireland region, where the business is the number one wine company by value and volume, more than double the size of its nearest competitor.

The company says under his leadership the market share of Accolade Wines in the UK has grown by more than 70% and Hardys, the leading wine brand in the UK on trade and off trade, has increased its market share by almost 16%.

The Accolade board paid tribute to Ratcliffe during whose tenure the company established its position as a major supplier of New World premium, commercial and value wines from Australia, New Zealand, South Africa, the US and Chile.

Accolade says under Schaafsma's leadership, the company has delivered industry-leading performance with a portfolio centred on Hardys, which has sales in 150 countries.

Ratcliffe has agreed that he become non executive deputy chairman ahead of time. Ratcliffe will pursue his other business activities while continuing to provide strategic advice to the board.

Schaafsma will take up his appointment on October 1. He will be spending time in all of Accolade Wines' markets, travelling from bases in the UK and Australia.


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Menu economics: Building a profitable beverage program

Source: NRN
Bret Thorn
Sep 28, 2015

Alcohol can be a great profit center at restaurants. Beer, wine and spirits are all generally more profitable than food, and their sales are usually incremental to whatever food guests are buying.

But to get the most out of alcohol sales, operators can benefit by developing strong corporate cultures around alcohol and having systems in place to measure sales and control inventory.

Managing costs

Pour cost - how much it costs to make a drink compared to how much a restaurant or bar charges for it - is easy enough to calculate: If you use $1 worth of ingredients and charge $5, that's a 20-percent pour cost. But there are other considerations when it comes to managing the cost of a beverage.

Claire Sprouse, who, with partner Chad Arnholt, runs the beverage consultancy Tin Roof Drink Community, said time is money, too, and not just in terms of labor cost: If a drink is fast to make, you can sell more of them, she said.

So at Izakaya, a new restaurant in Houston for which she and Arnholt developed the beverage program, she has bartenders come to work early - and has them paid as non-tipped employees for that time - to prepare ingredients that will make their jobs easier during service.

Old Chicago bills itself as the "craft beer authority," but its liquor sales are healthy. Photo: Old Chicago

"If we can make a compound syrup - a syrup with a few different ingredients - instead of having the bartenders picking up three different bottles during service, we're not cutting into the guests' time. So that's important to us," she said.

Izakaya's popular $11 Highball Tropical is made with vodka, pineapple sherry and ginger beer. But the sherry is infused with pineapple ahead of time, strained and then fortified with vodka before service. "So when they go to make that drink it's literally a pour into a highball glass with one bottle, and then ice, and then top it with ginger beer. So that's a great drink because it's not only cost-effective, but also time-effective, and we're able to sell a lot more drinks because some of our better sellers are these really quick, easy-to-make drinks," she said.

Sprouse also makes sure that top-sellers like that also have good pour costs, however.

She said that if she's aiming for a 20-percent pour cost, some cocktails with more obscure ingredients or expensive alcohols might have costs as high as 25 percent - such as the Fuku Bounce, a $13 drink with sparkling wine, pear brandy, lemon and togarashi - but they give authority and prestige to the cocktail program overall and are important to attract a certain type of high-spending clientele. "But that's balanced out by a drink that's going to appeal to a lot of people and might be a little bit of a cheaper pour cost for us," she said.

Regardless of the cocktail, they generally have better margins than beer and wine, which is one reason why CraftWorks Restaurants and Breweries, Inc. - parent company, based in Broomfield, Colo., of Rock Bottom Restaurant & Brewery, Gordon Biersch Brewery Restaurants, Old Chicago Pizza & Taproom and several smaller concepts - makes sure it has a robust overall bar program.

Stuart Melia, Craftworks vice president of beverage, said that although Old Chicago bills itself as the "craft beer authority," its liquor sales are healthy.

"Our liquor mix is higher than some of casual dining's total alcohol mix," he said, noting that alcohol accounts for 38 percent of Craftworks' total sales, and beer is just 24 percent. Hard liquor makes up much of the rest.

He said cocktails have more price flexibility than beer.

"With cocktails, depending on what brands [of liquor] you want to use, you could put a great cocktail on the bar top for $5, or you can do it for $10," he said. "You really have the luxury with using different brands to manipulate your cost or margin," because many customers will pay more for prestigious alcohol brands.

"It's in the operator's favor to use some of these premium brands at a high price point if your guests will pay that."

Exactly how much they will pay depends on the environment and customer, he said, noting that Old Chicago doesn't have cocktails higher than $8, but he can charge $10 at Gordon Biersch.

Determining the price is one thing, but sometimes the cost of a drink can be flexible, too. Sprouse said that when she and Arnholt start developing a drink, they first make it exactly how they want to, without regard for cost. "Then we figure out the cost for it and we go from there and see if we need to rework an ingredient or a proportion to make sure we're getting our costs in line," she said. That might mean a less expensive alcohol or mixer, or using high-impact ingredient with relatively low costs, such as sherry, for which a little can go a long way.

She said there's no flexibility when it comes to the cost of specific brands of alcohol in Texas because of the way the distribution is set up.

That's not true everywhere, however.

Ahmass Fakahany, CEO and owner of the Altamarea Group, which operates 17 restaurants, including fine-dining restaurant Marea in New York City and more casual Osteria Morini with locations in New York City, Washington, D.C., and Bernardsville, N.J., said that by having a good idea of how much of a specific alcohol he's likely to use, he can negotiate more effectively with his suppliers and distributors.

"We model for each bottle how many drinks we should sell and how fast the inventory goes down, so we know exactly when to order and how much to order for the group. And [our distributor] says, 'Well, great. We can now manage our daily sales better because we know what Altamarea will buy'," he said, noting that distributors might not only be able to provide preferential pricing, but also help with other needs, such as storage. He said it was like a judo move, "where you use the weight of someone else to your advantage."

For the uninitiated, alcoholic beverages might seem like an easy sell, but restaurants that take their eyes off their bar program can see sales fall quickly.

"Once upon a time, our sales were 50 percent food, 50 percent bar," said Nick Kegg, marketing director of The Greene Turtle, a 37-unit chain based in Hanover, Md. "But as the Turtle started expanding we started to see a trend with new restaurants that were more 75/25 [food/bar]. We decided we wanted to take back what belongs to us," namely, bar sales.

So in March they launched a "raise the bar" initiative.

Kegg said The Greene Turtle started last year by brainstorming with bartenders and franchisees, asking what the chain was doing badly, what their competitors were doing better, whether they were pricing things appropriately and so on. The company also consulted with their suppliers and distributors. Once The Greene Turtle had a new happy hour menu, new glassware, new cocktails and new service standards, it tested the new program in six restaurants, following up with weekly calls with those restaurants.

"Four weeks in, we changed things that didn't work. If you're going to fail, fail fast," Kegg said. "As soon as we felt really good about what we put into test, we knew we had to get it out in front of everyone."

Since then, The Greene Turtle has seen a 12-percent increase in sales of sprits, 4-percent increase in beer and 1-percent increase in wine sales.

Changes included doing away with glassware the company has had since the 1980s and introducing smaller 14-ounce and 9-ounce glasses and premium mixers, teaching customers to drink smaller, better cocktails, which not only made for more elegant drinks but smaller drinks with lower costs. "We've seen a 1 percent decline in liquor cost along with the sales increase," Kegg said, adding that they are currently running a pour cost of around 16 percent.

Kegg said they also redefined the bartenders' role, doing away with the paragraph-long job description they had before and replacing with "fun specialists who are on point and everyone's friend."

Each bartender was required to decide whether to become an expert in beer, wine or spirits and taught tactics to make customers into regulars, including personalizing their experience - changing the TV channel for them, recommending drinks, and learning their guests' names - and being aware that as bartenders they're supposed to put on a show with long drink pours, cup flipping, dramatic drink shaking to show that they're experts at what they do.

Melia said Craftworks in general and Old Chicago in particular have a strong focus on their beer program, with 32 different regional beer menus for the chain's roughly 100 locations as well as daily "fresh sheets" indicating seasonal or daily specials.

Imported beers are all served in the traditional mugs and glasses from their respective breweries, and domestic beers are served in glasses that are appropriate for the beer style - Willi-Becher for lagers and Nonic for ales.

"You're going to drink beer as the brewery intended you to enjoy it," he said.

Kegg said he thinks many restaurants overlook their beverage programs, "and I think it's going to drive your check average, drive additional trial, drive additional traffic into your restaurant, and if you can merge your beverage program with your food, then you're creating a full experience. And I think people are just as often sharing pictures of unique, fun drinks on social media as they are with food when they go out to eat."

On top of that, drinks are more profitable than food, he said.

"The increase in sales that we've seen driven through beverages definitely bring some more to the bottom line," he said. "You can't be mad at that."


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Albertsons to Raise Up to $1.84 Billion in IPO

Grocery giant to trade on NYSE under ticker symbol "ABS"

Source: WSJ
By Lisa Beilfuss
Sept. 25, 2015

Grocery giant Albertsons Cos. on Friday said it expects to raise up to $1.84 billion in its initial public offering, months after private-equity firm Cerberus Capital Management LP combined Albertsons with Safeway Inc.

The Boise, Idaho-based company, whose store banners also include Tom Thumb and Jewel Osco, set the proposed maximum offering size in a regulatory filing after first setting its IPO in motion in July.

Albertsons will trade on the New York Stock Exchange under ticker symbol "ABS."

An investment group led by Cerberus first bought a chunk of Albertsons in 2006 and eventually the grocer sold the rest of itself to the private-equity firm. Last March, Cerberus struck a deal to acquire Safeway Inc. for about $9.4 billion, a transaction that brought together Albertsons and Safeway chains to create what is the country's second-largest grocer, behind Kroger Co.

The tie-up was part of a string of deals among U.S. grocery chains grappling with tepid growth and fierce competition from discounters like Wal-Mart Stores Inc. and more upscale options like Whole Foods Market Inc.
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For the year ended in February, Albertsons reported a loss of $1.2 billion on $27.2 billion in sales.


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Aldi to launch online wine sales early next year

Discount grocer opens up new line of attack in supermarket wars by selling wine per case in its first online venture

Source: The Guardian
Sarah Butler and Sean Farrell
28 September 2015

Aldi is to open a new front in its assault on the UK grocery market early next year when it begins selling wine online.

The move comes despite the impact of the continuing price war on the group, which has suffered its first fall in operating profits in six years. Matthew Barnes, chief executive of Aldi in the UK and Ireland, said a huge part of an £11m decline in operating profits last year, to £260m, was due to price cuts, as Aldi responded to waves of activity by its bigger rivals.

However, Barnes said the company was determined to keep its prices well below rival grocers: "There is no doubt that the price wars have registered in our results and will continue to do so in 2015 but the 15% price gap is cast in stone and one of the foundations of our business," said Barnes. "We have a frank approach to making sure we are hands down cheaper than any of our rivals."

Sales rose more than 30% to £6.9bn for the 12 months to December 2014 as the company opened more stores and attracted 1.4m new shoppers.

Julie Palmer, partner at insolvency specialists Begbies Traynor, said Aldi's fall in profits was disappointing after growth of 65% in 2013 and 124% in 2012.

"Today's results show that even Aldi can't escape the clutches of the ongoing supermarket price war. As its bigger rivals have committed to investing billions of pounds worth of price cuts over the next few years, Aldi has been forced to react in kind," she said.

Barnes said he expected supermarket prices across the industry would continue to fall this year but believed the pace was slowing.

"Competitors realise they are not going to win that battle," he said.

Aldi was by far the fastest-growing supermarket in the UK last year.

Sales increased by 17% in the past three months as sales at rivals Tesco, Morrisons and Asda fell, recent industry figures showed. Aldi's growth is largely driven by new stores. The group is on course to open 65 of its no-frills stores this year, up from 54 openings in 2014. While rivals including Tesco, Sainsbury's and Morrisons are shutting outlets, Aldi is aiming for 1,000 stores by 2022, up from 598 today.

Barnes said underlying sales, excluding new stores, were growing strongly as it lured shoppers by introducing more fresh fruit and vegetables and British fresh meat. The company has attracted 800,000 new shoppers so far this year.

The pace of growth for both Aldi and fellow German discounter Lidl has slowed over the past year, but Barnes said the no-frills chains would continue to take market share from traditional players such as Tesco, Asda, Sainsbury's and Morrisons.

'It's not a temporary phenomenon. It's structural. It's a permanent shift in behaviour, as millions more people make a more informed choice about their shopping - a choice which means they can feed their families quality food while saving money," he said.

Aldi's long-rumoured wine service will be the grocer's first move into internet retailing in Britain and will start in the first three months of 2016. Aldi will sell all of its in-store wines by the case on the internet and some wines will only be available online.

In the second quarter of the year, Aldi will start selling non-food items, known as Specialbuys, online. These items, currently available in stores, range from cycling gear to power tools and Halloween outfits. It will offer customers a choice of home delivery or collection from pick-up points.

Barnes said Aldi would be investing £35m in the online launch: "This will enable us to introduce the Aldi brand and some of our bestselling, best quality and best value products to thousands more customers across the UK."

Aldi said it had no plans to offer other groceries online at present as such moves had proved unprofitable and complex for other retailers and it needed to keep costs low to maintain its leading price position. Barnes said he did not expect Aldi's online operation to make much profit in the short to medium term but would be an "opportunity to learn" about a fast-growing part of the market.

Online growth has helped the UK's big four supermarkets - Asda, Tesco, Sainsbury's and Morrisons - to offset falling sales at large supermarkets caused partly by the growth of Aldi and Lidl.

Online grocery sales are expected to be the fastest growing part of the UK market, more than doubling in value between 2014 and 2019 to £17bn, to make up 8% of overall sales.

Both Aldi and Lidl have used wine as a way to broaden their appeal to middle-class British shoppers looking for low prices. Lidl is also considering launching a wine website as a first move into internet retailing in Britain.


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Whole Foods to reduce costs with job cuts

Source: RT
By Gina Acosta
September 28, 2015

Whole Foods Market says it is slashing more than 1% of its workforce in an effort to lower prices for its customers and invest in technology upgrades, as the company fights against increasing competition in the organic grocery space.

The grocery chain announced it will cut about 1,500 jobs, or 1.6% of its workforce, over the next eight weeks. The company says many of the reductions will come through attrition.

"This is a very difficult decision, and we are committed to treating affected Team Members in a caring and respectful manner. We have offered them several options including transition pay, a generous severance, or the opportunity to apply for other jobs. In addition, we will pay these Team Members in full over the next eight weeks as they decide which option to choose." said Walter Robb, co-CEO of Whole Foods Market. "We believe this is an important step to evolve Whole Foods Market in a rapidly changing marketplace."

Whole Foods says it anticipates workers whose jobs are cut will find other jobs from the almost 2,000 open positions across the company or from new jobs that'll be created by more than 100 new stores in development.

Whole Foods was recently hurt by bad publicity when New York City officials found it was overcharging customers.

The company has also been facing intense competition from other retailers ramping up their organic offerings. The company plans to try to appeal to a broader audience by opening a new slate of budget-friendly stores called 365.

Whole Foods has had a series of disappointing quarterly results this year, and its stock has plummeted more than 40% within the last six months.


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Florida: Bill seeks to remove wall between liquor, groceries

One of this year's most heavily lobbied efforts - relaxing an 80-year-old state law that requires liquor stores to be stand-alone facilities - has been uncorked for the 2016 session that begins in January.

Source: News Herald
By The News Service of Florida
Sep. 27, 2015

One of this year's most heavily lobbied efforts - relaxing an 80-year-old state law that requires liquor stores to be stand-alone facilities - has been uncorked for the 2016 session that begins in January.

Rep. Carlos Trujillo, R-Miami, filed a proposal (HB 245) Friday that in part would repeal the section of Florida statutes that requires retailers to separately house liquor sales and bars any opening that allows access to other goods.

During the regular legislative session that ended in May, the liquor store-door proposal was included in a wide-ranging measure that pitted companies like Wal-Mart and Target, which backed the plan, against independent liquor stores and Lakeland-based Publix. A watered-down version of the proposal failed to make it to the House floor for a full vote.

Wal-Mart and Target argue the proposal would increase convenience for shoppers, while Publix objected that its business plan keeps liquor and grocery sales separate. In contrast, allowing people to buy liquor as well as groceries and other goods is part of Target's business model, which includes a push for smaller "express" stores in downtown sites.

A Senate companion to Trujillo's proposal had yet to be filed Friday afternoon.
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