Altria clouds SABMiller deal prospects
Marlboro owner's 27% stake gives group a voice in AB InBev talks
by: Lindsay Whipp in Chicago
September 30, 2015
Beer and cigarettes are not the healthiest combination, but for Altria, the maker of Marlboro, owning 27 per cent of brewer SABMiller has proven lucrative.
The stake has contributed 10-19 per cent of Altria's annual pre-tax profits over recent years, so the prospect of a bid for SAB by Anheuser-Busch InBev, its larger rival, has left investors watching keenly to see what Altria opts to do with its holding.
The size of the stake also means that the tobacco group could be an important influence over SAB's discussions on whether to accept an offer, and how the deal should be structured.
Most analysts say that the best outcome for Altria, the biggest tobacco company in the US, is to push for terms that allow it to keep a stake in an AB InBev-SABMiller combination.
Vivien Azer, an analyst at Cowen & Company, expects Altria to use its three board members to lobby for a 50-50 stock and cash deal that would allow it to maintain a "meaningful" position in the merged company. One reason being that selling Altria's stake for cash would incur significant tax costs, analysts noted.
"They would have a tremendous tax bill if they were to sell," says Michael Zbinovec, an analyst at Fitch, the rating agency. "They have repeatedly said they are happy with earnings from the business."
Morningstar's Adam Fleck estimates that its stake in SAB could be worth roughly $24bn in a takeover, with the research company estimating a fair value for the brewer of £36 per share. Others suggest the price could be higher.
This is close to where SAB trades now, standing at £37.22 in morning trade on Wednesday. It is difficult to determine the company's undisturbed share price, however. It has rallied nearly 20 per cent since an approach was confirmed on September 16, but speculation about an offer was rife even before this, bolstering the stock.
Regardless, any final price would be far higher than the $6.2bn book value of the asset as recorded on Altria's balance sheet at the moment.
And the tax rate on its gains would be 35 per cent, analysts say.
Altria's spin offs
? 2002 SAB acquires Miller Brewing from Philip Morris for $3.6bn in stock and $2bn in debt. The tobacco group holds a 36% stake in the combined company SABMiller, with three board members
? 2003 - 2009 Altria's stake in SAB is diluted to 27.3% from 36%
Altria, then Philip Morris, gained a 36 per cent share in SAB worth $3.4bn, after it sold Miller Brewing to SAB in 2002. This was gradually diluted to 27.3 per cent by 2009, according to its annual reports.
But tax is not the only reason that holding on to a stake would be in Altria's interest, according to analysts. SAB's substantial contribution to Altria's earnings provides steady cash flow for the company as it seeks to bolster shareholder returns amid a secular decline in its core tobacco business.
It has also been a form of diversification for Altria, given that most of the group's profit still comes from cigarettes, despite expanding its "smokeless" offerings and wine business. The group's geographic spread has also narrowed since it spun off Philip Morris International to focus on the US market.
By securing a stake in a combined AB InBev-SABMiller, Altria could share in the gains that analysts expect from a deal backed by 3G Capital, the cost-cutting Brazilian private equity group that owns 22.7 per cent of AB InBev.
Fitch's Mr Zbinovec also notes that AB InBev's dividend yield exceeds SAB's at 3.17 per cent and 2.07 per cent respectively, suggesting a continued stake could increase its dividend income.
Altria's long-term goal of earnings per share growth of 7-9 per cent "seems to imply growing equity contributions from SABMiller", Morningstar's Mr Fleck points out.
"If management wants to continue to hit those targets without increasing equity contributions, it would need to boost pricing and likely accelerate volume declines in its tobacco products," he says.
Altria's Marlboro brand, which accounts for almost all of its "smokable" cigarette sales, has nearly 44 per cent of the US market - more than the next 10 brands combined. The segment, which also includes cigars, enjoys generous margins of 44 per cent. Its smokeless offerings, while a much smaller contributor to profit, are growing and have margins of 63 per cent.
But with limited ability to advertise and regulation only likely to get stiffer, tobacco is a difficult industry.
Domestic competition is intensifying at a time of significant consolidation. Reynolds American recently completed its acquisition of Lorillard, with some brands from those two companies sold to Imperial Tobacco's US subsidiary, while Japan Tobacco this week announced it is to buy $5bn of assets from Reynolds.
More consolidation could come though. There has been market speculation that Imperial itself could be a target either for BAT or Japan Tobacco.
One key focus for investors and analysts if Altria maintains an investment in brewing through an AB InBev-SAB deal, is how big its holding will be.
At the moment, its 27.3 per cent stake and three board members gives it "significant influence" in accounting terms, allowing it to use so-called equity method accounting and consolidate its share of SAB's profit on its income statement.
While letting its stake fall below 20 per cent could force it to change the way it accounts for its holding and only count dividends, there is no hard and fast rule, analysts say, adding that it could prove in other ways that it continues to exert "significant influence".
As the Marlboro Man said of his smokes back in 1954 "You get a lot to like". For Altria, when it comes to maintaining a stake in a newly formed AB InBev-SAB, the same probably applies.
AB InBev faces delicate balance in structuring SABMiller bid
By Philip Blenkinsop and Martinne Geller
A $70 billion debt package being arranged to fund Anheuser-Busch InBev's (ABI.BR) takeover of SABMiller (SAB.L) still leaves the world's largest brewer with a tricky balancing act in satisfying a range of shareholder camps with different needs.
SABMiller's two major shareholders face potential capital gains taxes, so may want to get paid in shares - which would conflict with AB InBev's controlling shareholders' desire to limit the dilution to their control that would come with issuing new shares.
Furthermore, some shareholders might have geographical restrictions tied to the location of the share listing.
Marlboro maker Altria (MO.N) and the Santo Domingo family of Colombia together own 42 percent of SABMiller, and are widely believed to prefer shares in an enlarged company rather than cash, to avoid triggering capital gains taxes on the proceeds of their stakes, worth about $24 billion and $13 billion, respectively, at current prices.
"We can say with confidence that Santo Domingo and Altria will want a decent chunk of equity, probably the majority," said Exane BNP Paribas analyst Eamonn Ferry. "The wild card is how much of the free float would want equity too," he added, referring to shareholders beyond the major two.
AB InBev, maker of Budweiser, Stella Artois and Corona, is expected to have offered between 40 and 45 pounds per share for its nearest rival within the next two weeks. It is already asking banks to underwrite up to $70 billion in debt financing, sources have told Reuters.
With a deal therefore costing as much as $110 billion, that leaves a likely share issue of as much as $40 billion, a ratio that roughly fits the 60/40 split expected by analysts, who note the Brazilian and Belgian founding families of AB InBev, who own 52 percent of its shares, would not want to largely dilute their control by issuing too much new equity.
"It is hard to over-estimate the importance that ABI assigns to this ownership structure," said Nomura analysts earlier this month. "This drives an ownership culture and a long-term view."
SABMiller said on Sept. 16 that AB InBev had approached it about a friendly takeover that would form a combined group brewing a third of the world's beer. UK takeover rules require AB InBev to make a formal offer by Oct. 14, though the parties are not required to disclose the offer.
Despite the combination having been discussed for years, sources say one of the difficulties in pulling it off is finding a structure that ensures the two biggest shareholders get shares and the rest cash, while still offering the same to all shareholders.
"That's the problem," said an industry banker not involved in the deal.
SABMiller and AB InBev declined to comment. Officials representing Altria and the Santo Domingo family could not immediately be reached.
One way to ease dilution of control is to bring the Santo Domingo family into the core group of controlling insiders, say analysts. That would makes sense given the family are founders of a Colombian brewer that SABMiller bought in 2005, and the controlling group includes the founding families of AB InBev.
"The Santo Domingos clearly know the beer business quite well. They'd be more than happy to have money invested in ABI and the 3G guys," said Exane's Ferry, referring to private equity firm 3G Capital, which is run by some of AB InBev's controlling shareholders.
3G gained control of U.S. food group Kraft Heinz (KHC.O) following deals financed in part by billionaire Warren Buffett. Members of the Santo Domingo family have invested with 3G, according to the Wall Street Journal.
Depending on price, AB InBev's core shareholder group could see their ownership of the merged group fall from 52 percent to just over 40 percent with that level of new equity. If Santo Domingo's shares were added to the core group, it could rise back to nearly 50 percent, according to some analysts.
Equity financing would mean a far higher new share component than when InBev bought Anheuser-Busch for $52 billion in 2008. A rights issue of just 6.4 billion euros meant AB InBev's net debt to EBITDA (core profit) ratio soared to more than five times.
In an SAB deal, analysts see that multiple being just over four, after likely required disposals in the United States and China.
Furthermore, there is a group of South African shareholders, three of which own 5 percent of the company, who have long ties with the South African-born brewer and might like to participate in its future growth.
But their future ownership could hinge on a continued stock listing in Johannesburg.
If the dilution is too great, Societe Generale analyst Andrew Holland suggests a "backstop" share buyback at a later stage.
"The disadvantage is that the buyback would have to be done as a tender offer, which would probably have to be at a premium to whatever ABI's shares trade on at the time," he said.
The industry lost a very special member this week. Bill was one of the nicest people you would ever wish to meet, a true gentleman. Bill, we will miss you.
William David Young
Source: The Marietta Daily Journal
September 30, 2015
William David Young, the perfect example of a devoted husband, father, friend, and gentleman, died peacefully at home on Tuesday, September 29, 2015.
Bill was born on September 10, 1932, in Marietta, GA, to the late Annie C. Wilson and George W. Young. His sister Katherine Y. Thomas and brother Dr. George W. Young also preceded him in death.
He is survived by his wife of sixty years, Jane Howard Young, and three sons: William D. Jr. (Margaret), E. Howard (Becky), Stephen T. (Jena); and seven grandchildren: Coley Y. Cuttino (Judson), Laura Y. Morgan (Billy), Jana H. Young, William D. Young III, Brandon H. Young, J. Hailey Young, S. Talbot Young, and several nieces and nephews.
Bill graduated from Marietta High School, in 1949, where he was an All State Football player. He received a scholarship to play football at the University of Georgia, where he graduated in 1954 with a BBA in Business Administration. Bill was a 3-year football letterman and was most proud to have played under the leadership of Coach Wally Butts. At the University of Georgia, he was a member of the Chi Phi fraternity.
After graduation, Bill served in the United States Air Force as a Lieutenant. Afterwards, he began his career working in insurance with Adair Realty & Loan Company and later became a partner with Leide Associates. He went on to join the family business serving as President of General Wholesale Company for over 50 years.
While at General Wholesale Company, Bill was a member of the Board of Directors for the Wine and Spirits Wholesalers of Georgia. He was a member of the Board of Directors of the Georgia Beer Wholesalers Association. He then served as Chairman of the National Beer Wholesalers Association. He also served as President of the Seagram Family Association and was inducted as a Master of the Keeper of the Quaich, an exclusive, international community of members recognised for their outstanding commitment to Scotch Whisky.
As a devoted University of Georgia supporter, Bill served as a Trustee of the University of Georgia Foundation. In 1993, he received the Distinguished Alumni Award from the Terry College of Business. In 2004, he received the Bill Hartman Award from the University of Georgia Athletic Association. In 2009, he received the Family of the Year Award from the UGA Alumni Association. In 2013, He received the Top Dawg Award from the University of Georgia Athletic Association. Bill served as President of the Atlanta Bulldog Club. He was also a member of the Gridiron Secret Society and was a member of the Atlanta Rotary Club.
Bill was a long time member of Peachtree Presbyterian Church where he served as an elder. He was a member and past President of Peachtree Golf Club. He was also a member of Cherokee Town and Country Club, Capital City Club, and Highlands Country Club.
There will be a visitation on Thursday, October 1, 2015 from 5:30 - 7:00 at H.M Patterson & Son Spring Hill, 1020 Spring St., Atlanta, GA. A memorial service for Bill will be held on Friday, October 2, at 11:00 a.m. in the Sanctuary of Peachtree Presbyterian Church, followed by a reception in the Williams Center. In lieu of flowers, donations may be made to TGEN (TGEN Foundation, 445 N. 5th Street, Suite 120, Phoenix, AZ 85004 / (866) 370-8436). The family would also like to extend their thanks to Bill's special caregivers: Felix Manford, James Nderitu, Dan Moreland, and Jarvis Whitley. H. M. Patterson & Son Funeral Home is in charge of arrangements. Online condolences may be made at hmpattersonspringhill.com.
News From TTB: CECIL COUNTY LIQUOR STORE OWNER PLEADS GUILTY IN SCHEME TO EVADE PAYMENT OF TAXES ON LIQUOR SMUGGLED INTO NEW YORK
Agrees to Pay $673,992 in Restitution, the Amount of the Excise Tax Loss
September 30, 2015
Dilip Patel, age 49, of Wilmington, Delaware pleaded guilty today to wire fraud.
The guilty plea was announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Special Agent in Charge Andre Watson of U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI); Special Agent in Charge Thomas Jankowski of the Internal Revenue Service - Criminal Investigation, Washington, D.C. Field Office; and Tom Crone, Assistant Administrator for Field Operations of the Alcohol and Tobacco Tax and Trade Bureau.
Patel owned and operated a retail liquor store in Cecil County known as Chesapeake Wine and Spirits.
According to his plea agreement, from January 2011 to June 2012, a number of smugglers from New York City ordered bulk liquor from the store by phone. The smugglers then drove to the store, paid cash for the bulk liquor, loaded the liquor into their vehicles and drove back to New York City, evading the payment of excise taxes by failing to file reports with the state of New York describing the transportation of the liquor into New York.
Patel has agreed to the entry of an order to pay restitution of $673,992 to the state of New York - the amount of excise tax loss, and forfeit $11,000 seized from a bank account that was the liquor store's operating account.
Patel faces a maximum sentence of 20 years in prison. U.S. District Judge Marvin J. Garbis has scheduled sentencing for January 7, 2016.
United States Attorney Rod J. Rosenstein commended the HSI Baltimore, IRS - Criminal Investigation and the Alcohol and Tobacco Tax and Trade Bureau for their work in the investigation. Mr. Rosenstein thanked Assistant U.S. Attorney Richard C. Kay, who is prosecuting the case.
Plaintiffs Up Ante in Arsenic Case (Excerpt)
Amended lawsuit demands billions in damages after public and industry organizations declare no danger to public
Source: Wines & Vines
by Peter Mitham
This spring's class action against the California wine industry over the presence of arsenic in the alcoholic beverage has been tweaked to seek billions of dollars in civil penalties, among other damages.
Los Angeles attorneys Kabateck Brown Kellner LLP filed an amended complaint in California Superior Court on Sept. 16 alleging that California wineries violated the terms of Proposition 65, the California legislation officially known as the Safe DrinkingWater and Toxic Enforcement Act of 1986, which seeks to protect consumers from noxious substances (now numbering more than 600) such as wood and leather dust; bracken fern, chloroform and nicotine; alcohol (when consumed in an abusive manner) and arsenic.
Arsenic in both beer and wine is associated with the environment in which the raw materials are grown and in farming and processing supplies.
Arsenic is an element of chromium copper arsenate, a preservative of the wooden posts often used in vineyards as well as the diatomaceous earth often used to filter the beverages.
Symptoms of arsenic poisoning include changes to skin pigmentation and various types of lesions.
Arsenic found in many U.S. red wines, but health risks depend on total diet
Source: University of Washington
September 29, 2015
A new UW study found arsenic levels in 98 percent of red wines tested exceed U.S. drinking water standards, but that health risks depend on one's total diet.
A new University of Washington study that tested 65 wines from America's top four wine-producing states - California, Washington, New York and Oregon - found all but one have arsenic levels that exceed what's allowed in drinking water.
The U.S. Environmental Protection Agency allows drinking water to contain no more than 10 parts per billion of arsenic. The wine samples ranged from 10 to 76 parts per billion, with an average of 24 parts per billion.
But a companion study concluded that the likely health risks from that naturally-occurring toxic element depend on how many other foods and beverages known to be high in arsenic, such as apple juice, rice, or cereal bars, an individual person eats. The highest risks from arsenic exposure stem from certain types of infant formulas, the study estimated.
The two studies from UW electrical engineering professor Denise Wilson appear on the cover of the October issue of the Journal of Environmental Health.
"Unless you are a heavy drinker consuming wine with really high concentrations of arsenic, of which there are only a few, there's little health threat if that's the only source of arsenic in your diet," said Wilson.
"But consumers need to look at their diets as a whole. If you are eating a lot of contaminated rice, organic brown rice syrup, seafood, wine, apple juice - all those heavy contributors to arsenic poisoning - you should be concerned, especially pregnant women, kids and the elderly."
Arsenic is a naturally occurring element that is toxic to humans in some forms, and can cause skin, lung and bladder cancers, and other diseases. As rain, rivers or wind erode rocks that contain arsenic, it leaches into water and soil. From there, the toxic metalloid can work its way into the food chain.
The UW study is the first peer-reviewed research in decades to look at the arsenic content of American wines. As a group, they had higher arsenic levels than their European counterparts, likely due to the underlying geology of U.S. wine growing regions.
All but one of the tested wines exceeded the 10 parts per billion EPA drinking water standard for arsenic, and some New York wines exceeded the 15 parts per billion drinking water standard for lead.
The study looked at red wines, except from two areas in Washington where only white wines were produced, because they are made with the skin of grapes where arsenic that is absorbed from soil tends to concentrate.
Wilson also tested for lead, which is a common co-contaminant. The study found lead in 58 percent of the samples, but only 5 percent - all from New York - exceeded drinking water standards.
Washington wines had the highest arsenic concentrations, averaging 28 parts per billion, while Oregon's had the lowest, averaging 13 parts per billion.
"There were no statistical differences among Washington, New York and California," she said. "The only star in the story is Oregon, where arsenic concentrations were particularly low."
Where possible, the study also compared wines grown in "new" vineyards and those that had been converted from other agricultural uses like orchards, where farmers likely used arsenic-based pesticides that were popular in the early 20th century. It found some evidence that higher levels of arsenic in Washington red wines could be a result of pesticide residue.
Because the average adult drinks far more water (between 1.7 and 3.2 cups per day) than even core or frequent wine drinkers (roughly a half cup per day on average), it's an imperfect comparison to gauge health risks based on the EPA drinking water standard of 10 parts per billion. That's why Wilson also evaluated how much arsenic individuals can safely consume from all the sources in their diet.
In a companion study, she compiled consumption data for foods that have been shown to contain arsenic - juice, milk, bottled water, wine, cereal bars, infant formula, rice, salmon and tuna.
From that, she was able to determine how much of an arsenic "dose" an average child or adult would get from each food source and how close it would come to risk thresholds set by the U.S. Agency for Toxic Substances and Disease Registry for total arsenic consumption across a person's diet.
For the core or frequent adult wine drinker, the arsenic consumed from that single source would only make up 10 to 12 percent of the total maximum recommended daily arsenic intake. But if that person also eats large quantities of contaminated rice, tuna or energy bars, for instance, that could push that individual's arsenic consumption beyond levels that are considered safe.
A person who eats an average or large amount of contaminated rice would get between 41 and 101 percent of the maximum recommended daily dose of arsenic from that one source alone, the study found. A child who drinks apple juice could get a quarter of the maximum daily arsenic dose from that single source.
The food that posed the largest risk of arsenic poisoning was infant formula made with organic brown rice syrup, an alternative to high-fructose corn syrup. Wilson estimated that some infants eating large amounts of certain formulas may be getting more than 10 times the daily maximum dose of arsenic.
Based on recent studies that have found arsenic in numerous foods and beverages, Wilson recommends that U.S. wineries test for arsenic and lead in irrigation and processing water and take steps to remove those contaminants if levels are found to be high.
But rather than litigate against vineyards - as some have done - she would encourage consumers to evaluate their diets more holistically and speak with a doctor if they have concerns. Tests are available that can detect high arsenic levels and tend to capture arsenic exposure over longer histories than other toxic chemicals.
"The whole idea that you would sue a winery for having arsenic in their wine is like suing someone for having rocks in their yard," Wilson said. "My goal is to get people away from asking the question 'who do we blame?' and instead offer consumers a better understanding of what they're ingesting and how they can minimize health risks that emerge from their diets."
World's first vitamin-infused vodka to launch
Source: The Spirits Business
by Melita Kiely
30th September, 2015
The Vitamin Alcohol Company is readying to release the world's first vitamin-infused organic vodka next month.
Scheduled to launch in Central Europe in October, Vitamin Vodka is distilled from organic Australian sugarcane and water from the Hunter Valley near Sydney.
Bottled at 40% abv, Vitamin Vodka is distilled 12 times in copper pot stills, before being diamond-filtered and packaged in a glass decanter and gift box.
The new release is said to have a smooth, crisp palate with subtle citrus notes and has been designed to be sipped neat, mixed or in cocktails.
Bradley Mitton of Mitton International Wines has been recruited as The Vitamin Alcohol Company's European Business Manager and will act as the exclusive EU importer for the brand.
Furthermore, Mitton's Club Vivanova will work with the brand to "enhance the product launches with innovative and unique gourmet and luxury experiences".
Eco-beer is hoppin'
By Jeff Clark
September 30th, 2015
Here is a question you've probably never heard from behind the bar: "Excuse me, bartender? Exactly how water-efficient IS that double IPA on tap?"
While I personally ask that two or three times each week, I realize it usually isn't a top concern for most beer enthusiasts - at least not yet.
Trends, they are a-changing
"Beer drinkers will always choose their beer based upon quality, taste, and local origin," said Cheri Chastain, sustainability manager at Sierra Nevada Brewing Co. "We focus heavily upon these three topics but we want to add one more cutting-edge issue: environmental sustainability."
That said, Chastain is beginning to find sustainability is a brand differentiator and beer drinkers are taking notice.
"More and more, we are finding that customers are excited to learn sustainability is a core value for us, and they look for our brand on every beer menu," she said.
Restaurateurs should take note: beverage sales are an important part of business revenue, with full-service restaurants typically earning between $1,015 and $2,901 per seat, per year for beer and wine combined, according to the National Restaurant Association's Restaurant Operations Report 2013-2014 edition.
This budding, craft eco-beer crusade is somewhat similar to the booming farm-to-fork movement from a few years ago, and savvy restaurateurs could help boost their beer sales by telling an engrossing eco-story about how the product was made.
Why is sustainable beer important?
Beer is a liquid beverage and is therefore mostly water. Depending upon the agricultural practices, location and technology the brewer is using, it can take 20 gallons of water to make one pint of beer, according to SABMiller and the Chicago Tribune.
The growth of the craft beer industry is affecting water supplies. Just like with restaurants, more than 90% of a beer's environmental impact results from the agricultural supply chain, according to SABMiller. For drought-stricken California, where 68% of water is used for agriculture and at least 500 breweries operate in the state, the competition for water can have an effect on beer producers.
Due to water constraints, Bear Republic Brewing Co. in Sonoma County, Calif., had to reduce production, minimizing shipments to the East Coast, and Stone Brewing Company in San Diego had to purchase water from the Colorado River, which was much more expensive due to the high demand of H20 in California. Then, because of the higher mineral content in the Colorado River, Stone Brewing Company needed to filter out all the minerals three times over to match California water supplies and protect the beer's taste consistency, according to All About the Beer magazine.
So, what are breweries doing?
Many brewers are changing their business models to include sustainability. For example, 24 breweries joined the Climate Declaration initiative and pledged to improve their operational efficiency by saving water, energy and reducing their greenhouse gas emissions.
Brewers taking a stand include:
Sierra Nevada, which diverts 99.8% of its solid waste from landfills, recycles CO2 from its fermentation tanks and owns one of the largest private solar power panels in the country.
Hellbender Brewing Co., a microbrew operation in Washington, D.C., that purchased an expensive, but highly efficient mash filter. It requires 15% less grain and 35% less water per batch of beer than standard filters. The company also donates its spent grain to local farmers for animal feed.
Goose Island, out of Chicago, among many other efforts like recycling both CO2 and thin films (like pallet wrap), crafts a Chicago-only, carbon neutral beer called "The Green Line Project" aimed at reducing long-range shipping and bolstering a local following.
MillerCoors, which works with farmers to minimize the footprint of its beers' raw ingredients barley, hops and wheat. The company saved 440 million gallons of water over three years, the equivalent of water used in one brewery for approximately five months.
How to get in on the eco-beer movement now
Here are five ways to engage staff and sell more eco-beer at your restaurant:
Do a little research: Like any menu item, understand your product. It takes a lot of resources to make and distribute beer, such as energy, water, barley, hops, bottling and transportation.
Purchase product from businesses aligned with your values: Get the scoop from your supplier or directly from the brewer. What sustainability efforts are the brewers most proud of? Get to know their product and what they do to make it greener.
Buy specialty donation beers, or make your own: Some brewers produce interesting beer strains that help support local causes. For example, according to All About the Beer magazine, eight Long Island breweries collaborated to craft Surge Protector Sandy Relief IPA after Hurricane Sandy damaged Barrier Brewing Co. in Oceanside, N.Y. They raised $29,000 to help reopen that brewery and generated an additional $29,000 for a local food bank.
Host a local "Green Drinks" to promote eco-beer networking: New business never hurts and Green Drinks could be a good way to boost a slow Tuesday night. Find a chapter or start your own.
Empower your staff to tell that eco-beer story: We all like stories about the foods we order and choosing a beer is no different. Arm your staff with knowledge. Get them interested in a particular beer by bringing in a local brewer to tell them about it. Encourage them to ask lots of questions and taste some products. Your staff can then impress your customers with their knowledge and talk about specific brewers' sustainability efforts.
Use these steps to get on the beer-wagon. It might even launch your own business journey toward sustainability. Beer bottle recycling, anyone?
Top 10 wine label controversies (Excerpt)
Source: the drinks business
by Darren Smith
28th September, 2015
Whether it's the folly of the authorities or the cringeworthy poor judgement of winemakers, wine labelling is littered with examples of foul and hilarious controversy. Here the drinks business presents its top 10.
It must drive the winemaker doolally: you've been out tending your vines in every extreme of weather, fighting the elements, battling through the harvest, carefully monitoring the fermentation of the must and the maturation of the wine day after weary day, then it's time to bottle.
That wine is your baby and you want its label to represent everything you're about. Then the labelling police step in tell you it's not allowed.
So it's often easy sympathise with the winemaker's rebellious attitude when it comes to what they put on their labels. Having said that, labelling decisions are not always determined by authority regulations - and there are some wineries whose poor judgment deserves no sympathy at all.
2nd Circ. Affirms Koch Win In Fake Wine Case
By Jody Godoy
September 30, 2015
The Second Circuit affirmed a judgment for billionaire William Koch in his suit against a wine counterfeiter on Wednesday, upholding compensatory and punitive damages over the fake Bordeaux wine Koch bought "as-is" at auction for more than $14,000 a bottle.
The three-judge appellate panel rejected Eric Greenberg's bid for judgment as a matter of law, saying the jury had seen enough evidence to find him liable for fraud and deceptive business practices in connection with the sale. The Second Circuit was also unswayed by Greenberg's contention that the alleged fraud wasn't directed at the public and he therefore shouldn't have been liable for punitive damages.
"Given the evidence that the defendant intended to sell counterfeit wine, at auctions aimed at the public, no manifest injustice exists in the imposition of a punitive damages award," the panel ruled.
The case dates to 2005, when Koch won an auction for 24 bottles of Bordeaux - purportedly owned by Thomas Jefferson - that Greenberg had consigned to Zachys Wine Auctions. When Koch discovered two years later what he believed was proof the bottles were fakes, he sued Greenberg for fraud, deceptive business practices and false advertising.
Following a 13-day trial in March 2013, a New York federal jury sided with Koch. The April 2013 verdict said Greenberg had willfully advertised and sold wine that he knew to be counterfeit, and had acted with a wanton disregard for a potential buyer's rights. The jury awarded Koch about $355,000 in compensatory damages and $12 million in punitive damages.
U.S. District Judge J. Paul Oetken upheld the verdict in April 2014, but slashed the award to $212,699 in compensation and a $711,622 punitive fine. The judge noted that Greenberg's "conduct did not cause a particularly egregious harm" and that "he was dealing in luxury goods marketed to a sophisticated and wealthy subset of the population."
On appeal, Greenberg had argued that Koch never relied on his representation of the wine but on information in a Zachys catalog that contained a disclaimer as to the consignment's authenticity.
But under New York law, a disclaimer can be defeated when a defendant misrepresents facts that only he or she would know, the appellate court said. Despite that Zachys published the catalog, the jury had enough evidence of Greenberg's representations about the chateau and vintage of the wine to find that he had lied to the auction house, the panel said.
Greenberg had also claimed the sale wasn't consumer-oriented and therefore didn't fall under New York's deceptive business practices law.
But the Second Circuit said the state's definition of "consumer-oriented" means activity that could harm similar consumers, and was not defeated by Greenberg's contention that the auction was an exclusive affair.
Moez Kaba, who represents Koch, told Law360 the ruling is "the culmination of a yearslong effort by Mr. Koch and his lawyers to make meaningful change in the wine auction industry" and to "hold people accountable who are committing fraud in the wine market."
Another counterfeiter who duped the billionaire and others into buying more than $20 million worth of ersatz wine was sentenced to 10 years in prison last year.
Counsel for Greenberg did not immediately reply to a request for comment.
Chief Judge Robert A. Katzmann and Circuit Judges Peter W. Hall and Raymond J. Lohier Jr. sat on the panel for the Second Circuit.
Greenberg is represented by David C. Frederick and Daniel G. Bird of Kellogg Huber Hansen Todd Evans & Figel PLLC.
Koch is represented by Moez M. Kaba, John C. Hueston, Padraic W. Foran and C. Mitchell Hendy of Hueston Hennigan LLP.
The appeal is Koch v. Greenberg, case number 14-1712, in the U.S. Court of Appeals for the Second Circuit.
Domaine Select Wine & Spirits Announces Acquisition of Miami Based Florida Wholesaler, Vinecraft & Vinecraft Estates
Source: Colangelo PR
September 30, 2015
Domaine Select Wine & Spirits, one of the industry's most progressive importers and distributors of fine wine and artisan spirits, today announced the acquisition of Vinecraft, LLC, a Miami based fine wine and spirit distributor. This acquisition comes after the July announcement of Domaine Select's partnership with Walden Capital Management, a private equity group with financial and management expertise in the fine wine and spirits sector.
"Florida represents the third largest market in the U.S. for Domaine Select Imports and we are thrilled to be able to expand our reach through this acquisition," says DSWS Founder Paolo Domeneghetti. "Due to long term customer relationships in Florida, the fact that our new partners are Miami based, and the philosophy of the Vinecraft business model, this is a natural fit for DSWS."
The Domaine Select Wine & Spirits portfolio of over 100 suppliers will continue to be represented exclusively in Florida by three distributors, one of which is Vinecraft.
Vinecraft will be run as an independent unit and continue to be led by Paul Owens, Founder and President of the Florida operation. The current portfolio and sales staff of Vinecraft will remain intact and plans are in place for continued dynamic growth. Operational and warehouse staff will benefit from support of the DSWS infrastructure, including leadership by DSWS Executive Vice President/COO/CFO Evis Savvides, who will oversee the operational transition strategy.
"After an incredible first four years made possible by the support of our customers, our staff, and our talented suppliers; it is with great honor and excitement that we enter into this partnership with Domaine Select Wine & Spirits." says Paul Owens, President of Vinecraft. "The support of this new relationship will strengthen our position with our loyal suppliers, help us to grow our sales team, and allow us to continue to provide and improve exceptional service and amazing products to our customers, as the leader in craft distribution in Florida."
"The acquisition of Vinecraft represents an important step in the path of Domaine Select," explains DSWS Chairman, Daniel Holtz. "Notwithstanding that we will now have our own boutique distribution company in Florida, our distributor partners will continue to be an essential part of our growth strategy in the state."
About Domaine Select Wine & Spirits
Founded in 1999, Domaine Select Wine & Spirits (DSWS) www.domaineselect.com is dedicated to wines and artisanal spirits of the highest quality and which demonstrate excellence and tremendous character, particular to their origin. DSWS is committed to transmitting the individuality of our producers; expressing diversity, tradition and personality is the tenet of DSWS. Domaine Select Wine & Spirits was named 2010 Importer of the Year by FOOD & WINE Magazine.
Founded in 2011, Vinecraft LLC is a Miami based distributor of boutique wines & spirits. The diverse portfolio of more than 100 producers from around the world is represented by more than a dozen industry sales professionals throughout the State of Florida. Vinecraft owns and operates its own Miami based warehouse and delivery facility.
IWSC announces wine trophy winners
Source: the drinks business
by Lauren Eads
30th September, 2015
The IWSC has announced its 2015 varietal wine trophy winners, following seven months of judging wines from more than 30 countries.
IWSC 2015A total of 24 trophies have been awarded, with wines from the Southern Hemisphere faring particularly well. Both South Africa and Australia received four trophies each.
South Africa's Marks & Spencer Paul Cluver Ferricrete Riesling 2014 was awarded the Riesling Trophy, supported by Jancis Robinson, with judges describing it as being "fresh and crisp in the mouth with a range of citrus flavours in gentle array balanced by a sweetness that is smoothing rather than sweet".
Turning toward Australia, which was awarded a total of 50 gold medals this year, House of Arras' EJ Carr Late Disgorged 2002 was awarded the Bottle Fermented Sparkling Trophy for the first time since Brown Brothers won the accolade in 2007. Australian Vintage's Bin 9000 Semillon 2006 triumphed again for the second year in a row, picking up the Semillon Trophy.
New Zealand beat entrants from all other nations to take home the Pinot Noir and Sauvignon Blanc Trophies, as well as 20 gold medals across one of the widest spread of styles and varieties ever seen from New Zealand in the competition. The Crown Range Cellar Signature Selection Grant Taylor Central Otago Pinot Noir 2013 was awarded the Pinot Noir Trophy and the Rapaura Springs Marlborough Sauvignon Blanc 2015 won the Sauvignon Blanc Trophy.
"The standard of New Zealand wines entered into this year's competition was extremely high," said New Zealand-based wine writer and judge Jo Burzynska, who was a New Zealand panel chair at the IWSC this year.
"It was also great to see such a range of varieties winning top awards, as well as some exciting diversity in the Sauvignon Blanc classes that saw a number of complex older barrel fermented Sauvignon Blancs rewarded."
Chile also received two trophies, picking up both the blended Red Trophy for TerraNoble Lahuen Rojo 2012, Viña Terranoble, and the Carmenère Trophy for Sibaris Carmenere 2013 from Viña Undurraga SA.
NRA: More operators report sales decline in August
Restaurant Performance Index falls to lowest level in 11 months
Sep 30, 2015
A majority of restaurant operators - 56 percent - reported higher same-store sales in August, but that represented a decline from July, when 73 percent of operators reported improved sales, according to the National Restaurant Association's Restaurant Performance Index.
The Performance Index slipped 1.2 percentage points in August, to 101.5, its lowest level in 11 months. Still, any level above 100 indicates expansion of the index and of key industry indicators.
The RPI is a composite index comprised of the Current Situation Index, which measures current sales, and the Expectations Index, which measures operators' outlook.
The Current Situation Index, which measures same-store sales, traffic, labor and capital expenditures, fell 2.3 points, to 101.4, in August, its lowest level since November 2014.
The Expectations Index, which measures operators' six-month outlook with regard to same-store sales, employees, capital expenditures and business conditions, dipped slightly, by 0.1 percentage points, to 101.6.
"The RPI's August decline was the result of broad-based declines in the current situation indicators," said Hudson Riehle, senior vice president of the NRA's research and knowledge group, noting that all four of the factors measured declined.
Thirty-two percent of operators saw same-store sales decline in August, rising from 16 percent in July.
Traffic fell, too, with 41 percent of restaurateurs reporting higher traffic between August 2014 and August 2015, a decrease from 59 percent who saw a year-over-year increase in July. The number of operators who saw a decline rose to 37 percent, compared with 23 percent in July.
A majority of operators, 63 percent, said they had spent money on equipment, expansion or remodeling during the three months ending in August, making it the 11th month in which most operators said they were making such expenditures.
Looking forward, 46 percent of operators said they expect higher sales in the next six months, compared with the same period the previous year. That has risen from 40 percent who said the same in July, according to the NRA. An additional 44 percent said they expect their sales to remain about the same.
They are less optimistic about the economy overall, however, with just 22 percent of operators saying they expect economic conditions to improve over the next six months, and 21 percent saying they expect conditions to worsen. Nonetheless, 60 percent of operators said they plan to make a capital expenditure for equipment, expansion or remodeling over the next six months, a decrease from 66 percent who reported similarly in July.
The RPI is based on responses from the NRA's monthly Restaurant Industry Tracking Survey.
Toby Keith's I Love This Bar and Grill closings, lawsuits raise questions across the country (Excerpt)
Source: USA Today
Robert Anglen, The Republic
September 30, 2015
Trouble stacks up for Toby Keith's I Love This Bar and Grill
Boomtown Entertainment has opened 20 Toby Keith's I Love This Bar and Grill restaurants since 2009
17 have failed in the past 18 months, and projects in 19 other cities were never completed
It is facing at least $28.6 million in lawsuits, judgments and liens in 24 cities
Company officials say the closures are part of a strategic plan to make room for future growth
Toby Keith's I Love This Bar and Grill has generated a country song's worth of grief in cities nationwide - along with nearly $30 million in lawsuits, liens, judgments and accusations of unscrupulous business practices against a Phoenix-based restaurant chain.
Boomtown Entertainment is accused in lawsuits of taking millions of dollars from mall owners and developers to build new locations and then walking away with the money, often leaving projects unfinished.
Boomtown closed most of its restaurants this year amid allegations that it stiffed landlords, contractors and suppliers, as well as racked up hundreds of thousands of dollars in liens for failing to pay sales taxes.
An Arizona Republic investigation found Boomtown recently accelerated its restaurant closures, shutting down 10 since May with little or no warning to employees and customers. All told, Boomtown has closed 17 of its 20 Toby Keith restaurants in the past 18 months, including three in metro Phoenix and one in Tucson.
Boomtown officials followed many closures of Toby Keith restaurants with promises to open new ones in different cities. Since 2012, the company has announced plans to build 19 Toby Keith restaurants that it left unfinished or never started.
The Republic also found:
Boomtown, its affiliates and executives have been sued in 24 cities and are facing at least $28.6 million in lawsuits, judgments and liens.
No Toby Keith restaurant has been open longer than seven years, and some closed within months of opening.
The median time restaurants have stayed in business is two years. That includes the three still operating, in Rosemont, Ill., Foxborough, Mass., and Auburn Hills, Mich.
Boomtown's first Toby Keith restaurant, named after the country singer's 2003 chart topper "I Love This Bar," opened in Mesa six years ago. The concept was part dance hall, part nightclub and part Southern-dining experience. You want fried pickles with your American Soldier Burger? You got it. Beer was served in Mason jars and entertainment was provided by the Whisky Girls.
Toby Keith's was built big; the sprawling dining space included a stage for concerts. And if live music wasn't available, customers always could join in a line dance. The restaurant's centerpiece was an 85-foot-long guitar-shaped bar in star-spangled colors.
Keith's name was on the building, but he didn't have an ownership stake in the restaurant. He collected revenue on the naming rights and would make an occasional appearance. Boomtown wasn't the only company operating Toby Keith's I Love This Bar and Grill, but it quickly became the biggest.
Boomtown had caught country lightning in a bottle. It opened three more Toby Keith restaurants in 2010. By 2012 it had 10. Then the bottle cracked.
In 2012, a Dallas mall owner sued the company for not paying rent. A judge ordered Boomtown to pay $1.4 million in 2013, and company officials closed the restaurant a few months later.
That first closure in 2014 was followed by more lawsuits. A pattern quickly emerged: construction delays, tenant disputes, missed rental payments, delinquent taxes and evictions, which led to more closures and unfinished projects. But even as Boomtown closed restaurants, it continued to open new ones through April 2015.
Boomtown officials said in interviews that each restaurant was unique and that legal issues at one location were unrelated to the others.
They described the shutdowns as part of an aggressive new business plan and said in August that the closure of four restaurants soon would be offset by the openings of new ones in Ohio, Pennsylvania, South Carolina and elsewhere.
But The Republic found the company already had halted construction and walked away from its lease in Cleveland, delayed construction in Pittsburgh and canceled plans to build in Greenville, S.C.
Boomtown's website this week continued to display restaurant locations in 19 cities, but 16 of those are closed.
4 Affordable Care Act issues that impact restaurants (Excerpt)
Sep 30, 2015
After six or more years of unsuccessful opposition to the Affordable Care Act, the restaurant industry is turning its focus to managing the fallout.
The Supreme Court has twice decided that the law will stand, most recently this June in the King vs. Burwell Supreme Court decision. Angelo Amador, senior vice president and regulatory counsel for the National Restaurant Association, said the focus now shifts to making the Affordable Care Act easier to deal with.
"The fixes that we needed before the Supreme Court decision are still needed today," Amador says. "And they would have been needed regardless."
But with the law weighing in at 11,000 pages, not every section is equally important. Here are four issues affecting the industry and how restaurateurs are dealing with them.
1. 30 vs. 40 hours
In order to prevent employers from reducing their "full time" worker hours to 38 or 39 hours a week to avoid paying benefits, Congress defined 30 hours a week as the floor for full time under the Affordable Care Act. Tim McIntyre, vice president of communications for Domino's Pizza, said that provision may have inadvertent consequences.
"Defining full time as 30 hours could be devastating to the work force, especially if small business owners find the need to cut back employee hours," McIntyre said by email. "What you'd likely see is a workforce full of people working multiple part-time jobs."
This shift to a part-time workforce has happened at Dallas-based Dickey's Barbecue Pit. CEO Roland Dickey Jr. said he's had employment go down as he's found efficiencies in his seven corporate units. He said that whether it's at the corporate level or one of the brand's 508 franchise locations, lower hours don't equate to high performance.
"Thirty hours a week?" Dickey said. "I work 30 hours a week when I'm on vacation. We didn't grow this business by working 30 hours a week."
The full-time definition aspect of the ACA could be changing. In January 2015, the House passed the Save American Workers Act, which would make a 40-hour work week be considered full time, and there are at least two bills in the Senate which would do the same thing.
But Justin Klein, a franchise attorney and partner with Red Bank, N.J.-based Marks & Klein, said the issue isn't as significant as many think.
"I don't think the 30 hours vs 40 hours is really much of a difference especially in the quick-service industry," Klein said. "I just don't seeing the numbers being that different."
Alisia Kleinmann is the CEO of Industree, the Washington, D.C.-based restaurant industry group that is hosting the Fast Casual Explosion conference in D.C. and Philadelphia. She says that smart operators won't manipulate hours much, law or no law.
"I do 100 percent think that if employers are going to start messing around with hours in order to avoid providing healthcare they're going to lose their best guys," Kleinmann said. "If you value the staff you have, and want to retain them and be viewed as not a jerk, you have to award or support your best players."
The ACA has fairly extensive reporting requirements for tracking compliance with the law that requires paperwork for each covered employee. The idea is to make sure chains are not dodging the law by providing a paper trail the Internal Revenue Service can look at. If reporting requirements are not met, the IRS has the authority to levy fines.
"It's the only way to see if people are in compliance," Kleinmann said. "I think it's a necessary evil."
On the other hand, she agreed it could be simplified. Some chains, like Dickey's Barbecue Pit, have ramped up human resources staff in response.
Dickey said the corporate office hired a full-time staffer just to handle ACA requirements for the 200 corporate employees. But some of his franchisees who are on the verge of growing to 50 full-time equivalent employees are hesitant to make the leap. Companies with 50 employees or more are considered large employers under the ACA.
"There's been two people [franchisees] who have said they want to hold off," Dickey said. "It's the compliance, the reporting, keeping up with the 1094s and the 1095s."
Rodney Eckerman is co-CEO of PizzaRev, the Los Angeles based fast-casual chain partially owned by Buffalo Wild Wings. He said his company had to switch from an in-house to a third-party payroll service to handle the new complexity.
"We had to switch employer payroll services because we needed to switch to a more robust tracking system," Eckerman said. He says that the reporting requirements aren't as onerous as other aspects of the law, as he's already used to a higher paperwork burden from his state government.
"Running a company in California, everything's more difficult than it should be," Eckerman said.
But the reporting requirements may be simplified. Eckerman's fellow Californian Mike Thompson belongs to the House of Representatives, and along with Diane Black (R-Tenn.) introduced H.R. 2712, the Commonsense Reporting and Verification Act of 2015. This would reduce the administrative burden of the ACA by requiring employers to only file paperwork for employees that apply for coverage on the exchange, rather than for every covered employee. It also omits the need to collect social security numbers from dependents and allows for electronic transmission of this information. H.R. 2712 was introduced on June 10 and is currently in subcommittee.
Sainsbury shares climb as it lifts profit forecast
Supermarket chain offers glimmer of hope to struggling sector
by: Andrea Felsted, Senior Retail Correspondent
September 30, 2015
Shares in J Sainsbury rose 14.5 per cent in early afternoon trade on Wednesday after the grocer offered a glimmer of hope to the struggling supermarket sector, reporting better than forecast sales and saying profits would be ahead of expectations.
Although, Sainsbury, which is battling the rise of the German discounters and a supermarket price war, said sales from stores open at least a year and excluding fuel fell 1.1 per cent in its second quarter. This was not as steep a decline as analysts had expected.
Sainsbury also said that full-year underlying pre-tax profit was now expected to be "moderately ahead of published consensus" of £548m.
Earlier this year Mike Coupe, chief executive, said that Sainsbury was seeing some "green shoots" of recovery after the worst conditions in the supermarket sector for decades.
"Let's say the green shoots are about the same height," he said on Wednesday. "We are making the statement about our profitability, about the moderately improved picture relative to the consensus, on the basis that perhaps things have been a little bit better than we had been expecting."
He said that Sainsbury had in particular seen a "stabilisation in the underlying performance" of its core supermarkets, which had been hit hardest by the growth of the discounters, as well as online and convenience shopping.
Bruno Monteyne, an analyst at Sanford Bernstein, said the profit upgrade represented "a change of tone for Sainsbury. It has tried to take a cautious message up to now, that it will go 'toe to toe' with whatever price investment anyone else makes. That it is talking up guidance is now showing they are more confident in their strategic position."
Cutting prices and moving away from promotions such as three meat items for £10, to lower regular prices, had also driven an increase in customer transactions and just over a 1 per cent rise in the volume of goods sold.
This had also helped availability and made the supply chain more efficient - cutting waste for example - because demand was easier to predict.
Mr Coupe estimated that Sainsbury had invested about £200m in price cuts - the £150m planned plus extra money generated by a higher volume of sales. It had cut its price premium to the discounters by 5-10 percentage points over the past year.
Shares in Sainsbury rose 33p, to 262.45p. Rivals' stock also climbed amid hopes that the worst was over for the big supermarkets, which have been battered by the growth of the no-frills discounters and a vicious price war in response.
Tesco shares, which had fallen back to the levels seen after its profit overstatement a year ago, rose 7 per cent to 183.29p, while Wm Morrison were up 7.3 per cent to 167.50p.
Mr Coupe said there had been a "pause for breath" in the intensity of the price war, echoing comments from Aldi this week that the pace of price cutting was slowing down.
But he warned: "You can't get away from the fact it is a challenging market. I don't think there is anything currently in the wings that will suggest that it will get any easier."
Price deflation was running at 1.5 to 2 per cent, he said.
According to Kantar Worldpanel, the consumer research group, Sainsbury was the strongest performer of the so-called big four supermarkets - which also includes Asda - in the past four weeks. Sainsbury's sales rose 2.2 per cent, according to Kantar, outperforming the market and the only one of the big four to see sales growth.