2019 Market Update | Day 77

Posted in Beer, Industry, Spirits, Wine.

Analysts Dismiss Pernod Ricard’s Rumoured Wine Sale

Analysts have poured cold water on the rumour that Pernod Ricard is mulling a sale of its wine division, arguing that while there may be further sales of non-core brands, a wholesale disposal of the entire wine division is “unlikely”.

Analysts firm Jefferies International issues a note in response to a report in Bloomberg last week that claimed the French drinks company was in “early discussions” on a potential sale of its $500 million wine unit.

Bloomberg quoted sources “familiar with the matter”, who wished to remain anonymous, and said the company had been looking at options due to the $565 million worth of cost cuts it claimed was being demanded by new shareholder, US hedge fund Elliot Management.

Jefferies responded that while disposal of non-core assets were an ordinary part of business – echoing comments made by CEO and chairman Alexandre Ricard last month – it questioned whether a disposal of the entire wine division was likely.

“While we do not altogether rule out a wine disposal, we do not necessarily see [Pernod Ricard] reacting in a kneejerk fashion to external pressure,” analyst Edward Mundy said in the note issued last week.

Mundy noted that Pernod Ricard’s premium wine brands, including key strategic brands Jacob’s Creek, Campo Viejo, Brancott Estate and Kenwood, accounted for around 5% of the group’s sales, with growth of +2% in financial year 2018, compared to +4% in 2017.

“We think the margins on wine are in double-digits, with double-digit return on capital employed [a measure of long-term profitability], albeit lower than for spirits as wine is an agricultural capital-intensive business,” he noted.

Champagne brands Mumm and Perrier-Jouët sit outside the premium wine brand division, he noted.

Jefferies went on to note the strength of the company’s balance sheet and the strategic role wine plays in some markets, for example in providing routes to market for some of the company’s spirit brands.

“In this regard, wine is strategic in China (Jacob’s Creek and Mount Helen) in helping to expand Cordon Bleu into meal occasions,” it said.

It also acts to dilute the fixed cost base in market such as the UK.

“Wine helps to cover structural costs, with profits generated on higher-margin spirits,” it said.

“We estimate that wine comprises as much as a third of UK sales. We see champagne as core as it helps the route to the nightclub market.”

Furthermore, there would be a limited financial impact of the sale of the division, the note pointed out, calculating the potential disposal proceeds at around ?1.2-1.5bn.

It concluded that the company’s “key priorities” lay in organic growth in the business, bolt-ons, and rebuilding the dividend payout ratio from 41% in the last financial year, to 50% by 2020.

Speaking at a press briefing last month, CEO and chairman Alexandre Ricard said he would continue to “dispose” of brands that “no longer fit” within the drinks giant’s portfolio, following the sale of Argentine wine brand Graffigna to Chile’s VSPT in January, saying the company was “committed” to growing value sales over volume sales.

“Our wine volume sales are down by 8% due to our value focused strategy, which we’re not afraid of pursuing,” he said at the time.

Rival spirit giant Diageo sold its wine business in 2016 to Treasury Wine Estates for £361 million, while last month group Constellation confirmed rumours that surfaced in October that it was offloading around 40% of its wine brands to concentrate on its higher priced power brands.

Pernod Ricard (RI FP) – EMEA / Latam Webcast Slides – Solid Top Line And Margin Improvement

  • Jefferies
  • Edward Mundy, ACA, Elsa Hannar
  • March 19, 2019

Key Takeaway

Slides released ahead of today’s EMEA/LatAm call confirm a robust outlook for EMEA and LatAm (29% sales) with solid top line and margin improvement. Although group growth will moderate in 2H, we see low risk to F19 EBIT guidance +6%-8% after strong 1H +12.8%. RI is an attractive compounder, in our view, given strong execution and natural runway for growth offered by spirits; there is much to like, but we stay at Hold as the company looks fairly valued.

Insights

What’s new?

Pernod is hosting its EMEA/LatAm conference call today at 2pm (UK). EMEA and LatAm 29% of sales. We estimate Europe c.23% of profits (17% ex France, GTR and ROI), Africa and ME (Asia ROW) c.3% and LatAm (Americas) c.3%. Pernod trades at cal 2020 PE 21.6x vs staples 20.2x.

Overall message – greater focus on operational improvement than historically

EMEA/LatAm 1H19 sales +3% vs 1H18 +7% (1H17 +4%) given softer W Europe. Within this volume -2% with price/mix +5%. Strategic International Brands +5% (1H18 +8%, 1H17 +7%), specialty brands +18%. Co outlines a clear strategic roadmap to deliver “solid and diversified growth” with tailwinds from innovation, prestige, gin/tequila fast track and active portfolio mgmt. Margins should benefit from revenue growth management, COGS optimisation, A&P efficiencies, RTM efficiencies, on-going organisational improvements. Message has evolved from “solid foundations to continue to grow in EMEA and rebound in LatAm” (2017) to “an effective resource reallocation strategy” (2018) to “solid top line growth and margin improvement” (2019).

W Europe – grow Jameson and Absolut, leverage Apertif opportunity

Spain 1H19 -2% (F18 -5%, F17 +2.2%, F16 +6.1%) in a market +0.2% value MAT, premium dry gin first decline in 8 years. Germany 1H19 decline (F18 good, F17 +1.7%, F16 +0.2%) due to commercial trade dispute. UK 1H19 decline (F18 +6%, F17 +4.3%, F16 +3.6%) given value approach to wine offset by strong performance on spirits (+14% sell-out growth with price/mix +9%).

CE Europe – consolidate leadership esp in Whiskies

Russia 1H19 +7% in-line with depletions (F18 +DD, F17 strong) with price/mix +2% despite competitive pressure. Growth mostly driven by whiskies. Poland 1H19 +6% (1H18 +7%) with value MAT share +0.2pp driven by premiumisation strategy (price/mix +4%). Turkey 1H19 strong DD+ (1H18 +39%) solid volume growth in all channels and brand categories, benefit from significant price increases to offset FX devaluation.

LatAm, Africa & Middle East – accelerate growth and share, conquer emerging middle-class

Africa 1H19 +DD (F18 dynamic growth, F17 +1%) with excellent growth in Nigeria, South Central Africa strong DD+, West Africa solid. S Africa soft with stock adjustment. Mexico 1H19 decline vs tough comps, U/L sell-out MSD+ (F18 +DD, 1H18 +12%, F17 +3%) with market share gains in premium. Brazil 1H19 +6% (F18 growth, 1H18 +11%, F17 -3%) driven by strategic international brands with market share gains +0.7pp.

Fast track Gin and Tequila

Strategic roadmap to fast-track growth in Gin (1H DD+) and Tequila (1H DD+). Gin hub led by UK since Jan 2019, Beefeater (incl. pink and blood orange), Seagrams, Plymouth and Monkey 47. Integration of Avion and Del Maguey into house of Olmeca and Altos. Operational excellence and price increases to partially offset higher agave.

Tim Hassett Seeking $1.85M In Damages From Beam Suntory

  • Wine & Spirits Daily
  • March 18, 2019

Last week, we reported that Tim Hassett, the former head of Beam Suntory’s Americas region, filed suit against Beam Suntory for alleged breach of contract for “failure and refusal to pay certain compensation,” per the complaint [see WSD 03-12-2019]. Now we have the full details from the complaint with Tim’s side of the story.

Tim joined Beam Suntory in 2014 as the president of its North America business. Under the terms of his employment agreement, his compensation included but was not limited to: a base salary of $500,000, participation in the company’s Executive Incentive Plan (EIP) bonus program-also called the Annual Incentive Plan (AIP)-and an annual Long Term Incentive award, per court documents.

In October 2017 the company informed Tim he would be receiving an LTI award for $1.25 million on top of a $600,000 bonus, according to Tim.

As Tim tells it, he was offered a position with another company in October 2017, but he didn’t want to accept the position immediately if it meant giving up that hefty award and bonus. He told Beam chief Matt Shattock that he planned to leave and Tim agreed to stay on to assist with the transition to Tim’s replacement at Matt’s request, promising to stay until mid-November. Simultaneously, Tim was also dealing with the passing of his father and gave up his right to paid time leave for bereavement.

In return, Matt “promised” that Tim “would be entitled to either all or a portion of his LTI and 2017 AIP bonuses,” per court documents, and “given that the company had a history of making accommodations for employees in good standing, Mr. Hassett relied on and took Mr. Shattock at his word.”

But when Tim left, he claims Beam told him they would not be paying out his award/bonus because he was not employed through the end of 2017. Tim was “stunned by the company’s about-face.”

Tim says Beam previously paid out bonuses to senior execs who left the company before year’s end, citing three examples: Rudy Costello, Alison Wilcox and Christopher Stearman.

As a result, Tim filed suit claiming breach of contract, good faith and fair dealing, unjust enrichment and failure to pay wages. He is seeking damages in the amount of $1.85 million (the LTI + bonus) plus interest and attorneys’ fees.

When asked about the suit, Beam Suntory told WSD: “This claim is without merit and we are confident that we will prevail. Beyond that, as a matter of company policy, we don’t comment on the details of matters in litigation.”

The company has until May 13 to file its response.

We’ll have more as the case progresses.

America Has A Drunk Shopping Habit

  • CSA
  • MARIANNE WILSON
  • March 18, 2019

The amount spent on “spontaneous drunk purchases” is soaring in the United States.

According to personal finance web site Finder.com, Americans spent $39.4 billion on drunk purchases in the past 12 months, up from last year’s $30.43 billion. More than a quarter (26%) of Americans admit to shopping under the influence, totaling some 53.4 million people, according to Finder’s third annual Drunk Shopping survey. That’s down from 46% in 2018, which means the amount being spent per person is on the rise.

The study revealed that, on average, Americans spent $736 per person on drunk purchases, up from last year’s $447.50. Of the people who admit to making drunk purchases, 44% are women and 56% are men.

Men are the biggest spenders, spending $870 on drunk purchases, versus $511 for women.

By generations, Millennials spent the most drunk, dishing out a whopping $1,047. That’s more than double the spending of Baby Boomers ($466) and Gen X ($469).

Food is the most common drunk purchase, with 52.06% of drunk shoppers admitting to buying some type of food item. Food is followed by shoes and clothing (43.22%) and cigarettes (30.26%).

Minnesota Is About To Be The Last State Left With 3.2 Beer

Until last week, Minnesota and the Beehive State (that’s Utah’s official nickname, by the way-we Googled it) were the only states left with 3.2 beer, the final holdouts in the war of attrition over watery, low-alcohol suds. Battles in said conflict were waged in Oklahoma, Colorado, and Kansas last year.

On Wednesday, Utah legislators reached a deal to get (slightly) higher-alcohol brews in grocery and convenience stores throughout the state. According to Utah Public Radio, drinkers will soon be able to snag beers “with as much as 4.0 percent alcohol by weight” during food runs. The original bill would have upped that number to 4.8 percent, something lawmakers say they’re open to revisiting in the future.

“It’s not everything we’d hoped for, but it is the biggest change in alcohol laws in Utah since 1933,” Kate Bradshaw of the Responsible Beer Choice Coalition told Salt Lake City’s Fox affiliate.

It also makes the North Star State the only one left with 3.2 laws on the books. Considering our lawmakers just got around to letting people buy liquor on Sundays, maybe this is the next frontier when it comes to letting people make up their own damn minds about when and how convenient it is to get tipsy?

We’re speculating with some wistful optimism here, but it could mean the writing’s on the walk-in cooler for 3.2 beer… because 3.2 beer might soon be die off altogether.

Brewers like Budweiser’s Anheuser-Busch make special accommodations to get their buzz-denying beer varietal to shoppers-a standard Bud clocks in at 5 percent. (Alcohol by weight and alcohol by volume aren’t the same thing; that 4 percent ABW figure in Utah is equal to about 5 percent ABV.)

But as liquor laws have evolved to allow for full-strength brews, 3.2 sales have obviously dropped, and big breweries have decreased their production correspondingly.

Now that the only other “we’ll let you drink, but just this weak shit” state has acquiesced somewhat to the hop-hunting, IPA-loving masses, it might be just a matter of time until brewers stop making their slightly beer-ish water entirely.

RIP, 3.2 brews. You probably won’t be missed.

Should Alcohol Be Banned On Flights?

The government is reviewing airport licensing laws. But after another drunken brawl on a plane, should passengers be breathalysed before boarding – or even forbidden from boozing?

Since commercial airlines took to the air, drinking and flying have tended to go hand in hand, with drink seeming to add to the pleasing sense of disembodiment at 36,000ft. But for how much longer? In the face of a rising tide of drink-fuelled violence and antisocial behaviour, highlighted by a boozy confrontation on a flight from Glasgow to Tenerife over the weekend that ended with one man badly injured, there are increasing calls for booze on flights and at airports to be restricted.

The government is reviewing licensing laws at airports as part of a broad rethink of aviation policy. It has yet to report, but World Duty Free has pre-empted any official announcement with its own initiative – selling duty-free booze only in sealed bags that, in theory, cannot easily be opened on the plane.

Rob Griggs, a spokesman for Airlines UK, welcomes the move, but thinks more will be needed. “Our priority is airside licensing,” he says. “The establishments that sell alcohol should be subject to the same licensing conditions as elsewhere.” It would then be up to the local authority, rather than the airport, to decide whether the 5am pint was acceptable.

Suzannah Robin, an alcohol and drug specialist at AlcoDigital, accepts Griggs’ argument that most drinking is done in the terminal rather than on the plane, and advocates breathalysing passengers who display signs of intoxication before they board. She says the Civil Aviation Authority has to take the lead. “They dictate that it’s illegal to be drunk on board an aircraft. They now need to establish what being drunk means and to have a fixed number. In the same way as you have a drink-drive limit, you would have a passenger limit, and as an authority they need to enforce the airport having a method of checking passengers before they board an aircraft.”

She doubts whether the relationship between booze and flying will ever be broken completely. “I’d be surprised if drinking was ever banned on flights,” she says. “The events that happen obviously become very well known very quickly because of social media, but it is a tiny percentage of the population that cause these issues. The airlines benefit because they sell alcohol on board; the airports benefit because they have establishments selling alcohol within their terminals; I can’t see them wanting to back down. You’re asking an entire nation to change what they do when they go on holiday because of the behaviour of a tiny minority. Being able to manage it would be better.”

Uk Flyers Face On Board Duty-Free Drinking Ban

Air passengers in the UK have now been officially banned from consuming duty-free wine and spirits on board planes, prompted by growing concerns over alcohol-fuelled air rage.

As reported by The Times, World Duty Free, which is the only provider of duty-free shops at most large airports in the UK, has tightened its control on the sale of duty-free alcohol.

In measures that were introduced at the end of last year, all duty-free alcohol is now required to be placed in sealed bags to prevent passengers from opening them until their plane has landed.

According to the paper, all bottles of alcohol, regardless of their size, must be placed in sealed plastic bags bearing the inscription: “Do not open alcohol purchases until your final destination”. The reinforced bags require cutting with scissors which are of course banned from being placed in hand luggage.

According to The Times, Gatwick has implement further measures, banning the sale of miniatures from duty-free shops and enforcing a “no-shots policy” in bars.

A spokesperson for World Duty Free said the move was voluntary, adding that while alcohol-induced air disruption incidents are rare, “where they do happen, the impact can be serious for fellow passengers, employees working in the air and the airport industry.

“The industry is working together to tackle this problem and make disruptive behaviour such as this socially unacceptable. The vast majority of our customers understand that the alcohol we sell can only be consumed when they reach their destination, and this message is already clearly conveyed at tills, on receipts and on bags.”

In 2017, the Civil Aviation Authority revealed that a total of 422 serious incidents were recorded, double the number reported in 2014, with only those that directly put the aircraft at risk being noted. The CAA estimates that in half these cases, alcohol is involved.

Responding to the government consultation on the introduction of airside licensing at UK airports earlier this year, Tim Alderslade, chief executive of Airlines UK, which 13 UK carriers, said: “Whilst airlines do not want to stop passengers enjoying a pint or glass of wine at the start of their holiday the sale of alcohol needs to be responsible. We want to see common sense prevail and ensure bars and retailers airside come under the jurisdiction of the Licensing Act – simply applying the same rules as on the high street.

“It is the alcohol consumed or bought in the airport that is the most common causal factor (more than half) of disruption in the air and unfortunately the number of incidents continues to rise and each incident poses a safety threat.

“Simply bringing the airports in line with the high street would protect passenger interests while reducing the number of disruptive incidents and making flying safer and more enjoyable for all.”

While such incidents can impact fellow travellers and members of staff, they are also costly, with diversions due to on-board incidents ranging from £10,000 to £80,000 depending on the size of the aircraft and where it’s diverting to.

State Lines: Cannabis Tracker – March 18

  • Cowen
  • March 18, 2019
  • The Cowen Insight

Our Cannabis Tracker is a bi-weekly rolling update on cannabis legislation in individual states. For an update on federal cannabis legislation, click here for the latest analysis from Cowen Financial Services Policy Analyst Jaret Seiberg. For more granular tobacco and cannabis industry news, click here for Cowen’s most recent Cigarette & Cannabis Circular.

What’s New

Florida

Gov. Ron DeSantis (R) today signed a bill that eliminates the state’s ban on smokable medical cannabis. Bloomberg

A bill to legalize recreational use of marijuana in New Jersey was up for discussion today at legislative hearings in the Assembly Appropriations and Senate Judiciary Committees, setting up a potential final vote as soon as March 25. Marijuana Moment

New Mexico is poised to become the next state to decriminalize marijuana as lawmakers approved legislation to remove criminal penalties for cannabis possession early Saturday morning. The bill now heads to the governor’s desk to be signed into law. Marijuana Moment

Alaska

Lt. Gov. Kevin Meyer (R) signed new regulations into law on March 12 that will allow Alaska residents to consume cannabis at licensed dispensaries later this year. Some states like California and Colorado allow for on-site consumption in certain locales, but Alaska is the first to do so state-wide. Marijuana Moment

Connecticut

On March 14, legislative leaders announced a plan to legalize recreational use of marijuana via multiple bills rather than comprehensive legislation. Public hearings on the new measures are scheduled for March 22.

Marijuana Moment

Florida

Florida State Reps. Michael Grieco (D) and Carlos Guillermo Smith (D) filed bills in late February related to legalizing and taxing adult use cannabis in the state. The bills would allow adults 21 and older to purchase and use limited amounts of cannabis in their homes or other private places and purchase up to 2.5 ounces at a time. If someone were to smoke cannabis in public, they would face a $100 penalty. The state’s House of Representatives also passed a bill March 13 that would eliminate the state’s ban on smokable medical cannabis, which now heads to the governor’s desk. ABC Action News

Georgia

On March 5, the Georgia House of Representatives approved a bill that would allow medical cannabis to be grown, manufactured and distributed in the state. Georgia has previously allowed patients to use medical cannabis for seizures and cancers since 2015. In addition, former Governor Nathan Deal (R) signed a bill last year allowing for those suffering from post-traumatic stress disorder and intractable pain to use cannabis oil for treatment. However, it has previously been against the law to grow, buy, sell, or transport the drug, leaving patients on the medical cannabis registry with no method of obtaining it. The proposal would also license 60 medical cannabis dispensaries in the state. The Hill

Hawaii

The effort to legalize recreational marijuana in Hawaii stalled after a legalization bill did not meet a March 1 deadline to be considered by the state Senate. The bill made it farther than in past sessions, but the legalization effort is now essentially shelved as a ballot initiative is not an option in Hawaii. Honolulu Star Advertiser

Kentucky

On March 6, Kentucky’s House Judiciary Committee voted to advance a bill that would legalize medical cannabis in the state. The bill, which has 43 co-sponsors out of the chamber’s 100 total members, would establish a medical cannabis program under a newly named Department for Alcoholic Beverage and Cannabis Control. The state agency would be responsible for issuing licenses to qualifying patients, health care providers, cultivators, processors, and dispensaries. The legislation was approved by a 16 to 1 margin. The bill now advances to the Rules Committee before it is forwarded to the floor for a full House vote. Marijuana Moment

Minnesota

On March 11, a Minnesota Senate committee rejected proposals to legalize marijuana and create a task force to study the issue. MPR News

New Hampshire

On Feb. 27, New Hampshire’s House of Representatives approved a bill to legalize adult use cannabis. The legislation, sponsored by Rep. Robert “Renny” Cushing (D), would allow adults 21 and older to possess, gift, consume, cultivate, and purchase certain amounts of cannabis from licensed retailers. A governor-appointed commission would be responsible for approving and issuing licenses for commercial cannabis cultivators, product manufacturers, testing facilities, and retailers. In addition, a separate 11-member panel would be established to solicit public and expert input on the legal market in order to inform the commission. Marijuana Moment

Analysis: While Governor Chris Sununu (R) has vowed to veto cannabis legalization, House Speaker Steve Shurtleff (D) feels there is enough support in the House to override a veto.

New Jersey

Governor Phil Murphy (D) announced an agreement with the state legislature on March 12 on a bill to legalize cannabis for adult use. The legislation is expected to include compromise language to tax cannabis by weight ($42/ounce) rather than by price. Murphy’s FY 2020 budget estimated $60M in marijuana tax revenue. Marijuana Moment

Analysis: New Jersey appears to have taken the lead in the race to be the first state to legalize recreational use in the tri-state area. Gov. Murphy has predicted that legal marijuana sales would begin in early 2020.

New Mexico

On March 7, New Mexico’s House of Representatives narrowly passed a recreational marijuana bill (House Bill 356) by a margin of 36-34, with significant modifications. The bill also passed out of the first Senate committee on March 9 but stalled in the Senate Finance Committee. However, a bill to decriminalize marijuana is headed to the governor’s desk. Albuquerque Journal

Analysis: Governor Michelle Lujan Grisham (D) supported legalization of marijuana during her gubernatorial campaign, though it appears that the measure will likely have to wait until the 2020 legislative session.

New York

On March 12, the New York Senate and Assembly included Gov. Andrew Cuomo’s (D) marijuana legalization proposal in their budget bills, with modifications. However, Cuomo has recently said he’s “no longer confident” such a provision will be included in final spending legislation, which must be signed by April 1. Marijuana Moment

Oklahoma

On March 14, Gov. Kevin Stitt (R) signed new regulations into law that sets up guidelines for inventory testing/tracking, advertising, packaging, and labeling for medical marijuana. Associated Press

Texas

Senate Bill 90 (Sen. Jose Menendez [D]) and House Bill 209 (Rep. Ron Reynolds [D]) are the medical cannabis bills to watch in the state’s 86th Legislature, which runs from Jan. 8 to May 27. The companion bills would expand the definition of “debilitating medical conditions” to allow medical cannabis use for a number of new conditions such as cancer, HIV/AIDS, PTSD, autism and chronic pain. Leafy

Analysis: Texas’ legislative sessions only occur every other year and Gov. Greg Abbott (R) hasn’t shown much support for expanding medical cannabis in the state.

Vermont

Vermont’s Senate passed a bill Feb. 27 to regulate and tax cannabis for adult use. The bill would create a system of regulated cannabis production and sales for adult use, subject to a 10% tax, and municipalities could establish a 1% local option tax if they host a retailer. Under the proposal, oversight of the medical cannabis program would be shifted from the Department of Safety to a new independent commission beginning January 1, 2021. Cannabis Dispensary Magazine

Analysis: Importantly, we note that the bill passed with a veto-proof majority (23-5).

Wisconsin

Governor Tony Evers’ (D) first budget proposal was presented to the state legislature on Feb. 28. The proposed budget would decriminalize possession of up to 25 grams of marijuana for recreational use. It also proposes legalization of marijuana for medical use for a wide range of health conditions. Marijuana Moment

Analysis: Although there is some bipartisan support for Evers’ cannabis proposals, Republicans maintain control of both houses of the Wisconsin legislature and hold a 2-to-1 margin in the Assembly.

Penfolds Named The World’s Most Admired Wine Brand 2019

Australian wine producer Penfolds has risen two places to be named The World’s Most Admired Wine Brand 2019.

Penfolds has taken the top spot from Spanish producer Torres who has fallen to second, while New Zealand’s Villa Maria has risen five places to complete the podium in third.

Now in its ninth year, The World’s Most Admired Wine Brands has partnered with global wine market research company Wine Intelligence, who contributes to the voting system along with Drinks International’s global Academy of wine experts.

One member of the Academy said: “Penfolds has managed to maintain

an incredible consistency in quality and style throughout its extensive line of products for decades, and in recent years has been raising its high-end wines to the level of luxury products with mastery.”

Another Academy member added: “The brand has successfully preserved and extended its status as one of the icons of Australia and the world, with an outstanding focus on quality and a continued investment in marketing to maintain its position.”

Sassicaia of Italy was named the highest climber in 2019, having risen 23 places to sixth and French producer Jean-Marc Brocard is this year’s highest new entry, sitting 31st in the list.

Chile’s Concha Y Toro was also revealed as Most Admired Wine Brand in South America, while Chateau Musar of Lebanon received the same award for the Middle East and Africa.

Meanwhile US producer Ridge took the trophy for Most Admired Wine Brand in North America and of course Torres and Penfolds received the same awards for Europe and Australasia respectively.

On Sunday 17 March Drinks International hosted the first awards ceremony for The World’s Most Admired Wine Brands at Prowein, Dussledorf where representatives from the 50 selected brands were invited to attend.

The World’s Most Admired Wine Brands is considered a leading authority on the most influential and trending wine producers from around the world and the full list can be seen below:

https://drinksint.com/news/fullstory.php/aid/8250/Penfolds_named_The_World_92s_Most_Admired_Wine_Brand_2019.html

Champagne Sets Record ?4.9billion Turnover In 2018

Total volume of Champagne shipments declined by 1.8% in 2018 to 301.9 million bottles, but total turnover set a new record, hitting close to ?4.9 billion – 0.3% higher than in 2017.

As reported by the Comité Champagne, overall, exports of Champagne are on an upward trajectory, rising by 0.6% in volume and 1.8% in revenue.

In Champagne’s more traditional markets of France and the UK, which together account for 60% of total sales, volumes dropped by around 4% each, while by value turnover slipped by around 2% in both markets.

The UK, which remains the biggest export market by volume, imported 26.7m bottles in 2018, a decline of 3.6%, while value reached ?406.2m, a drop of 2.2% – making it the second biggest export market by value after the USA.

These figures are in line with estimates of 2018 Champagne shipments outlined by the drinks business in January.

However, demand is most dynamic beyond the European Union. The USA, which remains the biggest export market by value and second biggest by volume, saw exports rise by 2.7% to 23.7 million bottles. To Japan, exports increased by 5.5% to 13.6 million bottles, while exports to the “Chinese triangle” (mainland China, Hong Kong and Taiwan) increased by 9.1% to 4.7 million bottles.

Following very significant growth over the past decade (+134%), Australia saw imports of Champagne dip slightly, by 1.8%, to 8.4m bottles, which was attributed to a “less favourable exchange rate”.

Other countries are emerging stronger for Champagne, including Canada which increased its imports by 4.8% to 2.3 million bottles, Mexico by 4.3% to 1.7m bottles, and South Africa, where sales topped the million-bottle mark for the very first time, recording growth of 38.4% by volume and by 43.4% by value – the highest increase of any market on both counts.

“The 2018 results validate the value creation strategy of the Champagne region, based on a continual pursuit of exceptional quality and rigorous environmental targets,” the Comité Champagne said. “From an agronomic point of view, 2018 was an unprecedented year with a bumper harvest of outstanding quality, boding extremely well for the future Champagne cuvées.”

Budget-Conscious Aussies Ditch Champagne For Prosecco

Global Champagne sales have plummeted to their lowest level since 2004, with Australia among the countries to suffer a fall.

The Comité Interprofessionnel du Vin de Champagne (CIVC) said the overall number of bottles sold fell 1.8% to 302 million in 2018, although total revenue edged up 0.3% to a record 4.9 billion euros as prices rose.

Australian sales fell by 1.8% to 8.4 million bottles and 6.4% in value.

It’s a marked contrast to 2017, when Australia was ranked the fastest-growing of champagne’s top 10 markets by both volume and value. However, it still remains Champagne’s sixth largest export market by volume, with Comité co-president Jean-Marie Barillère noting that “when you consider the population of Australia, we’re not doing too badly.”

Both Woolworths and Pernod Ricard have recently pointed to a “wealth effect” damaging the fortunes of Champagne locally.

Woolworths CEO Brad Banducci said last month that there had been a significant drop in champagne sales at his stores, with shoppers switching to cheaper sparkling wine.

He blamed the trend on rising fuel and housing prices, with Dan Murphy’s stores budget-conscious drinkers in the face of a weakening of perceptions of wealth.

“In Dan Murphy’s we saw a little bit of that with a material trading down from champagne to sparkling wine, for example, which flowed through our results,” he said.

“I think that goes to feelings of affluence,” Banducci told The Australian, “and whether you feel affluent, and we just saw a marked trend downwards (in champagne sales). it was quite marked in the business.”

By contrast, prosecco sales were up 53% in Australia in 2018. CIVC also admitted Champagne was feeling strong competition from Italian prosecco, which is three to four times cheaper.

“Champagne has its place in special events and when we get good weather on special events we expect that business to come back over time as well,” Banducci added.

Last week, Pernod Ricard Pacific CEO Brian Fry echoed Banducci’s words, saying there was “no doubt that growth in some categories is being challenged”.

Pernod Ricard’s St Hugo was the official wine for Melbourne’s F1 Grand Prix, which began last Thursday.

He told the Australian Financial Review that sales of premium Australian red wine had proven resilient in the face of the “wealth effect”.

“Over Christmas we did see a softening in champagne,” Fry said. “We haven’t seen a big impact on premium reds. If we take St Hugo we are still seeing very strong demand for Coonawarra cabernet savignon and Barossan shiraz both domestically and internationally.”

Hdh Spirits Sale Makes $1.7m

Bourbon, Scotch, Japanese and rye whiskies went under the digital hammer at Hart Davis Hart recently and “soared” to a total of US$1.7 million.

The online auction which was held over two days, saw nearly all (99%) of the 1,656 lots of rare spirits sold for a total of US$1.7 million, with 59% of the lots fetching over their pre-sale high estimate.

The offering of Bourbon and rye combined (900 lots in total) realised $838,000 with bottles of Willett Distillery Bourbon and rye proving particularly popular.

Seventy-six bottles of Japanese whisky including 1977 Karuizawa, and 1988 Hanyu realised $93,000 overall, while a “robust” offering of Scotch including 50 year-old Macallan and 1955 Bowmore garnered $616,000.

The sale’s top lots were all whiskies from The Macallan, including bottles of the 1940, 1946, 1939, 1938 and 1951.

The most expensive bottle overall, by quite some margin, was a bottle of Macallan 50 year-old ‘Anniversary Malt’ which sold for $77,675.

German Marc Almert Awarded ASI’s Best Sommelier Of The World 2019

Marc Almert, aged 27 from Germany, was crowned Best Sommelier of the World 2019 last Friday in Antwerp by the Association de la Sommellerie Internationale (ASI).

Almert, who won Best Sommelier of Germany in 2017, took the prestigious world title competing against 65 other sommeliers from 63 different countries. Originally from Cologne, he is currently in charge of the wine department at five-star hotel Baur au Lac’s two-Michelin-star restaurant Le Pavillon in Zurich, Switzerland.

During the competition, the 66 sommeliers were tasked with a range of tests, including written exams and tastings. The top 18 were selected for the semi-finals, and just three competitors moved on to compete in the finals at the Elisabeth Centre in Antwerp.

Alongside the competition, the candidates were able to take part in more than 10 masterclasses, with topics ranging from viticulture to winemaking, and ancient grape varieties to old vintage-focused tastings.

The two runners-up were Nina Højgaard Jensen from Denmark (Best Sommelier of Denmark 2017 and Best Young Sommelier of Europe 2016) and Raimonds Tomsons from Latvia (Best Sommelier of the Europe and Africa 2017). Eric Zwiebel, 45, was the only representative from the UK; Zwiebel is currently in charge of the wine department at the Summer Lodge Country House Hotel, Restaurant and Spa in Dorset.

Sommeliers Map The Wine World (Excerpt)

A taste of Rajat Parr and Jordan Mackay’s new book.

Exploring the world one wine at a time with two leading experts and their new book.

Rajat Parr and Jordan Mackay are two of the bigger names in the wine and food world. On their own, each reflects a poise, sophistication, and expertise that only years of of industry experience could permit. And when their forces combine, the duo is unstoppable. Wine-Searcher sat down with Parr and Mackay to discuss their newly award-winning book, The Sommelier’s Atlas of Taste, as well as the inspirations behind the pages, lessons learned from one another along the way, and the notion that terroir is actually a created, man made concept.

What was the inspiration behind the The Sommelier’s Atlas of Taste?

https://www.wine-searcher.com/m/2019/03/sommeliers-map-the-wine-world

LLS, A Division Of Winebow Imports, Is Appointed Exclusive U.S. Importer Of Damilano

  • Winebow
  • March 18, 2019

LLS (Leonardo LoCascio Selections), a division of Winebow Imports dedicated to premium Italian wines, is pleased to announce that it is the exclusive U.S. importer of the wines of Damilano, a family-owned estate with more than 100 years of winemaking history in Barolo. Damilano joins a portfolio that represents more than 60 wineries throughout Italy.

“We are thrilled to welcome Damilano to the LLS family,” said Ted Campbell, Senior Vice President and General Manager of LLS. “The winery is a jewel in the Barolo region, with truly iconic vineyard holdings and a long family history. It’s an ideal complement to our growing portfolio in Piedmont.”

The winery was first founded in 1890, when Giuseppe Borgogno began to make wine from his own vineyards in La Morra, a commune of Barolo. His son in law, Giacomo Damilano, took over in 1935, growing the business and making substantial quality improvements in both the vineyards and the winery. A new facility was constructed in 1965.

In 1997, Giacomo Damilano’s grand-children, Paolo and Mario, along with their cousin Guido, assumed control of the estate. The current generation has continued to maintain and improve quality in the vineyards, with a focus on producing the best possible expressions of the Langhe terroir.

Damilano owns land in some of the most world-renowned and historic vineyards in Barolo. On what is perhaps the most historically important site of all, the fabled hill of Cannubi, Damilano owns 2 hectares in the historical core of the hill and has long-term lease contracts on an additional 8 hectares.

Their four Barolo single-vineyard crus – Cannubi, Brunate, Cerequio, and Liste – have distinct expressions that showcase their differences in terroir, ranging from the innate elegance of Cannubi and Brunate to the more decisive and structured character of Cerequio and Liste. In addition to these bottlings, Damilano produces the Barolo Lecinquevigne, a blend of five vineyards from several villages in the region.

The winemaker, Guido Damilano, works alongside Alessandro Bonelli, with the help of external consulting enologist Giuseppe Caviola. Their dedication to tradition, combined with the skills of modern winemaking, produce wines of the highest quality.

Aside from the winery, the Damilano family also operates a Michelin-starred restaurant in La Morra. Named Massimo Camia and located within the confines of the winery itself, it is considered one of the top places to eat in the region.

“We are excited to begin this new partnership,” said Paolo Damilano. “We have full confidence in the LLS team, which is respected in the trade for their enthusiasm, knowledge and professionalism. We look forward to a very bright future together.”

LLS will import the following wines from Damilano: Arneis Langhe, Vino Rosato, Barbera d’Asti, Barolo Chinato, Barolo Cannubi, Barolo Liste, Barolo LeCinqueVigne, Nebbiolo Langhe Marghe, Barolo LeCinqueVigne Riserva, and Barolo Cannubi Riserva “1752.”

About LLS

LLS is a division of Winebow Imports, a leading importer of fine wines and spirits from the around the world. LLS has represented Italian wines of impeccable quality, character, and value for over 35 years. Each wine in the collection tells a unique story about the family and region that produced it. A taste through the portfolio is a journey across Italy’s rich spectrum of geography, history, culture, and cuisine. Whether a crisp Pinot Bianco from the Dolomites or a rich Aglianico from Campania, the wines of LLS will transport you to Italy’s outstanding regions. For more information, please visit

www.llswine.com.

Annual Direct To Consumer Survey Closes This Week

Every year SVB and Wine Business Monthly collaborate on a survey that maps out the changes in direct to consumer wine sales – providing benchmarks to respondents that are invaluable in day to day business, and equally important as we chart new paths and channels to sell wine.

The 2019 survey closes this week. Join the hundreds and hundreds of wineries who have already taken the survey this year [Take the Survey]

Take the above chart for instance which was a product of last year’s survey. In it, we can see that for the first time, there are more tasting rooms being built than wineries. Why? Because wineries all believe they need a tasting room to sell direct. But is that true? The answer is that not all tasting rooms are necessary, but client experience is necessary even if there isn’t a tasting room

More than ever today, the wine industry needs to be more strategic and proactive in their direct to consumer strategy and execution. The business is rapidly changing and will over the next five years cause whiplash for those not buckled in. We really can’t follow the crowd anymore when the crows is shooting in the dark.

Improving and evolving direct sales strategies will be the difference between success and failure in the coming decade as the industry’s consumer evolves under our feet, anti-alcohol groups continue to push their agenda, and competition from beer, spirits and foreign wine intensifies.

https://svbwine.blogspot.com/2019/03/annual-direct-to-consumer-survey-closes.html

Hawaii Sea Spirits Welcomes Executive-Level Svp Of North America Sales

Hawaii Sea Spirits llc (HSS), makers of OCEAN Organic Vodka, is proud to announce and welcome Brent Wunder as the Company’s Senior Vice President of North America Sales. Brent joins the company with 20 years of industry experience having worked with leading organizations including Constellation Brands, Pernod Ricard and Remy Cointreau. He will be responsible for sales team leadership, driving revenue, program development, as well as contributing to overall business growth strategy.

Opentable Tightens Control On Consumer Information

Move raises questions from restaurant operators about data ownership

OpenTable on Friday updated its client agreement with restaurants to solidify control over the data collected as guests book reservations, sparking an outcry by rivals and restaurant operators who increasingly see such data as marketing gold.

The company said the move is an attempt to comply with looming consumer data privacy laws. But the resulting dispute is an early indicator of the battles that will likely be triggered as restaurant tech players tighten controls on the valuable data they collect.

Steve Hafner, CEO of OpenTable and sister digital travel service Kayak, both owned by Booking Holdings Inc., said the updated client agreement was necessary to maintain security and ensure the global reservations company is in compliance with upcoming privacy laws, including the California Consumer Privacy Protection Act scheduled to go into effect next year.

Effective March 15, OpenTable’s updated client agreement impacts users of the cloud-based GuestCenter services, which includes about 30,000 restaurants across the U.S. Under the agreement, OpenTable is reserving the right to block access to data when consumers have specifically directed the company not to share it with the restaurant or another third party. Consumers are offered the option of opting in to data sharing whenever they make a reservation through OpenTable.

“What we’re talking about is consumer data,” said Hafner. “If they give an email address, cell number or maybe credit card information, if a consumer doesn’t want to pass that on to a restaurant, or if they delete their OpenTable account, we have to give them the ability to own that data and remove it from our system, and remove it from third-party systems too.”

Restaurant operators, however, said they see the move as an attempt by OpenTable to hold useful data “hostage,” saying it would specifically disrupt their ability to work with integrated services like SevenRooms, a rival booking and table management company.

Arthur Li, chief financial officer for the New York-based Altamarea Group, which operates 13 concepts, including Marea, Morini Ristorante and Nicoletta Pizza, said, “It doesn’t matter whether OpenTable or we own that data. We just want to be able to deliver a certain level of hospitality with as much data as possible.”

Li said his group uses SevenRooms for customer relationship management. With SevenRooms, the group has created a database of clients pulled from OpenTable, but also guests who book reservations direct, for example, or through private events or delivery.

Over the past two years, Altamarea Group has done more than $500,000 in business with OpenTable, he said, and that relationship will continue to be valuable.

But Li said he is concerned about being forced into “overreliance” on OpenTable, which was once the dominant player in the digital reservations world.

“Now there are many other ways for diners to discover and make reservations with us, including Google, Instagram, our website. So we are trying to build those direct client relationships without OpenTable,” Li said.

The San Francisco-based OpenTable boasts integrations with nearly 600 brands, including Amazon Alexa, Facebook Messenger, Google, Instagram and TripAdvisor.

Hafner said the problem with SevenRooms specifically was that restaurants were giving out login credentials to OpenTable “and SevenRooms was coming through those credentials and sucking down all the information we have” on diners, including consumer data that goes beyond the specific reservation transaction.

In the past, OpenTable did not have an agreement with SevenRooms, which meant SevenRooms was not obligated to adhere to consumer requests to opt out of data sharing, as will be required under the privacy laws to come.

Hafner said an agreement was worked out with SevenRooms late Thursday, which would impact roughly 400 OpenTable restaurant clients that also use SevenRooms.

“It was never our intention to deny any of our customers access to SevenRooms. They provide a great service,” he said. “SevenRooms will now have direct access to our systems on a platform level. Their systems will be able to talk to our systems directly, which will actually be much better integration than currently exists.”

Hafner did not offer details of the costs associated with that agreement, but the Wall Street Journal reported that OpenTable will charge existing clients a fee of $250 per restaurant per month for use of both systems. New OpenTable users will be charged $1,000 a month for each location to use both systems.

SevenRooms officials confirmed they have received authorization to access OpenTable on behalf of restaurant operators that enter into an agreement about data access. “The terms of that access for customers are at the sole discretion of OpenTable and have not been disclosed to SevenRooms,” the company said in a statement.

Li said Friday he has not seen any details from OpenTable directly indicating what his company’s integrated services would cost.

Joel Montaniel, CEO of SevenRooms, meanwhile, declined to comment beyond this statement:

“SevenRooms was founded to provide open, connected technology that enables restaurants to build stronger relationships with their guests and operate more effectively. We are proud to work with thousands of operators around the world, from neighborhood restaurants to international, multiconcept hospitality groups. We welcome collaboration and integration with all of their technology and marketing partners, including OpenTable, to help restaurants run their businesses and provide outstanding customer service.”

Master Of Malt Reports 30% Sales Growth As Gin Soars

Gin has overtaken whisky as the largest category by volume at online retailer Master of Malt after enjoying huge sales growth over the past year. “It continues to grow and it occupies a large part of my day,” says head buyer Guy Hodcroft. “We’ve been watching it over the past few years catching up, and now it has overtaken, which is really exciting.

“We talk about a gin bubble, but there’s a lot of mileage in it yet. I live in a very alcohol-centric world – most of my friends are in the trade, my other half is — so we talk about drinking gin all the time, but for many people it’s still new. Up and down the country there’s a lot of time still to go.”

A love of wine propelled Hodcroft into the drinks industry and he worked as a sommelier in Spain during his formative years in the trade. He set up and managed a Corks Out store in the north west of England for Ruth Yates and worked for Harvey Nichols in the region before joining Selfridges. Its head buyer, Dawn Davies MW, became not only his colleague, but also his landlord as he rented a room from her.

“She’s fantastic, a force of nature, and I mean that in a very positive sense,” he says. “I was there for three-and-a-bit years with her, and then she left to go to The Whisky Exchange, and I hung around for a year and then the job at Master of Malt came up and it seemed like a good time to move.”

Hodcroft’s background is in wine, but now spirits – and gin in particular – dominate his days in the trade. “When I was at Selfridges, Dawn and I did everything together – beer, wine, spirits as a team,” he says. “I have very fond memories of doing something like 72 beers before 8am and thinking, oh yeah, these are nice.

“Her successor as the head buyer at Selfridges was Terry Threlfall, who is still there now. He was sommelier at Chez Bruce for a number of years. His background is very much wine – an interest in spirits, but not vast. I said it makes sense for me to do the spirits side, and you to do the wine. It’s allowed me to enjoy wine again, and now obsess – these tannins aren’t very well managed are they, I think they’ve acidified, have they acidified? I can just not entirely geek-out about it and say, yes, that’s a nice glass.”

Having said that, he is now building up a wine range at Master of Malt. “It’s growing, from a very small base,” he says. “I’m trying to build a range. Nothing too esoteric, just classics done well at varying price points. Three Chablis – one entry-level, one mid-range, one high-end – Châteauneuf-du-Pape, Rioja, Chianti, nothing too weird and wonderful.”

Master of Malt is now owned by AB-Inbev, the world’s largest brewer, which also controls online beer retailer Beer Hawk. Hodcroft and his team also have a beer range, but you will not find the likes of Stella Artois, Budweiser and Beck’s in it.

“Beer is doing really well,” he says. “It tends to be craft. We do very well with UK-based breweries, and quite a lot of American and speciality Belgian, German and Italian breweries. Beer is in a nice place. The only snag is that I’m used to working with things without a shelf life, and I have to go, oh yeah, beer does expire eventually. But nothing has gone wrong yet.”

Shopper insights

The team at Beer Hawk say that AB-Inbev largely leaves them to their own devices, and Hodcroft’s take on the situation is similar. The brewer can benefit from Master of Malt’s shopper insights and it provides significant commercial backing, but he says that it does not heavily involve itself in operations.

Business is currently booming for Master of Malt, which was set up as a mail-order vehicle for Scotch whisky in the mid-1980s. The company has undergone several makeovers and Scotch is still a chief focus – it remains the largest category by value – but gin is now leading the charge in volume. Hodcroft reports that overall sales are up 30% at Master of Malt in the past year, with retail sales growing at 26% and sales to trade up 41%.

“There’s still a lot of space to move,” he says. “Just 2.5% of people buy their alcohol online, so there are clearly a lot more people we can try to reach. We are going great guns and there are some ambitious targets for this year. They are similar numbers.”

The firm engages in friendly competition with The Whisky Exchange, while both retailers are under pressure from the rise of Amazon. “Eighteen months ago it was selling more SKUs you find in multiple grocers, but it is moving more into the specialist sphere,” says Hodcroft when asked about the world’s largest ecommerce retailer. “It just means that we have to work a little bit harder and get what we do right – the virtual reality tours, the customer service, the Whisky Santa and all that kind of thing. If we do all of those things well, hopefully we can keep ourselves in front.”

Master of Malt is investing in content, hiring former editorial staff from The Spirits Business, including former editor Kristiane Sherry, plus author Henry Jeffreys, in order to establish credibility online.

“We have expanded the editorial content team over the past year and we have three people now doing distillery profiles and that sort of thing,” says Hodcroft. “I think we do well, the team knows its stuff and the tone is very important to us. We get a lot of suppliers who want us to use their tasting notes and imagery, but we say no, no, it needs to sound like we’ve written this. Some of the notes are a little bit off the wall, and we could probably update some of the older ones – one of the strong points of the site is that it is authoritative, but we don’t take ourselves too seriously. We realise we are selling alcohol to people. It’s not life and death, and it should be enjoyed.”

Hodcroft notes that mead sales are up 64%, suggesting it could be down to the popularity of Game of Thrones. Tequila and mezcal, vermouth, spiced rum and liqueurs are also highlighted as categories that are currently soaring.

“Our commitment is that we try to have pretty much anything,” he says. “If you’ve had a Lithuanian liqueur on holiday, we’ll probably have a bottle somewhere. Whisky will always be a focus, but we don’t pursue it to the detriment of other categories.”

On the wholesale side, he adds: “We are different to most other supply businesses. We don’t have anyone doing field sales. What stands out is the breadth of our range and the service. If you order by 6pm as a trade customer, you’ll probably get it by 9am the next morning. We will sell you one bottle or 50.”

Mezcal is a category that particularly excites Hodcroft right now. “Now you have got two major brand owners with mezcal in their portfolios – Diageo and Pernod Ricard – and it will be interesting to see what happens there,” he says. “Mezcal reminds me of wine and I love that about it. Different agave species give you different flavours, depending on where they are grown. There are hundreds and hundreds of varieties.

“Low and no alcohol, there’s a lot of space there. Seedlip has done incredibly well. Dawn and I launched Seedlip at Selfridges. We were the first retailer to sell it. It’s done very well. Ceder’s is nice stuff. People seem to be wanting it.

“Most of our sales go to bars, rather than a consumer buying them. There’s still space there for someone to go after that at-home consumer.”

Hodcroft says he feels privileged to work in the drinks trade and he is planning on a long career in the industry. “Very few people leave it,” he says. “I think once you are in it, you don’t suddenly say, I want to sell chairs for a living. I am very lucky that it’s my hobby, but it’s also my passion and I get to do it 12 hours a day.”

Maryland: Beer Industry Stakeholders In Maryland Compromise On Reform

Maryland’s Craft Brewers, Wholesalers And Retailers Have Reached An Agreement On Sweeping Legislation That, If Approved, Would Reform The State’s Laws Surrounding Self-Distribution, Taproom Sales And Franchise Agreements.

Brewers Association of Maryland (BAM) lobbyist Brad Rifkin characterized the compromise as “a major turning point” for craft brewers and the “transformative change” the trade group has sought since 2016.

“We’re confident in our agreements, and our relationships with legislative leadership, to expect that those bills will pass,” he said.

One set of proposed bills would allow beer companies producing 20,000 barrels or less to terminate their wholesaler contracts by giving 45 days notice without showing “good cause.” The other bills would raise caps on self-distribution, taproom sales and production limits.

“We’re happy we were able to work the other and pave the way for future success for all parties,” Maryland Beer Wholesalers Association lobbyist Nick Manis told Brewbound. “We’re just glad to get it behind us and move on to do what we do best, which is distribute the beer, let them make the beer and let the retailers sell the beer.”

If passed, the separate pieces of legislation would end a contentious period for Maryland’s brewers. Maryland’s top regulator for the alcohol industry, Comptroller Peter Franchot, had advocated for many of these same changes, but received no buy-in for his “Reform on Tap Act” due to his brash and confrontational demeanor. Legislators are now attempting to strip Franchot’s office of its regulatory authority over the alcohol industry.

As Franchot’s future ability to reform alcohol industry laws became uncertain, Rifkin and BAM executive director Kevin Atticks told Brewbound that the state’s craft brewers began negotiating with the Maryland Beer Wholesalers Association and the Maryland State Licensed Beverage Association, along with legislative leaders Dereck Davis and Paul Pinsky, prior to this year’s session. They expect the bills to pass prior to the Legislature adjourning at midnight April 9.

Companion measures in the House of Representatives (H.B. 1080) and Senate (S.B. 704) would allow beer companies producing 20,000 barrels or less to give 45 days notice when terminating contracts with beer wholesalers without showing cause.

Currently, those companies are required to give 180 days notice and show “good cause” in order to get out of their distribution agreements.

Also as part of the franchise law reform proposal, brewers and wholesalers would be free to negotiate a “fair market value” buyout if no prior written agreement between the parties exists. If an agreement cannot be reached, the negotiating companies would go to binding arbitration. Brewers would also need to buy back any unsold inventory from their wholesalers.

Lawmakers in the House are currently discussing the bill. If passed, it would go into effect January 1, 2020.

A separate piece of legislation called the “Modernization Act” – H.B. 1010 and S.B. 801 – would increase the self-distribution cap from 3,000 barrels to 5,000 barrels annually for breweries holding a Class 7 “Limited Beer Wholesaler License.”

For Class 7 microbrewery license holders (companies producing 22,500 barrels or fewer), the Modernization Act would also increase the amount of beer those companies are allowed to sell directly to consumers, for on-premise consumption, to 5,000 barrels per year. Currently, class 7 microbrewery permit holders are only allowed to sell 3,000 barrels directly to consumers for on-premise consumption each year.

The bill would also raise the production cap from 22,500 barrels to 45,000 barrels annually for those license holders. Those companies would also be able to hold an additional license to operate a second outpost in the state, where they would be able to sell an additional 5,000 barrels of beer on-site each year.

The measure would make a number of other changes, including expanded taproom sales for Class 5 breweries (such as Diageo Beer USA’s Guinness brewery), and the elimination of a buyback provision on direct-to-consumer sales at brewery taprooms. It would also remove a tour requirement in order to sell beer for off-premise consumption, and expand the hours of taproom operation for Class 8 “farm breweries” from 10 a.m. to 6 p.m. to 10 a.m. to 10 p.m.

Breweries with Class 5, 7 and 8 licenses would also be allowed to brew beer at an off-site location, such as a warehouse, but they would not be able to sell beer at those locations.

The Modernization Act unanimously passed today out of the House Economic Matters Committee and is currently on the floor of the House, Rifkin said.

“Based upon everything we know and everything we’ve been told, I see no reason why both bills won’t pass,” he said.

Atticks told Brewbound that BAM retained Rikfin’s firm – Rifkin Weiner Livingston LLC – 18 months ago and they have worked to build relationships with Maryland’s 188 legislators.

“We’ve organized as an industry and professionalized our advocacy in Annapolis,” Atticks added. “That’s been a multiyear effort to transform our industry from a bunch of really creative entrepreneurs to a unified, singular voice.”

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