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 e - NEWS

February 6, 2004


1. If It’s Love, Give Chocolate Beer

2. Lawsuits Allege Alcohol Makers Target Youths

3. “Girls Gone Wild” at Bar in Iowa City May Violate Ruling

4. The Slice in the New Scots Gin is ... Cucumber

5. Pernod Ricard Scores Victory in Havana Club Dispute

6. Vive l’Amerique

7. Quit-Smoking Proposal Calls for $2-a-Pack Tax Plan to Cut Smoking

8. Anheuser-Busch Reports Higher 2003 Earnings


9. Pernod Targets Johnnie Walker With Chivas Push



1. If It’s Love, Give Chocolate Beer


February 3, 2004


Samuel Adams brews up chocolate-flavored beer for Valentine’s Day; says it complements chicken.

NEW YORK -- This Valentine's Day, give something that has romance written all over it, such as chocolate beer.

Boston-based brewing firm Samuel Adams said Friday it's launching a limited-edition chocolate-flavored beer for the Feb. 14 holiday.

Sam Adam's Chocolate Bock


Sam Adam's Chocolate Bock

"Beer and chocolate are two pleasures that should be enjoyed and savored," said Samuel Adams founder Jim Koch. "We knew that we were up to the challenge to create an unexpected brew that could perfectly complement a Valentine's Day meal or be given as a special gift."

Brewing with chocolate essences is common in darker beers, such as stouts and porters.

The company described Samuel Adams Chocolate Bock as a dark beer with "a big, malty character with a complex full-body taster and velvety finish."

It added that the beer will sell for $14.99 per 750 milliliter bottle--roughly the size of a champagne bottle--and that it goes well with roasted chicken, chocolate mousse, chocolate cheesecake or fresh fruit.



2. Lawsuits Allege Alcohol Makers Target Youths

By Christopher Lawton The Wall Street Journal

February 5, 2004


The first lawsuits filed against the tobacco industry in the 1950s were more or less laughed out of court. The cigarette companies had huge legal firepower, and both judges and juries weren't inclined to sympathize with smokers who had taken up the habit voluntarily.


But like asbestos and breast-implant litigation, the lawsuits began to build on each other until they reached a kind of critical mass. By 1998, the industry decided the threat was significant enough that it came to a settlement agreement with state attorneys general calling for companies to pay more than $200 billion for the first 25 years with payments of an unspecified amount to continue thereafter; another stipulation restricted the companies' marketing practices.


Now it's alcohol's turn -- maybe. In November, David Boies III, the son of famed attorney David Boies, filed a lawsuit seeking class-action status against several prominent members of the liquor industry. The allegation: The companies negligently targeted underage drinkers in their advertising. (The suit, filed in the civil division of the superior court of the District of Columbia, has since been transferred to federal court.)


On Tuesday, the advertising practices of the nation's two largest brewers, Anheuser-Busch Cos. and SABMiller PLC's Miller Brewing Co., were also targeted. A lawsuit filed in Los Angeles County Superior Court alleges that both companies are purposely wooing underage drinkers as part of a cynical marketing strategy.


"As publicly traded companies with obligations to increase firm value, Anheuser-Busch and Miller have deliberately engaged in a multifaceted campaign to encourage underage drinking," the suit alleges. At issue is everything the brewers do to promote their products, including magazine, TV and radio advertising. The complainants, Lynne and Reed Goodwin, state in their suit that their 20-year-old daughter, Casey, was killed last year by an 18-year-old drunken driver.


Both brewers have long denied that they intentionally market their products to underage drinkers. In a statement dismissing the California suit as lacking merit, Francine Katz, vice president of Anheuser-Busch, noted that the brewer has spent in excess of $465 million over more than 20 years opposing alcohol abuse. "We are deeply committed to fighting underage drinking and drunk driving," she said. A Miller statement said: "We believe this lawsuit is completely without merit."


As the suits move through the court system, they could serve as pilot fish for future litigation, exploring the outlines of how the law differentiates between booze and butts on issues such as marketing, addictiveness and class-action status.


Christine Gregoire, Washington state attorney general, says that after the master settlement agreement in 1998, she got calls from activists urging her to go after the alcohol industry for similar infractions. "I said, 'Show us the documents. Show us the evidence,' " says Ms. Gregoire, who adds that no one has come forward with the kind of paper trail that was necessary to file a case against the tobacco companies.


Mr. Boies says he possesses documents showing that the defendants knew that their advertising was reaching underage consumers, but he won't say whether he has internal company documents. "I do think the documents will play a particular role in this case," he says. "It's not the whole case, but it's always powerful when the jury and the judge see things with their own two eyes," he says.


His opponents are adamant that they have nothing to hide. "We are very sincere ... We don't want to do anything that might encourage someone underage to drink," says Peter Cressy, president of the Distilled Spirits Council, whose members include Diageo PLC and Bacardi Ltd., both named in the suit.


Even with documents, some of the conditions that threatened tobacco companies don't apply to alcohol. Although alcohol is addictive to a minority of people, the percentage is far smaller than that of tobacco users. Documents showing that tobacco executives appeared to encourage addiction without warning consumers contributed to the atmosphere that made the tobacco companies settle with the states. But that's a harder sell with alcohol.


Mr. Boies's suit instead claims unfair and deceptive trade practices and negligence in contributing to underage drinking. Under a District of Columbia consumer-protection law, Mr. Boies would need to show that there was an attempt on behalf of the spirits companies to appeal to persons under 21. Mr. Boies's suit mentions certain magazines -- Spin and Stuff among them -- that it says are disproportionately read by males under 21.


The introduction three years ago of flavored malt beverages or "alcopops" also could figure in whether underage drinkers have been targeted, says George Hacker, director of the alcohol-policies project at the Center for Science in the Public Interest. Critics charge that the sweet concoctions are by their nature kid-friendly. The manufacture and promotion of alcopops feature prominently in the suit against Anheuser-Busch and Miller Brewing.


Another issue is whether Mr. Boies's suit will be granted class-action status. Most tobacco suits ultimately have run into trouble claiming a class because of the difficulty of finding a "common class" of smokers -- different people started smoking at different times and smoke varying brands in different amounts. Alcohol suits may face similar problems.


Alcoholic-beverage companies are expected to maintain that they have always acknowledged that underage drinking is a problem and have spent millions to rectify it -- but that marketing isn't the cause. However, acknowledging the dangers of smoking didn't always shelter the tobacco companies. In one California case, a jury ruled that Philip Morris Co. and R.J. Reynolds Tobacco Holdings Inc. deliberately misled plaintiff Leslie Whiteley about the health hazards of smoking, even though she started smoking after warning labels began appearing on cigarette packs in 1966. Many suits prior to that had been on behalf of smokers who picked up the habit before that time.


Perhaps the most important difference between alcohol and tobacco is that the latter is deemed to be harmful even in small quantities. Moderate consumption of alcohol, though, is not inherently unhealthy.


"Cigarettes are the one consumer product that when used as intended, not abused, in all likelihood will make you sick and die prematurely. That is different from a firearm used negligently or alcohol you can drink to excess," says Vermont Attorney General William Sorrell.






3. “Girls Gone Wild” at Bar in Iowa City May Violate Ruling

By Frank Gluck – Iowa City Gazette

February 4, 2004


IOWA CITY – A “Girls Gone Wild” event at a downtown Iowa City bar Saturday night crossed the line in trying to bring women in to go wild, according to the city’s Human Rights Commission.


The Union Bar, at 121 E. College St., hosted an “illegal event” by granting free admission only to female patrons between 9 and 10 p.m., said Heather Shank, commission coordinator.


Known commonly as ladies night promotions, such events were ruled by the Iowa Supreme Court in 1989 to be sex discrimination.


City and state officials periodically warn bars about the promotions.


Lynn Walding, administrator of the Iowa Alcoholic Beverages Division, warned bars as recently as May to stop the practice.  Some bars have tried, unsuccessfully, to get around the rule by such promotions as “Skirt Night,” “Lipstick Night” and “High Heels Night,” he said.


Violating the rule could put a bar at risk of losing its license and leave it open to a civil rights lawsuit, Walding said.


“We take a dim view of ladies night promotions, and we have been scrutinizing them,” Walding said.  “If it’s a predominantly gender-based criteria, the law is not going to allow you to do that.”


Shank on Monday sent letters to local newspapers warning them about publishing advertisements for any ladies night events.  In an interview Tuesday, Shank refused to say if she has contacted the Union Bar or other promoters of the event, saying it’s “confidential.”


But another such ad would prompt a formal complaint from the commission, she said.


The event, promoted by a sign on the door of the bar and an ad in the Daily Iowan, announced “free cover (charge) for girls 9-10 (p.m.) Courtesy of Girls Gone Wild.”


That may be legal, Walding said.


“If Girls Gone Wild really paid the money to them to get in on that promotion, it might pass muster,” he said.  “I’d have to know more about the contractual relationship between the bar and this company.”


Bar co-owner Tom Barlas of Mason City declined to comment last night.


The other owner, George Thomas, could not be reached.



4. The Slice in the New Scots Gin is ... Cucumber

By Edward Black – The Scotsman

February 4, 2004


A new Scottish gin which has already taken the upmarket bars of San Francisco and London by storm with its unique blend of cucumber and rose petals is set to shake up watering holes and clubs north of the Border with its domestic launch next month.

Distilled and bottled in Girvan in Ayrshire, Hendrick’s is hoping to challenge the hegemony of classic London Dry products such as Gordon’s by cashing in on the recent growth of "mixologists" and style bars

Launched by William Grant & Sons, best known for the Glenfiddich malt, it is being marketed as Scotland’s "first homegrown premium gin". It picked up a gold medal at the San Francisco International Spirits Competition 2000 and was last year’s "Gin of the Year" at the Food and Wine Magazine Spirit of the Year awards

The drink comes in distinctive brown Victorian apothecary style bottles. Its cucumber, rose petal and other botanical infusions are designed to make it go well with a variety of mixers including cranberry and grapefruit juice - as well as a slice of cucumber rather than lemon

Jason Scott, a spokesman for Hendrick’s, said the aim was to appeal to younger drinkers as well as the classic gin market

He said: "Many people think of London gin but this is bottled and distilled in Scotland which is unusual for a premium brand of its nature. We are targeting bars and restaurants in Edinburgh like Oloroso and Circus cafe, as well as the country’s best-known golf clubs, including St Andrews and Muirfield

The emergence of a new gin was broadly welcome by the industry and connoisseurs alike.

Alicia Tetlow, spokesperson for Diageo which makes Gordon’s Gin, said: "Although we market ourselves as a London gin we have been producing Gordon’s in Scotland for generations. There is always room for other new brands.


Geraldine Coates, author of Classic Gin and the founder of new website gintime.com, added: "Since its long decline set in in the 1970s, gin is starting to catch up with vodka which really took off when it remarketed itself as a trendy club drink that could be mixed with most things.

"Like vodka, gin is now rediscovering the importance of using a variety of different botanicals to broaden its appeal."



5. Pernod Ricard Scores Victory in Havana Club Dispute


February 2, 2004


WASHINGTON, DC (Reuters) -- Pernod Ricard (PERP.PA: Quote, Profile, Research) said on Monday that a U.S. patent appeal board upheld its registration of the Havana Club trademark in the United States, handing the French spirits group a victory in long-standing dispute with Bacardi USA.

In a joint venture with the Cuban government, Pernod Ricard has been selling Havana Club-brand rum worldwide, although a four-decade old embargo against Cuba bars Pernod Ricard from selling the product in the United States.

But privately held Bacardi challenged the registration of the brand in the United States, saying it had purchased the trademark from its original owner.

An appeal board of the U.S. Patent and Trademark Office ruled last week that the Cuban-French venture had properly filed a U.S. registration renewal for the brand in 1996, Pernod Ricard said.

The spirits giant commended the patent office "for reaching a fair and correct decision based solely on the merits of the case," said Mark Z. Orr, Vice President for North American Affairs, Pernod Ricard USA.

Bacardi had sued under a five-year-old law known as Section 211 that prohibits the U.S. government from honoring trademarks confiscated by foreign governments.

The World Trade Organization said in 2002 that Section 211 violated international property protection rights. The United States has until the end of 2004 to comply with the ruling.


6. Vive l’Amerique

By John Turrettini – Yahoo! News

January 29, 2004


There were doubters when Pernod Ricard S.A. spent $3.2 billion in 2001 to split the fusty liquor cabinet of Seagram Co. with archrival Diageo Plc. Yes, the deal turned the Paris-based company into the world's second-largest alcoholic beverage concern. But could Pernod, which had but a teensy presence in the U.S., exploit the brands it inherited? "It was not a big deal for us," says Chief Executive Patrick Ricard, displaying his Gallic modesty. "We were sure of our ability to succeed, and that's what we've done."




He speaks the truth. In the two years since the deal, Pernod Ricard has paid down close to 60% of the debt it incurred, rung in record profits and quadrupled its share of the U.S. market to 5% (still dwarfed by Diageo's leading 21% share). It has done so by deftly playing the arcane system of U.S. distribution, a hangover from Prohibition that prevents distillers from direct sales; by turning out new products with celerity and skill; and by reviving tattered labels like Martell cognac and Chivas Regal. Pernod has also been lucky: Hard-liquor unit sales in the U.S. grew 2.7% last year and an average 2.4% annually since 1999, compared with just 0.8% for beer, says Brian Sudano at Beverage Marketing Corp., the New York-based consultancy. This helped boost U.S. sales for Pernod by 11% last year over 2002.

Credit Pernod for deftly stroking U.S. distributors, who arrange in-store and in-bar marketing, negotiate prices and shelf space and decide how hard to push one brand over another. It played monsieur nice guy to Diageo's get-tough policy in 2002 to force most distributors to set up exclusive sales teams for its brands--or lose the business. The London-based distiller even required distributors to employ a brand overseer it handpicked.

Most distributors complained but buckled. Not Orange, Calif.-based Young's Market, Diageo's largest distributor. "What they were asking of us was unfair to our other suppliers," explains Vernon Underwood, Young's chief executive and a principal stockholder. "Frankly, it was bullying, and we weren't comfortable with it." So he sent Diageo packing, losing one-third of his $1.8 billion in annual volume.

Into the breach stepped Ricard. He and his U.S. managers met with Underwood in April 2002 soon after the Diageo split and asked what they could do to help. Underwood told them he needed a mid-line vodka to replace Diageo's Smirnoff. Within six months--the fastest rollout Underwood had ever seen--the distiller developed, bottled and rushed to market Seagram's Vodka, made from Indiana corn and produced in the same Lawrenceburg, Ind. distillery as Seagram's Gin. Young's liked the fact that Pernod was offering a gross margin that was better--12% better--than what it had with Smirnoff, and pushed the brand hard. Last year Pernod Ricardsold 500,000 cases of the new vodka, worth an estimated $22.5 million in revenues to the distiller.

Underwood met with Ricard again last April and suggested Pernod leverage its topflight Irish whiskey brands (Jameson, Bushmills, Paddy) to create a rival to Baileys Irish Cream, another Diageo property. Bushmills Irish Cream went on sale last month. Such quick-trigger development can only enlarge Pernod Ricard's U.S. base, now 19% of its worldwide sales, up from 7% in 2001 before the Seagram deal.

How different a face from when Patrick Ricard, now 59, took over in 1978. The company then still resembled the smallish seller of Provençal aperitifs his father had founded in 1936. With 90% of sales coming domestically, it was close to a pure play in anise-flavored liqueurs like Pernod. Patrick had more cosmopolitan ambitions and over the next two decades bought his way into Irish and Scotch whiskeys, Polish wodkas, Greek ouzos and Italian bitters, eventually making the company top dog in Continental Europe.

If the U.S. has been an irresistible draw, so, too, is Asia. In China Pernod Ricard's scotches now enjoy 55% of the superpremium whiskey sector; sales there grew 15% last year. That's attributable in part to Pernod's beefing up its marketing teams for Chivas and Martell by 20% and making a big play for karaoke clubs, where one-third of the liquor is sold in China. Pernod was one of the first Western distillers to discover the popularity of Australian wines; the Jacob's Creek label, acquired in 1989, is a big hit in Europe and the U.S., growing at 21% a year since 1998.

Last year Pernod Ricard earned an estimated $530 million on sales of $4.3 billion. In euros, the results were close to flat with 2002 since muchof its business was conducted in currencies--dollars or the rinminbi, tied to the dollar--that weakened against the euro. J.P. Morgan liquor analyst Nigel Davies says the company has averaged 6% internal growth since 1997, just ahead of Diageo's rate. Pernod Ricard's operating (that is, Ebit) margin of 22% still lags Diageo's 28%. Pernod's shares, which trade on the Paris bourse and as ADRs in the U.S., are up 26% in euros since the Seagram deal, to the equivalent of $110. The Ricard family's 12% is worth $900 million.

One dark spot is Pernod's home base, accounting for 18% of sales. The French won't touch Australian wines, and they seem to have lost their appetite for whiskey and liqueurs. A government crackdown on drunk driving, coupled with lowered speed limits, may force Patrick Ricard to push even harder across the Atlantic.





7. Quit-Smoking Proposal Calls for $2-a-Pack Tax Plan to Cut Smoking Gets Backing Of Four Former Surgeons General

Wall Street Journal Associated Press

February 4, 2004

WASHINGTON, DC -- Four former surgeons general unveiled a plan to reduce smoking that included a $2-a-pack tax they predicted would prompt at least five million smokers to quit.


They also called for a nationwide counseling and support line for smokers trying to quit, an idea that immediately was put into practice by Health and Human Services Secretary Tommy Thompson.


Mr. Thompson said more than $25 million would be dedicated for the toll-free, national "quitline" that will be established by year's end. States also would receive additional funding to either supplement or create their own quitline services.


"The benefit of this network is that it provides a single access point for smokers so that every smoker can get the tools that he or she needs to stop smoking," Mr. Thompson said.

The 10-point plan endorsed by the former surgeons general and other health advocates seeks additional tobacco research, better doctor training and an extensive media campaign explaining the dangers of smoking.


It also urges that the cigarette excise tax be raised to $2.39 from 39 cents, of which 50% of the proceeds, or $14 billion, would go toward paying for the various aspects of the plan.


About 50 million Americans smoke, with many of them concentrated in poor neighborhoods where treatment isn't widely available. Health officials have estimated that smoking causes about 440,000 premature deaths a year and costs the nation $75 billion in direct health-care expenses.


"It is the equivalent of another 9/11 World Trade Center, Pentagon and Pennsylvania disaster occurring about every two days," said Julius Richmond, surgeon general under President Carter from 1977 to 1981.


About three out of four smokers seek to quit, but less than 5% who quit for a day are able to sustain that for longer periods.


"If we act now, we can prevent tomorrow's cancer, emphysema and health disease," said David Satcher, who served under Presidents Clinton and George W. Bush from 1998-2002.


Jennifer Golisch, a spokeswoman for Altria Group Inc.'s Philip Morris USA Inc., said that while the company supports government efforts to educate the public about smoking, a $2-a-pack excise tax could promote tax evasion.


"We are opposed to the proposed federal excise-tax increases because cigarette excise taxes could have unintended consequences," she said. "For example, smokers may purchase from the Internet and Native American territories."


The 10-point plan also calls for federal officials to:


Encourage insurers to provide health coverage for smoking-cessation treatment, such as counseling and drugs.


Initiate community-based programs in schools, workplaces and faith-based organizations to combat smoking.


Establish a standard of tobacco-dependence treatment among health-care providers.



8. Anheuser-Busch Reports Higher 2003 Earnings

February 4, 2004

ST. LOUIS -- Strong growth in Anheuser-Busch Cos.' domestic and international beer operations led to higher sales and earnings for the fourth quarter and full year in 2003, the world's largest brewer said Wednesday.

Anheuser-Busch, the maker of Budweiser, Michelob, Bud Light and other beers, said it earned $294 million, or 36 cents per share, in the quarter ending Dec. 31, up 9 percent from $269 million, or 32 cents per share, a year earlier.

The results matched the consensus forecast of analysts surveyed by Thomson First Call.

Sales rose about 4 percent to $3.22 billion from $3.10 billion in the same period last year.

"Anheuser-Busch had another excellent year in 2003, selling 111 million barrels of its beer brands worldwide," said Patrick Stokes, the company's president and chief executive. "The company's proven ability to leverage its substantial competitive strengths has led to these consistently strong results."

St. Louis-based Anheuser-Busch specifically cited the "outstanding success" of the new Michelob Ultra low-carbohydrate brand and increased Bud Light sales volume.

For the full year 2003, Anheuser-Busch earned $2.08 billion, or $2.48 a share, up from $1.93 billion, or $2.20 a share, in 2002.

Revenue rose 4 percent to $14.1 billion from $13.6 billion.

The company said domestic revenue per barrel grew 2.7 percent and 3.1 percent in the fourth quarter and full year 2003, respectively, compared with the same periods in 2002. Consumers switching to low-carbohydrate beers helped the revenue per barrel results, the company said.

Anheuser-Busch also said its domestic market share, excluding exports, for the full year 2003 increased to approximately 50 percent. That compared to 49 percent for the same period in 2002.

Shares in Anheuser-Busch rose 23 cents to close at $51.88 Wednesday on the New York Stock Exchange. 




9. Pernod Targets Johnnie Walker With Chivas Push
By James Ashton – The Scotsman

February 6, 2004

DRINKS giant Pernod Ricard yesterday backed away from its target to sell four million cases of its premium Scotch Chivas Regal by 2007, instead saying its number one aim was to overtake market-leading Johnnie Walker Black Label.

The French group, which will this year commit another 40 million (£27 million) to marketing Chivas around the world, reported 8.1 per cent growth in wines and spirits sales last year, saying it would beat its recently increased target of around 15 per cent growth in net profits before one-off items and the effect of currencies.

Along with Martell cognac, Chivas 12-year-old is one of the key brands acquired by Pernod from Seagram in late 2001

Richard Burrows, the group’s joint managing director, said the revised target was to "knock Johnnie Walker Black Label off its perch ... but in terms of volume sales or exact timetable, I won’t be that specific."

Including the 18-year-old and Revolve sub-brands, Chivas sold 2.9 million cases last year, a 7 per cent increase, compared with 3.6 million sold by Diageo-owned Johnnie Walker Black Label in the year to June.

Chivas’ rise was led by a revival in Asia and good growth in European markets such as Spain and Greece. The US was "just about stable", while Central and South America dipped 4 per cent as consumers hit by local currency devaluations opted for cheaper brands.

The market for premium blended Scotch heated up early this month when Sir Sean Connery agreed to promote Dewar’s whisky, the Bacardi-owned blend that trails both Johnnie Walker and Chivas.

Pernod spent 40m on Chivas in 2003, with the bulk going in the last four months of the year on a marketing campaign that rolled out a new "This is the Chivas Life" banner into 40 countries.

Christian Porta, who took over as chairman and chief executive of Chivas Brothers this year, said the group would invest "at least the same amount" in 2004. That will be coupled with new packaging, which he said was "a positive evolution" of its wrapper.

Burrows insisted that the group had adequate stocks of its malt whiskies, including Glenlivet, and was not tempted to concoct a controversial "pure malt" mix like Diageo to capitalise on strong growth of single malts in new territories.

Pernod, which is best known for its aniseed-flavoured French pastis and Jacob’s Creek wines, said it had no plans to reopen the four Speyside distilleries - Allt A’Bhainne, Braeval, Benriach and Caperdonich - it mothballed more than a year ago.

Porta said there was more scope to expand production at its six working distilleries, and at least three of the others could reopen in the future. He refused to say which remaining operation was most likely to be sold.

He added: "It makes no sense to sell a distillery at a price that is too low, but if the price is right we would look at it."

To help finance the £1.9 billion Seagram deal, Pernod has been selling down non-core assets such as distribution and fruit preparation. A dozen brands now account for 70 per cent of sales. Divestments and the strong euro saw 2003 group turnover decline 27 per cent to 3.53bn (£2.42bn).