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 e - NEWS

December 19, 2003


1. Liquor Industry's New Pitch: How to Drink Alcohol on Diet

2. Thanks to Cable, Liquor Ads Find a TV Audience

3. Wine Importers Chafe at New Anti-terror Law

4. R.I. Considers Cutting Liquor-Sale Hours

5. Costco's Fine Whine


1.     Liquor Industry's New Pitch: How to Drink

     Alcohol on Diet

By Christopher Lawton –The Wall Street Journal

December 17, 2003


Groups Seek Nutrition Labels As Distillers Go Low Carb;

The Surprise About Guinness


In a world where it's OK for dieters to load up on bacon and hamburgers, what's so bad about a cocktail?

Not much at all, according to the liquor industry. In an effort to cash in on the popularity of trendy low-carb diets like Atkins, makers of vodka, whiskey, and other hard liquors are starting to pitch their products as low-carb and diet-friendly, following the success of a low-carbohydrate campaign this year by Michelob Ultra beer.

In fact, looks can be deceiving and there can be some surprisingly low-carb and low-calorie drinks behind the bar. Guinness, for instance, with its thick consistency and chocolate-cake color, is likely to be one of the first beers carb-conscious drinkers would cut out. In fact, it has only 10 grams of carbs and 125 calories per 12 ounces -- fewer carbs than Budweiser, Coors and Corona. (The reason is, Guinness contains less alcohol.) Other products that look more virtuous, such as the clear-colored malt beverage Smirnoff Ice, are carb-laden. A 12 oz. serving of the trendy brew has 32 grams of carbs and 228 calories, or about the same as a baked apple pie from McDonald's. Same for drinkers of non-alcoholic beers, which can carry more than 14 grams of carbs per 12 ounces.

Tuesday, consumer advocacy groups launched a campaign to urge liquor companies to put more nutritional information on their packaging, saying current labeling rules are haphazard and hard to decipher. Two major groups, the Center for Science in the Public Interest and the National Consumers League, petitioned the federal government to require uniform labeling for liquor much like what's already required on food-product packaging.

The proposed labels would include information on alcohol content, serving sizes, calories and ingredients. Currently, the government has widely varying rules for different products -- low-carb and light beer must list calorie content, for instance, but wine, spirits and regular beers don't have to.

Nutritional label for alcoholic beverages as proposed by consumer advocates.

"People are unaware of the calories and ingredients, and don't know how to compare between types of beverages," said George Hacker of the Center for Science in the Public Interest. Brewers and distillers including Anheuser-Busch and Diageo said they are still evaluating the proposal.

The low-carb, high-protein dieting trend should be terrific news for liquor makers: Rum, vodka, gin, whisky and tequila contain no carbs or fat at all, and never have. Still, 63% of consumers incorrectly believe wine and beer are lower in carbs than spirits, according to a study by Ipsos Public Affairs.

All of this has triggered a wave of new marketing campaigns. Diageo, which makes Captain Morgan Original Spiced rum and Johnnie Walker, is now urging bartenders to promote holiday-themed drinks such as a Johnnie Walker Red Label and Ginger, a mix of scotch and diet ginger ale that clocks in at 96 calories, about the same as three rice cakes.

What's In Your Drink?

See chart below depicting total carbohydrates, calories and fat in various types of alcohol.

Allied Domecq, which makes Kahlua, is also targeting barkeepers and encouraging them to, for example, offer "skinny" White Russians made with skim milk instead of regular milk. It's trying to stir up buzz by sponsoring parties at the offices of Hollywood producers and publicists, as well as some hip hair salons. The drink has roughly half the calories (229) and two-thirds the carbs (18) of a normal White Russian.

Phillips Distilling recently launched a low-carb campaign for its UV vodka and is telling distributors to cross-market it with products like Crystal Light sugar-free lemonade. And Bacardi plans to dust off some of its old advertising from dieting crazes of yore. An 1984 print ad, for example, asks which has more calories: five ounces of white wine, or a five-ounce Bacardi and diet Coke. (Answer: The rum drink, 66 calories, wine, 121.)

Text Box: Still, drinking on a diet is harder than it looks. A pint of regular beer can have up to 150 calories and 13 grams of carbs. The Atkins diet bans all alcohol, at least during early days, as does the South Beach Diet, which stresses eating the right carbs and the right fats. For dieters who choose to drink, Weight Watchers recommends drinking moderately, which is defined as one drink per day for women and two drinks for men.
Liquors become diet busters because they're often served with sweet juices and sugar. A simple pina colada can rack up 27 grams of carbs and 236 calories per a typical 9 oz. serving, of which only 2 oz. is usually alcohol. Plus, drinking can weaken inhibitions, making people likely to indulge in wild behavior such as eating pasta.
Avoiding high-calorie mixers can make a big difference. Subbing Diet Coke in a rum and Coke cuts the calories to 66 from 209 and the carbs to nearly zero from 21 grams. Club soda instead of regular soda will save someone who drinks three to four a week, thousands of calories a month.
Jayde Feinstein, a 22-year-old office manager in Los Angeles, dilutes the cranberry juice in her cranberry  and  vodka  with water to




















limit her sugar and carbs.  She also dilutes red wine with sparkling water to make sparkling wine. "It's a brilliant way to minimize the carbs, but still get the same flavor you desire."

Simple moderation is the best approach, says Stacey Snelling, a professor and registered dietitian for American University in Washington, D.C. When students ask if they can freely drink low-carb beer without getting a beer belly, she warns that switching to a low-carb beer from most light beers saves just 10 calories. "There are still alcohol calories in low-carb beer, and alcohol calories are stored as fat," she says.


It's tough to make an argument that a bar is a good place to maintain a diet. Consider the final pitfall: Mindlessly grazing the bar snacks. Three handfuls of mixed nuts can silently harbor a whopping 500 calories, or fully a quarter of the Food and Drug Administration's guidelines for average daily requirement.


2. Thanks to Cable, Liquor Ads Find a TV Audience

By Stuart Elliott – New York Times

December 15, 2003


NEW YORK -- Almost two years ago, an experiment to allow American liquor marketers access to the biggest, most powerful advertising medium of all - national broadcast network television - ended in acrimony. Since then, those advertisers have pieced together an alternative, virtual TV network, enabling them to expose consumers to more pitches for vodka, gin and whiskey than ever before.


Commercials for distilled spirits, once relegated to the fringes of the television landscape, now appear on two dozen national cable networks from AMC to WE, more than 140 local cable systems and 420 local broadcast stations. That patchwork network lets the liquor marketers take advantage of the benefits of selling on television - primarily the ability to reach large numbers of consumers quickly and frequently - even if its most potent form is barred to them.


This month, for instance, the VH1 cable network, owned by Viacom, started running spots for distilled spirits, and several liquor brands like Grey Goose vodka introduced their first commercials with holiday themes. The Jim Beam Brands Company division of Fortune Brands is considering a cable version of its print and radio "Drink smart" campaign, encouraging responsible drinking, which could begin running as soon as the first quarter of the new year. And Vin & Sprit A.B., the Swedish maker of Absolut vodka, is planning TV spots for a new, higher-priced brand, Level vodka, to come out in 2004.


"Even with everyone frightened about the decline of television as an advertising medium, there's still something about its communication values that are hard to beat," said Adam Stagliano, president at Brand Architecture International in New York.


"Television has sight, sound and motion, and the ability to target an audience," said Mr. Stagliano, whose agency created for G1 Worldwide, a division of the TBWA Worldwide unit of the Omnicom Group, the first American television commercials for Pernod Ricard's Chivas Regal Scotch whiskey. The spots have been running since October on cable networks like Bloomberg, FX and Outdoor Life.


"And TV is great for what's called top-of-mind awareness," Mr. Stagliano said. This quality, highly prized by marketers, means that when consumers are asked in surveys to name a specific brand of, say, Scotch whiskey, they reply "Chivas Regal" without prompting.


By now, viewers ought to be able to demonstrate awareness of a lengthy list of distilled-spirits brands as a result of the hundreds of spots that run each week for products that in addition to Chivas Regal include gins like Bombay Sapphire; rums like Bacardi and Captain Morgan; vodkas like Finlandia, Grey Goose and Smirnoff; whiskeys like Crown Royal and Jack Daniel's; and liqueurs like Baileys, Disaronno, Kahlúa and Southern Comfort.


In most instances, the TV spots are supplementing traditional media schedules for liquor brands dominated by print and outdoor advertising, though in some cases television - especially spots on hit cable series like "Nip/Tuck," "Queer Eye for the Straight Guy" and "Trading Spaces" - is supplanting other media choices.


"At this point, liquor ads have saturated cable," said George A. Hacker, director for the Alcohol Policies Project at the Center for Science in the Public Interest in Washington, who has long fought against such commercials because of fears that they are more visible to children than print ads and glamorize drinking more.


"We're satisfied that at least the barrier against broadcast remains, but it's very hard to have a big enough thumb in the dike," he added. "They're aggressively advertising on cable, and we have more limited legal remedies there." That is because broadcast networks are more stringently monitored by federal regulators.


It was the harsh outcries from those regulators, along with advocacy organizations like Mr. Hacker's, members of Congress and the American Medical Association, that forced a premature end to the experiment by one big broadcaster, the NBC division of the General Electric Company, to run commercials for hard liquor.


For decades, the American liquor industry had adhered to voluntary bans on the advertising of its products on radio (since 1936) and television (since 1948), even though its counterparts overseas have long run such spots. In 1996, after Seagram began defying the ban, it was lifted, but TV spots were still rare because the big broadcast networks - ABC, CBS and Fox, along with NBC - kept intact their policies against accepting ads for distilled spirits.


That changed on Dec. 15, 2001, when NBC ran a spot sponsored by Diageo on behalf of Smirnoff, which promoted designating a driver before going out to drink. It was the first step in a long test that would not have allowed commercials explicitly devoted to selling Smirnoff or other Diageo brands until April 2002. But a month before that, NBC ended the experiment, citing fierce opposition. (Now that NBC owns Bravo, said Cory Shields, a spokesman for NBC in New York, "whether or not Bravo continues to take liquor advertising is under review," though the review is expected to conclude with the policy intact.)


The brief foray of liquor onto a stalwart of broadcasting emboldened Madison Avenue.




3. Wine Importers Chafe at New Anti-terror Law

San Francisco Chronicle

Thursday, 2003



Call for documents may be difficult for a unique business


SAN FRANCISCO -- The new Bioterrorism Act rules are inconvenient for most food and beverage companies, but they could wreak havoc in the esoteric world of collectible wines.


If enacted as written, the Food and Drug Administration rules could drive up prices and make some rare wines virtually impossible to find. Mannie Berk, a Sonoma importer who is lobbying on the issue, estimates that $200 million to $300 million in annual imports could be barred from the United States.


Berk and other importers are banding together to fight the regulations in Washington and to share information that will allow them to comply.


The problem lies in the prior-notification form that must be submitted with every imported comestibles shipment. The form requires a registration number assigned by the FDA to each food and beverage producer.


Overseas wineries in many cases will provide the number only to their official importer, leaving other importers out of the action.


For most comestibles, this is not a problem because most foodstuffs are purchased and consumed soon after they are made.


Wine, however, can last for decades and change hands many times. A network of brokers and importers exists in the United States and overseas to match collectors with specific wines they want to add to their cellars. These sales happen on what is called the "gray market" or "parallel market."


Berk, the owner of Rare Wine Co. in Sonoma, says the rule puts 25 percent of his business at risk.


Adventures in Wine, one of the area's largest gray-market importers, could lose one-third of its $6 million in annual revenues, owner Merrick Dowson says. "I'd have to lay off two or three people in my staff of 10, maybe more," says Dowson, whose company imports wine for, among other places, San Francisco's popular Wine Club store on Harrison Street.


Berk and other importers in the California Fine Wine Alliance are submitting comments to the FDA asking for changes. They are also creating a database of registration numbers to share among importers in case the regulation goes into effect as written.






4. R.I. Considers Cutting Liquor-Sale Hours

By Stephen Elliott– The Dispatch

December 14, 2003


ROCK ISLAND -- A Rock Island police officer was called to the Stop and Save convenience store at 1501 7th Ave., shortly before 2 a.m. on Dec. 4.


The parking lot was filling with people, several people were inside and the clerk might need help if there was trouble.


The officer dispersed the crowd and went on to his next call. The patrolman was lucky that night.


``If a policeman is not there, it usually ends up in a fight,'' Rock Island Police Sgt. J. Michael Sponsler said. ``If the officer is there, most people will simply move on.''


Rock Island convenience stores can sell liquor until 1 a.m., or 3 a.m. if they're approved for extended hours. That's later than any other city in the immediate area, and the city council has asked attorneys to draft an ordinance eliminating extended hours.


The city has 20 convenience stores, and nine have extended hours.


Sometimes, late night - or early morning - calls to convenience stores have involved seven to 10 officers dealing with a crowd of 50 to 75 people. Police also are called to deal with thefts, shots fired and drug activity at convenience stores.


``This situation only seems to happen a couple or a few times a year, but even one time could lead to an officer getting seriously hurt,'' Sgt. Sponsler said.


In a report to the city council last Monday, Sgt. Sponsler said stores that have extended hours call for police aid more than other stores.


``One very serious concern I have for our department and officers handling these calls is the serious nature of the call and the amount of manpower it takes to get the situation under control,'' he said.


Police Chief Terry Dove said extended liquor-store hours also are hard on neighbors around the businesses. ``For residents living nearby, you have people parking in the driveways. You have trash and litter. Quality of life is a very important issue.''


Joe DePaepe, owner of four Mother Hubbard's Cupboard stores in Rock Island that have extended hours, is not in favor of the proposal to cut those hours.


``It's not going to accomplish much, except erode some of the traffic at our stores,'' he said. ``The plight of the convenience store is we're fighting for our lives. We're fighting to stay open.


``When cigarettes went up to $4 a carton on the Illinois side, business went to the Iowa side. We're down about 30 percent on gas sales this year, because everybody's crossing the river. Gas (in Iowa) is cheaper, too.''


Mr. DePaepe said the city should go after the stores that have problems instead of all stores with extended hours. ``Take care of the problem stores, but don't blanket everything.''


Davenport Police Capt. David Struckman said Davenport convenience stores can sell liquor until 2 a.m. He said many bars have ``last call'' about 1:30 a.m., which means some customers head for a convenience store to get more liquor before the 2 a.m. closing.


There have been some problems at convenience stores with late-night liquor sales, he said. ``When you have people in mass sometimes like that in a parking lot, it might be a fight that carried over from a bar. It's a natural meeting place.''


Sgt. Sponsler told the Rock Island council that convenience stores have, for the most part, cooperated with police in trying to curb late-night incidents.


He cited the Stop and Shop as one of the cooperative ones. ``Now, at about 2:20 to 2:30 a.m., the store completely shuts down to avoid the tavern- closing crowd that used to stop at this location.


``The same thing happened several years ago with the Kwik Shop at 2400 7th Ave. They encountered continual serious problems with the tavern-closing crowds.''


He said police worked with store management to restructure hours, which eliminated most of the problems.


Calls to Stop and Shop and Kwik Shop for comment for this article were not returned.


In 1996, Mr. DePaepe was part of a lawsuit filed against the city of Moline which claimed that making gasoline and oil stations ineligible for liquor licenses was unconstitutional. Moline agreed to lift the ban in 1997 before the case was heard in court.


``They're (people who want alcohol) still going to get it somewhere,'' Mr. DePaepe said. ``If they want beer at 1:30 a.m., they'll get it. It will just be in some other city. There's sales tax from that.


``Cigarettes, pop. They may buy that at the same time. That's also going to go away.''







5. Costco's Fine Whine

The bulk retailer challenges state liquor restrictions.

By Roger Downey - Seattle Weekly

December 18, 2003

SEATTLE, WA -- WASHINGTON STATE'S rigid system of control over pricing, distribution, and sale of alcoholic beverages has survived nearly 70 years without significant challenge. That challenge finally came just before Labor Day, when attorneys for discount-retailing behemoth Costco, which is headquartered in Issaquah, threatened to take the state to federal court, charging that Washington's elaborate three-tiered alcohol marketing system violates the venerable Sherman Antitrust Act, and demanding that the state promptly dismantle offending parts of the system or face "expensive litigation."

When you read Costco's complaint, you can't help wondering why it's taken so long for someone to force the state's hand. The reason appears to be not that everybody was content with the system, but only because no one was big enough or determined enough to challenge it. As one of the Forbes top 50 American corporations, Costco is big enough and stands to benefit significantly if the law is changed.

It's only recently that the legal odds tipped in Costco's favor. For a long time after repeal of Prohibition, courts bent over backward to support the states' right to regulate alcohol. That began to change in 1980, when the U.S. Supreme Court agreed with some California liquor distributors that there are limits to a state's right to interfere with business in the name of the 21st Amendment.

THERE'S NO ARGUMENT that Washington's law interferes with free competition where alcohol is concerned. Alcoholic beverage wholesalers have to post their prices publicly where the competition can see them and are allowed to change prices once a month at most. They're forbidden to offer discounts for volume buyers, or sell a consignment on credit to sweeten the deal. Out-of-state producers can't ship their wares directly to retailers but are required to market them through "licensed distributors," thereby increasing their cost to consumers.

That last requirement appears to be what made Costco decide to challenge the state system, if necessary, in federal court. Costco's business model is based on buying in massive bulk, directly from producers, and distributing to its "warehouse" stores through its own gigantic and efficient "cross-docking" facilities. That brings down the price to Costco shoppers for items from mayo to mattresses. Costco wants to offer the same price break on wine.

If the state's requirement that wine must pass through the hands of an independent distributor were set aside, Costco wine customers would benefit. But the change might quickly put a lot of distributors out of business. It's the mandated markup they earn on high- volume, mass-market beers and wines like those stocked by Costco (and supermarket chains) that makes them profitable. Indeed, owning a beer or wine distributorship in Washington state is considered a license to coin money, one to be jealously kept in the family and handed down through the generations.

Washington's alcohol distribution system is described as "three-tier," with producers and consumers as the outside tiers and distributorships at the center, holding the sandwich together. If Costco can persuade the courts that forcing it to buy through distributors is anticompetitive and results in higher prices to the consumer, the rationale for the whole system collapses.

FEDERAL CASE LAW offers the state one fallback position to defend the system: States are permitted to fix prices and control markets only as long as they actively supervise the results of their regulations to ensure that they aren't abused. But the agency in charge of enforcing Washington's system, the Liquor Control Board, isn't set up to do much in the way of supervising the effects of its regulations, and, at least during the reign of Gov. Gary Locke, its governing commission has been less concerned with oversight than providing political sinecures for allies of the governor.

Costco's letter to the state attorney general points out that under the present system, a number of questionable practices have been allowed to develop over the years, including distributors holding de facto monopolies over some popular products in one region of the state while a competing product is handled by a different distributor in another region. Whether the practice is due to tacit agreements between distributors or not, it obviously limits buyers' ability to choose between equivalent products on the basis of price: If the wine you want isn't distributed in your county, you take what you can get, at the price asked.

On Monday, Dec. 1, lawyers for the state and Costco and representatives of the liquor commission met for the first time to explore the legal landscape dividing the parties. Costco's lawyers seem almost arrogantly sure of their ground. In their letter to the attorney general's office on Aug. 29, they invited the AG to join with them should litigation become necessary, leaving the liquor commission to hire its own lawyers. If progress isn't made, litigation could ensue as soon as January.