www.IowaABD.com

Lynn M. Walding, Administrator

	e - NEWS
March 5, 2004

2. Police Get State Alcohol Grant

3. The Cocktail is Back

4. MEXICO: Tequila Production Up, Exports Down

5. Anheuser-Busch Widens Bacardi Silver Line

6. Another Hiccup in Alcohol Ordinance

7. Coors Seeks Edge in Low-Carb Market

8. Liquor Licenses Suspended

1. Vodka a Tonic for Iowa Revenue
By Dave DeWitte - Iowa City Press Citizen

February 27, 2004

Gain seen by cutting tax on pricey brands, raising it on low end

IOWA CITY, IA -- Can Grey Goose lift Iowa out of its revenue slump?

Iowa Alcoholic Beverages Division Administrator Lynn Walding hopes so.

Iowans have a preference for inexpensive vodka that Walding links to the straight mark-up on liquor Iowa adopted when state liquor stores closed in 1987.

Initially 55 percent, the mark-up has since been cut to 50 percent.

Taxing inexpensive brands at the same rate as premium brands contributes to a situation in which people buy more of the "value-brand" vodkas.

Those vodkas make up four of Iowa's top 10 liquor brands.

Interest in premium vodkas such as Grey Goose, a pricey French import, is now boosting sales of vodka nationwide, Walding says.

Premium vodkas could generate more tax revenue than cheaper vodkas. But Walding thinks Iowa's flat tax on premium brands is keeping Iowans from buying them.

In an experiment beginning Monday, the Alcoholic Beverages Division will raise the excise tax rate on inexpensive vodkas to as much as 60 percent and lower them on premium brands to as little as 40 percent.

The theory is that lowering prices on premium vodkas will bring in more tax revenue without boosting consumption.

The plan, called "variable mark-up rate," has its detractors.

"I understand raising revenues, but it's bizarre to lower the mark-up at the high end when the people who buy at the high end can afford it anyway," said Wally Plahutnik, wine and spirits buyer for John's Grocery in Iowa City.

"It seems like a regressive tax," he said.

Walding disagreed. "Liquor is not a food group," he said.

On average, Walding said, the price of a 750-milliliter bottle of value vodka at the new 60 percent rate will increase in cost by about 30 cents, less than 2 cents per 1.5-ounce serving.

One of Walding's nagging concerns about the experiment is whether retailers will pass along the savings on premium products. He says consumers should see the price of premium brands coming down and the value brands going up slightly.

The Alcoholic Beverages Division generated $66.4 million in funds last year, more than 1 percent of the state's revenue. If the policy boosts revenues, Walding said, it could be expanded to other liquors.

2. Police Get State Alcohol Grant

By Vanessa Miller - Iowa City Press-Citizen

February 27, 2004

Citations expected to increase

IOWA CITY, IA -- The number of police officers strolling through bars and pulling over late night drivers will increase in April after the Iowa City Police Department receives an additional $13,900 to work with.

The funds will come from a Governor's Traffic Safety Bureau grant that was awarded for alcohol and traffic enforcement earlier this month. The money, which must be spent from April 1 to Sept. 30, will add to a $21,000 alcohol and traffic enforcement grant Iowa City received last year for the period from Oct. 1 to Sept. 30.

"There will be people that will be prevented from driving very far drunk, and that is a significant benefit," said Iowa City Police Sgt. Mike Lord, adding that some of the money also will be used for seatbelt enforcement. "I am a firm believer in seatbelts."

Lord said the existing $21,000 grant is a renewable source of funding that Iowa City has been getting throughout the 1990s. The department is occasionally awarded additional grants, the last one coming in 2002.

That year arrests for underage possession of alcohol jumped to 2,271 from 988 in 2001. Adding to the increased enforcement, an Iowa City Council majority agreed to ban those under age 19 from entering bars after 10 p.m. beginning Aug. 1.

Since that time, the number of alcohol citations issued has continued to climb. From Aug. 1 through the end of January, officers issued 2,219 alcohol-related tickets.

"It happens every year. They will increase enforcement, they will increase arrests, and they will justify passing another law," said Daryl Woodson, owner of the Sanctuary Restaurant & Pub, 405 S. Gilbert St. "The question is, how are we allocating our police department resources? With these grants, you have to put police in bars getting 20-year-olds with beers in their hands, rather than putting our resources where more serious crimes are happening.

"I don't like grants for law enforcement," he said. "Because they take people away from the real problems."

Jim Clayton, co-director of the Stepping Up Project, a community-led coalition against underage and binge drinking, disagreed, arguing that alcohol can lead to serious problems.

"We are in favor of additional enforcement because it reduces the access and availability of alcohol," Clayton said. "We have gotten the bar owners' attention with the additional enforcement. They know they are in a vulnerable position."

Lord said he expects the additional money allocated for traffic enforcement to increase the number of drunken driving charges, which have been on the decline in recent years.

While 2001 saw 1,071 arrests, officers cited only 925 people in 2002. Through October of last year, 471 tickets were issued.

Lord said he expects the majority of the grant to be used for enforcement on Memorial Day, the Fourth of July, for safety check points and when the University of Iowa is in session.

3. The Cocktail is Back
By David Goetz – The Courier-Journal

February 29, 2004

Growing popularity of mixed drinks is lifting spirits sales

LOUISVILLE, KY -- Victoria Davies used to be a one-drink woman, and not a very happy one at that.

"There's only one place in the city you can find a decent Bloody Mary," Davies said, so she often found herself half-heartedly sipping a glass of wine when she was out for dinner and drinks.

Then a friend introduced her to the cosmopolitan, a colorful drink popularized by the sophisticated, female cocktail klatch on the HBO series "Sex and the City."

That started Davies experimenting with brands and flavors. Now she's a cocktail enthusiast who holds fondue-and-martini parties. She's also comfortable going to a bar for drinks with friends or browsing a liquor store for spirits and mixers.

"I know what I like now. I actually know how to buy something other than Early Times and vodka."

Davies, 46, is part of the "cocktail culture," a growing taste among Americans for spirits-based drinks that has been credited with shaking up liquor sales in America.

Beginning in the 1990s, and with the help of a growing number of flavored rums and vodkas, Americans began to drift away from good old blue-collar beer toward more spirited drinks with more complicated components. Pop culture picked up on the trend and before you could say "1940s retro" the cocktail had become a symbol of sophistication.

"It's almost like the old image of Hollywood," said Tim Laird, trade marketing manager for Brown-Forman Corp. For the last year or so, Laird has been making media calls to radio stations and TV shows, suggesting drink recipes and boosting the company's brands.

"The hot drink is anything in a martini glass," he said.

The cocktail has even moved from bar to billboard, taking on the dimensions of a marketing icon.

"You see a martini glass in just about every ad for everything," said media specialist Patrick Riedling, who included cocktail recipe contests among the initial efforts to revive the Four Roses bourbon brand.

Clubs and bars are mixing more drinks, with more flavors and colors. And more people, especially women, are buying them.

Liquor drunk in clubs or bars where a friendly bartender can whip up an old favorite or recommend something new and colorful jumped by 5 million cases between 1998 and 2002, according to Adams Beverage Group. That was a 4 percent increase.

It wasn't just a question of more liquor being consumed in bars. Retail store volumes rose 1.7 percent in the same period.

Adams' numbers show that in 2001 women drank 44 percent of their liquor in bars or clubs, up from 34 percent eight years earlier.

Women have found they can enjoy mixed drinks if they've got the right combination of flavors, said Brook Jenkins, whose tastes run from chocolate martinis to Diet Pepsi Vanilla and Old Forester. "It doesn't have to hurt, it doesn't have to burn going down."

But it's not just women fueling the cocktail culture, said John Higgins, Brown-Forman's national brand director for Finlandia vodka.

"Flavored vodkas skew toward the women, but there are plenty of males out there drinking appletinis and chocolatinis, a lot of flavored drinks."

All of this mixing and sipping has had a solid impact on liquor sales. Spirits sales were up about 3 percent last year in the United States. Liquor giant Diageo said its U.S. sales were up 2 percent in the second half of 2003, with growth of its Smirnoff Twist group of flavored vodkas boosting North American sales of its dominant Smirnoff brand 6 percent.

Flavored vodkas are the prime ingredients in some popular cocktail concoctions, while upstart cordials such as blue Hpnotiq, and old-fashioned cream liqueurs add flavor and color.

"Flavor is what's driving spirits (sales)," said Frank Walters, senior vice president and director of research for beverage industry scorekeeper Impact. "Flavor in vodka, flavor in cordials and liqueurs, flavor in tequila from the mixers."

Straight whiskeys and bourbons haven't benefited as much, but sales of premium brands like Maker's Mark and Jack Daniel's have increased.

Theories about why the cocktail culture has emerged abound: Baby boomers drinking less but better, nostalgia for the days of the World War II generation, some kind of generalized retro movement.

"Beer has been slowly losing (market) share to spirits since '96, when the baby boomlet began," Walters said.

Baby boomers' children are growing up, getting a little older, getting better jobs, moving up from Jell-O shots.

"If you go out in a T-shirt and a pair of jeans, you're comfortable walking up and drinking a Bud Lite," said Don Burns, owner of @mosphere restaurant and nightclub and Main Street Lounge. "But when you're in a suit, you prefer martinis or cocktails."

Maker's Mark maven Bill Samuels sees an architectural component, based on restaurants' desire to raise check averages by selling more drinks.

"Most of the new restaurants built in the '90s moved the bar into a prominent location in the restaurant, bartending became a profession, all those things help," he said.

They've helped Maker's Mark, Samuels figures, because two popular drinks — the Manhattan and the Old-Fashioned — are made with bourbon and there's a good chance it's Maker's Mark, since bars tend to use premium brands to maximize profits and tips.

"It helps rationalize all the money they spent on the restaurant and all the space they gave to the bar," he said.

Main Street Lounge manager Alan Darville has a more practical take, one that fits in well with the economic principles of supply and demand.

"The market's so flooded with vodkas right now, you have to do some inspired things to sell it," he said. "I probably have on hand 30 different vodkas."

All that vodka isn't just going into martinis, cosmopolitans and other exotic drinks, said Darville, who moved to Louisville last year from Florida. When the early business-suit crowd moves out and the younger set moves in, the drink orders change to more basic mixers like the Red Bull energy drink.

"In Fort Lauderdale, it was basically Red Bull and vodka — all the exotic vodkas, Grey Goose and Grey Goose (L'Orange). We would order, like, 60 to 80 cases of Red Bull a week."

4. MEXICO: Tequila Production Up, Exports Down

Just-drinks.com editorial team

March 1, 2004

Tequila production in January leapt by 18% year-on-year, according to figures released over the weekend. The amount of Tequila exported in January, however, fell by 8.3% year-on-year, to 7.7m litres.

The president of the national chamber of the tequila industry CNIT, Eduardo Orendain, who announced the figures, also predicted a recovery and consolidation of the Tequila industry in Mexico this year.

In January, Orendain said that Tequila prices should fall by 25% year-on-year in 2004. Orendain credited the potential fall to the decrease in prices of agave, the main material for Tequila production, and its greater availability on the market. Agave has been in short supply in the past two years, leading to an increase in prices and a decrease in consumption and production.

Mexico’s production of Tequila fell last year to 140m litres from 191m litres in 1999, as the price of agave soared to 16 pesos per kilogram. Prices in 2004 are expected to be between 3 pesos and 5 pesos.

Tequila production has fallen steadily in the last four years, while Mexico’s 2003 Tequila consumption fell by 27% year-on-year.

5. Anheuser-Busch Widens Bacardi Silver Line

By Betsy Taylor, Associated Press Writer

March 1, 2004

ST. LOUIS - Anheuser-Busch Cos. Inc. said Monday that it is expanding its family of flavored-malt beverages to include Bacardi Silver Limon, a new lemon-infused drink.

In February 2002, the world's largest brewer launched a rum-flavored Bacardi Silver beverage, then rolled out two variations last year — O3, a drink named for the juice of three types of oranges, and Raz, a rasberry-spiked drink.

"This is a category that remains important to Anheuser-Busch," said Marlene Coulis, director of new products for the St. Louis-based brewer.

She said the company believes the product will stand out from "hard lemon" offerings, both because of the "spirit branding" — or the connection to the Bacardi name — and because of the flavor.

"Our tastes in our whole (Bacardi Silver) line we call refreshing and not too sweet," she said.

Anheuser-Busch's announcement came a week after Miller, a unit of London-based SABMiller PLC, discontinued three of its malternative products to focus on its Skyy Blue vodka-flavored drink, noted Paul Gatza, director for the Association of Brewers, a Colorado-based trade group.

"It does run counter to the trend," he said of the Limon launch. Still, "I think the research Anheuser-Busch would do is probably the top in the world. I think they know what they're doing."

Anheuser-Busch said it has a 28 percent share of all spirit-branded flavored malt beverages, and Coulis said Anheuser-Busch has the opportunity to increase its market share.

She said the products especially appeal to drinkers ages 21 to 27 looking for something different.

Limon will be packaged in six-packs of 12- and 24-ounce bottles, 16-ounce plastic containers and smaller barrel sizes at Anheuser-Busch's brewery in Baldwinsville, N.Y., where the company already makes its Bacardi malternatives.

6. Another Hiccup in Alcohol Ordinance

By Vanessa Miller - Iowa City Press-Citizen

March 3, 2004

Proposal would exclude minors I

IOWA CITY, IA -- A law allowing alcohol sales in Iowa City parks, initially proposed to help increase ticket sales at the Riverside Theatre's annual Shakespeare Festival, might not benefit the event as much as originally thought.

The City Council approved first consideration Tuesday night of a law that also permits beer tents at street festivals. But the measure would exclude those 19 and younger from attending the theater and other events that run past 10 p.m.

"This is a bump in the road," said Tom Bender, board chairman for the Riverside Theatre.

The ordinance, as initially proposed, would have allowed non-profit corporations to sell alcohol in city parks to patrons attending the event for consumption in a confined area. That proposal exempted the non-profit group from a city law that bans those under age 19 from entering an alcohol-serving establishment after 10 p.m. because of the performance-entertainment aspect.

A council majority agreed that ordinance was too narrow and wanted it expanded to include city streets. In redrafting the proposed law, City Attorney Eleanor Dilkes removed the 19-and-under ordinance exception, asserting that if organizers of a downtown festival wanted to set up a beer tent, they should have to comply with the same laws bars do.

"Now they are just like a bar - it's a level playing field," Dilkes said, adding that if Shakespeare Festival performances are not over by 10 p.m., those under 19 will not be permitted. Exceptions apply for employees and those accompanied by a parent, guardian or spouse of legal age.

The revised ordinance passed the first of three readings on a 6-1 vote, with Mayor Ernie Lehman voting in the negative.

"We will have to discuss it," Bender said. "It might be cause for some more tinkering."

The council's original "tinkering" was intended to extend the financial benefit to other non-profit groups. Lehman, however, argued the proposed law sends the wrong message.

"This will allow us to have beer tents downtown, where we have 50 bars anyway," he said. "We are talking about events that are family events. I do not believe these events need alcohol."

Councilor Connie Champion disagreed.

"This doesn't mean we are endorsing underage drinking, binge drinking or excessive drinking," she said. "If there are problems we will look at it again and respond accordingly."

7. Coors Seeks Edge in Low-Carb Market

By Jason Blevins - The Denver Post

March 04, 2004

New light beer makes debut after brewer loses share to others

DENVER, CO -- Adolph Coors Co.'s new Aspen Edge lager, available this week in 11 states and nationwide by the end of summer, is the Golden brewer's heavyweight contender in the lighter-than-light low-carb beer wars.

Coors, the third-largest U.S. beermaker, is hoping its low-carbohydrate brew can bulk up profits just as Michelob Ultra has done for Anheuser-Busch.

But Coors is late to the battle and Coors Light, the second-most-popular light beer in the country, has lost market share to low-carb competitors.

The original hope was that Coors Light, which makes up 75 percent of Coors' U.S. sales, could help the brewer weather the low-carb frenzy.

That hope fizzled when Miller Light spent millions informing carb-counting beer sippers that their beer held fewer carbs than Coors Light.

"It was unfortunate for Coors that Coors Light had a few more carbs than Miller Light and Miller really exploited that in their advertising," said Harry Schuhmacher, editor and publisher of Beer Business Daily in San Antonio. "It's been a tough year for the beer industry, unless you are Michelob Ultra."

Coors' U.S. sales volume fell 1.4 percent in 2003. The company's stock finished 2003 down 8.4 percent compared with 2002, ending the year at $56.10 a share, about the same price traded at the end of 1998.

Merrill Lynch analyst Martin Feldman estimated Coors would spend $2 million to $3 million to launch Aspen Edge.

The beer now is available in Delaware, New Jersey, New York, Pennsylvania, New Hampshire, Massachusetts, Vermont, Maryland, Virginia, Maine and Texas. A national rollout is planned for late summer.

"The goal of launching Aspen Edge is to capture those consumers aged over 30 years who are shifting into the low-carb segment," Feldman wrote in a report issued Tuesday.

The low-carb revolution, which includes as many as 60 million Americans avoiding starchy, sugary foods and drinks, has triggered the creation of at least 13 low-carb beers worldwide, said Paul Gatza, director of the Boulder-based Association of Brewers.

"This isn't going to take over the whole beer industry, but this category will grab 10 percent of the market in the next few years," Gatza said. "I think Aspen Edge will do just fine."

8. Liquor Licenses Suspended

Channel 7 News

February 27, 2004

Cedar Rapids, IA (AP) -- Several bars in Cedar Rapids are losing their liquor licenses for a while. That’s after the Federal Bureau of Investigations found illegal gambling devices and games at the businesses. No criminal charges were filed, but the bars agreed to a short-term suspension and fines. The bars don’t have to close during the suspension, but they can’t sell liquor. The bars that have reached a settlement with the Iowa Alcoholic Beverages Division are the Westside Lounge, Log Cabin Lounge and the Home Port. Another settlement is pending with the Viking Lounge. A hearing for a fifth bar, Gilligan’s, has been delayed.