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October 31, 2003 1. Woman who Gave Teens Alcohol Sent to Prison 2. Turnaround for California Wine Industry? 3. Proposed Rule on Flavored Malts Brews Frothy Response 4. Glenfiddich/Bacardi Martini: Spirits of Christmas 5. US: Fortune Brands Profits Leap 29% in Q3 1. Woman who Gave Teens Alcohol Sent to Prison Waterloo/Cedar Falls Courier Online October 29, 2003 COUNCIL BLUFFS (AP) --- A woman convicted of giving alcohol to a party of teenagers, one of whom was later struck by a car, was sentenced to three months in jail, three years probation and ordered to pay $150,000 restitution to the victim's family. Tracy Cleaveland, 31, of Oakland, also is required to perform about 150 hours of community service. The judge urged that she do that educating area youth on the dangers of drunk driving and alcohol consumption. Cleaveland was convicted in August of one count of providing alcohol to minors resulting in death and 29 counts of providing alcohol to minors. Police said Cleaveland provided a 16-gallon keg of alcohol and cans of beer for an April 16 senior skip day party, which resulted in the death of Tyson McCain, of Carson. McCain, a senior at Riverside High School, died from injuries he suffered after he was struck by a car in the early morning hours of April 17. Providing alcohol to a minor is punishable by up to one year in prison and a minimum $500 fine. The felony charge of providing alcohol to minors resulting in death is punishable by up to five years in prison and $150,000 in restitution to the victim's family. She could have received up to 34 years on the charges. Pottawattamie Judge Tim O'Grady said he took into account that Cleaveland had no prior criminal record and wasn't the only one to provide alcohol to the party. He suspended the $500 fines but instituted the mandatory $150,000 fine to be paid to McCain's estate. He also deferred judgment on the felony charge and ordered Cleaveland to serve three years probation. Another man charged in the case, Christopher Matejka, 27, of Omaha, Neb., pleaded guilty to providing alcohol to a minor resulting in death. Sentencing is set for Nov. 24. Michael McSorley, 21, of Council Bluffs, pleaded guilty to four counts of providing alcohol to minors and was fined $500 on each count. 2. Turnaround for California Wine Industry? AFP October 24, 2004 Leading US winemaker Robert Mondavi Corp. reported a 22 percent jump in first quarter earnings Thursday, heralding a possible turnaround for the depressed California wine industry. The Oakville, Napa Valley-based company reported net income rose to 9.8 million dollars in the three months to 30 September, compared to 8.1 million a year before. The earnings translated into 60 cents per share, compared to 49 cents earlier. Mondavi chief executive Gregory Evans told analysts in a conference call that the company benefited from the improving US economy, especially the travel and entertainment sectors. "We were encouraged to see strong growth from our core wines and our new brands," said Evans. The earnings also included a one-time income of one million dollars from asset sales, reflecting belt-tightening at the 37-year-old company. The turnaround in Mondavi's earnings came after nearly two years of recession in the 14-billion-dollar California wine industry. Industry growth slowed sharply with the US economic downturn in 2001, and was exacerbated by the plunge in travel and entertainment spending following the September 11, 2001 terrorist attack on New York and Washington. Also hurting producers was a glut of grapes in the 2001 and 2002 harvests. The surplus drove down wine prices as new products like the two-dollar Charles Shaw brand, known as "Two Buck Chuck", undercut established producers. Over the past 18 months, a dozen or more winemakers have closed down or gone into bankruptcy protection due to the intensified competition. The most famous of Napa Valley producers and one of the few publicly listed American vineyards, Mondavi's earnings report also reflected its own difficulties. The company laid off 100 workers in early 2003 and closed down expensive promotional centers in southern California to save money. Turmoil inside the company was reflected in uncommon public criticism by the founder, 90-year-old Robert Mondavi, of his sons Michael Mondavi and Tim Mondavi, who manage the company. It also led to speculation, as reported in a recent edition of the Wine Spectator, that Mondavi could be the target of a takeover by more powerful firms in the beverage industry. 3. Proposed Rule on Flavored Malts Brews Frothy Response By David Goetz - The Courier-Journal (Louisville, Kentucky) October 27, 2003 Flavored malts such as Smirnoff Ice and Brown-Forman Corp.'s Jack Daniel's Hard Cola may have lost some of their sales kick in the last two years, but they still can create a buzz in the beverage industry. When federal regulators proposed a strict new rule last spring about the source of the alcohol in the malts, they were required to ask for public comment. Boy, did they get it. The Alcohol and Tobacco Tax and Trade Bureau received 8,000-10,000 letters and e-mails about the change before Tuesday's close of the comment period, a bureau spokesman said. "This is a lot more than I'm familiar with on any other rulemaking," said bureau spokesman Art Resnick. "I don't recall one of this magnitude." The size of the response and the need to read all that mail make it "highly unlikely" that the bureau could finish work on the rule and pass it on to the Treasury Department for approval this year, Resnick said. So it will be 2004 or beyond before any new rule takes effect. That should please convenience-store operators, who weighed in with batches of letters protesting the new standard, which could ban the malts from their shelves and confine them to liquor outlets. Liquor giant Diageo has opposed the new rule for its Smirnoff-branded malts. Dozens of its U.S. employees papered the tax bureau with form letters objecting to what they called the "Draconian" standard. Less-pleased with the delay are likely to be state alcohol regulators, who say the malts violate their liquor laws and deprive them of excise taxes, and alcohol critics, who deride the malts as "alcopops" for their appeal to younger drinkers. At issue is the amount of alcohol in the malts that actually comes from brewing – very little in the vast majority of the brands. Most of the alcohol is in the citrus and other flavorings, which are made with distilled alcohol. The malts have been around for decades, but state regulators became concerned a few years ago when Diageo scored a hit with its Smirnoff Ice, which gained a reputation among young consumers in Europe, where it actually contains vodka. Other liquor makers followed the lead, licensing their famous brands to brewers Anheuser-Busch, Miller and others. The malts quickly grabbed 3 percent of the big U.S. beer market. That put products with the labels and logos of Bacardi, Smirnoff, Jack Daniel's and other brands on grocery shelves and in broadcast network advertising, where distilled alcohol was banned. The drinks were taxed as beer, at a much lower rate than liquor. Some of the malts even said on their label that their flavorings contained vodka. State regulators rebelled, saying the liquor-branded malts were deceiving consumers at best and at worst violating state laws governing sales of beer and whiskey that had been in place since the end of Prohibition. In response, the tax and trade bureau ordered some labeling changes and took up the question of alcohol content. In April, federal regulators proposed a rule requiring that 90 percent of the alcohol in flavored malts sold as beer come from actual brewing. It included a fall-back position, saying it would consider a more lenient standard of at least 51 percent brewed alcohol. That's a level Brown-Forman favors, arguing the strict standard is arbitrary and unfair, because there's no similar restriction on wine coolers. The brewing industry as a whole supports the strict standard, however, saying it preserves the historic difference between liquor and beer that has allowed brewers broader access to distribution and advertising. The longer the rule-making process takes, the less effect it's likely to have on brewers. Interest in the malts appears to be fading among the often-fickle young consumers who are their prime market. "The category's obviously down for the year," said Frank Walters, executive vice president and director of research for trade magazine IMPACT. "One of the companies I spoke to recently said (flavored malt) sales have been cut in half." Walters said the entire beer category is down as aging baby boomers have begun turning to wine (up 5 percent) and spirits (up 3 percent) in sales for the year. Even as Anheuser-Busch introduced a new raspberry-flavored extension to its rum-flavored Bacardi malt line in August, it said it expected overall flavored malt sales to dip 14 percent this year. Much of the early popularity of the liquor-branded flavored malts had to do with the $70 million in advertising that producers poured out in their first year and the media buzz that created, said Tom Pirko, president of California-based industry consultants Bevmark. "The industry continues to slide backward" and the flavored malt category will turn out to be "a relatively minor phenomenon," Pirko said. "I think it will persist with a small number of brands backed up by companies with large trademarks." That suggests Smirnoff, with its third of the malt market, Bacardi and perhaps Mike's Hard Lemonade, which has done well despite the competition with the liquor brands. Hard Cola could be among the survivors, Pirko said. "Brown-Forman is a very stable and secure company and can continue in the markets where others can't." 4. Glenfiddich/Bacardi Martini: Spirits of Christmas Data Monitor October 28, 2003 Glenfiddich and Bacardi Martini have unveiled their Christmas campaigns. The Christmas season is starting early with two drinks brands launching campaigns aimed at boosting brand awareness among key consumer groups over the festive period. As well as being a time of increased drink consumption, Christmas is also an opportunity to get consumers to experiment with new brands. Keen to take advantage of the convivial festive season, two drinks brands have unveiled their Christmas TV campaigns, aimed at promoting brand identities that consumers can buy into. This reflects the importance of the Christmas season in boosting drinks sales. Family-owned distiller William Grant is revisiting its previously successful 'Stag in the Street' campaign, which saw cosmopolitan drinkers stop and stare as the Glenfiddich stag walked down the street. The campaign, which was "incredibly successful" according to a spokesman, will remain largely unchanged. However, the tag line "Independently minded, independently made" will be added, in order to appeal more to thirty-something males. The company hopes that this will encourage its target audience to reconsider the Glenfiddich brand. This is in line with recent activity in the whisky category, where distillers are trying to attract a younger audience. At the same time, Bacardi Martini is putting GBP6.3 million behind a cinema campaign for Southern Comfort. The two executions focus on sociability, showing groups of friends "hanging out and having fun". One shows a group on a train toasting first Prague, their intended destination, and then Barcelona, their actual destination. The other shows a series of disappointing Christmas presents compensated for by a gift of Southern Comfort. These adverts are aimed at targeting a younger age group (18-29), hence the focus on more active social exchanges. Both brands, however, are aiming for a male audience. Christmas is an important time for the drinks industry, and not merely because of the temporarily increased sales. For both of these brands, the festive season is being seen as an opportunity to build brand equity and to win new consumers. The odds are that consumers will be more willing to try new drinks (or may have new drinks thrust upon them) over the festive season. As a result, this is an opportunity to engage with a new consumer group. 5. US: Fortune Brands Profits Leap 29% in Q3 Just-drinks.com Editorial Staff October 17, 2003 The US group Fortune Brands Inc, which owns Jim Beam Brands, said yesterday that its third quarter profits were up 29%, thanks in part to strong growth Jim Beam Bourbon. Net profit reached US$146.1m in the period compared to US$133.2m in the third quarter last year. Sales rose 8.2T to US$1.58 billion. Profits at the spirits and wine division were up 12.1% on a 10.5% rise in sales.