What We’re Reading —

Posted on February 14, 2022 by Joel Whitaker

European Union Lurches Towards Prohibition

A crunch meeting of the European Parliament could cast the terrible shadow of temperance across Europe. (Wine-Searcher)

Young people are buying less wine, but the industry keeps marketing to aging boomers

During the pandemic, consumers realized they could enjoy restaurant-quality wine at retail prices.  Overall wine sales may have declined 2% last year, while sales of spirits increased. (Washington Post, citing Silicon Valley Bank wine report).

How much did wineries make in 2021?

Total sales at premium wineries was strong, with more cases were sold in 2020 to make up for lost revenue per case, so total sales growth for 2020 was essentially flat at minus 0.6%.  Profitability was surprisingly strong in 2020 due to staff reductions in customer-facing jobs from COVID, reduced harvest and winemaking costs from fires and smoke, and lower overhead allocations. In addition, many wineries availed themselves of Paycheck Protection Program loans in 2020, which were forgiven both in 2020 and 2021. SVB on Wine)

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Wine Retailers: For Competitiveness, State Laws Need Fixing

Posted on February 13, 2022 by Joel Whitaker

National Association of Wine Retailers called on state legislatures to “consider if the benefits of the three-tier system outweigh its costs to competition and study markets without a three-tier system’ for it is that very ‘three-tier system’ of alcohol distribution with its state mandate that alcohol flow through wholesalers that leads to thousands upon thousands of products being restricted from state markets.

The comments were in response to last week’s Treasury Department report on ways to enhance competition in the bev/al business.

“The required use of wholesalers causes independent retailers to race to the bottom on price since all are selling the same wholesaler-provided products, rather than competing on unique inventory offerings that would better serve the customer and the health and safety needs of communities.

“The NAWR also appreciates the emphasis the report on competitiveness placed on Direct-to-Consumer sales and shipments, which has led to the huge increase in domestic wine, beer, and spirit producers by giving them a profitable path to market, rather than having to rely on wholesalers that too often ignore the needs of small, artisan producers,” the report said. “It was disappointing, however, but not wholly surprising, to see no mention in the report of many states’ protectionist and anti-competitive laws barring direct to consumer interstate shipments by retailers. These often-unconstitutional bans on retailer direct shipping are the single greatest deterrent for consumers accessing the wines they want. However, we recognize that barring federal legislation, this obstacle to a fair and competitive marketplace must be addressed at the state level.”

 

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Iowa Bill Expands Direct Shipping to Distillers

Posted on February 13, 2022 by Joel Whitaker

Iowa law currently permits only wineries and breweries to ship their products direct to consumers via third-party delivery services, but a bill pending in the Iowa Legislature would extend that privilege to distillers, too.  Iowa Beer Wholesalers Association thinks that’s a bad idea.

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What We’re Reading —

Posted on February 13, 2022 by Joel Whitaker

Glass wine bottle shortage sparks recycling debate

A lobbyist for the glass recycling industry says there’s enough raw material in North America to serve bottlers’ needs. But vendors who procure new bottles for the wine industry say it’s not so simple. (Western Farm Press)

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75 US, UK Trade Groups Urge End to Tariffs on Products Unrelated to Steel, Aluminum Trade Tiff

Posted on February 10, 2022 by Joel Whitaker

Seventy-five trade associations, ranging from clothing manufacturers to food processors to rice producers, all representing sectors unrelated to the steel and aluminum dispute, urged U.S. and UK leaders, consistent with their recent commitments, to expeditiously reach an agreement to remove retaliatory tariffs and the threat of tariffs on their products without delay.

“We welcome the suspension of tariffs between the U.S. and EU in the steel and aluminum dispute and urge the UK and U.S. governments to quickly secure an agreement removing tariffs and the threat of tariffs on products unrelated to the dispute, following the precedent set under the Airbus/Boeing dispute,” they said, adding: “This is an important step in helping to reset the critical U.S.-UK trading relationship, and it is essential to our ability to recover from the pandemic.”

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Pernod Ricard 1st Half Sales Up 17% Organically

Posted on February 10, 2022 by Joel Whitaker

Pernod Ricard reports first half sales jumped 17% organically (20% reported).  Sales in the Americas were up 14%, and Pernod noted sales in the USA, Brazil and Travel Retail were especially strong.  Europe posted the best growth for any region, up 21%, while Asia/Rest of World advanced 16%, led by China, Turkey and India.

All of the company’s strategic international brands sales showed growth, ranging from 51% for Perrier-Jouet to 2% for Ricard.  In terms of volume, Royal Salute was up 40% and Havana Club was down 1%.

Profit from recurring operations rose 25% (reported) 22% organic, the company said, noting that in the Americas reported profit rose 30% and organic profit was up 24%.

“The execution of our Transform & Accelerate strategy is delivering an excellent and broad-based performance in the first half, with brand share gains in most countries and with all our Must-Win Markets showing very strong growth,” said Alexandre Ricard, chairman/CEO.  “I take the opportunity to praise the engagement and performance of our teams throughout the world, who have relentlessly accomplished outstanding work, in an environment still largely disrupted on many fronts by the Covid crisis.

Despite the ongoing volatile environment, Ricard said he expects year-end FY 22 to show strong sales growth across regions, with continued On-Trade rebound, Off-trade resilience and a gradual Travel Retail recovery. “We will increase investments to fuel growth momentum,” he said.

We remain focused on executing our strategy, progressing on our Sustainability and Responsibility journey and accelerating our digital transformation. A successful mix of robust fundamentals, the dedication of our teams and our portfolio of brands, has yielded a very strong set of results and seen us through this crisis, emerging even stronger.”

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