INDIA: United Spirits acquires Tern Distilleries

23 November 2009 | Source: just-drinks.com editorial team

United Spirits is owned by Vijay Mallya

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United Spirits, the India-based spirits firm controlled by billionaire Vijay Mallya, has acquired Tern Distilleries in the Indian state of Andhra Pradesh.

United Spirits, part of Mallya's UB Group, paid INR134m (US$2.89m) to acquire Tern, the group announced today (23 November).

Further details were not released.

United Spirits saw net profits slide to INR696m in its second fiscal quarter to the end of September, from INR938.9m a year earlier. Net sales, however, were up by 20% to INR10.80bn, with sales volumes rising by 10%.

In October, the firm announced plans to raise $350m via a share rights issue.

FRANCE: Militant winemaker group CRAV strikes again

23 November 2009 | Source: Stuart Todd

Languedoc winemakers turn up pressure

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Militant Languedoc winemaker group, the Comité Régional d'Action Viticole (CRAV), has claimed responsibility for an explosion outside a bottling plant run by a subsidiary of French cooperative group Val d'Orbieu.

Little damage was done to the premises following the explosion, but the action follows attacks on the premises of retailers and merchants earlier this month.

"We have attacked a cooperative because they are buying in wine at prices even lower than those paid by merchants. By so doing, the sector is killing itself," one CRAV member told French TV, his face covered by a mask.

"There will be further attacks unless the Government comes up a package of direct aid," he warned.

Premises of the Val d'Orbieu group were already targeted by CRAV in 2006 and 2008.

Comment - Pernod takes a swing at Diageo

25 November 2009 | Source: just-drinks.com editorial team

Pernod Ricard and Diageo's pitched battle on the fairways of world golf is hotting up.

Pernod's announcement this week that Ballantine’s Scotch whisky is to sponsor Rhyder Cup 2008 player Graeme McDowell and also the Omega Mission Hills World Cup golf tournament in China is a further challenge to Diageo's presence in the sport.

Scotch whisky and golf are in the mix with bagpipes, tartan and battered chocolate bars as contributions Scotland has made to the world.

It is no surprise, then, that whisky distillers have strong 'links' with modern golf. Even non-Scotch distillers have followed this pattern, with United Spirits having tied up with every major golfing club in India long before buying Whyte & Mackay.

Pernod Ricard and Diageo have for several years aligned their Ballantine's and Johnnie Walker Scotch whisky brands with golf and its supporters. Both the annual Johnnie Walker and Ballantine's Championships are on the PGA Tour.

Pernod's move this week ups the stakes, particularly after Diageo's decision earlier this year to drop its Johnnie Walker Classic golf tournament in Asia next year. The Classic has run every year in Asia since 1990.

Instead, Diageo will sponsor golf events in Australia, South Korea and Cambodia next year and will continue to sponsor the Rhyder Cup.

Both Johnnie Walker and Ballantine's could use some uptake to scoop their sales out of the bunker.

Johnnie Walker sales slipped by 6% in value and 11% in volume for the 12 months to the end of June, according to the latest figures available from Diageo. Ballantine's, meanwhile, fell by 15% in value and 13% in volume in Pernod's fiscal first quarter, the three months to the end of September.

UK: English whisky set for launch

8 December 2009 | Source: just-drinks.com editorial team

English whisky reaches maturity

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St George's Distillery, based in eastern England, is preparing to launch the only known English whisky.

The English family distillery, started in 2006, will launch its first limited edition whisky on 11 December, with a general release set for 16 December.

Andrew Nelstrop, managing director of the English Whisky Company, told just-drinks that the business is a "dream and ambition" of his father's.

"It doesn't just differ from a Scotch whisky, it differs from every whisky," he said.

"The style, for those who want to compare it to something, would have to be like a Speyside whisky, but you won't be able to go and find a Glenfiddich or a Glenlivet that tastes remotely like it," he added.

The 46% ABV whisky will be distributed in the UK by Gordon & MacPhail and will cost around GBP35 at retail.

"For this very first release we will have bottled somewhere in the region of 4,500 bottles, 2,000 of which are limited edition and 2,500 will be available to anyone else," said Nelstrop.

In 2010, the company is hoping to sell around 40,000-45,000 bottles and around 100,000 in the following year - the majority of which, Nelstrop said, will be shipped abroad.

The whisky will be available from the distillery or online at www.englishwhisky.co.uk, as well as a few small local retailers.

In the Spotlight - Brown-Forman

11 December 2009 | Source: Michelle Russell

Jack Daniel’s whiskey owner Brown-Forman lifted its full-year profits guidance on Tuesday (8 December), exceeding expectations and moving analysts to raise their fair value estimate on the firm. Michelle Russell examines the results and market reaction.

Joel Bloomer, an associate director of equity research at Morningstar, said the Kentucky-based wine and spirits maker "navigated well" in the second quarter as shares rose as much as 6.2% to touch a year-high of US$55.47 on Tuesday morning, before falling back to $52.91 by midday.

"Brown-Forman's profitability through the first half of its fiscal year is ahead of our expectations, so we're increasing our fair value estimate slightly," Bloomer said.

"This management team continues to impress with its meticulous brand management and focus on returns on invested capital."

The maker of Jack Daniel's and Finlandia vodka benefited from spending less on advertising and lower wage costs for the six months to the end of October, boosting net profits by 16% to US$286.6m.

Profits rose 3% to $147m in the second quarter, while operating profits rose 15% and 2% for the half-year and second quarter respectively.

Analysts, on average, expected a profit of just 84 cents per share, according to Thomson Reuters.

"Net, the upside was not high quality and the 19% reduction in advertising spending in (the fiscal first half of the year) raises questions, but as expected, fundamentals do not appear to be getting worse," JP Morgan's John Faucher said in a research note.

He affirmed his "neutral" rating on the stock.

However, while Brown-Forman raised its fiscal-year earnings forecast to a range of $2.95 to $3.15 a share from $2.60 to $3 a share forecasted in June, the firm, which also owns Southern Comfort whiskey and el Jimador Tequila, continues to be hurt by weak demand.

The company reported a 5% fall in net sales for the half-year, to $1.63bn from $1.72bn. The decline slowed to 4% in the second quarter.

For the six-month period, sales growth of Jack Daniel's, Gentleman Jack, el Jimador tequila and ready-to-drink beverages was offset by declines for Finlandia vodka and Southern Comfort.

In recent times, the whiskey maker has relied on its overseas business to offset lackluster sales at home. While it saw net sales gains in Australia, Germany and France, demand was weak in Poland, the US and South Africa.

Brown-Forman cut costs earlier this year and has been offering discounts to attract consumers, however on a conference call earlier this week, chief financial officer Don Berg warned of "intense" price pressure on the US spirits market as the holiday season takes offer.

The company said it "remains concerned about the impact on consumption from a soft on-premise channel, consumer trading-down and heightened competitive activity".

"There's no doubt we've seen more and more pressure, particularly on the pricing side," said Berg, who is also executive vice president of Brown-Forman.

"Two of the five largest suppliers have really taken down their price mix, anywhere around 2% - that would be Diageo and Pernod - whereas the other three, across [brown-Forman], Fortune Brands and Bacardi have continued to try and find ways to create additional value to the pricing mechanism," said Berg, citing recent Nielsen data.

While distilled spirits were seemingly bulletproof a few years ago as consumers switched to them from beer and other forms of alcohol, they have not been immune to the economic downturn.

And although consumers are not necessarily drinking less, it seems they have continued to trade down to cheaper, lower-margin brands in the recession and are now consuming more at home.

Bernstein analyst Trevor Stirling said the US spirits market has continued to deteriorate, but highlighted some positives.

"The US spirits market contracted in October, with shipments in the NABCA (National Alcohol Beverage Control Association) states falling 2.1%. Trends on premium brands continue to be negative, but mix seems to be declining at a slower rate," Stirling said in a note today (11 December).

"Mid market brands, such as Captain Morgan and Smirnoff, are now showing marked improvements, although Smirnoff's has come on the back of heavy promotional activity," he added.

Brown-Forman said that it believes that the on-premise business will eventually stabilise and growth will return, "although that certainly is not in sight yet".

Both Berg and Brown-Forman's CEO, Paul Varga, said that they remain optimistic that consumers in North America will return to levels of premiumisation seen in spirits before the economic downturn.

"Hopefully over time we'll get back to that point," said Berg. "But I think it'll probably be pretty gradual. From some of the data that we've seen recently, two of the categories doing particularly well at the higher end are whisk(e)y and Tequila, which suits us very well."

Varga said that emerging markets around the world were likely to recover a taste for premium spirits more quickly.

Morningstar analyst Bloomer said he expects some of the more substantial bottom-line improvement to be sustainable in the long run, but eventually some advertising spending will have to be reinstated to maintain brand awareness.

"By not sacrificing brand quality through aggressive pricing and maintaining customer awareness through ready-to-drink products, Brown-Forman has positioned itself well for the eventual return of on-premise consumption and discretionary spending in general," he added.

UK: Diageo launches Scotch whisky “malt matcher”

15 December 2009 | Source: just-drinks.com editorial team

Diageo's Scotch whisky Flavour Map

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Diageo has launched a tool that allows consumers to match a single malt whisky to an individual taste.

The Malt Matcher, the drinks giant said today (15 December), is available online at www.maltmatcher.com or as a free iPhone app.

The tool has been designed to help consumers find the right malt whisky through one of three methods - from a malt usually drunk by the person you are buying for, by a region or by the types of food the person likes.

Diageo last week launched a mobile version of its website thebar.com, designed to help consumers "plan and shop on any budget".

The mobile site offers a drink recipe database, supported by the Diageo portfolio.

UK: Berry Bros & Rudd brings Cutty Sark distribution in-house

14 December 2009 | Source: just-drinks.com editorial team

Berry Bros & Rudd Spirits has ended its UK distribution arrangement for Cutty Sark Scotch whisky with Emporia Brands.

After two years with Emporia, UK distribution of the whisky will be transferred back in-house to Berry Bros & Rudd, the distributor said today (14 December).

James Rackham, chairman of Emporia Brands said: "I am very proud of our work on Cutty Sark. Although the UK market for blended Scotch whisky has been declining for a number of years, we targeted the premium sector with Cutty Sark and achieved some excellent results, especially in the London area.

I am delighted we are able to hand Cutty Sark back to Berry Bros. & Rudd with far more on- and off-trade listings than when we took the brand on."

James Steiner, regional business director for Berry Bros. & Rudd Spirits, said Emporia Brands was a good fit for Cutty Sark in the UK.

"I would like to thank James and his team for all the hard work they have put in for the last two years. As there are significant plans for Cutty Sark from 2010, we have decided to bring distribution in-house to give us greater control and focus."

More to follow...

UK: Diageo CEO cannot rule out overseas HQ move

16 December 2009 | Source: just-drinks.com editorial team

Paul Walsh hopes Diageo can stay in UK

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The chief executive of Diageo has refused to rule out moving the drinks firm's headquarters away from the UK.

Following the UK Government's move to raise corporate tax, Diageo CEO Paul Walsh said the company "absolutely looks at all options" regarding its base.

Speaking on the Jeff Randall show on Sky News yesterday (15 December), Walsh said a move overseas for Diageo is "certainly plausible" but added: "I hope it doesn't happen."

He said that if the Government tax regime jeopardises business then more firms may look to move out of the UK, adding that "what's happened in this country is not competitive".

The owner of Guinness, Johnnie Walker and Smirnoff has been intermittently linked with a move away from its London base, but this has never proved anything more than speculation.

Diageo has this month relocated its global headquarters in London, with global staff now housed with staff at the firm's domestic Diageo Great Britain division.

Diageo reported a 6% fall in sales for its first fiscal quarter, but maintained its profits guidance for the year.

UK: Ian Macleod Distillers signs deal with Scottish Racing

17 December 2009 | Source: just-drinks.com editorial team

Isle of Skye goes to the races

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Ian Macleod Distillers has signed a deal for its Isle of Skye Scotch whisky to sponsor Scottish Racing.

Isle of Skye 8 Year Old blended Scotch will sponsor the Scottish Racing Trainers' Championship, as well as all five horse racing courses in Scotland - Ayr, Hamilton Park, Kelso, Musselburgh and Perth.

Isle of Skye will be stocked in bars at all of the courses, which welcome more than 300,000 visitors per year.

"The sponsorship of Scottish Racing will form a key part of our 2010, and beyond, marketing programme," said Iain Weir, marketing director for Ian Macleod Distillers.

The move strengthens Isle of Skye's ties with horse racing, with the brand having last month stepped up sponsorship of National Hunt racehorse trainer Lucinda Russell and her team at Arlary House Stables.

Isle of Skye will sit alongside other Ian Macleod brands - Glengoyne Highland single malt, London Hill gin and Watson's Trawler dark rum - in public bars at the five racecourses.

Στο Sir με αγάπη

just the facts - Japanese drinks giants awaken

18 December 2009 | Source: just-drinks.com editorial team

Japanese drinks firms take centre stage

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Destocking and economic turmoil aside, 2009 must surely be the year when Japan's latent drinks giants seized their chance to make themselves heard on the international scene.

Here are the major deals that have taken place.

Only today (18 December), Kirin further expanded its Asia Pacific presence after San Miguel Brewery agreed a deal to buy out San Miguel International Brewing.

Earlier this year, Kirin acquired a 48% stake in San Miguel Brewery.

It also secured full control of Australian brewer Lion Nathan.

The group also raised its stake in Shanghai Jinjiang Kirin Beverage & Food.

On the home market, Kirin has signed a JV deal with Diageo.

It is also in merger talks with big rival Suntory.

Meanwhile, Suntory this month signed a deal to buy control of ASC Fine Wines in China.

It has also bought up Orangina Schweppes.

At the start of the year, Suntory bought Danone's Frucor drinks business, and followed this up with Simply Squeezed in New Zealand.

Moving to Asahi Breweries and the group has this month said it will spend $4.5bn on foreign acquisitions in the next three years.

It has already bought Cadbury's Australian soft drinks business.

While in beer, Asahi has bought a 20% stake in Chinese brewing giant Tsingtao from A-B InBev.

Sapporo, the smallest of the four Japanese rivals, has also been the quietest in 2009. But, the group joined the overseas game this month by agreeing to acquire a controlling stake in Kronenbourg Vietnam.

At home, it bought a stake in Japanese food and drink company Pokka.

Στο Sir με αγάπη

just the facts - Japanese drinks giants awaken

18 December 2009 | Source: just-drinks.com editorial team

Japanese drinks firms take centre stage

It is also in merger talks with big rival Suntory.

Ολα καλα και ωραια ,εξακολουθω να πιστευω οτι οι προσκυνητες -εξ ανατολης- φιλοι μας εχουν πολυ μελλον μπροστα τους. Οι συγκεκριμενες συζητησεις ομως με ανησυχουν ιδιαιτερα.Η αγορα του whisky στην Ιαπωνια δειχνει σημαδια καμψης και οι μεγαλες εταιριες εχουν προχωρησει εδω και μηνες -οχι τωρα- σε συζητησεις για συγχωνευσεις.Το μελλον του Karuizawa ειναι αβεβαιο ,το Shirakawa παρεδωσε πνευμα,ενα grain αποστακτηριο ειναι ζητημα εβδομαδων να κλεισει και ,λαμβανοντας υποψη τις ιδιαιτεροτητες της Ιαπωνικης παραγωγης,τυχον συμφωνια των γιγαντων θα φερει την ποιοτικη προοδο τους πολυ καιρο πισω αφηνοντας μικροπαραγωγους οπως τον Ichiro Akuto ή το Shinsu να προσπαθουν να δωσουν κατι το διαφορετικο ,μια "ερασιτεχνικη " νοοτροπια και προσεγγιση.

Sir δεν διαφωνώ καθόλου άλλωστε το θέμα το γνωρίζεις καλύτερα από όλους μας

απλώς όταν το πρωτοδιάβασα έκανα την εξής σκέψη ότι ίσως είναι και καλο γιατί

αν αποστακτήρια που ήταν σε αντίπαλες εταιρίες βρεθούν τώρα στο ίδιο στρατόπεδο

ανοίγει το ενδεχόμενο της συνεργασίας τους και της παραγωγής νέων καλυτερων προϊόντων

ειδικά στο θέμα blended.

Τις σκέψεις σου

“Dalmore Whisky Experience” με 85.000$. Μόνο?!

2009-12-15

By ministry of men staff

Το Υπουργείο δεν έχει κρύψει την ιδιαίτερη προτίμησή του στο whisky. Οπως άλλωστε και το μεγαλύτερο μέρος των Ελλήνων ανδρών, άλλωστε ας μην ξεχνάμε ότι είμαστε η τρίτοι μεγαλύτεροι καταναλωτές του παγκοσμίως. Οποτε λοιπόν κάτι ιδιαίτερο σε αυτό το χώρο πέσει στην αντίληψή μας, οφείλουμε να σας το μεταφέρουμε.

Οπως το ”Dalmore Experience package”, δηλαδή την ευκαιρία να δοκιμάσετε υπό τη καθοδήγηση ενός από τους κορυφαίους Master Distiller του Richard Paterson, ορισμένα από τα ακριβότερα Dalmore Whisky και όχι μόνο. Το πακέτο περιλαμβάνει μεταφορά στα Σκωτσέζικα Highlands, διαμονή για 4 βραδυές σε 5άστερο ξενοδοχείο, περιήγηση στη πόλη και την εξοχή, μια μέρα με τον Richard Paterson στο αποστακτήριο και τελικά ένα whisky που θα φτιάξει αποκλειστικά για εσάς, αφού έχει μάθει τη προσωπικότητα και τις προτιμήσεις σας. Το μπουκάλι θα έρθει σε χειροποίητη συσκευασία λίγες εβδομάδες μετά. Αυτά και κάποια ακόμα που πιθανότατα μας διαφεύγουν, περιλαμβάνει η εμπειρία του Dalmore στη μαγευτική Σκωτία και μόνο για 85.000$.

Kατάλαβα καλά;; ΟΓΔΟΝΤΑΠΕΝΤΕ ΧΙΛΙΑΔΕΣ ΔΟΛΛΑΡΙΑ;;;;

Πότε ήρθε κιόλας η Πρωταπριλιά και δεν το πήτα χαμπάρι;;

Πότε ήρθε κιόλας η Πρωταπριλιά και δεν το πήτα χαμπάρι;;

Εμ,πως να το παρεις χαμπαρι αν εισαι ακομα πητα απο χθες?

Στις βραδιες της προσφορας συμπεριλαμβανεται και η συντροφια του Paterson?

Για αγοραια κατασταση ,πολυ ακριβη μου φαινεται...

CHINA: Chivas Brothers unveils Royal Salute campaign

21 December 2009 | Source: just-drinks.com editorial team

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Chivas Brothers has launched a print advertising campaign for its Royal Salute brand. The campaign will be launched in January, initially in China and will then be rolled out through the Asian region.

The advertising was developed by TBWA Singapore with a brief to "update Royal Salute in a dynamic and fast changing region", the company said.

The new print campaign depicts metaphorical images of tributes to royal leadership.

"Honour, passion, vision and conviction are strong values associated with the concept of Royalty and which dynamic entrepreneurial Asian whisky consumers see in themselves. Royal Salute brings them together in a highly visual and authoritative set of print advertising that refreshes the brand proposition" said Neil Macdonald, brand director for Royal Salute.

The new Royal Salute print advertising campaign is part of a significant investment programme supporting Chivas Brothers' aim to reinforce Royal Salute as the leader in luxury Scotch whisky.

Research - Cognac sees Asian markets compensate for US slough

22 December 2009 | Source: Ben Cooper

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The Cognac market has not surprisingly been affected by the global economic downturn, but, according to a new report from IWSR/just-drinks, Asian markets have proved relatively resilient, compensating for a steep decline in the key US market.

The downturn may have been a global phenomenon but Cognac makers can at least be thankful that its effect on their business has not been as severe in some areas than others. According to a new IWSR/just-drinks report, the Asia Pacific region has compensated for a dismal performance in Europe and particularly in America.

But the fact that such a key market as the US was at the epicentre of the crisis has certainly not worked in Cognac's favour.

According to just-drinks/IWSR's Global market review of brandy and Cognac - forecasts to 2014, global Cognac/Armagnac sales fell in 2008 for the first time in more than 10 years, from 12.18m cases in 2007 to 11.92m cases.

Cognac marketers are quick to point out that 2007 had been a very good year and would have made for a tough comparison even without the onset of the financial crisis. But it is clear that the trend that began to be seen in 2008 continued in 2009, with the report putting provisional total volumes for this year at 11.38m cases, down a further 5% from 2008.

In 2008, consumption in the Americas was down by 7.6%. This was mainly due to the US market, which represents 88% of all Cognac consumption in the region, where sales fell by 8.4%, or 327,000 cases, with reductions across all qualities.

"The US obviously was the most affected market and western Europe to a lesser extent," says Cyril Camus, chief executive of Cognac Camus. "There are a lot of issues with eastern Europe and Russia in particular, where the lack of liquidity in the trade really impacted the entire supply chain from the retailers to the wholesalers, distributors and importers."

The US market was also reported to be one of the markets most affected by consumers trading down. "The main markets most affected by trading down are the US and Russia," says Pascal Fillioux, president of Cognacs Jean Fillioux. "You have to remember than in the preceding two years they were two of the best markets with a high degree of consumer trade-up. We are just back to where we were. We still have big hopes for these countries."

The story in Europe was not as bad as the US but still fairly bleak. European shipments fell by 3.4% with Europe accounting for seven of the ten fastest-falling markets. The only pockets of growth in 2008 were Russia and Denmark, and since then, the report states, Russia has also gone into sharp decline owing to adverse economic conditions.

The better news appears to be coming primarily from the Asia Pacific region, which was Cognac's best-performing market overall in 2008, rising by 3.9%. Regional consumption overall increased by 94,000 cases, with China registering the largest growth of 97,000 cases to reach 1.56m cases. However, Japan continued to suffer heavy losses, down from 190,750 to 154,500 cases.

The economic downturn in Western markets is hitting luxury products harder than expected and Cognac sales in important markets such as the US and UK are suffering as a result, the report states, and the major Cognac houses have looked to Asia to maintain sales.

Cognac's governing body, the Bureau National Interprofessionnel du Cognac (BNIC), believes this resilience demonstrates the advantage of Cognac having a global presence, evenly spread through all regions. Cognac derives roughly one-third of its sales each from Western Europe, the US and Asia. "This leaves the Cognac industry very well-balanced to manage the risk, even though it is a global crisis," says BNIC chief executive Jerome Durand.

Based on the forecasts in the report, the Cognac industry may have to rely on growth being generated in some of its Asian markets for some time to come.

The report forecasts that the US market will fall from 3.56m cases in 2008 to 3.27m cases in 2009. The downward trend is set to continue into next year, with sales of 3.16m cases forecast for 2010. The market is only forecast to begin to recover in volume terms by 2013 and 2014, when shipments are predicted to rise to 3.20m and 3.25m cases respectively.

China, meanwhile, is tipped for steady growth. Final volumes for this year will be in the region of 1.58m cases, up from 1.56m cases in 2008, with volumes set to rise to 1.60m cases in 2010. By 2014, the Chinese market will have risen to 1.75m cases, the report forecasts.

Other Asian markets expected to grow between 2010 and 2014 include Malaysia, Indonesia, Taiwan and Vietnam. Travel retail, the fortunes of which are closely tied to the health of Asia Pacific markets, is also forecast to grow, reaching 1.63m cases by 2014, against its current level of 1.26m.

However, in contrast, core European markets are expected to register declines. The UK, for example, will fall to 809.8m cases in 2008 to 793.8m in 2010, declining to 759.0m cases by 2014. France and Germany, Cognac's fifth and seventh largest markets respectively, are also forecast to fall.

Still, in spite of the anticipated declines in Western Europe, the global Cognac market is forecast to rise over the review period, from 11.38m in 2009 to 11.88m in 2014, underlining once more the benefit of its global profile.

IRELAND: Guinness brewery hit by fire

22 December 2009 | Source: just-drinks.com editorial team

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A fire broke out at St James' Gate brewery in Dublin, home to Diageo's Guinness brand, yesterday (21 December).

The blaze, which started when a construction worker was using a blow-torch on the roof, did not affect production of the beer, Diageo told just-drinks today.

"The fire broke out during routine repairs to the roofing area of an infrequently-used and currently vacant building," a spokesperson said. "This part of the brewery has been evacuated, no personnel have been injured and brewing production has not been affected."

Local reports said earlier today that Dublin's fire department sent 15 units to tackle the blaze, which took around three hours to control.

The company is "currently assessing the damage", the spokesperson noted.

Earlier this year, Guinness celebrated its 250-year anniversary with a range of music concerts, including one at the St James' Gate site.

Analysis - Beer shares dive on Kirin, Suntory breakdown

8 February 2010 | Source: Chris Mercer & Michael Fitzpatrick in Tokyo

Japan drinks stocks fall

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Analysts and investors have reacted badly to a breakdown in merger talks between Kirin Holdings and Suntory.

Kirin's shares price tumbled 7% on the Tokyo Stock Exchange today (8 February), after it announced an end to merger talks with Japanese drinks rival Suntory.

Both firms claimed to have terminated negotiations, seemingly mirroring the power tussle that has been played out behind the scenes over the last six months.

The root of the breakdown was disagreement over the makeup of the merged entity and the way it would be run. Kirin is a publicly listed company, while Suntory is a private enterprise with a different business ethos.

A breakdown in talks has been greeted as a negative for the whole Japanese drinks sector.

Shares in rival Asahi Breweries, which has played no part in negotiations, fell by more than 5% on the Tokyo Stock Exchange today.

"We see termination of the merger talks as negative not only for Kirin’s longer-term strategy but also for the brewing industry as a whole," said an analyst at Goldman Sachs in Tokyo.

"We would have expected the merger to result in lower sales promotion spend for the industry. The news can therefore also be seen as negative for Asahi Breweries."

The analyst added: "From a Kirin standpoint we think it is rational to opt for no merger rather than one with irrational conditions, but we see termination as negative for the medium to long term due to the substantial potential synergies."

Aside from potential synergies, it could be argued that only a combined company would have the clout necessary to compete with top multinationals in the beer sector and beyond.

Japan's major brewers are looking to expand outside of a domestic market in terminal decline. Market volume sales fell 2% in 2009, a record low for the fifth straight year, according to industry figures.

Bearing this in mind, a deal between Suntory and Kirin, or perhaps a combination of any of the major brewers, may not be dead.

UK: Diageo silent on deal offer to leave UK

3 February 2010 | Source: just-drinks.com editorial team

Diageo receives offer to move HQ - report

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Diageo has declined to comment on a report that authorities in Switzerland have offered the drinks giant incentives to switch its corporate headquarters to the country from the UK.

A sub-10% corporate tax rate and waived personal income tax for top executives were part of the deal offered by the local Government for Zug, Switzerland, according to Sky News today (3 February).

A spokesperson for the producer of Johnnie Walker Scotch whisky and Smirnoff vodka declined to comment directly on the offer when contacted by just-drinks.

However, the group said in a statement: "As we have said before, we see many advantages to remaining a British domiciled company, but we have also made clear time and again that it is important the Government takes steps to ensure this country remains and develops its position as a competitive place to do business."

Concerns have grown over the last couple of years that corporate tax pressure could prompt several top UK companies to relocate their headquarters abroad. A mass exodus would damage Government tax revenues.

Diageo completed a rehousing of its global headquarters within London in December. Global staff are now based alongside workers for the firm's Great Britain division.

just-drinks understands that the move was not conceived as a stop-gap solution or as a precursor to a move elsewhere.

In an interview with Sky News' Jeff Randall late last year, Diageo CEO Paul Walsh said that he hoped the group does not move out of the UK. To see the interview, click here.

UK: Edrington Group acquires Cutty Sark, divests Glenrothes to Berry Bros

3 February 2010 | Source: just-drinks.com editorial team

Edrington snaffles Cutty Sark

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Berry Bros & Rudd (BB&R) is set to sell the Cutty Sark blended Scotch whisky brand to The Edrington Group, with The Glenrothes single malt brand heading in the opposite direction.

The UK-based wine and spirits merchant announced earlier today (3 February) that it will acquire The Glenrothes from Edrington, which has signed long-term supply agreements to provide whisky fillings and stocks to BB&R. Edrington will retain ownership of The Glenrothes distillery.

As part of the transaction, Edrington will acquire all of Cutty Sark's distribution contracts. Edrington's sales-and-distribution alliance, Maxxium, is set to continue to distribute The Glenrothes in key international markets and is also expected to provide a distribution option for other brands within BB&R’s spirits portfolio.

The agreement is due to be concluded by April, while financial details for the transactions have not been disclosed.

"In an ever-consolidating drinks industry, this agreement offers significant operational synergies and market advantages,” said Ian Curle, chief executive of Edrington.

“It improves our distribution in key territories and strengthens our position as an independent premium brand company.”

In Spain, Cutty Sark’s largest market, the distribution agreement with Importaciones Varma will come to an end prior to the completion of the sale of Cutty Sark. The brand will then be handled by Maxxium Espana,. In Greece, the distribution of Cutty Sark will remain with WS Karoulias, which will continue as a wholly-owned subsidiary of BB&R.

Edrington has has supplied blended whisky for Cutty Sark for around 70 years and is currently responsible for all aspects of producing Cutty Sark.

Comment - A word with Woodard - Spirits laws: The time is now

26 January 2010 | Source: Richard Woodard

Richard Woodard

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Diageo’s recent court victory in the Vodkat “passing off” case has brought the world of spirit regulations into the headlines. But, according to Richard Woodard, two more low-profile announcements have arguably even more long-term significance for the category at large.

Unless you’re an IP lawyer, a geek or an insomniac, you probably haven’t paid much attention to the recent regulatory changes announced for Scotch whisky and Cognac.

But, besides keeping a bunch of legal experts off the streets for a few months, these lawmaking tweaks are crucial to maintaining the strength and distinctive nature of these spirits categories – they could also serve to teach others a valuable lesson.

I’ll spare you the full details of The Scotch Whisky Regulations (2009/2890) introduced in late November, but the gist is that they set out labelling rules for Scotch sub-categories like blends and single malts, and give added protection for geographical descriptors like Speyside and Islay.

The changes were sparked by the Cardhu affair, when the industry was split by Diageo’s decision in 2003 to redesignate the single malt as a “pure” or blended malt to keep pace with demand.

Diageo backtracked on its plans, but the furore swept away the idea that Scotch could be governed by convention, rather than enshrined in law.

The importance of the new regulations, however, goes further than preventing corporations from bending the rules to their own ends. For the first time, the legal framework governing Scotch whisky is contained in one consolidated, comprehensive piece of legislation.

That’s crucial for an industry reliant on exports to far-flung destinations such as the US, Japan and China, because it makes it easier for overseas courts to find out just what is and is not permitted. Bear in mind that the Scotch Whisky Association is involved in about 70 legal actions around the globe at any one time.

The changes in Cognac are less root and branch, specifically giving the category the status of a Protected Geographical Indication (PGI) in China, its second biggest market behind the US.

Beside the kudos of being the first non-Chinese product to be granted PGI status, Cognac now has overt legal protection in what will soon become its biggest market – again, a crucial move if the category is to fight off fakes and retain its distinctive, prestigious character.

Different as they are, the thinking behind the regulatory changes for both Cognac and Scotch share a single motivating factor: multi-million dollar industries cannot be ruled by conventions and vague legal classifications.

There’s a lesson here for drinks categories in general – and for a couple of sectors in particular. Step forward Tequila and gin.

Some Tequila purists argue that the mixto category – which combines at least 51% agave spirit with cane spirit – shouldn’t exist at all. Tequila owes its distinct character to the agave, they say, and nothing should be allowed to dilute that.

Fair enough – but wrong. It’s a bit like saying all Scotch whisky should be made using barley, because that’s what makes single malt special. Think of mixto Tequila as blended Scotch – and, as with blends, there are some excellent mixtos out there – and the “problem” disappears.

But there is a problem, and it lies with the label. While Scotch now clearly distinguishes between blends, malts, etc on the bottle, with a mixto Tequila there’s nothing to tell the consumer that nearly half of what’s in the bottle has been nowhere near an agave plant. Sure, 100% agave Tequilas are often labelled as such, but the overall regulations remain inadequate for true consumer clarity.

Now for gin. The European Spirit Regulations cover three types: standard gin, distilled gin and London gin, with the rules tightening as you move up the quality ladder.

London gin, however, is a bit like Cheddar cheese, in that it’s designed to be a guarantee of a certain quality and style, rather than a geographical designation. In practice, most of it originates from well outside the capital.

And that might be fine, but for a product like The London Gin. Because The London Gin, produced in the capital for Gonzalez Byass, is not a London gin at all. Stylistically it might be fine, but it’s a pale blue colour – and colouring is prohibited in London gin. Which, to be frank, is utter nonsense - but Gonzalez Byass have rebranded it as ‘The London No. 1’ as a result.

Then there is the broader definition of all types of gin. These have to be at least 37.5% abv and made from ethyl alcohol flavoured with juniper. Specifically, the rules say that juniper must be “the predominant flavour”.

Hmmm. Defining spirits categories on subjective perceptions of flavour profile is woolly at best, and a rogue’s charter at worst. Who’s to say that product X does or doesn’t taste mostly of juniper? How are we supposed to measure it in the first place?

The picture is confused further by the recent spate of new entries into the premium gin sector. Most of these, I would argue, have used botanical innovation to breathe new life into a stagnant market. Take Hendrick’s combination of cucumber and rose petal, Whitley Neill’s mélange of baobab and Cape gooseberry, or G’Vine’s use of grape flowers.

But – and this is crucial – they still taste like gin, whether that’s down to the juniper or not. Some of the newer entrants to the market, however, can’t say that. By pushing the botanical envelope past the point of no return, they have parted company with gin as we know it and, in the process, become nothing more than flavoured vodka by another name.

The result is an attack on gin’s very identity, threatening its distinct character in the longer term and blurring the lines between it and the vodka category. Does gin really want to take on vodka head-to-head? I think we all know how that would end. And loosely-worded regulations will have played no small part in the matter.

UK: Whyte & Mackay toasts whisky profits rise

29 January 2010 | Source: just-drinks.com editorial team

Whyte

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Whyte & Mackay, the Scotch whisky group owned by India's United Spirits, has reported a jump in net profits for its most recent fiscal year.

Net profits after tax for the 12 months to the end of March 2009 were GBP22.5m (US$36.6m), compared to GBP18.3m in the 18 months to the end of March 2008, Whyte & Mackay Group said in a filing to Companies House released this week.

Net sales for the year were GBP216m, against GBP348m for the prior 18 months.

Operating profits reached GBP45.6m, compared to GBP49.4m for the preceeding 18-month period, said the group, which owns The Dalmore and Isle of Jura single malt whiskies.

One-off gains, such as lower interest payments, "contributed significantly" to higher profits, the firm said.

On its future growth, the Whyte & Mackay said: "Strategic growth will be brands-led but will be supported by maintaining contribution levels on contracted bulk spirit and private label business and by focusing on initiatives to drive down overall costs and thereby increase profitability."

No dividend was recommended for the 18 months to the end of March 2008, said the firm, which last year announced it may cut 85 jobs from a workforce of 574 in Scotland.

United Spirits, owned by Indian billionaire Vijay Mallya, acquired Whyte & Mackay for $1.18bn in 2007. The Indian firm has spent the last six months attempting to raise funds in order to repay a $625m loan taken out to finance the acquisition.

Neither United Spirits nor Whyte & Mackay have commented on speculation that the Indian group may sell a stake in the Scotch whisky group.

Whyte & Mackay Group's net debt at the end of March 2009 was GBP156.5m. Its latest accounts show that GBP18.6m was paid to senior executives and selected employees in bonuses related to the United Spirits acquisition in the 18 months to 31 March 2008.

The just-drinks interview - Whyte & Mackay

21 January 2010 | Source: just-drinks.com editorial team

Whyte

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In the first just-drinks interview of 2010, we sit down with John Beard, CEO of Whyte & Mackay, and ask him about his first nine months in the hotseat, his company's relationship with its Indian owners and where he sees opportunity for growth going forward. Go on, take a guess.

John Beard became CEO of Whyte & Mackay in March last year. Whilst it would be unfair to describe the position as a poison chalice, Beard took the helm just as the biggest waves following the credit crunch started to hit our industry. Not only that, but the Scotch whisky firm was also having to deal with speculation at the time suggesting that its parent company was considering a sell-off.

One would be forgiven, then, for assuming that Beard spent the bulk of 2009 cursing his timing, as well as his luck. But Whyte & Mackay had – and still has – quite an allure for the former head of UK joint-venture Bacardi Brown Forman. “

“Compared to the corporate lives of the big drinks companies,” Beard says, “Whyte & Mackay has a lot of autonomy. That's thanks to the nature of the structure and ownership of the business. There's also an ability to run something in its entirety, as opposed to the more controlled role of running an individual market within a bigger operation.”

Since assuming the CEO-ship, Beard feels the rest of 2009 was “pretty dramatic” for Whyte & Mackay. The year was defined for the Scotland-based firm by its announcement in August that it was in the process of a "major review" of its organisation, which forecast the loss of up to 15% - or 85 people - of its total workforce. Now that the process is complete, Whyte & Mackay actually cut 18% of its employees - around 90 jobs.

“We're a very Scotland-weighted business,” notes Beard. “Around 90% of our employees are based in Scotland. We've been sensitive to the needs of local communities in the country. In hindsight, I think it's been well-coordinated as a process.

“This has been difficult for the business, but I'm absolutely convinced it was the right thing to do. It makes us leaner and fitter going into 2010.”

Beard is particularly pleased, however, that the company avoided closing any of its facilities in the country. Indeed, he concurs that this was part of the reason why the move did not garner anywhere near as many headlines as Diageo's plan, announced in July to cut around 500 jobs in the country.

“I think Diageo were in a particularly difficult situation,” he says. “Because of their size and profile in Scotland, whatever they were going to do in Scotland, they were going to be criticised for. We were able to take some learnings from the way they handled it, purely because their announcement was ahead of ours. But they (the situations) were fundamentally different. One was closing a facility, the other was a restructure of all elements of a business. We didn't have the even more emotive topic to deal with of closing a facility.”

Back in May 2007, eyebrows were raised when Indian conglomerate The UB Group acquired Whyte & Mackay for US$1.18bn. The Indian firm, headed up by the flamboyant character of Vijay Mallya, subsequently put its United Spirits division in charge of Whyte & Mackay, and sent over Ashwin Malik, who had been with UB for 19 years, to be chief executive.

Despite the Indian ties, Beard was attracted to the position last year in part because of the level of aforementioned autonomy he is afforded. “It (the business) is very much driven by our recommendation for what is right for Whyte & Mackay,” he says. “We put those recommendations to India and we move ahead accordingly. Compared to larger businesses, there is less bureaucracy, there is more autonomy and there's a management style from Dr Mallya that encourages his people to get on and run the businesses and that's proving very exciting.”

The reports out of India earlier this year, suggesting that UB was looking to sell off some or even all of its Whyte & Mackay ownership must have been unsettling. (The Indian company spent most of this year looking at debts thought to be in the region of $1.5bn, so the rumours must have had some credence). Beard seems satisfied, however, that the dust has settled. “In the last few weeks,” he notes, “there's been a very successful deleveraging share issue in India, which reduces the United Spirits debt. That was over-subscribed on the Indian stock market during the autumn and has reduced the debt incurred by the purchase of Whyte & Mackay.

“That's gone extremely well,” he continues. “My read is that there is renewed optimism and confidence in the Indian market within United Spirits. The business is set to break 100m cases of spirits in 2009. I also think Dr Mallya is delighted by some of the recognition that Whyte & Mackay has received in the last few months. We've had strong coverage for some of the successes we've had with The Dalmore and we also achieved the Global distiller of the year at the IWSC. So, there's some very positive momentum in the context of United Spirits and its links with Whyte & Mackay.”

At present, around 60% of the Scotch whisky firm's business occurs in the UK. Looking forward, however, it is pretty obvious which market Beard believes offers Whyte & Mackay the greatest opportunity.

“Going forward, we think that the US is a significant opportunity for us,” he teases. “In France, we're having a great time with our malt whiskies.”

Here it comes.

“It would be impossible,” he says, “to ignore the huge potential for Whyte & Mackay in India.” Beard believes that India should be viewed as “one of the net winners of what we call a global recession – the likes of India and China never actually went into recession”.

“United Spirits is going from strength to strength – it's recent results are very strong and it has recently overtaken Pernod Ricard by volume to become the second largest spirits company in the world. So, India is a disproportionately large opportunity for Whyte & Mackay.”

As India's thirst for Scotch continues to grow, Whyte & Mackay would appear perfectly poised to make the most of this opportunity. Provided UB can afford to keep a hand on the tiller.

Post-script: Since just-drinks spoke to John Beard, Whyte & Mackay released its results for the 12 months to the end of March earlier this week.

In the Spotlight - Diageo gives Government a taxing headache

12 February 2010 | Source: Chris Mercer

Diageo cannot rule out overseas move

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Diageo CEO Paul Walsh has fired another warning shot across the bows of the UK Treasury, insisting that high tax rates could force the drinks giant to relocate. just-drinks examines the fallout.

This story has been rumbling along for some time. Since 2008, when the UK Government announced it would start taxing overseas operations of UK-based companies, there has been disquiet in the corridors of 'UK Plc'.

Disquiet has snowballed in the economic downturn as Governments look to recoup unimaginable sums of money for bailing out banking systems. We have seen bankers, threatened with a super-tax on bonuses, warn that they may vacate the City of London for some as-yet-to-be-defined tax haven paradise, where at least someone is grateful for their contribution, thank you very much.

Diageo CEO Walsh said at the group's results conference yesterday that a 50% tax rate on high earners is making it hard to recruit top people to work at its global headquarters in the UK. Added to this, corporate tax, he said, is much less favourable in the UK than it was. If this trend continues, Diageo will "consider its options", he said.

Unilever has chimed in with similar comments this week.

With a general election set to take place in the UK before June, some have attributed the complaints to a spot of electioneering.

Rather than faint promises to cut tax, "the chief executives seem to want something stronger – like a concrete commitment to cut and a firm timetable", wrote Nils Pratley in the Guardian newspaper.

Others believe that the Government should call Diageo's bluff (though quite how they would do that is unclear).

"We should treat the warnings of companies such as Diageo with the same scepticism that wiser heads reserved for the dire predictions we have heard about thousands of fund managers leaving the City," wrote David Prosser of the Independent newspaper.

The rightwing Daily Mail newspaper talks of companies having "fled" the UK tax regime, as if seeking asylum.

Personal finance website, financialadvice.co.uk, takes a more considered view: "While some businesses are expressing concern about the short term tax outlook, the truth is that businesses leaders are likely to be looking for concessions in the medium to longer term once the economy has settled down and moved back into a growth phase."

The UK cannot compete with everyone on corporate tax. Switzerland's Zug region, which is recently understood to have approached Diageo, has one of the lowest corporate taxes in the world and offers a best rate of sub-10%. Not to mention endless supplies of Swiss mountain air and Raclette cheese, no doubt.

If this were simply a case of maths, why would anyone stick around paying over the odds to the treasuries in Washington, London and Paris?

Of course, it is not simply about maths; there are also political, public relations and social implications.

Companies play a continuous game of cat-and-mouse with the taxman, with some of the best accountancy minds employed by both sides.

Diageo is suggesting that the scales are tipping and that it may exit the game. Taxing overseas operations is likely to be a particular bone of contention. More than two thirds of Diageo employees are located beyond UK shores and around 90% of the company's annual profits come from outside of the UK.

Whatever the company's motive, the UK Government of the day appears to be locked in an increasingly dangerous game of poker. In early 2009, Diageo claimed to bring in around GBP3bn in revenues for Treasury - money that the Chancellor can ill-afford to lose.