Tequila Rack Blog

In the December 17, 2009 issue of Drinks International online magazine, the headline reads:

WHO plans global duty free liquor ban

The story goes on to say…

“The World Health Organization (WHO) has shocked the duty-free industry by proposing a global ban on duty-free liquor sales, a business which was worth $6.3bn last year.”

The proposal to slow down alcohol consumption was actually published in December of last year, but will finally get onto the WHO’s Executive Board agenda between January 18-23, 2010. The Board is made up of health ministers from 34 leading countries, and if it approves the proposal, it will be presented to the WHO’s full annual General Assembly in May 2010.

Keith Spinks, secretary general of the European Travel Retail Council (ETRC) believes that the proposal will pass the Executive Board and into the General Assembly that is made up of 193 governments, and warns, “If this goes though, it will be a disaster for the industry.”

Should the World Health Organization ratify this proposal, there is an upside.  According to Spinks, this proposal on liquor would not be “binding.”

“It is going to be up to each member country to decide whether to implement the proposal or not.” But, he adds, “My fear is that some countries will and some won’t, leaving us in a big mess.”

In 2005, the WHO tried to ban duty-free tobacco sales through its Framework Convention on Tobacco Control (FCTC). The FCTC was ratified by 165 countries worldwide, but has yet to be implemented by any country.

A quick review of the members of the World Health Organization may give a clue as to why.

Alcohol, Tobacco, and Tourism

All countries which are Members of the United Nations may become members of World Health Organization by accepting its Constitution.  So, which countries are members?

Australia, the Bahamas, Costa Rica, Dominican Republic, Egypt, Finland, Germany, Hungary, Italy, Mexico, Switzerland, UK, and the USA, to name just a few.  Most all of these countries have one or more international airports with duty free stores selling among other things, spirits, cigars, and cigarettes.

Not only do most of these member countries tout tourism as a major industry, but many also have their signature spirits (and cigars, in some cases) that define them.  Examples are rum from Barbados, limoncello from Italy, and of course, tequila from Mexico.

Where duty free merchants pay inventory/business or other taxes, customers usually pay none.  For these countries, tourism, and the profit made at duty free shops from alcohol and tobacco sales, is directly related to each other.

How much damage could the enforcement of this proposal do?

WHO vs. Patrón

As stated above, duty-free liquor sales from last year amounted to $6.3 billion in 2008.  That accounted for 17.2% of the total global liquor business according to the Drinks International article.

In the April 2008 issue of Impact Magazine, it states that Patrón tequila was also penetrating the travel retail sector overseas, long a key channel for high-end spirits but one in which tequila was underappreciated.  Patrón was aggressively growing its brand by sampling at very visible public relations events in key cities such as London, Athens, Hong Kong, Singapore and Sydney, all whose countries are members of the World Health Organization.

The Patrón Spirits Company, producers of Patrón tequila, claim on their website to be in over 100 countries and islands worldwide.  Given that there are only 193 members of the WHO, the chances are good that Patrón is available in the duty free stores of most of these member countries.

Assuming that the same 163 countries that ratified the duty free tobacco ban in 2005 also decided to ratify—and enforce–the duty free alcohol ban, the results could be devastating not just for Patrón, but also for Sauza, Brown-Forman (El Jimador brand), and Jose Cuervo, as well as all spirits suppliers, duty free retailers, and airports.

While it seems likely that the World Health Organization’s Executive Board will ratify the alcohol ban proposal, it seems unlikely that any countries will actually enforce it.

By Andrew Cleary

Nov. 26 (Bloomberg) – Patron Spirits International, which outspent all other U.S. liquor brands on marketing last year, plans to grab more “blockbuster” billboards, ousting auto, phone and beer ads to catch up with tequila rival Jose Cuervo.

Patron, controlled by shampoo billionaireJohn Paul Dejoria, this year gained control of a 225-foot-tall billboard, New York’s largest, near Penn Station. Formerly held by AT&T Inc., the billboard says shoppers can “eliminate regifting” by buying Patron for their loved ones this weekend, the busiest of the U.S. Christmas shopping season. Clear Channel Outdoor Holdings Inc. says such a billboard can cost $1 million a year.

Chief Operating Officer John McDonnell said the third- biggest U.S. tequila maker is raising its marketing budget by 10 percent to secure similar billboards in the 10 biggest U.S. spirits markets. Sales of Patron, which costs between $40 and $500 a bottle, rose 10.6 percent in the year to Sept. 6, Chicago-based researcher Information Resources Inc. says.

Patron is “taking advantage of opportunities that haven’t been available in the past, like choice outdoor locations,” McDonnell said yesterday. “Increased awareness and exposure is very much attributable to our advertising.” Las Vegas-based Patron may pick up sites being vacated by automakers, he said.

A Patron ad replaced Heineken NV on a billboard above the I-93 expressway in McDonnell’s home town of Boston last year.

Heineken, which is cutting costs like advertising to stay profitable, saw U.S. sales of its Dutch beer plunge 12 percent by volume in the first half. Diageo Plc, the largest liquor maker and Cuervo’s U.S. distributor, cut its marketing spending by 9 percent in the year ended June 30.

Seagram Veteran

For Patron, “it is particularly smart to increase that spend,” said Tom Sebok, chief executive officer of advertising firm Young & Rubicam North America. “Those who are aggressive will get long-term dividends. Those who aren’t will have a much harder time clawing back in better times.”

Patron, which also owns Ultimat vodka, may buy more brands, McDonnell said. The veteran of Seagram Co. said the company has no debt, and declined to provide sales or profit figures.

Larger tequila rivals Casa Cuervo SA de CV and Fortune Brands Inc.’s Sauza, which both sell for less than Patron, saw their revenue decline 2.4 percent and 8.9 percent, respectively, while total U.S. liquor sales rose 1.6 percent over the same period, according to Information Resources.

Patron is also spending more to secure inside covers and pull-outs in magazines including GQ, Sports Illustrated, and Forbes, McDonnell said in an earlier interview in London. “You have to have these blockbuster positions,” he said.

The company generates 90 percent of its revenue in the U.S. and spent $50.9 million on advertising its tequila in 2008, more than any other liquor brand, Taylor Nelson Sofres Plc says.

READ MORE HERE: http://tinyurl.com/ydg8elj

By Jillian Jones

FOR THE STAR

Friday, November 20, 2009

An old wine industry adage says that during good times, people drink. During bad times, they drink more.Whoever came up with this saying didn’t come from Napa Valley.With the economy on the skids, local vintners have suffered through wrenching changes in business even though — or especially because — the valley is one of the premium winemaking regions in the world.The cheap wine is selling. But $50 Napa Valley cabernets aren’t making the cut.

“People drink more wine, but they only drink cheaper wine,” winemaker Mike Grgich said.Grgich, the founder of Grgich Hills Estate, whose wines go for anywhere between $20 for his most inexpensive sauvignon blanc to $135 for his cabernet sauvignon, said his sales have plummeted 30 percent this year in California. Out-of-state sales have dropped by 50 percent.Grgich has spent 50 years in Napa Valley, and he said he’s not seen conditions this difficult. “People in this recession don’t buy the wines that they used to, and the Napa Valley wines don’t sell,” Grgich said.Drop-off in 2008Wine sales in Napa County dropped suddenly during spring 2008 after several years of steady growth, according to sales tax figures from the county. Napa Valley saw record sales in 2007 and the beginning of 2008, but by the second quarter of 2008 — months before the collapse of Lehman Bros. and billion-dollar losses in the financial markets — Napa Valley wine sales headed south and dipped to 2006 levels.Industry insiders cite several related factors. Consolidation among distributors has made it more difficult for small producers, which includes many wineries in Napa County, to get onto restaurant lists and market shelves. Increased competition from Australia, New Zealand, Argentina and Chile is giving the wine buyer new options.But the pain in Napa County — even in the face of increased wine consumption in the United States — appears to stem primarily from the fact that people aren’t buying expensive wine as they once did. High-end restaurants, many of which distinguish themselves with impressive wine lists carrying bottles from the most reputable regions, are seeing a significant reduction in wine sales.Consumers are turning to cheaper alternatives, which feeds into the strengths of New World importers and large domestic wineries that bottle inexpensive brands from less prestigious regions.A recent study by the Napa Valley-based industry research firm Wine Opinions indicated more than half of the wine drinkers in the United States are in a worse financial situation than they were a year ago. As a result, most are trading down to cheaper wines.One-third of the people surveyed are buying more wines between $6 to $15 than they did a year ago, and 40 percent say they have cut back on wines more than $30 and are no longer buying anything above $50.“The change in the last year has not been in the amount of wine but rather in the type of wine and where it is consumed,” said Ed Matovcik, an executive with Foster’s Wine Estates, which owns four Napa Valley wineries, including wine giant Beringer, and two in Sonoma County.“Consumers are trading down in price, purchasing more from grocery stores and less at restaurants. Both factors have negatively impacted many Napa Valley wines that are sold at higher price points and primarily in restaurants,” he said.‘Dangerous place’Counter to the trend, ultra-premium cult wines are going strong, selling just a touch slower than usual.Bill Harlan of Harlan Estates, whose top cabernet is available only to club members and is listed for as much as $500 a bottle by online wine retailers, said the major impact has been that the waiting list has winnowed.“The waiting period isn’t as long as it used to be, but the wines are selling out,” said Harlan.Still, many local producers have a lot of extra wine on their hands.That may mean fantastic deals for consumers as wineries slash prices to get their product moving.But people in the industry worry that that discounting prices could tarnish the Napa Valley’s prestigious image and hurt prices in the long run.“It’s a dangerous place to go,” said Deborah Steinthal, founder of Napa-based wine consultancy Scion Advisors. “I know quite a few brands are feeling the pressure, but they also know the long-term impact of discounting your product is huge, because it’s very difficult to climb back out of that hole.”Gary Fisch, founder of Gary’s Wine and Marketplace in New Jersey, agrees that deep discounts could undermine Napa Valley wine values over the long haul, but he argues that it is imperative Napa maintain its share in the increasingly competitive global wine market, especially when other wine regions are offering huge discounts.“My first choice is a Napa Valley cabernet, and I want (Napa wines) to succeed,” Fisch said. “But I have to be realistic. If I get a deal on a Burgundy that normally was $100 that now is $40, that’s where my cash is going.”Terry Hall, communications director for the Napa Valley Vintners, an association of some 370 Napa Valley wineries, acknowledges the dangers of discounts, but adds that the industry has never faced an economic climate like this.“In a typical day we would say when you discount your brand, it’s hard to get that dollar back,” Hall said. “However, in this economy, this is the Great Recession … I think we’re all discounting because we’re in the same boat.”

Read the full article here:  http://tinyurl.com/y8vmhch 

Study Shows Moderate Drinking Cuts Risk of Heart Disease in Men by 51%

By Kathleen DohenyWebMD Health News

Reviewed by Louise Chang, MD

Nov. 18, 2009 — Regular consumption of alcohol — beer, wine, or hard liquor — reduces the risk of heart disease in men by a third or more, according to a new Spanish study.

”Our study confirms what many other studies have already said,” says researcher Larraitz Arriola, MD, of the Public Health Department of Gipuzkoa in San Sebastian, Spain. One difference, she says: Researchers in the new study separated ex-drinkers from lifelong teetotalers in hopes of better understanding the alcohol- heart health link.

Arriola and colleagues also found a beneficial effect of alcohol for women’s heart health, she says, but it was not strong enough to be considered statistically significant. She suspects it’s because of the relatively low number of women in the study who developed heart disease.

While drinking was associated with heart health, Arriola is quick to offer this caveat: ”I would not advise anybody to [start to] drink alcohol, because alcohol causes, as we mention in our paper, 1.8 million deaths a year” in addition to disabilities.

“If somebody already drinks alcohol, then I would advise to drink moderately, eat healthy food, and do some exercise.”

In the study, researchers evaluated more than 41,000 men and women enrolled in the ongoing European Prospective Investigation into Cancer (EPIC) study. That study includes a half million adults living in 10 Western European countries.

In the current research looking at alcohol and heart health, the researchers evaluated 15,630 men and 25,808 women ages 29 to 69,  all free of heart disease at the beginning of the study, following them for a median of 10 years (half longer, half less).

The researchers calculated alcohol intake from a diet history record; a follow-up revealed which participants had a cardiovascular event — either a heart attack or unstable angina (chest pains) that required a procedure such as a bypass operation or angioplasty.

During the follow-up, 609 such events occurred to 481 men and 128 women.

Spain has low heart disease death rates in comparison to some other countries, but high levels of alcohol consumption.

Amount of Alcohol and Heart Risk

Drinking any type of alcohol lowered the risk of serious heart disease in men, with the amount of risk reduction associated with the amount of alcohol:

• Light drinking reduced risk by 35%
• Moderate drinking reduced risk by 51%
• High and very high levels of drinking reduced risk by 54% and 50%.

Former drinkers had a 10% risk reduction.

For the study, the researchers considered a drink as an alcoholic beverage with 10 grams of alcohol, the U.K. standard, Arriola says. In the U.S., a standard drink is equal to 13.7 grams of alcohol, according to the CDC.

Roughly, here is how Arriola defines her categories:

• Light drinking was up to 5 grams a day — or about one glass of wine, one and one-half beers, or less than a half glass of hard liquor.
• Moderate drinking was 5 to 30 grams a day, or about two glasses of wine, two or three beers, or a half to one glass of hard liquor.
• High and very high levels of drinking were 30 to 90 grams a day, or about five or more glasses of wine, seven or more beers, and one to one and a half glasses or more of hard liquor.While the type of alcoholic beverage consumed, overall, did not have an effect on the level of risk reduction, the researchers found the protection greater for those drinking moderate to high levels of alcohol, which included beverages other than wine alone.

  The study results replicate many other studies, according to Kristi Reynolds, PhD, MPH, a research scientist and epidemiologist at the Kaiser Permanente Southern California Medical Group. But she points out that heavy alcohol consumption carries many risks.

  In an email, she writes that heavy alcohol consumption has been shown in other studies to lead to increased illness and death from other causes. “Therefore, the implications of these findings should be examined cautiously. Advice regarding alcohol consumption should be tailored to the individual patient’s risks and the potential benefit.”