A-B InBev planning to own more distributors?
By Paul Vang
Do they or don’t they?
The Swiss banking company UBS sent ripples through the beer industry when the Wall Street Journal reported that, according to a study by a UBS analyst, Anheuser-Busch InBev is studying the idea of consolidating its network of independent U.S. beer distributors, perhaps by the company, itself, owning more distributorships.
According to the report, the company is exploring the concept of selling as much as 50 percent of its U.S. beer volume through its own distributors, up from 7 percent today.
In follow-up stories in Just-Drinks and the St. Louis Post-Dispatch, A-B InBev denied that they had plans to force distributors out of business, though in a statement from company spokeswoman, Marianne Amsomms, the company noted, “Consolidation has been occurring for many years and we believe it will and should continue … There are no plans to significantly expand company-owned distributorships at this time…”
A-B does own 13 distributorships in cities such as New York, Denver and San Diego. Many states do not, however, allow beer sales outside the three tier system.
Rumors will likely keep flying, however. In March, a Credit Suisse analyst told a wholesalers group, “Wake up and smell the coffee,” going on to note that InBev has a traditional “culture of dominance” over retailers, suppliers, employees and distributors.
I suppose we might also ask whether there are just too many Swiss banks.
Cheaper than Air?
“Australia can’t even bottle air and make money selling at that price,” is how Jeremy Oliver, an Australian winemaker, describes a current crisis in Australia’s wine business.
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Paul Vang
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There’s a glut in Australian wine inventories. As reported last month, the maker of "Two Buck Chuck" is buying large amounts of Australian chardonnay wine to market in the U.S. at $3 a bottle. The New York Times now reports that the industry is in a crisis with over-production, dropping prices and increased competition from Chile, Argentina and South Africa.
According to the story, while the volume of Australian wine sold in Great Britain has more than doubled over the last decade, the price per liter has fallen to A$2.36, down from A$4.36 10 years ago, provoking Mr. Oliver’s remark about bottled air.
He added, “It’s not sustainable for Australia to be trying to produce the world’s cheapest wine; we’re totally unsuited to it.”
Australia isn’t alone when it comes to a glut of wine, or at present, unsold grapes for the upcoming fall harvest.
The Wall Street Journal reports that many American high-end wineries are feeling a squeeze as customers slash spending on fine wines. According to the Journal report, Americans are drinking more wine than ever, but they’re buying more mid- and low-priced wines, causing a sharp drop in sales of wines of $25 a bottle or higher.
Speculation is that there will be some shakeout among some prestigious California wine producers.
The Press-Democrat of Santa Rosa, California (in the heart of the Russian River area of Sonoma County) reports that Sonoma County grape growers are worried about grapes that may go unsold this fall. Normally, about 20 percent of the crop sells on a spot market, and in a typical year, 40 percent of that market is unclaimed in the early summer. This year, 70 percent was still unsold.
Grape farmers will have to decide whether to sell at a loss, leave the grapes on the vine, or press the grapes and hold the wine in storage tanks in hopes of an improved market.
Wine, we should keep in mind, is, bottom line, an agricultural product and the grape farmer in California shares many of the same supply and demand (and foreign competition) issues that Montana’s cattle ranchers and wheat farmers have.
Beer Market Reacts to Economy
In another St. Louis Post-Dispatch story, Morgan-Stanley analysts have been studying how the slumping U.S. economy affects the hospitality business.
A key finding is that as personal incomes come under pressure, people cut back on drinking at bars, restaurants and clubs and, in general, cut back alcohol consumption.
On the other hand, beer is seen as a relative bargain, or at least not an expensive luxury, though some consumers are switching to popular domestic brands, such as Budweiser, Miller or Coors, which they perceive as a better buy than an import, for example.
While the industry is under pressure, the Morgan Stanley report says that the U.S. beer market remains one of the most attractive and stable beer markets in the world.
Labels Switch Owners
Beam Global Spirits and Wine, makers and distributors of spirits such as Jim Beam Bourbon, Makers Mark Bourbon, Laphroaig Scotch whisky and other products, recently acquired the EFFEN lines of vodka from the Sazerac company of New Orleans, according to the online newspaper, Earth Times.
EFFEN, the Dutch word for “smooth,” is a super-premium vodka produced in the Netherlands. Its primary U.S. markets are in Chicago, Florida and California.
As part of the deal, Beam sold its Old Taylor Bourbon whiskey brand and inventory to Sazerac.
In a release from Buffalo Trace Distillery, Mark Brown, CEO of Sazerac and Buffalo Trace Distillery, said, “We’re ecstatic about this transaction. Part of our family is returning, and we are thrilled to welcome home a true bourbon whiskey pioneer.”
Old Taylor is named after E. H. Taylor, a great-nephew of President Zachary Taylor, who in 1870 purchased a predecessor to Buffalo Trace Distillery. He ran into financial difficulties and was forced to sell out, though his name continues as a whiskey brand name.
About that ‘e’
Sharp-eyed readers, and that especially includes Tavern Times editor/publisher Cole Boehler, may take note that when I write about bourbon and other American amber spirits, the spelling is whiskey, but if it’s Scotch, it’s whisky.
That’s not an accident. According to Wikipedia, whisky, without the pesky extra "e" is the original spelling for the spirit. Around 1870, Scotland flooded the market with cheaper spirits using a new type of still. Irish and American distilleries then adopted the spelling “whiskey” to distinguish their product.
Today, the spelling "whisky" (plural: whiskies) is generally used for whiskies distilled in Scotland, Wales, Canada, Australia, and Japan, while ‘whiskey’ is used for the spirits distilled in Ireland and the United States.
I had previously understood that the reason for the different spelling was that the frugal Scots saw no reason for that extra letter. Now, we know better.
Senate Softball League a Beer League
According to Roll Call, the Capitol Hill online newspaper, the U.S. Senate softball league is evolving into a true beer league.
Four teams are directly tied, at least in name, to beer or a place where beer can be found. One team is the Hawk ‘n’ Dove, surely a good name for a pub, and then there are the LC Miller Lites, and the Premium Drafts. Another team, Well Swung, is sponsored by the Pour House.
“America’s pastime and America’s favorite beverage have been a winning combination for decades,” said Rebecca Spier, vice president of public affairs for the National Beer Wholesalers Association. “While softball teams might have designated hitters, we hope they do have designated drivers to ensure everyone is a winner.”
I can only wonder if these Senate staffers can get together to play softball and drink beer, why can’t they get their elected bosses to get moving on health care? Seems to me we’re missing something here.