Shanken News Daily: Exclusive news and research on the wine, spirits and beer business

Executive Summary: October 29-November 7

November 7, 2012

Bacardi Ltd. unveiled a raft of senior executive changes in recent days. Current CFO Jacques Croisetiere is retiring at the end of this year. He will be replaced by Joseph Schena, most recently a partner in the Centerview Capital private equity firm and, like Bacardi president and CEO Ed Shirley, a former Procter & Gamble executive. In addition to CFO duties, Schena, who will join Bacardi on December 3, will also become president and CEO of Bacardi International Ltd, reporting directly to Shirley. Bacardi will also soon welcome a new CMO, following the announcement that current CMO Silvia Lagnado will leave “over the next few months to pursue other interests.” That appointment is expected “in due course.” Meanwhile, the company’s senior global rum category director position, vacated in August by Eugenio Mendez, will be filled by Dmitry Ivanov, formerly managing director of Bacardi Russia. In other Bacardi news, the spirits giant is getting behind its Dewar’s Scotch whisky brand with its first TV advertising since 2007. The new Dewar’s campaign, running under the tagline “The Drinking Man’s Scotch,” will also appear on print and digital platforms, focusing on Dewar’s White Label and 12-year-old variants.

Diageo continues to negotiate two potential blockbuster deals, one toward gaining an ownership stake in Jose Cuervo Tequila, and the other toward acquiring control of India’s United Spirits Ltd (USL). Diageo Latin America & Caribbean president Randy Millian told Bloomberg yesterday that talks with Cuervo were ongoing, but that Diageo has “plan Bs” in the event a deal cannot be struck before its global distribution contract on Cuervo runs out next year. Meanwhile, reports out of India assert a $2-billion deal that would give Diageo a 51% stake in 121-million-case juggernaut USL could be announced as early as this week. The arrangement would likely see USL chairman Vijay Mallya remain in that role, with Diageo appointing other key USL management posts. Still, the two parties have been close to accords before, only to see talks falter over valuation.

Beam Inc.’s net sales increased 8% in the third quarter of 2012 (and were up 4% on a comparable basis), even with a challenging comparison to strong North America sales in the year-ago quarter. That solid performance brought the company’s net sales growth for the first nine months of the year to 5% (7% on a comparable basis). The Pinnacle vodka line, which Beam acquired from White Rock Distilleries earlier this year, grew 23% in its first full quarter with the company.

New York-based Charmer Sunbelt Group (CSG) has acquired full ownership of longtime joint venture partner Ben Arnold, South Carolina’s biggest spirits and wine distributor. Ben Arnold will continue to be managed locally, by newly appointed president Sean O’Connor and executive vice president and chief financial officer Mike Sisk.

Remy Cointreau is currently in talks to acquire a majority share of family-owned Cognac producer Larsen. Financial details on the potential deal were unavailable at press time. Founded in 1926, Cognac Larsen is one of the last independent producers of AOC Cognac. The company’s core portfolio includes its VSVC, VSOP and XO labels (priced between roughly $29 and $82 a bottle), as well as a variety of specialty offerings such as the La Cloche Viking ($94), Leif Eiriksson XO ($126), XO Extra d’Or ($137) and Extra Reserve ($253) expressions.

Trinchero Family Estates has launched two new varietals to the Sutter Home range–Pink Pinot Grigio and Red Moscato. The extensions will be available this month at large retailers across the country. Pink Pinot Grigio is billed as being similar to an off-dry rose. Red Moscato is a blend of Moscato and Merlot. Sutter Home, which sells over 10.3 million cases annually, has been one of the biggest players in the Moscato boom. The brand launched a Bubbly Pink Moscato to the line earlier this year.

Anheuser-Busch last week got permission from the Illinois Liquor Control Commission to continue investing in beer distributorships. In a 4-2 vote, the commission upheld A-B’s right to retain its 30 percent stake in City Beverage-Illinois, the state’s largest Budweiser distributor, which mainly serves the Chicago area. Illinois lawmakers last year had enacted new legislation barring brewers’ self-distribution, exempting craft brewers producing fewer than 15,000 barrels a year. But liquor commissioners asserted that the law was vague, though their own legal staff had earlier recommended a suspension of City Beverage’s license because it conflicted with the state mandate.

Anheuser-Busch InBev (ABI) shipment volumes in the U.S. rose by 0.1% in the nine-month period through October 31. For the company’s third quarter ending in October, shipments in the U.S. were up by 1.5%. ABI said that the rollout of Bud Light Platinum and Bud Light Lime-A-Rita helped grow the U.S. market share of the Bud Light range in the third quarter. Michelob Ultra, Shock Top and Stella Artois, among other premium brands in the portfolio, also grew share in the quarter. ABI’s U.S. beer-only revenue per hectoliter was up by 5.7% in the third quarter, driven by a price hike that occurred late last year.

MillerCoors reported a net sales rise of 1.5% to $1.99 billion for its third quarter ended September 30. Third quarter underlying net income also rose, up 13.5% on the prior year to $325.6 million. Despite overall weakness within MillerCoors’s core premium light beer portfolio, Coors Light was able to advance by low single digits, helping to offset Miller Light’s mid-single-digit decline. The company’s economy portfolio–including Miller High Life and Keystone–also fell by the mid-single digits. MillerCoors’s Tenth and Blake import and craft unit, however, continued to thrive during the quarter, driven by Leinenkugel’s Summer Shandy, which has nearly doubled in volume since the prior year, and strong growth from Blue Moon.

Cerveceria Costa Rica, subsidiary of Florida Ice and Farm Company, S.A., has agreed to acquire Rochester, New York’s North American Breweries (NAB) from private equity firm KPS Capital Partners for $388 million in cash. NAB was formed in 2009 when KPS bought U.S. rights to Labatt from Anheuser-Busch InBev. In addition to Labatt, NAB also markets the Genesee, Magic Hat, Pyramid and Honey Brown Lager brands and performs contract brewing. The deal is expected to close in the fourth quarter.