Diageo to Buy Chalone

January 1, 2005
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Diageo to Buy Chalone
Diageo North America will acquire the Chalone Wine Group, Napa, Calif., for $260 million. Diageo says the purchase, which is subject to shareholder and regulatory approval, will yield significant synergies and is expected to become profitable in the third year of ownership.
The Chalone acquisition has been the subject of much speculation. Diageo outbid, by $2.50 per share, a previous agreement with a joint venture company created by Constellation Brands, Domaines Barons de Rothschild-Lafite (DBR) and the Huneeus family. Prior to the agreement with Diageo, Chalone terminated its agreement with DBR, and Diageo will pay a $2.475 million termination fee on Chalone’s behalf.
“The compatibility of Chalone’s operations to our existing Diageo Chateau and Estate Wines business will enhance our ability to integrate the two businesses and to innovate, to the benefit of the enlarged range of premium brands,” said Diageo North America President and Chief Executive Officer Ivan Menezes of the acquisition.
If approved, the agreement is expected to close in the first quarter of 2005.
New rules for FMBs
The U.S. Alcohol Tobacco and Trade Bureau has established new guidelines for flavored malt beverages that require at least 51 percent of the alcohol in the products be from the brewing process rather than from distilled spirits. Manufacturers will have until January 2006 to change their formulas if they do not currently comply with the new regulation.
The Bureau took up the issue because beer and distilled spirits are taxed at different rates, and regulators were unsure how to classify the drinks.
SoBe hit with fine
PepsiCo’s South Beach Beverage Co. has been fined $219,000 by the state of Connecticut for false advertising and packaging on products that claimed to protect against colds and fatigue.
The company has said it cooperated with the Connecticut Attorney General’s Office to resolve the matter, and that the messages in question have not been printed on SoBe products for at least two years.
Constellation completes Mondavi acquisition
Constellation Brands Inc., Fairport, N.Y., has completed the purchase of winemaker Robert Mondavi Corp. Mondavi shareholders overwhelmingly approved the deal that makes Mondavi a wholly-owned subsidiary of Constellation.
“Today opens a new chapter for Constellation and the Robert Mondavi brand,” said Constellation Brands Chairman and Chief Executive Officer Richard Sands. “With the successful completion of this landmark transaction, Constellation offers an unmatched wine portfolio with expanded fine wine offerings, in addition to our broad portfolio of leading brands in the spirits and imported beer categories and unparalleled global distribution capabilities.”
Constellation reportedly does not plan to close any of the Mondavi production facilities, but may have to enact layoffs as it integrates Mondavi into its fine wine division.
Coca-Cola creates online retailer tool
The Coca-Cola Co. has developed a new online tool to help supermarkets increase market share based on the way consumers shop. Located at ccrrc.org, the Web tool developed by the Coca-Cola Retailing Research Council walks retailers through five interactive steps, including:
1. Explaining what is on the minds of consumers during various shopping occasions;
2. Probing the retailer to determine how consumers experience their stores compared with their top three competitors;
3. Assessing a retailer’s performance  against competitors;
4. Determining where and how to strengthen the quality of the shopping experience in the retailer’s store;
5. Identifying which need state the retailer can own and brand to better differentiate from the competition. BI

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