Industry Issues

October 1, 2005
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Spirits brands change hands
Fortune Brands Inc., Lincolnshire, Ill., received approval from the U.S. Federal Trade Commission for its acquisition of the Maker’s Mark bourbon brand and its facilities, including the distillery in Loretto, Ky., from Pernod Ricard following its acquisition of Allied Domecq. The brand is among more than 20 spirits and wine brands that Fortune is expected to acquire from Pernod Ricard.
The company’s new spirits and wine brands — which also include Sauza Tequila, Courvoisier cognac, Canadian Club whisky, Laphroaig single-malt Scotch and Clos du Bois wines will more than double Fortune Brands’ sales of spirits and wine.  
In other acquisition news, Pernod Ricard and SPI Group have worked out an agreement for the exclusive rights to distribute SPI’s Stolichnaya brand portfolio globally. Allied Domecq was the previous distributor of the Stolichnaya brand portfolio. In addition, the groups agreed to discuss an outright acquisition of the brand by Pernod Ricard should SPI decide to sell in the future. BI
Pepsi names top bottlers
Pepsi-Cola Co., Purchase, N.Y., selected The Pepsi Bottling Group (PBG) of Hawaii and the Honickman Group’s Pepsi-Cola Bottling Co. of New York as its Donald M. Kendall Bottlers of the Year. The companies were recognized for their contributions to the Pepsi-Cola North America system in 2004, including customer service, consistently high volume growth and support of their communities. Bottlers are measured against key performance criteria, such as volume and sales growth, per capita consumption trends, product quality and community involvement.
Dawn Hudson, president and chief executive officer at PCNA, presented the awards at a ceremony during the company’s bottler meeting last month in Las Vegas. This is the first time in the 10-year history of the award that two companies were recognized.
“PBG Hawaii and Pepsi-Cola New York both embody Pepsi-Cola’s winning spirit,” Hudson said. “These operations have delivered remarkable sales growth across our total beverage portfolio while tirelessly and generously giving back to the communities they serve.”
PBG Hawaii had the greatest bottle and can growth among all PCNA bottlers in 2004, and during the past five years, its volume growth rate was among the top five in North America. Serving more than 30,000 retail outlets, Pepsi-Cola New York posted one of PCNA’s top five volume growth rates last year. BI
Cott announces North American realignment
Cott Corp., Toronto, announced it will realign the management of its Canadian and U.S. businesses to a North American basis to leverage management strengths, improve supply chain efficiencies and position the North American business to become more profitable and responsive to customers’ needs. Under the new structure, two veteran Cott executives will lead North American operations and sales. Mark Benadiba, currently executive vice president of Canada and International, will head North American operations and supply chain functions, including manufacturing, purchasing, logistics and quality. John Dennehy, currently vice president of new business development for Cott USA, will lead North American sales and marketing. Additionally, Gil Arvizu, who is responsible for building Cott’s Mexican business, will return to the United States to head the U.S. sales organization.
The company also announced that Robert J. Flaherty, executive vice president and president of Cott USA., has left Cott to pursue other interests.
“The new structure puts proven Cott executives into key leadership positions, with John Sheppard taking a direct role in turning around and growing Cott’s North American operations,” said Frank E. Weise, chairman at Cott.
Sheppard added: “With this structure, we will be a more efficient and effective organization with a critical focus on operations and sales.” BI
Great American beers
The best in brewing were honored recently at the Great American Beer Festival in Denver. Organized by the Brewers Association, Boulder, Colo., the awards recognize beers in 69 categories, with gold, silver and bronze medals given in each. The goal of the 109-member judging panel is to identify the three beers that best represent each beer style. Competition entries came from 466 breweries, with a total of 2,335 beers judged.
This year’s overall brewery winners were:
Large brewing company of the year: Anheuser-Busch, St. Louis  
Mid-size brewing company of the year: New Glarus Brewing Co., New Glarus, Wis.
Small brewing company of the year: Sandlot Brewery At Coors Field, Denver
Large brewpub of the year: Iron Hill Restaurant & Brewery #3, Wilmington, Del.
Small brewpub of the year: Pelican Pub & Brewery, Pacific City, Ore. BI

IBWA hosts bottled water convention in Orlando
The International Bottled Water Association, Alexandria, Va., held its 2005 annual convention and trade show last month in Orlando, Fla. With the theme “Quality Through Innovation,” IBWA presented innovative technologies, processes and industry trends to help bottled water professionals meet marketplace challenges. In addition, bottled water-focused exhibits showcased processing, packaging, equipment and services.
Newly-elected IBWA Chairman Phil Susterick of Culligan of Brooklyn Park, Brooklyn Park, Minn., and other board members were installed for the 2005-2006 period. The association also presented a number of awards, including the Aqua Awards, which recognized the best in advertising and public relations programs produced by IBWA member companies in 2005. The “Best of Show” Award was presented to Oasis Pure Drinking Water in recognition of its creative contributions in marketing and public relations.
In addition, IBWA presented its 2005 Route Salesperson and Plant Manager of the Year Awards to three people representing small, medium and large companies who have demonstrated a strong work ethic and interpersonal skills while maintaining successful bottled water delivery routes. Awards were given to Denny Basich, Clear Mountain Spring Water in Charleston, S.C. (small company category); Travis O’Hagan, Eureka Water Co. (medium company category); and Mark Stankiewicz, Nestlé Waters North America, (large company category).
The Plant Manager of the Year Award, which recognizes the impact of plant managers, was presented to Trina Coggins of CCDA Waters LLC. BI
The winners of the 2005 IBWA Aqua Awards, which were chosen from small, medium and large company categories, are as follows:
Print
Masafi Mineral Water Co., medium company
DS Waters of America LP, large company
Special promotions and public relations
Cohutta Water Inc, combined small/ medium company
DS Waters of America LP, large company
Vehicle advertising
Oasis Pure Drinking Water and DS Waters of America, LP, tie for combined small/large
Package and label design
BIOTA Brands of America Inc., combined small/medium company
Mountain Valley Spring Co., large company
Web site
Mountain Valley Spring Co., combined small/large company
Point-of-purchase
Oasis Pure Drinking Water, combined medium/large company
Outdoor advertising
Oasis Pure Drinking Water, combined medium/large company
Supplier advertising and marketing
Whatman Inc.
Supplier Web site
Whatman Inc.
Television
Blue Hills Spring Water Co. Inc., combined medium/large company
Radio 
Oasis Pure Drinking Water, medium company
Nestlé Waters North America Inc., large company
“Best of Show”
Oasis Pure Drinking Water
“Best of Show” Honorable Mention
Mountain Valley Spring Co.

Beer convention works to improve industry
More than 3,600 beer industry representatives attended the National Beer Wholesalers Association’s 68th Annual Convention that took place Sept. 18-21 at the Bally’s and Paris Hotels in Las Vegas. This year’s general sessions included several guest speakers, panel discussions, brewery speakers and an industry update. The convention stressed NBWA’s efforts to strengthen the three-tier system, protect the 21st Amendment, work to repeal the death tax and oppose a proposed rule that may allow alcohol beverage labels to include descriptions of alcohol content per standard serving accompanied by graphics suggesting that all types of alcohol are equal.
NBWA hosted 25 educational seminars as well, offering topics for every level of the beer wholesaler organization. The seminars addressed a variety of issues such as technology, sales and productivity, legal issues facing wholesalers and future trends in beer wholesaling. With 245 exhibitors filling the tradeshow floor, companies showcased products and services to help streamline beer wholesaler operations, as well as promote new beverages, including beers, malts, energy drinks and energy malt beverages.
Monday’s panel discussion featured a beer industry import set with panelists David Eickhold, Diageo-Guinness USA; William Hackett, Barton Beers; Simon Thorpe, InBev USA; and Frans van der Minne, Heineken. The panel yielded a discussion of domestic price discounting, and underscored that the beers growing in sales also are the ones that have gone up in price. InBev USA’s Simon Thorpe said, “If we can maintain strong import pricing, then consumers will follow.” The panel also emphasized that on-premise sales are absolutely critical in promoting sampling of imports, distinguishing brands and developing an image, as have been successfully done with Stella Artois and Guinness. With the introduction of Heineken Light, panelists agreed that the market is ready for luxury light beers and sees huge potential for this category, with panelist hinting at other light import beer introductions in the near future.
The panel discussion the following day hosted a beer industry financial update with panelists Christine Farkas, Merrill Lynch Equity Research; Bonnie Herzog, Citigroup; and Nik Modi, UBS. Panelists addressed the beer industry’s declining volume and pricing and increasing costs. The group stated the current pricing environment is hurting domestic brand equity, with some panelist feeling the market is stabilizing and others saying it should next year. The discussion generated statements from the analysts that too many choices have dampened the market, with the panelists emphasizing that the economic situation cannot be just blamed on wine and spirits. With multi-brand beer distributors performing better in the market, the analysts also added improving brand equity should be the suppliers’ job.
NBWA’s convention also introduced its 2005-2006 slate of officers: Chair, Phillip A. Short, P.A. Short Distributing Co. Inc. in Hollins, Va.; Immediate Past Chair, Jeffrey S. Vukelic, Saratoga Eagle Sales and Service in Glens Falls, N.Y.; Vice Chair, Betty Buck, Buck Distributing Co. Inc. in Uppper Marlboro, Md.; Secretary, Phillip Terry, Monarch Beverage Co. Inc. in Indianapolis; and Treasurer, Aldo Madrigrano, W.O.W. Distributing Co. Inc. in Sussex, Wis. BI
2005 NBWA Award Recipients
Public Affairs Award
Herbert Schilling, chairman of Schilling Distributing Co. in Lafayette, La.
David Hutchinson, president of Valley Distributing Corp. in Salem, Va.
Life Service Award
C.L. Fox, chief executive officer of Fox Distributing Co. in Shelby, N.C.
Tom LaRose, chairman emeritus of House of LaRose in Brecksville, Ohio
Virgis Colbert, executive vice president of Miller Brewing Co.
Jerry Clinton, chairman and chief executive officer of Grey Eagle Distributors in Maryland Heights, Mo.
Carrol Orrison, president and chief executive officer of Casper Beverage in Casper, Wy.
R. Kenneth Kerr PAC Award
Joe Fabiano, president of Fabiano Brothers in Mt. Pleasant, Mich.
Industry Service Award
Michael Lashbrook, president of the Michigan Beer and Wine Wholesalers Association
Mike Madigan, president of the Minnesota Beer Wholesalers Association
Frans van der Minne, president and chief executive officer of Heineken USA
Norman Adami, president and chief executive officer of Miller Brewing Co.  
2005 President’s Award for Legislative Excellence
Representative Kenny Hulshof (MO-9)
Representative Bud Cramer (AL-5)
Representative Dave Weldon (FL-15)
Senator Jim Inhofe (OK)
NBWA Chairman’s Scroll
Mark Doll, former NBWA board chairman, and president and chief executive officer of Doll Distributing in Council Bluffs, Iowa

NACS show moves to Las Vegas
In the wake of Hurricane Katrina, the National Association of Convenience Stores has moved the NACS Show 2005, originally scheduled to take place this month in New Orleans, to the Las Vegas Convention Center, Nov. 16-18. Despite the move, the show still will feature a full line-up of educational sessions and an exhibit floor that is expected to draw 1,400 exhibitors in 370,000 square feet of exhibit space. In all, more than 24,000 people are expected to attend.
Beverages of all kinds, from hot, cold and frozen dispensed beverages, beer, nutritional drinks, packaged soft drinks and alternative beverages, and bottled water can be found at the NACS show, which has become a popular place to feature new products. In fact, the show will include a “What’s New for Convenience? Cool New Products Preview Room” that will showcase new items by category.
Both the opening and closing general sessions scheduled for New Orleans will take place in Las Vegas, featuring Ann Rhoades, former executive vice president of people at  JetBlue Airways, and former U.S. Secretary of State Colin Powell, respectively.
Rhoades has led several high-profile companies and is said to specialize in creating workplaces where people love to come to work.
General Powell is one of the most respected statesmen in U.S. history. During his tenure, he was tasked with building coalitions, forging alliances and spreading the universal values of democracy and freedom throughout the globe, and in doing so became one of the most easily identifiable and revered people in the world.
Other sessions of interest to beverage companies include:
Emerging Customer Segments and the Convenience Store Industry
As 70 million teens and twentysomethings come of age and convenience retailers face greater competition, what do we need to know about these emerging customer segments? The NACS/Coca-Cola Leadership Council will report on its consumer research initiative that examines and compares the shopping habits and preferences of teens and twentysomethings.
Coffee: The New Black Gold
Now that a cup of coffee provides more profit than a gallon of gas, retailers are focusing more and more on how to compete with Starbucks. This session will highlight several retailers who are excelling at serving a hot cup of Joe to their customers and share what it takes to keep them coming back.
Fueling the Fire: Loyalty Marketing Best Practices for Convenience Stores
More and more convenience and petroleum retailers are embracing the concept of loyalty marketing in an effort to increase sales from their best customers. This session will outline the key criteria and best practices to make loyalty marketing work in the convenience store industry by addressing how a true loyalty marketing program differs from a simple discounting scheme, what loyalty marketing can and can’t accomplish, and the 10 best practices for convenience store loyalty marketing.
Retailer-Supplier Relationships: Getting to a Win-Win Partnership
The relationship between buyer and seller is always an interesting one. This session will feature a panel of retailers discussing category management, product innovation, technology, communicating what it takes to have a successful relationship, and getting to that “win-win” for both organizations and the end consumer.
What’s Hot: Trends in New Products
Each year the NACS Show invites experts in the field of new products to update the industry on the hot new products that have been introduced and how they are performing in the marketplace. This session will feature consumer trends in new products and identify ways convenience store operators can capitalize on these trends.
New Product Presentations: Products for Resale
The No. 1 reason attendees come to the NACS Show is to see new products and services. This session is designed to help buyers find the most innovative ideas available at the show by providing attendees with a “sales call” from exhibiting companies with products for resale.
Age Restricted Sales Training
New updated Techniques of Alcohol Management Training followed by a discussion regarding several of the challenges and strategies associated with age restricted sales. 
For more information about the NACS Show 2005, visit nacsshow.com. BI

Did you know?
The convenience industry posted $394 billion in total sales in 2004.
Packaged beverages (non-alcohol) are the second highest selling products in the convenience channel and accounted for approximately $16.1 billion in sales.
Alternative beverages, sports drinks, iced teas (ready-to-drink) and bottled waters drove that figure.
Beer is the fourth highest selling product category in the convenience channel and accounted for more than $15.6 billion in sales.
Beer-related businesses, including brewers, wholesalers, brewer suppliers and retailers contribute more than $162 billion annually to the U.S. economy.

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