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Lifted by a string of great vintages and soaring demand for Cabernet Sauvignon, the Napa Valley is enjoying an unprecedented boom. After blockbuster vintages in 2012, 2013 and 2014, its renown is greater than ever, and despite rising prices, demand for top-end Napa Cabernet continues to soar. “The luxury Cabs will become more expensive and harder to obtain,” says Veronica Litton, wine buyer at Crown Wine and spirits, the 13-unit chain based in Fort Lauderdale, Florida. “Customers are willing to pay. The only issue is supply—not price.”
Indeed, getting sufficient inventory has become a major headache for traditional retailers, and not only due to demand. It’s also because Napa continues to move toward the direct sales model, which is more profitable for wineries. “It’s gone from about 25% winery-direct sales in the early 1990s to about 60% today for the average Napa winery, though the larger producers do a lower percentage of direct sales,” says Rob McMillan, executive vice president and founder of the wine division at Silicon Valley Bank.
Top luxury Cabernets like Harlan Estate, Bryant Family and Colgin have always been available in tiny allocations, but that scenario is now playing out more broadly, and many retailers are feeling left out of Napa’s upswing. “We get enough mainstream Napa wines, but it’s a different story with the most desirable ones,” says Charles Sonnenberg, owner of the three-unit Frugal Macdoogal Wine & Liquor Warehouse in Nashville, Tennessee. “So many of them are now being sold direct—none of that allocation filters down to us.”
“Every year it’s a fight for allocations,” agrees Ed Sands, owner of Calvert Woodley in Washington, D.C. “The top wineries are holding back more than ever for their private customers, which I don’t think is a good thing. They’re also doing multiple releases like they do in Bordeaux, with a first and second tranche.”
Some retailers are seeking out Napa’s emerging luxury players as alternatives. “Starting with the 2012 Cabernet Sauvignons, we began focusing on new producers like Hourglass Estate and O’Shaughnessy Estate, which got scores in the mid-90s,” says Joseph Tedesco, wine department manager at Hazel’s Beverage World in Boulder Colorado. “Those brands run from $80 to $200 a 750-ml. bottle. Limitations on the better-known labels have prompted us to seek other options.” Market Watch has a full report on the state of the Napa category.
Yesterday, Constellation added to its burgeoning collection of premium wine brands, with an agreement to purchase five Washington brands from Charles Smith Wines for $120 million. The sale is expected to close later this month. With this deal, Constellation says it will become the second-largest supplier of Washington state wines.
The acquisition includes five wines that Charles Smith calls “the five core brands” of his company—Kung Fu Girl Riesling, Eve Chardonnay, Boom Boom Syrah, Velvet Devil Merlot and Chateau Smith Cabernet Sauvignon. Altogether, the brands add up to nearly 500,000 cases per year, selling mostly at $12 to $15 a bottle. Wine Spectator has more on the implications of the deal for both Constellation and Smith.
Solid results in the U.S. market led Rémy Cointreau to a 4% organic sales increase in its fiscal first half (ended in September), as revenue climbed to €513 million ($565m). Rémy Martin Cognac—accounting for more than 60% of the group’s sales—was up 5% to €323 million ($355m) during the period, with U.S. growth driven by its 1738 Accord Royal expression (retailing at around $60 a bottle). Cointreau liqueur also continued to see strong demand in the U.S., Rémy noted, as did its portfolio of Islay spirits—including the Bruichladdich, Port Charlotte and Octomore Scotch whiskies, as well as The Botanist gin.
•Beam Suntory has revealed plans to pour $1 billion into its Kentucky Bourbon operations over the next five years. According to the Louisville Business Journal, Suntory Holdings Ltd. CEO Takeshi Niinami told a Japan/American Society of Kentucky luncheon yesterday that the outlay won’t cover new capital investment, but rather will fund ongoing operating costs at its Jim Beam and Maker’s Mark distilleries amid the U.S. market’s Bourbon boom. Niinami also noted that Bourbon’s current renaissance hasn’t been limited to the U.S. Jim Beam Bourbon now sells more than half-a-million cases in Japan, up from 30,000 cases in 2012, he said. In related news, Jim Beam workers have gone on strike at two facilities in Clermont and Boston, Kentucky, although the company says it has contingency plans in place to to allow operations to continue.
•Jägermeister is rolling out a new bottle design across its entire range, from 50-ml. up to its 1.75-liter bottles. The redesign features a taller bottle with higher square shoulders, a more realistic stag icon, framed label and new copy with information on the product. The enhanced cap also now bears the signature of founder Curt Mast with the founding year of 1878. Marketed in the U.S. by Mast-Jägermeister subsidiary Sidney Frank Importing, the liqueur brand was down 8.7% to about 1.7 million cases last year, according to Impact Databank.
•Australia’s Calabria Family Wines has acquired a Griffith, New South Wales-based production facility, previously owned by The Wine Group, for an undisclosed sum. Located in Australia’s Riverina agricultural region, the site has a crushing capacity of 22,000 tons. The Calabria family, whose portfolio includes the Calabria Bros., 3 Bridges, Richland, Nine Stones and Whistling Duck brands, among others, says the deal will further boost its exports, which currently account for around 70% of production.
•Stone Brewing has laid off about 5% of its workforce in a restructuring effort. The Escondido, California-based brewer blamed the reductions on a slowdown in growth and changes in the craft beer landscape, including a flurry of acquisitions by major brewers and the flowering of smaller “hyper-local” breweries around the country. Stone, ranked as the 10th-largest U.S. craft brewer according to the Brewers Association, noted that despite the layoffs it remains one of the largest employers across the craft category.
•San Diego-based Saint Archer Brewing, in which MillerCoors holds a minority stake, is releasing its Mosaic Double IPA in six-packs of cans to the California, Nevada and Arizona markets. Mosaic (9% abv) is brewed with Mosaic, Amarillo, Simcoe and Chinook hops and is also available on draft. A recent brewery expansion has increased Saint Archer’s production to 65,000 barrels, allowing it to extend distribution beyond its home market of California.
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