Archive for February, 2016

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Feb

News Briefs for February 8, 2016

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•Total Wine & More is set to open its first Bay Area store on February 11, in Fremont, about four miles away from a BevMo outlet. The Fremont site is expected to be joined later this year by another location … Continue reading →

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Feb

Craft Brewing and Distilling News for February 8, 2016

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•The Craft Brew Alliance (CBA) has reported a 2% net sales rise for fiscal 2015, even as the group’s shipments fell 1% on the year prior. Depletions were flat, due to declines from CBA’s Redhook, Resignation and Widmer Brothers brands. … Continue reading →

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Feb

Foley Family Wines Acquires Chalone From Diageo

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Foley Family Wines has agreed to acquire California’s Chalone Vineyards from Diageo, as the drinks giant continues to shed its wine assets. The purchase includes the Chalone Estate Vineyard and Gavilan brands as well as nearly 1,000 contiguous acres, with … Continue reading →

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Feb

Diageo completes wine category exit in US

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Foley Family Wines has purchased Diageo's Chalone Estate vineyards and Gavilan brands in California, marking Diageo's exit from wine in the US. Read more

Feb

Passion, Cuba, Women & Wine

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Duck and Cover

I remember walking to school shortly after the Cuban Missile Crisis. We were practicing ‘duck-and-cover’ drills in our classrooms, and we trained on what to do when we saw the blinding white flash. The propaganda video clip at the top is a great example of the beliefs of the day.

Wine and Cuban Hero Che

Walking to school in the early 60's, I’d plan where I would hide along the route just in case. One of the neighbors had a bomb shelter but after that, it was refrigerators in garages and fireplaces as the preferred hideouts. It was a discomforting time for the Country. President Kennedy embarrassed in the Bay of Pigs Invasion was staring down Khrushchev, the Premiere of the former USSR in a game of nuclear chicken with continental annihilation hanging in the balance.

With that as context, it’s surreal to find myself sitting in a bar in Havana Cuba writing this piece and participating in an official U.S. Trade Mission promoting California Wine. We're not promoting world peace or selling tractors. We're promoting a luxury product to a socialist country.

In the past 70 years executive orders have made it almost impossible to do anything with Cuba, but on this mission we are able to travel based on carve outs for agricultural products. People in the boomer generation never thought they would see Cuba in person. And while tourism from the US is still illegal, the fact that I’m here is a statement of how far relations between the countries have come.

This is a change that isn’t going to reverse course. While I doubt Cuba will ever return to a free-market economy given the scars and excesses that led to their Revolution, this change to allow greater openness will create large economic opportunities for those participating in rebuilding country, for businesses selling into a growth market, and for foreign investment partners.

Vinum Non-Grata

I learned so much in this trip about the culture, history, people and their view of what has taken place between the U.S. and Cuba from their angle, but I want to try and stick largely to the wine opportunity in this post. And starting there, if you are like me the first question you are asking is, why bother selling the Cuban’s wine? There are great reasons, but let’s start with the circumstances that make Cuba a difficult export market.

Terminal Two, Havana Airport

Even with a metropolitan population where eighty percent of the people live in Havana, the average monthly salary is just $20. There are still government subsidies for food basics and medical care is free, so salaries go a little further.

They don’t have an official unemployment rate because socialism doesn’t allow the concept, but I was told there were about 15% of the population who are “available.” The infrastructure is crumbling as 80% of the structures were built before Castro took power in 1959 and only 8% has been built since. Havana is the definition of deferred maintenance.

Major Street and Edifice Overlooking Harbor

Driving through the city, it’s sad to see beautiful colonial structures everywhere with concrete chipping off exposing rusting rebar in the columns. Probably only forty percent of the buildings and homes are even painted because a single gallon of paint would cost 25% of your pay check. There are an average of 3 houses every day that collapse and kill people living inside due to disrepair just to give you an idea of the economic problem.

Congressional Building & CA Wine Symposium

Exporting wine takes some time as well. While there are a few US Wines sold there already (I found a bottle of Wente in one wine shop), to get permission to sell there take two approvals that are needed through US Agencies, as well as three approvals needed from Cuba.

The US end takes time, but the Cuban end takes time and is a little more cluttered with changing requirements and cross agency input. But my sense from the Cuban’s is the process is something that’s improving.

With respect to consumption, Cuban’s don’t spend much on alcohol at all given their incomes, and until recently wine wasn’t on the list of desired product compared to rum. Those who are experimenting with wine seem to be early in adoption and by my own observation, seem skewed today to inexpensive white and slightly sweet wines, much like young US consumers.

Total consumption is 377,000 cases per year in the country, which is about .4 liters per capita, but that is inflated by tourism which is expected to grow to 5M people per year within five years, and that gets us to why Cuba can be an interesting export market.

Vinum ad Animam

While we were there, we learned one of the major cruise lines will start service to Havana this summer. There are already some smaller ships coming into port and routine flights from most other countries in South America and Canada, but the addition of the big ships will add a mass influx of wine consuming foreign nationals, particularly the Americans if the two countries can move forward on normalizing relations and allowing US tourism into Cuba. And tourism isn’t a fad or new initiative. Government sanctioned tourism started in the 1990’s.

New Russian Embassy

When the Soviet Union collapsed and they left Cuba in the 1990’s, outside information started to trickle in. (Actual satellite and internet is still unavailable to most Cuban’s.) The Russians took about 60 percent of the Cuban GDP with them in what is called in tongue-in-cheek fashion today, “The Special Period” which included 16 hours without power every day to give an indication of the pain experienced.

Without foreign aid from the USSR, the Cuban government had to start making changes to survive such as allowing people to start non-government controlled businesses which today accounts for 27% of employment.

While growth in wine is today a miniscule 2% a year, consider the majority of the wine consuming world is contracting in consumption, so growth is good! Consider also that the Cuban’s are showing interest in wine and are buying low cost imports for domestic consumption and that they are a highly educated populace which is a consistent thread for wine consumers.

But the real immediate opportunity which will happen rapidly is having representation in tourist areas and picking up a part of the large tourist dollars being spent. In addition to Cuba, there is the U.S. Virgin Islands, Puerto Rico, and other Caribbean islands that could fit into a nearby export program for a winery. While China is a long way across the ocean, a flight to Cuba from Miami is about 25 minutes and far more affordable.

Plaza Vieja in Havana which was a slum 5 years ago

The Government began designating tourist areas in the 1990's, relocating people from those areas, starting up restaurants and bars, and repairing the run-down historic areas of Havana. They even partnered with others to build some western style hotels with internet and satellite TV. Today, tourism represents 51% of the economy and government/private partnerships are being set up in exponentially to help improve business conditions and attract needed investment.

Recognizing the opportunities in the 1990’s, the Spanish, Chilean’s and Australians started importing wine, so today the wine lists in hotels and restaurants are filled with those foreign offerings but mostly trended to Chilean and Spanish. All the restaurants and bars I visited did have wine on the list.

Cuban Compass Band

I knew you wouldn't read the business part. You just wanted to see this amazingly hot performance ensemble above. This group played at the Grand Tasting of the Symposium. I have many short videos of the larger group who played but this will give you an idea why the title of this post.

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For those travelling with me, here are additional videos with grateful acknowledgement for the contribution from Prof. Marianne Wolf from Cal Poly:

Arrival in Havana and bus ride

Tour of Old Havana

Havana Food and Wine Shop

Opening Reception at the Yacht Club

Bacardi Factory & Hemingway Bar

California Grand Tasting

Jose Ernesto Humidor Factory

Bonus video I watched before going. Lots of the sights from the trip.

Feb

Casa Cuervo Takes Aim at Upscale Tequila Category

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The Beckmanns, the family behind Jose Cuervo, have given a rare on-record interview about their plans to create a Napa-Valley-style tourist destination in Tequila and grow their presence in the high end. Amid the claims that nearby cartels "tend to lea... Read more

Feb

This week in spirits & wine, featuring another Havana Club twist, Australia’s wine failings and Islay’s special-ness

Categories: Wine Industry News

Tags: news

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Here's a round-up of this week's top stories in the spirits & wine categories. We also have similar round-ups for beer & cider and soft drinks & water. Read more

Feb

Phillips Distilling Sees UV Turning Around, As Revel Stoke, Prairie Organic Thrive

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Led by its flavor-focused UV vodka range, Minneapolis-based Phillips Distilling Co. has faced a challenging landscape lately as U.S. consumers continue to favor brown spirits categories. After tripling in volume from 2007-2012 and earning multiple Impact “Hot Brand” awards, UV … Continue reading →

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Feb

Rémy Cointreau Renews A Host Of U.S. Distribution Agreements

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With the middle tier seeing seismic changes recently, Rémy Cointreau has announced a slate of distribution agreements covering more than 40 states. RNDC continues to be Rémy’s top partner, handling its brands in 21 states—including new deals in Maryland, Washington D.C. and … Continue reading →

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Feb

News Briefs for February 5, 2016

Categories: News, Wine Industry News

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•Amazon has extended its Prime Now alcohol delivery service to the San Diego market, joining New York and Seattle. In San Diego, Amazon has partnered with retail chain Keg N Bottle, which has nine locations in the area, offering beer, … Continue reading →

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