News

Consolidation Comes with Legal Challenges 

Wednesday, July 26, 2017 4:48:00 PM

Mergers among alcohol distributors have taken off during the past few years.

Source: winesandvines.com

July 25, 2017

The uptick in mergers among U.S. alcohol distributors has been followed closely by another trend: lawsuits. As many major markets have come to be served by just a few companies, their competitors and customers have retaliated with legal push back.

One of the most recent legal fights is taking place in West Virginia, where one of the nation's largest distributors, Johnson Brothers Liquor Co., and its West Virginia subsidiary Mountain State Beverage are facing a lawsuit from smaller wholesalers.

The Minnesota-based company is the fifth-largest wholesaler in the United States, according to Wines Vines Analytics, and was sued by six smaller distributors in West Virginia. According to a statement by the law firm Bailey & Glasser, which is representing the plaintiffs in the lawsuit filed in early July, Mountain State Beverage used "anticompetitive" practices in an attempt to monopolize the wine market in West Virginia by forcing smaller companies either to sell or go out of business.

The distributors filing suit against Mountain State Beverage include Wine and Beverage Merchants of West Virginia, Atomic Distributing Co., Beverage Distributors Inc., Jo's Globe Inc. and Martin Distributing Co. The companies claim Johnson Brothers and Mountain State operated at a loss to drive competitors out of business, paid fees and used other tactics to induce suppliers to not do business with the plaintiffs and regularly claimed to suppliers and the plaintiffs' employees that the companies would soon go out of business. 

In March of this year, a judge dismissed a lawsuit filed by New York-based Empire Merchants against Breakthru Beverage Group that was formed following the merger of Wirtz Beverage Group and Charmer Sunbelt.

Empire had alleged Breakthru smuggled millions of dollars' worth of alcohol into the New York market via a subsidiary company in Maryland. The case was dismissed with prejudice by a U.S. district judge.

In November of 2016, an owner of several bars in Albany, N.Y., filed a lawsuit against the nation's largest distributor: Southern Glazer's. The owners sought $1.25 million in damages and alleged a Southern employee fabricated thousands of dollars of orders of sales and also charged more than $100,000 through the bars' Southern accounts for alcohol that may have been sold on the side.

According to reports in the The Times Union newspaper, the attorney representing the bars rejected an offer to settle the case because Southern refused to acknowledge such abuses by its staff were widespread.

The company later released a statement to the Albany paper that it plans to "vigorously defend" itself against the "inaccurate" claims in the suit and blamed the wrongful conduct on "a single employee acting independently of company policy and who has been terminated."

The current status of the case is unclear, and James Linnan, the Albany attorney representing the bars, did not immediately return a call or email for comment by Wines & Vines.

The claims in that case are quite similar to allegations in a lawsuit filed earlier this month. Southern Glazer's Wine & Spirits is the target of a class-action lawsuit that alleges "unfair, unlawful, deceptive and fraudulent business practices" that run afoul of numerous state and federal laws.

The lawsuit was filed July 5 in the U.S. District Court of Northern California by the firms Scott Cole & Associates APC and Wakeford Gelini on behalf of San Jose, Calif., resident James C. Nguyen, who holds a liquor license for a San Jose restaurant and bar.

According to the lawsuit, Nguyen learned of Southern's allegedly deceptive practices after he received a tax bill from the state for liquor he never ordered from the wholesaler.

That's because his attorneys argue Southern's management and employees made a habit of using their customers' account numbers to process fraudulent purchases to either achieve their sales quotas or drive up business for lucrative accounts. The lawsuit also alleges Southern sold alcohol to unlicensed third parties as well as provided full-size liquor bottles with "sample" labels for free or sold alcohol for a penny per bottle as "kickbacks" or as a way to keep retailers and restaurants from reporting any unethical behavior.

Southern is also accused of threatening to cut off supply if a restaurant or retailer didn't buy sufficient quantities of brands offered by the wholesaler.

The goal, according to the lawsuit, was to maintain exclusive and profitable relations with the top suppliers and extract as much profit as possible from restaurant and retail clients. "Through its unscrupulous, unethical and unlawful schemes detailed herein, Southern has enjoyed increased revenues, profitability and market share from its larger volume of sales," the lawsuit filing alleges. "These practices have given Southern an unfair competitive advantage over its competition with a resultant disadvantage to the public and class members."

The company's practices, as described in the lawsuit, also allegedly helped secure "highly desirable and highly profitable supply relationships" and that, "during the class period, Southern enjoyed numerous exclusive contracts with alcohol manufacturers/producers, with a resultantly larger client base, more orders therefrom and higher profitability."

A spokesman for Southern did not immediately reply to Wines & Vines' request for comment but was quoted in other news reports as saying the company was still reviewing the allegations in the lawsuit and did not have any comment on the lawsuit.

In a statement released after filing the lawsuit, attorney Scott Cole said the case, if successful, could "substantially" compensate many of Southern's customers for several years' of business. "Southern's clients trusted they'd be treated right-not charged for liquor they never bought, not forced to buy what they didn't need," Cole said. "The sheer number of potential violations is jaw-dropping."

According to Wines Vines Analytics' distributor database Southern operates in 44 states and distributes for 1,178 domestic wineries. On its website, the company claims to sell 150 million cases of wine and spirits per year, and Forbes estimated the firm's total revenue in 2015 at nearly $12 billion.

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Revenue from Illinois' five-year-old cigarette tax hike falls short of expectations  

Tuesday, July 25, 2017 1:28:00 PM

 

 

ILLINOIS NEWS NETWORK

Five years ago last month, another tax hike was hitting pocketbooks around the state of Illinois.

In June 2012, a dollar-per-pack cigarette tax increase raised the state levy from 98 cents to $1.98. The same law also increased taxes on other products such as loose tobacco and supplies. Supporters estimated the state would see an additional $350 million each year from the hikes.

A review of data from the Illinois Department of Revenue, however, shows the number never has come close to the goal.

According to the IDR’s Annual Report of Collections, total revenue from cigarette taxes and the tobacco products tax was approximately $609 million in fiscal year 2012, the final year before the tax increases took effect.

The following year, total revenue collected from cigarettes and tobacco totaled $856 million, meaning $244 million more was brought into state coffers.

Total revenue numbers peaked in 2015, as the state collected $861 million, before falling to $844 million in fiscal year 2016.

All told, in the four years following the tax hikes, the state of Illinois fell about $419 million short of projected additional revenue from cigarettes and tobacco.

“People were saying, ‘See, this is good. People have quit smoking.’ Well, no,” state Sen. Dave Syverson, R-Rockford, said. “For about $20 a carton difference, people have no problem driving over to Indiana, to gas stations just over the border.”

Reports do indicate a decline in the smoking population in Illinois, but one that’s in line with the rest of the country.

The Illinois Department of Public Health uses the Behavioral Risk Factor Surveillance System to track adult tobacco use in the state. It shows 18.6 percent of Illinois residents identified as being a smoker in 2011. That number dropped to 15 percent in 2015, the most recent year data is available. Nationally, the rate dropped from 18.1 percent in 2012 to 15.1 percent in 2015. 

An IDPH official says there may be numerous reasons why the rate has dropped, so it’s difficult to say how big of an impact the tax increase made.

“When you’re surrounded by five states with lower cigarette taxes, the problem is when it gets to be a $15 or $20 per carton difference, people will change their behaviors,” Syverson said. “Will some people quit smoking? You might get some. But, otherwise, you’ll get a lot of migration out of the area.”

At the time of the tax hike, then-Gov. Pat Quinn also touted the increased revenue as a way to shore up the state’s Medicaid program. The state was able to access dollar-for-dollar federal matching funds from the tax on cigarettes for payments to Medicaid. But Syverson says it hasn’t made a huge difference.

“This generates a couple hundred million dollars to help pay Medicaid bills,” Syverson said. “But as a state I think we’re going to spend $10 billion or $11 billion on Medicaid each year, plus the federal matching money. Does it have an impact? Yes, but it is small compared to our overall Medicaid spend, especially since Obamacare kicked in and Medicaid costs increased dramatically.”

Meanwhile, recent cigarette tax hikes in Cook County and Chicago have left the Windy City with the highest per-pack tax in the country, totaling $6.16. Additionally, the city of Chicago raised the minimum smoking age from 18 to 21 in 2016.

Syverson says the high price of cigarettes in the state also led to an increase in smuggling across state lines. Earlier this year, a Cook County grocery store owner was charged with allegedly purchasing millions of dollars of cigarettes at St Louis-area stores and reselling them in Chicago for a much higher profit using Illinois tax rates.

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Labor department to rescind tip-pooling restrictions 

Tuesday, July 25, 2017 1:22:00 PM

Changes would let front- and back-of-house employees share tips 

Source: NRN

Jonathan Maze

Jul 21, 2017

 The federal government is planning to rescind a controversial regulation preventing restaurants from pooling tips, a major victory for industry advocates who had fought the rule for years.

 This week, the U.S. Department of Labor published a notice that it intends to rescind the tip-pooling rule, which the Obama administration put in place in 2011.

 "By all means, this is a huge victory for us," said Angelo Amador, executive director of the National Restaurant Association's Restaurant Law Center. "This is a great development."

 Under the Fair Labor Standards Act, restaurants are able to pay wait staff a lower wage as long as their tips make up the difference, which is known as a "tip credit."

 Historically, restaurants that don't take the credit have been able to take tips and "pool" them, to share with back-of-house staff. Tip pooling is designed to make pay more equitable throughout a restaurant.

 But the Obama administration repeatedly tried to change the rules to forbid tip pooling and let wait staff to keep their tips. The National Restaurant Association has repeatedly fought the efforts in court.

 "We have been litigating this since at least 2010," Amador said.

 The courts have differed in their views over whether the Department of Labor could make such a regulation, with some federal courts agreeing with the association, and others agreeing with the federal government.

 The Department of Labor's decision to rescind the rule should eliminate some confusion over the future of the regulation.

 "At least for the time being, it lifts the confusion that has been created by issuing the rule to begin with," Amador said. "Courts have been all over the place."

 Still, the rule is not in place yet, and Amador said that until it is published restaurants should still follow previous regulations forbidding tip pooling.

 "While this is good news, the law is still what the law is," Amador said. "Proceed with caution."

 Nor will the rule stop the potential litigation.

 Amador suggested that a recent court ruling against the Department of Labor led the agency to reconsider the rule. The U.S. Court of Appeals for the 10th Circuit recently sided with the association and denied a government motion for a rehearing.

 Meanwhile, the association wants to bring tip pooling to the Supreme Court to decide once and for all whether the labor department can make such a regulation.

 Amador said the labor department opted to change the rule in part to make an argument to the Supreme Court to avoid that step. The government would argue that a Supreme Court decision is unnecessary because it rescinded the rule.

 But the association wants to continue litigating to settle the issue.

 "We want to prevent this is three years down the line a different labor secretary decides to give it another try," Amador said. "We want the Supreme Court to decide."

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Beverage Licensees Support Bipartisan Transparency in Music Licensing and Ownership Act 

Tuesday, July 25, 2017 1:20:00 PM
Posted on July 21, 2017

Bill Would Establish Digital Database, Bringing Copyright Ownership & Licensing Information to the Public and Stakeholders

July 21, 2017 – Bethesda, MD – American Beverage Licenses (ABL), a national trade association representing nearly 15,000 beverage alcohol retailers, announced its support today for the Transparency in Music Licensing and Ownership Act (H.R. 3350). The bipartisan bill, introduced by Representative Jim Sensenbrenner (R-WI) and cosponsored by Representatives Suzan DelBene (D-WA), Blake Farenthold (R-TX), and Steve Chabot (R-OH), would establish a reliable, unified database of copyright ownership and licensing information for musical works.

“Beverage licensees thank Congressmen Sensenbrenner for his legacy of strong leadership on music licensing issues and his recognition that increasing transparency in the music licensing system benefits licensees and artists alike,” said ABL Executive Director John Bodnovich. “Many bars and taverns obtain licenses so that music can be legally played in their businesses. The database that this bill calls for will provide them with dependable information on which they can make entertainment choices for their businesses.”

Bar and tavern owners, who already operate in the traditionally-regulated beverage alcohol industry, understand the importance of observing laws and regulations, including complying with copyright laws for the public use of musical works. Beverage licensees generally use copyrighted musical works – either via streaming service, jukebox, karaoke, live bands, DJs, or otherwise – by purchasing licenses from performing rights organizations (PROs). Each year, these licensed beverage businesses support songwriters by collectively paying millions of dollars in licensing fees to PROs.

Under the current system, bars and taverns have no verifiable and reliable way to determine which musical work rights belong to each of the PROs. This prevents beverage licensees from making informed business decisions when it comes to purchasing music licenses and knowing what they are getting when they obtain licenses from PROs. This uncertainty can result in protracted disputes between small business owners and PROs. More ominously, it can lead to bars and taverns shutting down live music in their businesses altogether.

The Transparency in Music Licensing and Ownership Act would alleviate this problem through the creation of a public database that identifies entities through which musical works are licensed in a format that reflects current technological practices; is updated on a real-time basis; and is publicly accessible without charge. By establishing the database under the Register of Copyrights, and encouraging rights owners to register their works with the database, this bill will benefit all stakeholders in the music marketplace.

“This is a bipartisan issue, affecting hospitality businesses in every town, city and state across America,” said Bodnovich. “Beverage licensees have been clear that their focus is on bringing transparency to the music licensing process. The Transparency in Music Licensing and Ownership Act is a sensible step toward that goal, and we look forward to working with Congressman Sensenbrenner to advocate for this legislation.”

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The Strange War on Alcohol Advertising 

Tuesday, July 25, 2017 1:13:00 PM

Source: The American Spectator

KEVIN KOSAR

July 21, 2017

 Earlier this year, there began a drum beat to ban drinks advertising. There was the Washington Post, which ran an article titled, "For women, heavy drinking has been normalized. That's dangerous." To ensure readers were sufficiently panicked, they included "Nine charts that show how white women are drinking themselves to death." The authors fingered alcohol advertising and even an Amy Schumer movie.

 The ivory tower, eager to help, also chimed in. "It is a looming health crisis," declared one academic. Addiction journal, an always cheerful read, issued a "call for governments around the world" to pass laws banning alcohol advertising. "Governments are responsible for the health of their citizens," admonished Prof. Thomas Babor, who edited the issue and long has demonized drink. To this end, public health agencies should be empowered to enforce the ban and punish anyone who violates it.

 The Federal Trade Commission, for its part, frets, "These days, advertising is almost everywhere we go - on television, in the bus, on the street, and on the Internet. Alcohol advertising is no exception. And, as is the case with most advertising, alcohol advertising makes the product look great!"

 What is all so bizarre is that the data on alcohol consumption paint a very different picture of America and drink. A new Gallup survey reports about six out of ten Americans today consume alcohol occasionally, which is about the same level as it always has been.

 But what about alcohol misuse, you may wonder? Well, per capita alcohol consumption is down from 10 liters to 8 liters per year since 1980, a 20% drop. Chronic liver diseases, which alcoholics can get, is down from 15.1 individuals per 100,000 to 10.4 per 100,000 during that same period. Drunk driving also is trending downward.

 But what about the children, you may ask? Well, underage drinking by high schoolers has declined over the last decade. So too is binge drinking by under-age persons. The Centers for Disease Control reports: "During 1991-2007, the prevalence of current drinking among high school students declined significantly, from 50.8% (1991) to 44.7% (2007), and then significantly declined to 32.8% in 2015. The prevalence of binge drinking increased from 31.3% in 1991 to 31.5% in 1999, and then significantly declined to 17.7% in 2015."

 All of which makes the thesis - that alcohol advertising is a peril that demands new laws and new governmental enforcers - very strange.

 Kevin R. Kosar is a senior fellow at R Street Institute and heads its alcohol policy reform program. He is the author of Moonshine: A Global History (2017) and Whiskey: A Global History (2010).

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Preckwinkle Pops Off On Retailer Lawsuits Against Soda Tax 

Friday, July 14, 2017 3:58:00 PM

WBEZ Staff

July 13, 2017

Cook County Board President Toni Preckwinkle on Thursday blasted the Illinois Retail Merchants Association, accusing the group of seeking “maximum negative impact” by waiting to file a lawsuit to block the county’s sweetened beverage tax until just days before it was scheduled to go into effect, a move that will cause “hundreds” of county workers to lose their jobs. 

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“That’s disingenuous on their part, to put it kindly,” Preckwinkle said of the association on WBEZ’s Morning Shift. “We enacted this tax last November. At any point after that, they could have talked to us about compromise. … They chose the very last moment to have maximum negative impact. If they had done it immediately, we might have had this judicated in the courts by now and know where we were.” 

The Illinois Retail Merchants Association did not immediately comment.

A Cook County judge last month put a temporary halt on the penny-per-ounce tax on sweetened beverages after the association argued the tax is unconstitutional and vague. 

As a result, Preckwinkle said each county department and office will have to cut 10 percent of its budget. County officials had hoped to balance the county’s $4.4 billion budget for the 2017 fiscal year with the tax, which was estimated to bring in more than $67 million this year and $200 million next year. 

Cook County State’s Attorney Kim Foxx, a close ally of Preckwinkle who also appeared on Morning Shift Thursday, said any layoffs within her office would be “painful.” A spokeswoman for the Cook County Sheriff’s office said nearly 1,000 employees could receive pink slips

Preckwinkle said 1,100 workers were laid off in November due to budget cuts. She said she doesn’t know how many additional layoffs will be made now. 

Appearing on Morning Shift, Preckwinkle talked about the difficulties of finding another revenue stream and what she expects to be a “protracted court battle” over the sweetened beverage tax. Below are some interview highlights. 

On the possibility of raising other taxes 

Toni Preckwinkle: I don’t think that there’s any source of revenue that I could get nine votes for. You have to understand, we did this last year because it was two years out of an election. I can’t ask my commissioners — because I know I won’t get the votes — to propose another tax increase right before they have to run in the primaries or right before they have to run in the general election. That’s just really unlikely. 

On finding compromises with the Illinois Retail Merchants Association 

Preckwinkle: We enacted this tax last November. At any point after that, they could have talked to us about compromise. What they talked to us about is modifying the rules and [regulations], which we issued in March and we have tweaked since then in every case they at their request. 

And then, two days before the tax was to be implemented, they went to court and sued us. They could have brought suit anytime between November, when we enacted the budget, and the end of June, when we were about to implement the tax. 

They chose the very last moment to have maximum negative impact. If they had done it immediately, we might have had this judicated in the courts by now and know where we were. As it is, we’re in for a protracted court battle. 

On budget cuts 

Preckwinkle: We’ve asked bureau chief, every department head, every separately elected official to cut their budgets by 10 percent between now and Nov. 30. They can do that with non-personnel costs — contracts, vendors, whatever. They can do that through personnel, but since most of our budgets, across the board, are personnel, it’s going to result in some layoffs. I’m not sure the exact magnitude. We’re eliminating a lot of positions, sweeping them as one way of saving money so people can’t fill positions. But we’re also going to end up laying off hundreds of people. 

On layoffs

Preckwinkle: One of the worst things about this job is that I’ve had, over the course of the seven years that I’ve been in office, [is] to lay people off. It’s heartbreaking because the folks who are going to be laid off, it’s no fault of their own. It’s not a reflection of their performance or the importance of the work that they do. It’s because we just don’t have the resources to pay all of our costs.

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California: Liquor licenses are too expensive, and the L.A. dining scene suffers as a result 

Wednesday, July 05, 2017 9:22:00 AM

Source: LA Times

June 30, 2017

 

When I dine out in Los Angeles, I sometimes think of the editor Robert Messenger, who observed that a good cocktail "whets the appetite, pleases the eye, and stimulates the mind. It is one of our conspicuous contributions to cultured living." Or the writer Adam Gopnik, who said that "meeting someplace with old and new friends, ordering wine, eating food, surrounded by strangers, I think is the core of what it means to live a civilised life."

 

This is my way of saying that I like to order drinks at restaurants. But the price tag often stops me. Though California is home to many distillers and some of the world's most productive vineyards, a cocktail and a glass of wine while dining out can easily top $30. Why?

 

Supply and demand explains why wealthy Californians have access to, say, better real estate than poor Californians. There are only so many houses perched above the shores of Malibu, only so many courtside seats at Staples Center, and they go to the highest bidders. But the high cost of ordering a Negroni or a glass or Chianti is largely our creation, the result of a manufactured scarcity in licenses to sell liquor. A restaurateur must incur thousands of dollars in direct costs just to be in the drink business. And the process is so complicated that consultants and lawyers are hired to help navigate it.

 

At minimum, you'll need to pay roughly $13,000 to the state to be considered for a liquor license, initiating a review process that takes 90 days on average - though as the official website warns, "circumstances often result in a longer waiting period." You'll also need to pay a fee to local authorities to be considered for a conditional-use permit. In Los Angeles that costs about $8,000 if you're in no hurry. Expedited review costs closer to $15,000. Did I mention that you need to have your location established before you submit these applications, or that signing a lease without a liquor license requires a leap of faith? (If you can't sell liquor, you probably can't stay in business.)

 

The high cost of ordering a Negroni or a glass or Chianti is largely our creation, the result of a manufactured scarcity in licenses to sell liquor.

But that summary radically understates the costs. As noted, California artificially limits the number of liquor licenses it grants through a complicated process that involves the population size in different census tracts and counties.

 

What's important for our aspiring taqueria owner is that the regulations create a secondary market, which fluctuates according to supply and demand and can make the effective cost of a liquor license for a new restaurant soar well into six figures.

 

Hence stories like this one, from the owners of AQ on Mission Street in San Francisco. "When we opened AQ in 2011," they explain on their blog, "we purchased our license from a closing Chinese restaurant for $85,000. It seemed like a huge cost at the time." But less than five years later, they added, "many licenses are being sold in the $250,000 to $325,000 range!"

 

Big industry players can thrive in spite of those eye-popping upfront costs, knowing they'll pass them along to consumers over time.

 

But as Jim Saksa observed in Slate after surveying the 16 states with similar laws, "the quota system creates barriers to entry stiffer than a shot of cheap tequila, forcing aspiring restaurateurs to take on more debt, or surrender more of their business to equity investors, just to get off the ground." The status quo favors corporate partnerships backed by hedge funds. Meanwhile it's brutal for aspiring restaurateurs who happen to be culinary school graduates with student debt -- and more brutal still for recent immigrants with a dream, a family recipe and a language barrier that makes navigating a complex alcohol bureaucracy even harder.

 

Most Californians are blind to the costs. They don't notice when the would-be owners of a small taqueria never open because the business doesn't make sense without the margaritas; nor do they lament the lost pleasures of the meals uneaten, even as they complain that all the new dining spots are too expensive.

 

The restaurant scenes of many neighborhoods are increasingly geared to diners who can afford $15 or $16 for the pleasure of a cocktail before ordering a pricey Merlot. Want other kinds of restaurants to thrive?

 

Make liquor licenses cheaper.

 

Doing so hardly invites a dystopia. In Oregon, our looser, more egalitarian neighbor to the north, restaurateurs pay $400 for a state liquor license, plus $100 to the city of Portland for a municipal license, if that's where they want to open. Portland's culinary scene is more creative, delicious and fair by virtue of the fact that anyone from the biggest restaurant group to the aspiring chef to the refugee family with a flair for cooking can plausibly execute any concept they want without prohibitive licensing costs.

 

Shouldn't everyone in our restaurant industry have a shot?

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MILLENNIALS LOVE DINING OUT 

Wednesday, July 05, 2017 9:19:00 AM

New survey says that this generation eats out at least five times a week.

 

Source: NACS

June 27, 2017

 

Millennials are falling victim to what Bankrate.com calls "common financial vices," such as spending money in coffee shops, racking up bar tabs or frequently dining out.

 

According to a new study from Bankrate.com, the average millennial dines at a restaurant or buys take-out food five times per week and 29% of millennials say they buy coffee at least three times per week.

 

"Often, it's the minor, habitual expenses, such as take-out and alcohol, that wreak havoc on your budget," said Sarah Berger of Bankrate.com. "Small steps, such as preparing meals at home and brewing your own coffee, can add up to big savings over the course of a year."

 

Overall, Americans are doing a better job with "financial vices." The survey found that 59% of Americans say they don't purchase any brewed coffee or tea in a typical week, 73% say they don't buy alcoholic drinks at bars or restaurants each week and 40% of Americans say they buy take-out or dine at a restaurant no more than once per week.

 

However, millennials have different spending habits than their elders. Bankrate.com found that 54% of younger millennials eat out at least three times per week, compared to 33% of Gen Xers and 32% of Baby Boomers. In addition, 42% of all millennials and 51% between the ages of 21-26 typically go to a bar at least once a week, versus 24% of Gen Xers and 19% of Baby Boomers.

 

"A recent survey conducted by Bankrate.com measuring Americans' emergency savings showed that just 16% of younger millennials have saved the recommended six months' worth of expenses. Money saved from packing lunch and passing on lattes would be a smart investment in building that emergency fund," Berger added.

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Why Off-Premise Consumption is Eating into On-Premise Performance 

Wednesday, July 05, 2017 9:19:00 AM

Source: Wine & Spirits Daily

June 27, 2017

As American consumers increase their alcohol intake at home, the on-premise channel shifted some share over to off-premise in 2016, a trend both Nielsen and IWSR have pointed out to your editors recently.

In a presentation during the annual NABCA convention, Nielsen's Danny Brager shared that volume growth for wine grew 1.5% off-premise and 1.2% on-premise, while spirits volumes grew 2% off-premise and 1.4% on-premise.

According to Nielsen, the key reasons consumers are opting to spend more time drinking at home include: 

.           Popularity of pre-gaming

.           E-commerce

.           Prepared meals/ meal kits

.           Airbnb taking people out of hotel bars

.           More people working from home (lunch impact)

.           Drinking/driving laws

.           Cost/value of drinks under more scrutiny

"The transparency of on-premise mark-ups makes it easier for people to weigh the cost of eating out and paying $12.00 for a glass of wine, versus buying that same bottle of wine for $24.99," IWSR's Brandy Rand tells WSD.

Zeroing in on what IWSR considers the two most important factors behind the increase off-premise, convenience and cost, Brandy says: "Most people believe they can make a meal or cocktail at home better--and cheaper--than going out," she says. In addition, prepared foods at grocery stores are on the rise, and replacing casual dining. "In the end, it's about what's most convenient," says Brandy, and technology is making at-home consumption more convenient.

Subscription food and beverage services, and meal kits like Hello Fresh and Blue Apron, allow consumers to get their hands on items that might not be available in their neighborhood grocery store, which they might have formerly relied on on-premise for.

 "As more and more technology is actually enabling and telling people what to buy, that brand experience and brand resonance becomes crucially important," said Jordan Rost, Nielsen's vp of consumer insights, at the NABCA convention.

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Is big alcohol taking a hit from legal weed? 

Wednesday, June 28, 2017 10:23:00 AM

According to one survey, some Gen Xers and boomers are making the switch from alcohol to pot.

Source: Salon

PAUL ARMENTANO

June 21, 2017

Consumer trend data compiled by OutCo and Monocle Research finds that many California twenty-somethings, post-legalization, are switching from beer to pot. Marketers surveyed 2,000 cannabis consumers in seven major California cities. One-third of millennial respondents said that they are choosing cannabis over beer. One out of five acknowledged substituting weed for wine, and 14 percent admitted consuming herb rather than hard alcohol.

Older respondents, including baby boomers, also reported making the switch from booze to pot. According to the survey, 20 percent of Gen Xers and eight percent of boomers similarly acknowledged substituting pot in place of alcohol.

The findings provide further credence to a December 2016 report from the Cowan & Company research firm which determined that beer sales by major distributors - including Anheuser-Busch and MillerCoors - have "collectively underperformed" over the past two years in Colorado, Oregon, and Washington. In Denver, arguably the epicenter for the marijuana retail sales market, beer sales have fallen nearly seven percent, analysists concluded.

A March 2017 research report by the Cannabiz Consumer Group similarly indicates that cannabis is cutting in on beer's popularity. Researchers reported that 27 percent drinkers surveyed said that they had either substituted cannabis for beer, or that they would do so in the future if retail weed sales become legal. The company estimated that beer sales could decline by as much as $2 billion if cannabis was legal nationwide.

Questions concerning whether cannabis typically acts as a substitute or as a complement to alcohol remain ongoing. But a 2014 literature review published in the journal Alcohol and Alcoholism indicates that the weight of the available evidence supports the former theory - particularly among young adults. Authors concluded: "While more research and improved study designs are needed to better identify the extent and impact of cannabis substitution on those affected by AUD (alcohol use disorder), cannabis does appear to be a potential substitute for alcohol. Perhaps more importantly, cannabis is both safer and potentially less addictive than benzodiazepines and other pharmaceuticals that have been evaluated as substitutes for alcohol."

Survey data from states where medical cannabis has long been legally available frequently report declines in alcohol consumption. For instance, a 2011 patient survey from California reported that those qualified to access medicinal cannabis used alcohol at rates that were "significantly lower" than those of the general public. More recently, a study published this year in the Journal of Psychopharmacology reported that over 40 percent of state-registered medical marijuana patients acknowledged reducing their alcohol intake after initiating cannabis therapy.

Polling data finds that most Americans, and those between the ages 18 to 40 in particular, now believe that cannabis is far less harmful to health than alcohol. Their belief is supported by the relevant science. For example, alcohol possesses a dependence liability that is nearly twice that of cannabis, is a far greater contributor to traffic accidents, and is capable of causing organ failure and even death by overdose. According to a 2011 study comparing the physical, psychological, and social impact of the two substances: "A direct comparison of alcohol and cannabis showed that alcohol was considered to be more than twice as harmful as cannabis to [individual] users, and five times more harmful as cannabis to others (society). . As there are few areas of harm that each drug can produce where cannabis scores more [dangerous to health] than alcohol, we suggest that even if there were no legal impediment to cannabis use, it would be unlikely to be more harmful than alcohol."

The fact that the legal marijuana market may pose potential challenges for the alcohol beverage industry is hardly going unnoticed. The topic was front and center at the 2016 Beer Industry Summit, according to reports from attendees. And last year, industry players contributed funds against voter-initiated legalization measures in Arizona and Massachusetts. (The Massachusetts initiative passed while the Arizona measure was defeated.)

Yet, given the ubiquitous role alcohol plays in American culture, it is hard to imagine a scenario where the emerging legal marijuana market presents a serious threat to Big Booze any time soon. After all, while federal lawmakers have endorsed Congressional resolutions "commending" US beer sales, they simultaneously refuse to amend federal law to even permit marijuana businesses to have relationships with banks or take standard payroll deductions. In short, as long as booze remains king on Capitol Hill, the cannabis industry will continue be engaged in an uphill battle for both respectability and market share.

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