License State News June 25, 2018 NY: Retailers Win in New York

NABCA HIGHLIGHTS OK: SQ 792 — New alcohol law: With Fall will come stronger brew The Public Health Considerations of Fetal Alcohol Spectrum Disorders (White Paper) NM: New Mexico lawmakers consider revisiting complex Native American Nations & State Alcohol liquor laws Policies: An Analysis (White Paper) OK: ABLE exec: Aiming for a smooth liquor law Alcohol Technology in the World of Tomorrow - (White Paper) implementation The Control State Agency Info International News Sheets. Please view website for more information. Australia: Woolworths Group own over half of alcohol NABCA Survey Database (members only) market Upcoming NABCA Meetings United Kingdom: Booze-free beers cost THREE times Statistical Data Reports more than alcoholic ones Mirror probe reveals Japanese researchers hope to be the first to turn wood www.NABCA.org

into booze Canada: Cheaper wine at restaurants? Proposed liquor policy change could make it happen Industry News Tariffs stir unrest among American whiskey producers A New Bar Coming to London Will Promote Women in The Wine Industry Tariffs will create Bourbon ‘casualties’ Daily News Dennis Horton, a pioneer in Virginia's wine industry, dies at 72 Millennial entrepreneurs drawn to starting craft businesses

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LICENSE STATE NEWS

NY: Wine Retailers Win in New York The Empire State's legislature has knocked back measures limiting consumer wine purchases. Wine-Searcher By Liza B. Zimmerman June 25, 2018 In a move reminiscent of UPS and Fedex's pullout from shipping wine from retailers and auction houses to consumers in 36 states this past October, a New York Senator and Assemblywoman recently sponsored two bills that would have – if passed – forced residents to solely purchase though established retail chains. However, both houses have declined to move on the proposals. The bills, NY Senate Bill S05437, introduced by State Senator Terrence Murphy; and Assembly Bill A10737 remained "in committee" when both houses went into recession on June 20th. They were among the many issues left unaddressed by a very unproductive New York legislature this year that left other issues – such as tightening gun regulations, according to the New York Times – unresolved. "There is a tacit agreement if it doesn't get voted out of committee it dies," says John Hinman, a partner in the San Francisco-based, drinks-specialized law firm of Hinman & Carmichael. "Most of the alcoholic beverage bills don't pass," adds attorney Elke A. Hofmann, the owner of the New York City-based Elke A. Hofmann Law, PLLC. However, she notes the New York State's individual process of committees and readings process is baffling. If these bills had passed retailers would have been prohibited from buying from private collectors and at auction. This would have made older vintages and sought-after bottles very hard to find for high-end restaurants and big- ticket buyers. This would be a challenge for the wine market anywhere, but New York is also home to all the major international auction houses. These bills are also reminiscent of when the New Hampshire State Liquor Board tried to block out-of-state retailers from shipping to residents from out-of-state stores last month. Neither Senator Murphy or Assemblywoman Carrie Woerner returned multiple calls and emails for comment. One source noted that Murphy's office is down the street from the local Southern Glazer's Wine & Spirits New York office, so it is likely he received wholesalers' donations. The bills are "dead for the year", says Daniel Posner, owner of the White Plains, New York-based wine shop The Wine Company and president of the Sacramento-based National Association of Wine Retailers NAWR. "But they will come back in January. These bills have appeared for several years," he adds. He goes on to say "members of legislation elect to sponsor bills because of [financial] support. [That] is how politics is run and the wholesalers have all the money." According to Votesmart.org, a site that tracks political campaign finances, no major wholesalers appeared as the top donors for either politician. Despite this Jeff Zacharia, the president of the Scarsdale-based, single-unit Zachys wine store, which also has a major auction business, says that he knows "that New York wholesalers have donated $2.2 million to various New York candidates and election committees since 2014". Tom Wark, the executive director of the NARW, goes on to add that "there was very little support for the bills outside of the wholesalers [themselves.]" The attorney Hofmann adds that the bills are generally the result of systematic lobbying by wholesalers. "This is probably the fifth or sixth year in a row the wholesalers have convinced someone to introduce this bill. We have beat it back each time," she adds. Posner notes that given the strong contingent of great wine stores and passionate wine lovers in New York State, "I don’t see it getting passed". The bill likely didn't pass because groups like NARW, major retailers and the auction houses opposed it. "New York is the wine capital of the United States. In restaurants, in retail shops and at auctions, we have the most diversity and breadth of fine and rare wines in the country. Why the wholesalers or anyone would try to weaken New York's position here is utterly illogical," says Zacharia.

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As a result, the NARW reached out to 4000 consumers who reached out to their lawmakers asking them to oppose the bills. Retailers like Jaime Wolff, co-owner of Chambers Street Wines in New York City, who sent out emails to hundreds of associates and customers. "Consumers are retailers' natural allies," says Wark. "With our system in place to allow consumers to quickly send emails to their lawmakers, our effectiveness has increased significantly," shares Wark in a newsletter. The grassroots efforts by industry and consumers proved themselves to be strong in a vibrant wine market such as New York. Bills NY SO5437 and NYA10737 had sought to empower what is called the "primary American source of supply", meaning that major wholesaler, who have had the right since the repeal of Prohibition to distribute wine and spirits to retailers. However, most wholesalers focus on more recent vintages and rarely offer older vintages or unique bottles of wine, as the market for these purchases is small, so such wines are almost always sourced from auction houses or private collectors. Rare wine sales are a small but important part of the market. "We don't have these statistics, but believe it is less than five percent [of the total market]. However, this five percent makes the market what it is today, giving a diverse and interesting selection of wine in restaurants and at retail," shares Jamie Ritchie, the New York City- based worldwide head of Sotheby’s Wine. This type of legislation would have had "would have a detrimental impact on both the wine auction and retail industries. By significantly restricting the sourcing of wines to one primary source and limiting the vintages available for sale in the secondary market, the bills would severely limit the selection available and transform New York from being an exciting, vibrant wine market to one that is largely devoid of interest," Ritchie says. Private collectors and the auction houses have long found innovative ways around these restrictions when the pop up, such as delivering wines to buyers directly during the Fedex/UPS kerfuffle last October. "The bottom line is that buyers will find a way to acquire what they want. If passed, this legislation would encourage consumers to look outside of the New York market for their purchases, to the detriment of local retail, auction and even the restaurant industry – one of the great draws for visiting a city like New York," shares Ritchie. Should such bills ever pass "all fine wine businesses would have to consider relocating outside of New York State in order to have a chance of maintaining their sales and reputation", adds Ritchie. While the national wholesalers may have deep pockets and significant political influence, New York wine retailers are forces to be reckoned with in one of the world's most vibrant wine markets. "People ought to be able to sell their property when and if they need it. Wine lovers, especially in New York, need to have access to as wide a range of wines as possible," says Wolff. "We advocate for the free distribution of wines throughout the US and hope that the legislators choose not to restrict consumer choice in New York State," concludes Ritchie. His customers and colleagues in the retail business couldn’t agree more.

OK: SQ 792 — New alcohol law: With Fall will come stronger brew The Shawnee News-Star By Vicky O. Misa June 24, 2018 [EDITOR’S NOTE: This is the first part in a two-part series about upcoming changes that can be expected because of an alcohol law approved by voters in November 2016. It will become effective Oct. 1] Come Fall, Oklahomans will be offered stronger brew — and in more places. A new alcohol law, passed by voters in November 2016, is much closer to becoming finalized as the effective date comes this Fall — Oct. 1. Though the higher alcohol content is perhaps the biggest shift to the law, other key

NABCA Daily News Update (6/25/2018) 4 changes aren’t far behind. Residents will visibly notice the convenience as many new businesses — like grocers and gas stations — will be able to add the higher-content liquor to their shelves, and at frosty temperatures. What it means In the state of Oklahoma, State Question 792 legalizes beer up to 8.99 percent alcohol content and wine up to 15 percent alcohol content — 3.2 percent or less is current law. Residents would be able to buy it in grocery stores and convenience stores, and liquor stores would now be able to sell cold beer; the law will go into effect Oct. 1 this year. Age to sell Currently in Oklahoma, employees at liquor stores have to be at least 21 years old to sell or handle alcoholic beverages, but store owners selling only low-point beer are not covered by ABLE and their employees can be young as 16. When to sell Right now the law states that liquor stores can sell alcoholic beverages between the hours of 10 a.m. and 9 p.m. any day but Sunday — and at room temperature. The new law will okay the purchase of refrigerated alcohol in liquor stores Monday through Saturday between 10 a.m. and midnight. Grocers and convenience store owners now can sell cold low-point (3.2 percent or less) beer every day between 6 a.m. and 2 a.m. the next morning. The new law will allow sales from 7 a.m. to 2 a.m. the next morning. Who’s in charge? Right now, the ABLE Commission deals with licensing for liquor stores, but the Oklahoma Tax Commission is the agency in charge of low-point beer sales; the new law will place all oversight into the hands of the ABLE Commission. Pros/Cons to increased availability According to the National Institute on Alcohol Abuse and Alcoholism, at niaaa.nih.gov, global access to and consumption of alcohol has never been higher. But the institute cautions, “it has never been more important to understand the physical and social consequences of drinking. Research clearly shows that alcohol can have both a direct and indirect effect on social life, injury, chronic disease, and death.” On the other hand, according to the Blue Zones Project, at pottawatomie.bluezonesproject.com, a well-being initiative — actively underway in Shawnee — touts the positive effects of enjoying (in moderation) a glass of wine with food and friends each day. Alcohol-related crime Tecumseh Police Chief J.R. Kidney said though he would need to read the actual law to become more educated with it, his initial response is that he doesn’t expect there to be a spike in DUIs or crime. People are going to drink no matter where they buy it, he said. “I hate it for the locally owned liquor stores — they will lose money,” Kidney said, “but it will be convenient for consumers.” See Part 2 on the new alcohol law in this week’s News-Star and watch for even more coverage in future editions as the effective date approaches.

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NM: New Mexico lawmakers consider revisiting complex liquor laws Santa Fe New Mexican Associated Press June 23, 2018 State lawmakers are considering rethinking New Mexico’s complex liquor licensing system in hopes that more local alcohol vendors can help revitalize downtowns in smaller cities, like a brewery did for Truth or Consequences. Members of the Economic and Rural Development Committee agreed to review the licensing system and other ideas to help jump-start downtowns in dying towns this summer. Any proposed changes could be introduced in the 2019 session, the Albuquerque Journal reported last week. Lawmakers cited the Truth or Consequences Brewing Co. as an example of what local alcoholic beverages on tap at the brewery can do for a city. After the brewery’s opening, more businesses began staying open later to benefit from the extra traffic on the city’s Main Street, Rep. Rebecca Dow of Truth or Consequences said. The brewery has also become a venue for live music. “What it’s done for the downtown area is amazing,” she said. Truth or Consequences is about 75 miles north of Las Cruces, near Elephant Butte reservoir and Spaceport America. It’s home to a group of hot springs. The brewery’s success was made possible in part by support from the state. The brewery received about $125,000 in state funding under the Local Economic Development Act to renovate the building it would be housed in. That makes it one of about a half-dozen breweries or distilleries from Silver City to Santa Fe to benefit from the program over the past three years. Because the brewery makes its own beer on site, it did not need a full liquor license. Several lawmakers believe small towns might benefit from making full licenses more accessible. A majority of full licenses are currently concentrated in the state’s largest cities. Businesses that do hold full liquor licenses in small towns include big chain restaurants like Chili’s or Applebee’s. A quota system from the 1980s caps the number of certain licenses, making them extremely expensive, said Sen. Ron Griggs of Alamogordo. In some cases, it can cost $250,000 to $1 million to buy a license from someone willing to sell, Griggs said. He predicts owners of limited liquor licenses would push back if lawmakers tried to make the system more flexible. “Finding the right answer has been really difficult,” Griggs said. State Rep. Debbie Rodella, an Española Democrat who serves as chairwoman of the Economic and Rural Development Committee, said she will add the issue to the committee’s agenda ahead of the 2019 legislative session.

OK: ABLE exec: Aiming for a smooth liquor law implementation NewsOK By Steven A. Barker June 24, 2018 Senate Joint Resolution 68 passed more than two years ago. Now the Oct. 1, 2018, effective date is no longer a far-flung date on the calendar, but is bearing down on us with significant pressure. NABCA Daily News Update (6/25/2018) 6

Many know State Question 792, placed on the ballot via SJR 68, as the “wine in grocery stores” or “cold beer in liquor stores” measure. It is those things and a lot more. As the state's alcohol regulating agency, the Alcoholic Beverage Laws Enforcement Commission has been busy preparing to implement SQ 792. We have now received more than 1,300 applications from grocery and convenience stores for the retail beer license and nearly 800 for the retail wine license. While we don't have any way to determine how many remain, we anticipate roughly 3,000 applications in total. Large majorities of the applications received are from corporate chains such as Dollar General and Walmart, but we expect to see smaller, privately owned stores apply as well. One particular issue has manifested itself that is causing some delay to issuance of these licenses. Oklahoma law requires an applicant for a license to obtain and provide the commission with a “certificate of compliance” from the municipality or county in which the business is located. This certificate denotes the business complies with all applicable zoning, safety, fire and health codes the municipality or county may have. Some applicants are reporting issues with obtaining these certificates. We have hundreds of applications still pending where the commission has completed its work, and the certificate from the local authorities is all that remains to issue the license. By law, we are restricted from issuing a license until an applicant has obtained the certificate. A variety of reasons have been offered by applicants and local authorities for this issue, ranging from confusion to legitimate problems with zoning ordinances that have not been updated to reflect the removal of 3.2 beer in Oklahoma. We have almost completed our application for that desire to ship their products directly to Oklahoma consumers. It will be available on the ABLE Commission website later this summer. The provisions contained in the law restrict the direct shipment of alcohol to include only wine, and only from a licensed that also obtains a direct-shipper permit. Beer and spirits will remain unauthorized for direct shipment. Third-party vendors, out-of- state wholesalers, retailers, wine clubs, etc., remain unauthorized to directly ship into Oklahoma. On Tuesday, the 14 remaining “dry” counties in Oklahoma will vote to approve or disapprove liquor sales by the individual drink in their county. The entire state will consider legalizing medical marijuana through State Question 788. Many are unaware that state law prohibits a county that votes against liquor by the drink from reconsidering passage again for a period of two years. It is at least possible that medical marijuana may become legal in a county where alcoholic beverages, served by the glass, are not. That could be a first in modern American history. Regardless of the complexities and challenges involved, the ABLE Commission is committed to making implementation of the new liquor laws as smooth and seamless as possible. Barker is deputy director and general counsel for the Oklahoma ABLE Commission.

INTERNATIONAL NEWS

Australia: Woolworths Group own over half of alcohol market Inside Retail By Dean Blake June 25, 2018 Nearly 75 per cent of alcohol purchases occur in Australian supermarkets, with over half of the total amount spent in the $15.5 billion market going through Woolworth’s Group, a new report finds from research firm Roy Morgan. “Supermarkets have long been the market leader for the retailing of packaged alcohol, yet hotel bottle shops, independent retailers, wine clubs and duty free stores still find their market,” said Roy Morgan CEO, Michele Levine. Woolworths Group, which includes Woolworths, Dan Murphy’s and BWS, increased its market share of the market by 1.5 per cent in the 12 months to March 2018. NABCA Daily News Update (6/25/2018) 7

“This is largely due to the recent success of Dan Murphy’s, as well as the underperformance of Coles Group’s First Choice stores in the last 12 months.” Coles group saw a slight decline in market share, attributed to small gains in Liquorland and Vintage Cellars. Dan Murphy’s had the biggest increase of share of market for Woolworths Group, increasing by 1.2 per cent. Source: Roy Morgan Alcohol Retail Currency Report The report is based on interviews with 3650 who have recently purchased packaged alcohol for off premises consumption, and includes purchases made in store, over the phone, via mail or a wine club, duty free and online. Liquor was also a strong point in grocery wholesale company Metcash’s full year result, with liquor sales increasing 5.7 per cent to $3.47bn.

United Kingdom: Booze-free beers cost THREE times more than alcoholic ones Mirror probe reveals Sales of non-alcoholic beer have surged 64% in a year, but millions of consumers could be getting a poor deal Mirror By Stephen Hayward June 23, 2018 Shoppers are paying through the nose for boozefree drinks that can cost more than three times as much as the hard stuff. Sales of non-alcoholic beer have surged 64 per cent in a year, while spirit drinkers can also opt for a healthier alternative for the first time. But a Sunday Mirror probe found drinks makers are cashing in on the soaring demand by charging more. As a bonus, no excise duty is payable on anything that contains less than 0.5 per cent alcohol. London-based distiller Seedlip sells its Spice 94 and Garden 108 drinks, aimed at spirit lovers, for the equivalent of £40 a litre. Yet Gordon’s London Dry Gin is on sale at £16 a litre. Tesco sells 20 bottles of US favourite Budweiser for £10, or £1.67 per litre. Yet alcohol-free Bud Prohibition is £2.28. Supermarkets sell Spanish wine for £5.20 a litre. But the Alcohol-Free Shop sells a no-booze version of the same wine for £17.32 a litre. The Light Drinks website offers Spanish cider for £3.90 a litre but Strongbow works out at £2.85. Dr James Nicholls of Alcohol Research UK welcomed the rise in quality of booze-free drinks but called for lower prices. Seedlip said its alcohol-free spirits took longer and cost more to produce than the real thing. Official figures say 10million adults are teetotal.

Japanese researchers hope to be the first to turn wood into booze Besides making a pleasant drink, turning trees into alcohol will also ‘help promote the forestry industry’, says technique’s developer Yuichiro Otsuka South China Morning Post June 23, 2018 Researchers in Japan have developed a technique for making alcohol by fermenting wood, paving the way for the creation of the world’s first wood liquor. The safety of the product, which carries the distinctive aroma of the type of wood it is made from, as a drink is yet to be confirmed, but the Forestry and Forest Products Research Institute hopes people will be toasting with it soon. While bioethanol, also an alcohol made from wood, has long existed as a fuel, it is made using heat and sulphuric acid, making the product unsuitable for drinking. NABCA Daily News Update (6/25/2018) 8 he technique developed by the institute does not require the use of such a harmful substance or heating, which takes away the unique scent of the wood used. Instead, the alcohol is made by adding water to the wood chips, grinding them with a food-processing machine until the content becomes a liquid, and adding enzymes and yeast to ferment it before it is distilled. The final product of the two-week process is a liquid with an alcohol content of 20 per cent and unique aroma of the ingredient wood. “We can find a new appeal in trees if we can create a tasty alcoholic drink from them,” said Yuichiro Otsuka, who developed the technique, adding, “It will help promote the forestry industry too.” Alcohol made from cedar has a refreshing smell, while that made from white birch has a fragrance found in whisky or brandy matured in wooden barrels for a long period. Cherry tree alcohol has a sweet scent. The institute said it is still analysing the content of the alcohol and will seek to commercialise the beverages by partnering with businesses. Japan has one of the highest ratios of forest areas among developed countries, with two-thirds of its land covered by forests, according to the Forestry Agency. But the forestry industry has long suffered from labour shortages, falling demand and price competition as a result of cheaper imports. Output by the industry stood at 466.2 billion yen (US$4.2 billion) in 2016, roughly 40 per cent of its peak of 1.16 trillion yen in 1980.

Canada: Cheaper wine at restaurants? Proposed liquor policy change could make it happen Global News By Simon Little, Digital Reporter, CKNW June 23, 2018 A new liquor policy recommendation to the province could potentially mean a cheaper glass of wine when you dine out. It’s one of 24 recommendations contained in a new report by long-time wine industry lawyer and liquor policy adviser Mark Hicken that was submitted to Attorney General David Eby earlier this week. The report heard from a panel made up of a variety of stakeholders, including representatives of the restaurant, beer and wine industries. The proposal would allow B.C. bars and restaurants to buy liquor at wholesale prices. Currently, licensees pay the same shelf price as the average consumer. “I can’t think of another business that has to deal under this draconian sort of law, it’s absolutely ridiculous,” said Vancouver chef and restaurateur David Hawksworth. “In Europe, you could negotiate with a chateau and purchase the wine from them, just like if I want to go to the farmer and purchase carrots. “When you’re buying on the levels of which we’re buying, you know millions of dollars throughout the year. People would normally roll out the red carpet,” he added. BC Restaurant and Food Services Association president Ian Tostenson was among the panelists, and said that most consumers are shocked to learn that restaurants — who are themselves retailers — are not paying a wholesale price similar to what private liquor stores pay. “We buy our product for resale at full retail prices, we pay the same prices as you and I do when we go in to buy something at the BC [Liquor Distribution Branch (LDB)] liquor store,” he said.

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“The other issue is that we have to buy from government stores, so B.C. is one of the only jurisdictions in North America that does that kind of procedure.” Tostenson said that the system also creates uncertainty for licensees. Often, he said, they’ll be given a price by the producer for a product that isn’t regularly stocked by the LDB, such as a bottle of wine, only to find out that the BC Liquor Store has marked it up again before they get it. The report found that these “hospitality price” retail margins being added to products were not consistent, creating further confusion for licensees. The lack of wholesale pricing is a contributing factor to high restaurant prices for liquor, Tostenson explained, as establishments add their own mark-up on products in order to generate a profit. He said letting restaurants buy at a wholesale price could end up being good news for consumers. “You know, if we had a five, or let’s say a 10 per cent discount, you’re likely to see prices go down five, six, seven per cent in a restaurant, which in today’s restaurant would be very refreshing, wouldn’t it?” Tostenson said. Tostenson added that bringing prices down for restaurants could also bring some relief to an industry that is facing a number of new cost pressures, including the Employer Health Tax and rising wages due to a labour shortage. “They’re being forced up a little bit by the minimum wage over the nexty four years, and that’s a big one because labour is about 30 per cent of your cost, maybe even more to run a restaurant,” he said. “Rents have been going up for restaurants, taxes have been going up, food prices have been going up.” Hawksworth said that consumers could very well see prices drop, but pointed to the same rising cost pressures Tostenson highlighted. “We want to help our employees access benefits, and we want to do everything we can, but we’re going to need something in return. So hopefully this is a significant offer,” he said. “It’s incredibly difficult operating a restaurant, so one or two per cent will make a huge margin, and hopefully it will be a lot more than that.” Hickens’s report acknowledges that switching hospitality customers from a retail to a wholesale price would come with a financial cost to the province. In order to offset that, the report suggests the possibility of creating a second-tier hospitality wholesale price, along the lines of a five per cent markup. Several other ideas proposed in the report would also benefit the restaurant industry, including allowing them to buy liquor from sources other than government stores. That issue made headlines earlier this year when the government seized $40,000 worth of whiskey that handn’t been bought from the government in a “prohibition-style raid.” The report also recommends creating a new distribution system to cut down on the sometimes weeks-long wait for products not carried by government stores. Other ideas include granting permission for the brewing industry to deliver beer without going through LDB warehouses, changing the pricing formula for minimum prices on alcoholic products, and moving all regulatory functions from the Liquor Distribution Branch to the Liquor Control and Licensing Branch. Attorney General David Eby said the province is looking at all 24 of the recommendations. “B.C.’s liquor industry impacts hospitality, tourism, job creation, small business, and culture, and Mr. Hicken’s report and recommendations provide a valuable industry consensus,” he said in an emailed statement. “Improving efficiencies and business relations between the liquor industry and government will benefit our manufacturers, retailers, and customers.” Eby said the province is currently consulting with health experts and looking at whether recommendations would possibly violate trade agreements. NABCA Daily News Update (6/25/2018) 10

INDUSTRY NEWS

Tariffs stir unrest among American whiskey producers Richmond Register By Bruce Schreiner, Associated Press June 25, 2018 LOUISVILLE — Much of the rye whiskey aging in hundreds of barrels at Catoctin Creek Distillery in Virginia could end up being consumed in Europe, a market the 9-year-old distilling company has cultivated at considerable cost. But an escalating trade dispute has the distillery's co-founder and general manager, Scott Harris, worried those European sales could evaporate as tariffs drive up the price of his whiskey in markets where consumers have plenty of spirits to choose from. "If Europe dried up, then we're sitting on inventory we didn't need," Harris said by phone. "And that's a really tough position to be in." What American whiskey makers have dreaded is becoming reality. The European Union will start taxing a range of U.S. imports on Friday, including Harley-Davidson bikes, cranberries, peanut butter, playing cards and whiskey. The union is responding to President Donald Trump's decision to slap tariffs on European steel and aluminum. American distilleries large and small have watched warily as the threat of tariffs from Europe ratcheted up in recent weeks. And while larger, corporate-owned facilities tend to do the most business overseas, small and mid- sized companies could be especially vulnerable, since they lack the ability to stockpile reserves and take other protective steps. Foreign markets have become lucrative for American whiskey makers. Export revenues for bourbon, Tennessee whiskey and rye whiskey products topped $1 billion in 2017, continuing a strong trend in recent years, according to the Distilled Spirits Council. Four of the five top growth markets by dollar value for American distilled spirits were in Europe — the United Kingdom, Germany, France and Spain. Total U.S. spirits exported to the EU in 2017 were valued at $789 million, the distilled spirits trade group said. American whiskey has also been targeted by other countries targeted by the Trump administration, including China, Canada and Mexico. In a recent letter to Commerce Secretary Wilbur Ross, the distilled spirits group said: "The imposition of tariffs on these products by our major trading partners threatens to seriously impede the export progress that has benefited our sector and created jobs across the country." European markets -- led by Germany, Italy and the UK -- represent about 25 percent of Catoctin Creek's overall business, Harris said. The distiller, which makes rye, gin and other spirits, has invested close to $100,000 in recent years to build its European business, he said. It developed special bottles and labels, built distribution networks and promoted its products. "We're continuing on right now, hoping that it will blow over," Harris said. "But I am not a big fan of these trade tariffs. I think they are ill-thought through. I've had certain people say, 'Well, this would be our patriotic duty to take it on the chin so that we can normalize the playing field out there.' But I come from a free-trade background. Let us compete freely, fairly in these markets and our products ... will do well." Some of his inventory could be sold in the U.S. if European sales decline, Harris said. But expanding market share in the ultracompetitive U.S. market is tough for a small distiller. Industry giant Brown-Forman Corp., whose brands include Jack Daniel's Tennessee Whiskey and Woodford Reserve, tried to hedge against tariff-related price increases by stockpiling inventories overseas. About one-fourth of its revenues are generated in Europe. NABCA Daily News Update (6/25/2018) 11

Beam Suntory, whose brands include Jim Beam and Maker's Mark, has "contingency plans in place," company spokeswoman Emily York said without offering specifics. She said "no one wins in a trade war," and the company urged the U.S. and EU to reach a solution. But small and mid-sized distilleries often don't have the luxury to stockpile supplies. "That's just not an option. We don't have that kind of capital," said Amir Peay, owner of the Lexington, Kentucky- based James E. Pepper Distillery, whose signature bourbon and rye brand is James E. Pepper 1776. Peay had projected the European share of his business — now about 10 percent of overall sales — would more than double by next year. His distillery spent hundreds of thousands of dollars in the past year expanding its European presence. Now, the tariffs come as "a punch to the gut," he said. Meanwhile, at the distillery he founded with his wife, Becky, in Purcellville, Virginia, Harris is bracing for a drawn- out trade battle. He worries his overseas distributors might drop his spirits if the dispute drags on, and consumers will quench their thirst elsewhere. Already, rye whiskeys are coming out of Ireland and Scotland, he said, and with a bit of internet digging, "I could probably come up with a German distiller who's making a corn spirit that could, for all practical purposes, be very similar to bourbon." The industry is known for its patience, since whiskey takes years to mature. Harris wants to take the long view. But he sees little reason for optimism on the trade front. "I think we're digging in deeper with China, we're digging in deeper with Europe," he said. "Unless something miraculous happens, I don't have a lot of hope right now."

A New Bar Coming to London Will Promote Women In The Wine Industry The Drinks Business By Edith Hancock June 25, 2018 A new bar has opened in Covent Garden celebrating women in the historically male-dominated wine industry. Lady of the Grapes, a wine bar, restaurant and shop opening in July 2018, will showcase wines made predominately by female winemakers. Owner of the bar in Maiden Lane, 33-year-old Parisian Carole Bryon, believes women are still hugely under represented in the wine industry. She has launched a campaign on Crowdfunder to raise the capital required for the new venture, with a target of £25,000. “When I first started in the industry I realised there were not a lot of women so I want to support all women in wine from the to the shop,” Bryon said. “I want to champion women in the wine trade and make them more visible through our wine list, because it’s not just men who make wine.” Lady of the Grapes will have 29 covers and a wine list featuring 80 wines, 15 of which will be available by the glass and all of which will be organic, biodynamic or natural. Bryon, who worked as an art director in various advertising agencies before running The Grocery Wine Vault shop in Shoreditch, said that due to the rise in popularity of natural and biodynamic wines in recent years, transparency in the industry is more important than ever. “It’s important to offer transparency with what is in wine.” “As there are no ingredients listed on the back of the bottle, like with other edible products, I think certification is important. Customers can rely on this and we all know organic, biodynamic and natural wines are healthier for the people drinking it and for the producer making it.” NABCA Daily News Update (6/25/2018) 12

The organic menu has been designed by chef and restaurateur Victor Garvey, chef and owner of the Catalan restaurant Rambla in Soho and cheese and wine restaurant Sibarita in Covent Garden. Lady of the Grapes is located on the site of his first London restaurant Encant, which closed earlier this year.

Tariffs will create Bourbon ‘casualties’ The Spirits Business By Melita Kiely June 25, 2018 As an international trade row escalates, the US spirits industry has reiterated its warning that retaliatory tariffs will have a “significant impact” on Bourbon and other associated industries. On Friday, the European Union introduced tariffs on €2.8 billion (US$3.3bn) worth of US products – including American whiskey – in response to president Donald Trump’s tax hikes on imported aluminium and steel. Other nations introducing tariffs in response to the White House include Turkey, India, Mexico and China. Trade body the Kentucky Distillers Association (KDA) warned that “there are no winners in a trade war, only casualties and consequences”, adding that the retaliatory measures “will have a significant impact on Bourbon investment, employment and economic growth throughout the Commonwealth”. KDA president Eric Gregory said: “An extended trade war would not only harm our iconic industry, but also Kentucky’s farm families, cooperages, glass and other suppliers, hospitality and tourism partners, and ultimately, our loyal consumers through higher prices and limited availability.” Bourbon and other distilled spirits accounted for more than US$450 million in global exports from Kentucky last year – a 23% annual increase. Of that, almost US$200m was exported to EU countries. The Distilled Spirits Council, which previously estimated that 46% of spirits exports could be hit by retaliatory tariffs, has similarly urged the EU and US “to re-engage as soon as possible to resolve the current situation and prevent needless further escalation”.

DAILY NEWS

Dennis Horton, a pioneer in Virginia's wine industry, dies at 72 Richmond Times-Dispatch By Ellen Robertson, Richmond Times-Dispatch June 23, 2018 During the early 1980s, the great Horton experiment, as he called it, began in Dennis Dunne Horton’s log cabin in Aroda, which came to hold a cellar full of home wine-making equipment and very small barrels of homemade wine. After planting a small home vineyard in 1983, it didn’t take Mr. Horton long to discover that the grapes that grew best in Virginia’s hot, humid summers had thicker skins and grew in loose clusters. That realization sparked a search for that not only would thrive in Virginia, but also would produce world-class wine. He also wanted to expand wine drinkers’ palettes with alternatives to the standard chardonnays, cabernet sauvignons and rieslings that appeared on most restaurant menus. In the warm wine-growing regions of the Rhone Valley in southern France, he found a standout that seemed a perfect match for Virginia’s somewhat fickle climate: the . It not only grew with thick skin and in loose clusters, but it was also used to make some of the world’s finest wines — particularly Chateau Grillet.

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Only a few growers in California wine country were working with viognier at the time, and in limited quantities, but new plantings were increasing across that state. Mr. Horton, who took viognier as his premier grape and launched Horton Inc., now one of the industry’s “most innovative wineries,” died Tuesday at 72 at his home in Aroda. A memorial service will be at 11 a.m. Monday at St. Isidore the Farmer Catholic Church, 14414 St. Isidore Way in Orange, where he was a member. A celebration of his life will be from 4 to 8 p.m., July 9 at the winery, 6399 Spotswood Trail in Gordonsville. Mr. Horton and his wife moved to Virginia in 1977. A marketing graduate of the University of Maryland and Air Force Vietnam War veteran, he and longtime business partner Joan Bieda started Horton Vineyards by acquiring 55 acres of land in 1988. They tasked his wife, a nurse, with establishing the vineyard. Designing for quality, she utilized the “open lyre” method of trellis-training the grapevines, which promotes superior exposure to sunlight and air circulation for ripening and prevention of disease. She put in drip irrigation for ideal soil moisture conditions. In 1990, Mr. Horton became one of the first vintners in his area and time frame to plant viognier, along with smaller amounts of Rhone Valley , mourvedre, and grapes and several other varietals, including 5 acres of the norton grape. A small 1991 harvest was made into wine and aged at Montdomaine Cellars in Charlottesville, noted for its cabernets, according to the Horton Vineyards website. Mr. Horton later took over management at Montdomaine and produced and cabernet under the Montdomaine label in addition to his own line of Rhone varietals. “He loved a rich wine, filled with character, that he could put on the shelf at a price people could afford,” noted Michael Heny, an award-winning winemaker who was a former longtime employee of Horton Vineyards. Mr. Horton’s 1992 wines did well in national competitions, and he began construction on an underground winery, which made its first crush in 1993. The next year he planted more acreage with Bordeaux and Portuguese and Spanish varietals, as well as more of his initial Rhones. He is thought to be the first in the state to plant and make wine from tannat, petit manseng, nebbiolo and rkatsiteli as well as varietals from Russia/Georgia and Italy and pinotage, a South African grape. “His major contribution was planting many of the grapes that are synonymous with the industry today,” Heny said. “He was a fierce advocate for the overall success of ; he wanted to build an industry.” Mr. Horton is credited with launching a movement of growers that made viognier the most widely-planted grape in the state. “The legendary 1993 Horton viognier is widely recognized as the wine that launched the modern era of Virginia wine,” Heny noted. “Many of his wines were finalists in the Governor’s Cup (awards), including the 2001 tannat, 2002 petit manseng, 2010 tannat and 2014 viognier.” In a February 2014 post on www.virginiawine.org, editor Michael Franz noted, “Whereas the wines were once curiosities on account of their origin in Virginia, they’ve now come to stand as such a string of viognier exemplars that one wonders if Horton hasn’t become the USA’s premier producer of the variety.” Horton Vineyards was the first to reestablish the norton grape in Virginia, which enjoyed much success in the 19th century in nearby Charlottesville. With the advent of Prohibition, the nortons were uprooted in Virginia. However some survived in Mr. Horton’s native Hermann, Mo., and “he was intrigued by the idea of reviving this historic grape with its incredible rich, fruit flavor, soft tannins and inky color,” the Horton website noted.

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He took Norton cuttings from a friend at Stone Hill Winery in Hermann, had them rooted in New York and used them in his first vineyard in Virginia. There are more than 126 acres of norton currently planted in Virginia, according to the Virginia Wine Board. Heny found his former boss to be “relentless, clever, demanding, funny. Often with a mischievous sparkle in his eye. He was open with the success and challenges that Horton Vineyards faced through the years, offering advice and insight to all who sought it.” Mr. Horton was a charter member of the Rhone Rangers, a nonprofit group that promotes American Rhone wines. The award-winning Horton Vineyards was among five Rhone Rangers honored this past week at the annual winemakers dinner of the Smithsonian Institution. A strong voice and mentor in his profession, he was a member of the Virginia Wineries Association, the Virginia Vineyard Association and a former board member of the Monticello Wine Trail. “Dennis was a giant in the wine industry,” wrote Richmond Times-Dispatch wine columnist Jack Berninger in an email. Survivors include his wife, Sharon Elaine Eldringhoff Horton; a daughter, Shannon Lee Horton of Aroda; two brothers, Earl Eugene Horton Jr. of Clearwater, Fla., and Phillip Stinson Horton of Tempe, Ariz.; two sisters, Margaret Anne Barret of Chicago and Francine Horton of Wisconsin; and a granddaughter.

Millennial entrepreneurs drawn to starting craft businesses Lenconnect.com By Dmitriy Shapiro Daily Telegram Staff Writer June 24, 2018 ADRIAN — In almost any developing town one looks at today, officials can point at the shiny new brewpub or independent coffee shop in their downtown. These, as well as independent craft distilleries, bakeries and other crafts have been making a comeback after nearly being wiped out for more than half a century. Not just in Seattle or New York, these craft-focused businesses have been making a comeback in small towns across the |country. This rebirth has been happening in Lenawee County: Maggard Razors in Adrian, which produces its own line of craft grooming products; Cotton Brewing Co. in Adrian; Tecumseh Brewing Co.; and the future Atlas Distilling Co. in Clinton are just some of these businesses. And almost all of these local, craft-focused startups are owned by millennials. James Hill, instructor of business management at Siena Heights University, said that he doesn’t see any difference in aspirations from previous generations of entrepreneurs but that today’s young entrepreneurs seem to see fewer reasons not to take that kind of a risk or the same roadblocks. “I was entrepreneurial then, and I think people are still entrepreneurial now. The difference is they’re starting in their 20s rather than in their 30s and 40s,” Hill said. “Are they better risk-takers or more willing to take the chance? Maybe they don’t have as many choices as we did.” Hill said when he left college, there were plenty of job opportunities. “And there wasn’t as much competition as there is today. Today there is,” he said. “Not only are the graduates, recent graduates, that I work with competing against other graduates here in Michigan or the U.S. ... but the people in China, Eastern Europe, Russia — they have the same technology, they have the same skills, they have the same knowledge. That’s who many of them are competing with.” Also, today’s customers are seeking out more individualized products, Hill said. “Back in the day, if you wanted to sell beer, just make as much as you can (and) it was going to sell. It was all about mass. Today it’s much more local, much more custom, much more doing stuff for people you know,” Hill said. NABCA Daily News Update (6/25/2018) 15

“The market has fragmented and people appreciate individual differences now. Customers are different and who they buy from is different.” “I think the era of being able to buy something and resell it is kind of over. I think you kind of have to have some kind of value-added process,” Brett Cotton, 37, of Cotton Brewing said. “In my opinion, I think Amazon and online sales kind of destroyed just kind of being able to buy in bulk, break it down and resell it and make a profit. Because now you can just buy straight from the source, one item at a time. Shipping now is so cheap and so fast, you don’t really need to go into a major warehouse to buy a basic item.” He, along with his wife, Krista, 34, started Cotton Brewing and are now working on opening their Rice & Barley restaurant in downtown Adrian. It will be another location for serving their craft beer, as well as liquor, sodas and other items along with a Pan-Asian menu. “I think it’s in large part a response to what consumers want. People are kind of getting back to, I guess if you go back far enough, what’s happening today is what traditionally happened here,” Cotton said. “People are getting back to knowing where their food comes from, knowing where their beer comes from. And I mean not just that but kind of the artisan feel, the feeling that you’re getting something unique. That you’re not just getting the mass-market stuff that everybody has. That you might be getting something actually special, something made by hand.” Social benefits Millennials, described as those who were born starting in the early 1980s until the mid-2000s, began their life watching their parents work for large, international companies. The older millennials, who started their careers in the late 2000s, had the start of their working lives stunted by the Great Recession. It all started 10 years ago for Arlo Brandl, 30, of Tecumseh, a pastry chef who is the owner of Tecumseh Bread & Pastry. To please his family, he was studying nursing at Michigan State University when he discovered that, while a noble profession, he didn’t get the same satisfaction from it as he did from baking bread. He decided to go into the baking business “knowing fully that I wasn’t going to make a ton of money, but I was at least going to be doing something that I could come home really proud of because of the hard work that was put into it.” “I don’t know what’s going on ... but it’s great,” Tim Schmidt, co-owner and brewer of Tecumseh Brewing, said. “It’s kind of like Old World stuff coming back around. It’s more labor intensive and things like that. I think people just appreciate that more and more.” “For me, a desire for flavor and different kinds of beer was the first thing that got me into craft beer,” Schmidt said. Schmidt, 36, went to Western Michigan University for two years, but said that he didn’t last there, instead coming back to Tecumseh and working at Evans Street Station restaurant. By the time he left, he was a bartender. He worked as a bartender in Ann Arbor, working mostly nights. He started home brewing and applied for an assistant brewer position at Grizzly Peak Brewing Co. in Ann Arbor. After working at Grizzly Peak for a year, he took two 12-week courses in brewing in Chicago. He was hired at Blue Tractor BBQ and Brewing in Ann Arbor and worked for five and a half years before opening TBC with his friend and co-owner Kyle DeWitt. “I like the process. I still say I like the smells that go on when you’re brewing beer,” Schmidt said. “Obviously, the work that you put into it is rewarded with good beer if you do it right.” Quality of life Nearly every business owner and craftsperson interviewed said that their current path was not the one they originally set out upon after their schooling.

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Brett Cotton holds a bachelor’s degree in business and a master’s in organizational leadership. Krista Cotton has a bachelor’s in accounting and a master’s in organizational leadership. Krista Cotton worked as a certified public accountant for a firm and as a controller at an industrial contracting company. Brett Cotton left to work at Sprint in Washington, D.C., before leaving in 2013, coming back to Lenawee County where he worked a very different job overseeing production at a local drill bit manufacturer. “The telecom industry was exciting when it took off in the early 2000s. Everybody was excited to have something new and innovative in their hand and every year something new would come out and people got excited,” Brett Cotton said. By the time he left, “everybody had a cellphone, everybody hated their cellphone and everybody that came in told you that they hated their cellphone. Even working at the corporate offices in D.C., it still all came back to customers purchasing phones and buying air time and keeping them happy.” “We both got burned by corporate America pretty bad,” Brett Cotton said. “We both did a master’s degree for corporate America and when things were bad, we got cut.” “But that, actually, made (starting our own business) a lot easier to decide,” Krista Cotton said. “ ‘Well, we have nothing to lose, let’s do it.’ It takes away that fear.” Owning a business is more exciting as well as dangerous, according to Krista Cotton. “There’s no fallback net. ... But it makes everything a lot more interesting instead of sitting at a desk knowing what you’re going to be doing every single day — going through the doldrums of cubeville — you’re kind of out there experienceing things,” she said. “No two days are alike. If there’s a problem, you’re the one dealing with it. There’s nobody there to catch you.” Still, Krista says that her training as a CPA has helped them make business decisions by being able to review financial documents and making projections. This made their transition to business ownership easier because they did not have to rely on anyone else for that kind of knowledge. “At the end of the day, you don’t get to turn it off,” Schmidt said. “That’s the difference for me. I enjoy working for myself. As an artist, I get to ... create things that I want to do and for the most part we’ve got a pretty good group of regular people coming here that allow me to do that,” he said. “For me, brewing beer is sort of my form of expression.”

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