We came away from our recent trip to Vegas more positive on our Overweight MGM Strip recovery thesis as group bookings for the market appear to be ahead of budgets while investor RevPAR expectations remain in check. LV Locals top-line growth remains elusive, but we continue to see EBITDA upside for BYD in this segment as the competitive environment is better than 6 months ago and there continue to be cost refinements. Key takeaways (see inside for further thoughts): Las Vegas Strip. Sentiment around the Strip operating environment remained positive despite the noticeable weakness in February gaming results published by the state (appears driven by baccarat volatility). Operators said visitation strength in 1Q was at least inline with their expectations (MGM guided to +10% RevPAR growth). While no operator gave specific 2Q-4Q RevPAR guidance, commentary on forward bookings continues to be positive as few suggested that they had already surpassed their annual group booking budgets, which will help drive rate, and we believe consensus expectations of ~3-4% are reasonable. In addition, 2015 / 2016 bookings continue to strengthen, validating MGM’s commentary that 1Q13 strength can be a stepping stone. LV Locals. We met with a number of LV Locals operators and consensus remains that top-line growth will likely be hard to achieve in 2014 (we model +1% revenue growth for BYD). While leading indicators remain positive, they have yet to translate into gaming revenue growth. Suggestions for why this was were: i) While unemployment levels have improved, hours per week have declined (down ~20% from peak) resulting in lower levels of disposable income; ii) Companies have shifted employees from full-time to part-time to keep healthcare costs down as a result of new ACA guidelines; iii) Lack of interest income for retirees; iv) Negative impact from proliferation of Dotty’s (slot machine parlors that use cheap cigarettes as a marketing tool) which now have ~120 locations in the LV area. Macau. We heard much of the same as we did on our trip to Asia two weeks ago (see Casino Tale No. 31: Macau Gaming Trip Takeaways which we published with our Asia Gaming analyst, Praveen Choudhary). Operators continue to be bullish on the underlying strength of the Macau market. Union Pay scrutiny is in the press but not in the market. The market today continues to be underpenetrated and we think LVS / Sands China have an opportunity to better utilize room footprints for premium mass gaming customers as the depth of their databases increases. Operators are conscious of the risk around labor inflation / shortage, but we think they may be underestimating it. Online Gaming. While operators acknowledged that the NJ market is smaller than initially thought as a result of technology issues (detailed in our note US Online Gaming: “You Can’t Shut Down the Internet”), they still believe there will be a significant ramp (NJ can be a ~$500m market). Companies are hopeful they can use their online databases to grow on-ground business and are seeing positive customer behavior in terms of length of use, how quickly customers make deposits, and how long customers leave deposits on their sites. Company take-aways. We continue to recommend LVS and MGM as our favored ways to play the continued strength in Macau and for MGM, a levered option on the LV Strip recovery as well. We like BYD for the longer-term LV Locals recovery and US online gaming growth.


Can we expect to see Aviva, the superyacht owned by the Bahamas-based currency billionaire Joe Lewis, steaming into London soon to allow its maverick owner to shake up the stockmarket? Rumours are swirling that Mitchells & Butlers, the pub chain for which Lewis launched an audacious (and failed) takeover attempt in 2011, is eyeing a merger with the rival pub company Greene King. Bankers from Deutsche Bank are reportedly working on making the potential deal shipshape.


The convenience store industry’s in-store sales have seen rapid growth over the last decade, as consumers seek out more food and beverages on the go, according to new NACS State of the Industry data. Source: NACS April 3, 2014 U.S. convenience stores reached record in-store sales in 2013, with sales climbing 2.4% to $204 billion. Combined with motor fuels sales of $491.5 billion, overall convenience store sales were $695.5 billion, according to figures released today by the National Association of Convenience Stores (NACS). The industry’s 2013 numbers were announced at the NACS State of the Industry Summit, a two-day conference that reviews and analyzes the industry’s key economic indicators. The convenience store industry’s in-store sales have seen rapid growth over the last decade, as consumers seek out more food and beverages on the go. In-store sales in 2013 were led by continued growth in foodservice (2.4%), driven by prepared food and commissary. Motor fuels sales also hit new highs on a per-gallon basis, with sales climbing 0.9% to 132,029 gallons per store per month. While fuels sales per store increased on a unit basis, a 2.9% decrease in gas prices led to an overall 2.1% decrease in fuels sales. Although the industry again realized strong sales, store-operating costs increased at a faster rate than sales and led to a decrease in industry pretax profits, which fell from $7.2 billion in 2012 to $7.1 billion in 2013. The biggest increase in costs was wages and payroll taxes. The industry saw a dramatic 19.5% increase in employees, a function of the industry’s continuing embrace of foodservice, which requires more labor to manage. The link between fuels and convenience retailing continues to grow. Overall, 83.7% of convenience stores (126,658 total) sell motor fuels, a 2.7% increase (3,369 stores) over 2013, according to the 2014 NACS/Nielsen Convenience Industry Store Count. The U.S. convenience store count increased to 151,282 stores as of December 31, 2013, a 1.4% increase (2,062 stores) from the year prior.Convenience stores also account for 34.3% of all retail outlets in the United States, according to Nielsen, which is significantly higher than the U.S. total of other retail channels including drugstores (41,378 stores), supermarket/supercenter (37,459 stores) and dollar stores (24,853 stores). Beyond sales, convenience stores are an important part of the economy. They employed 2.2 million people and generated $174.5 billion in federal, state and local taxes in 2013. Overall, convenience stores sales represent 4.0% – or one out of every 25 dollars – of the entire $17.4 trillion U.S. gross domestic product. “Our industry numbers demonstrate that convenience and fuel retailing continues to grow, despite economic and retail environment challenges,” said NACS Chairman Brad Call, vice president of adventure culture at Maverik Inc. “These numbers show that we continue to meet the needs of our diverse consumers throughout the United States.” Motor fuels continued to drive revenue dollars, but in-store sales drove profit dollars. Overall, 70.7% of total sales were motor fuels, but motor fuels only accounted for 35.6% of profit dollars. Motor fuels gross margins were 18.5 cents per gallon before expenses, or 5.3%. The industry’s bifurcation also continues, with a considerable difference between top quartile and bottom quartile performers. Top quartile performers had hot dispensed beverage gross profits that were 7.3 times greater than those of the bottom quartile; prepared food gross profits 3.0 times greater than the bottom quartile; cold dispensed beverage gross profits 3.9 times greater than the bottom quartile; and packaged beverage gross profits that were 2.4 times greater than the bottom quartile. Of major interest to retailers this year was the breakout of industry numbers into regional benchmarks, allowing them to compare key metrics against more companies in their respective markets. Here’s how in-store sales were broken down in 2013: Tobacco (cigarettes and other tobacco products): 37.0% of in-store sales Foodservice (prepared and commissary food; hot, cold and dispensed beverages): 18.0% Packaged beverages (soda, alternative beverages, sports drinks, juices, water, teas, etc.): 15.5% Center of the store (candy; sweet, salty and alternative snacks): 9.9% Beer: 7.9% Other: 11.7% Meanwhile, foodservice was the category that drove profits, accounting for 29.1% of gross profit dollars. Packaged beverages were second, accounting for 19.6% of gross profit dollars. While tobacco products constituted 37.0% of in-store revenue dollars, they accounted for only 18.7% of gross margin dollars. The industry’s 2013 metrics are based on the NACS State of the Industry survey powered by its wholly owned subsidiary CSX, the industry’s largest online ?database of financial and operating data. Complete data and analysis will be released in June in the NACS State of the Industry Report of 2013 Data.?


VEEV SPIRITS has appointed industry veteran Jeff Feist to the newly created position, Vice President Sales. Feist has been in the spirits industry for more than 20 years; for the past 17 years he was with the Phillips Distilling Company, most recently as Executive Vice President.Reporting directly to Bryan Crowley, President and COO, Feist will be responsible for driving VEEV Spirits sales in the U.S. He will be responsible for leading a sales organization that has nearly tripled in size in the last year with U.S. sales that have grown +80% in the last six months. “Jeff is an industry veteran and skilled sales leader with a proven track record of building strong distributor and retail partnerships to take brands to new heights,” says Crowley. “I look forward to working with Bryan and the VEEV team to strengthen the relationships already in place while developing new relationships at the distributor and key account level,” says Feist.


Governor Branstad has reappointed Stephen Larson as the Administrator of the Iowa Alcoholic Beverages Division (Iowa ABD) for a second four-year term. Larson began his first term May 1, 2010, after being appointed by former Governor Culver. During his tenure, Larson has been dedicated to increasing transparency and accountability while improving the quality of service for Iowans. He is the Chairman-Elect of the National Alcohol Beverage Control Association and a member of the National Conference of State Liquor Administrators. “After taking over the division in 2010 after the State Auditor’s office found numerous deficiencies and mismanagement, Steve Larson has displayed strong leadership in turning the Alcoholic Beverages Division around,” said Branstad. “I’m pleased his well-deserved reappointment has been confirmed by the Iowa Senate and am confident he will continue to be a strong asset in our administration.” Throughout his first term Larson implemented initiatives including policies and procedures for enhancing customer service, improving efficiencies and space utilization, initiating education and outreach programs, renewing the alcohol compliance program, and increasing transparency. He has also focused on revitalizing the agency’s relationships with partners such as licensees, other state agencies, prevention groups, trade associations, industry partners and local law enforcement officials. “I am honored to have the opportunity to serve the State for four more years and will continue to carry out those goals set forth by the Governor to bring the Iowa ABD into the future,” said Larson. “I will continue to focus on the core functions of regulation, licensing and distribution while implementing strategic initiatives to increase efficiencies, advance technologies and improve customer service.” A native of West Burlington, Larson’s career in public service dates to 1984, when he began working for the state treasurer’s office. He has extensive experience in regulatory compliance, treasury management and governmental relations. Larson has served on numerous boards and commissions including the State Appeals Board, Vision Iowa, and the Iowa Accountability and Transparency Board. Notable achievements include the 2007 Presidential Distinguished Services Award for Outstanding Service, Golden Dome awards on Dedication to Process Improvement and Leader of the Year in 2003. Larson graduated with honors from William Penn University in Oskaloosa, Iowa, with a B.A. in Business Administration.


Lettie Teague Speaks With Respected Wine Authority Clive Coates Wine drinkers who dislike the 100-point scoring system (and there are quite a few) might want to consider the “Coatesian” classification of wine. English writer and critic Clive Coates rates wines by means of adjectives, utilizing words like “fine” and “very good”-occasionally augmented by “plus”-to indicate the quality of a particular wine. For example, a wine that is “very good” but has a little something extra would be scored as “very good plus.” A wine that was even better would be “fine” or “fine plus,” or even “very fine plus.” But calling a wine “fine” makes it sound like it doesn’t quite measure up to a wine that is “very good,” I protested to Mr. Coates, who was in New York to promote his latest book, “My Favorite Burgundies.” The 72-year-old is one of the world’s most highly regarded authorities on wine, particularly the wines of Burgundy, where he now makes his home. Mr. Coates has written nine books about wine, and his “Côte d’Or: A Celebration of the Great Wines of Burgundy” is considered a seminal work. Mr. Coates seemed surprised that I misunderstood his terminology, thinking perhaps it was confusion born of cultural differences-the linguistic rift that occasionally widens between the Americans and the English. The two of us were at Crush Wine & Spirits-I’d asked Mr. Coates if we could do a bit of pre-lunch browsing together: I wanted to look at Burgundies through his eyes. Mr. Coates seemed mostly surprised by the high prices the wines command in New York. “I find the idea of a premier cru Marsanny for $58 to be a lot of money,” he observed, adding: “Obviously you Americans are not as poor as I thought.” But he admired the store’s selection of the more basic Burgundies. “It’s nice to see some good generics,” he said to Joe Salamone, the Crush wine buyer, and Ian McFadden, the director of fine and rare wine, who were standing nearby. Mr. McFadden offered to show Mr. Coates the rarer, more expensive Burgundies in the store’s back room. Mr. Coates declined. He was perfectly happy examining the lesser wines-many of them made by his friends and neighbors. He was particularly pleased to see a wine from Domaine Dureuil-Janthial. “We had Mr. Dureuil’s Aligote at a luncheon recently and it was delicious,” Mr. Coates said. (Aligote is the “other” white grape beside Chardonnay grown in Burgundy that is used to produce inexpensive but often quite good wines.) “Do you find that Aligote is better than it was 20 or 30 years ago?” Mr. McFadden asked him. “I think wines in general are better than they were 20 years ago. The quality of everything has gone up in almost every country,” replied Mr. Coates, adding that it was also easier to make wine. Or, as he put it: “It’s possible to make wine in a bucket of sand on the North Pole.” Mr. Coates has been writing about wine for decades; he started out as a wine merchant in London and took up writing on the side. He even founded a magazine, Vine, which lasted more than a decade. All Mr. Coates would say on the subject of its circulation or readership was: “It provided a good living.” His first few books were about Bordeaux, the region he knew best and visited the most often in his early years. Of course, both Burgundy and Bordeaux were very different places back then, Mr. Coates noted, as were the wines. Most Burgundies were bottled by negociants rather than individual domaines, and few of the important Bordeaux chateaux were owned by corporations, as they are now. Mr. Coates lives in the Côte Chalonnaise region of Burgundy just south of the Côte d’Or-an area that he described as a “gastronomic desert.” And worst of all, there is no decent Chinese food to be found, so when Mr. Coates visits New York he makes sure to eat as much of that cuisine as he can. He had already eaten at several Chinese restaurants by the time we met at Shun Lee Palace in Midtown. Mr. Coates generously supplied the wine for our lunch-a lovely 2005 Trimbach Cuvée Frédéric Emile Riesling that was from Alsace rather than a Burgundy. The former is an easier match with the restaurant’s cuisine, he noted, though “Marsanny Rose is a great wine for Chinese food,” he said. We talked a bit about his early years in Burgundy and the differences between Burgundy and Bordeaux. “Burgundy is a very friendly place. It’s a very relaxed place and it’s a family place. In Bordeaux, there is no one who ‘lives over the shop,’ so to speak. You can’t go and chat with the owner. You can do that in Burgundy,” Mr. Coates said. Burgundy lovers can do just that under Mr. Coates’s guidance, as he takes very small groups of wine drinkers to visit various Côte d’Or domaines-places they might not find on their own. “I know the people where you will get the best visit even if they aren’t most fashionable,” he said. Mr. Coates regards it as his responsibility as both a journalist and a tour guide to introduce people to the small growers he feels should be better known. They don’t need him to tell them about Domaine de la Romanée Conti, the most famous domaine in Burgundy. Or, as he said: “They don’t need someone to tell them how good DRC is.” Famous or otherwise, I was sure that the wines were all very fine-perhaps even very fine plus.


The NCAA Doesn’t Sell Alcohol to the General Public at its Basketball Championships. Seven members of a bachelor party slumped on the couches of an Indianapolis hotel lobby last Sunday, nursing cans of amber ale before they headed to the NCAA men’s basketball regional final between Kentucky and Michigan. Two days earlier, the men had arrived for a day of semifinal games at Lucas Oil Stadium to a sobering sight: “The beer taps were all removed,” said a member of the party. “We were like, ‘Aww.We’re screwed.’ ” A bachelor party in Indianapolis last weekend, which also visited the home of ‘Garfield’ creator Jim Davis, was surprised to learn at the NCAA basketball tournament’s Midwest regional games that the NCAA prohibits the sale of alcohol to the general public. Clockwise from bottom left: Dan Kador, Robert Newton, Bill Conroy, Ryan Spraetz, Nate Walsh, Kevin Wombacher and Kyle Wild. Courtesy of Dan Kador The men’s basketball Final Four that begins Saturday in Arlington, Texas, is the culmination of the highly popular tournament run by the National Collegiate Athletic Association, with an anticipated TV audience of millions and a sellout of AT&T Stadium.But thousands of fans who attend the games will be forced to swallow a policy that is nearly unique among major American sporting events: The NCAA doesn’t sell alcohol to the general public at its championships. The NCAA is so serious about the ban that host sites are even required to cover up any existing ads for alcoholic drinks. The no-booze rule, in place during all rounds of the tournament, endures even as more colleges and universities, such as Texas, have begun selling beer at athletic events. An NCAA spokeswoman said the association’s overall goal is to maintain “an environment that promotes healthy choices about alcohol.” Flask While fans in suites and other restricted areas are exceptions to the policy, most people at the Final Four will have to sweat it out all evening. Saturday’s two semifinal games can last a total of six hours including a 40-minute intermission-making it one of the longest major dry sporting events. AT&T Stadium, home of pro football’s Dallas Cowboys, seats 77,122 for the Final Four. Longtime basketball fan Jim Dillon, 47 years old, said it is “ridiculous” that fans can’t buy alcohol. “What’s the point of the rule? Because it’s a student-attended event? It’s not as corporate as the Super Bowl, but it’s getting there. Ticket packages, brokers, private jets. It is big-time.” The average face-value ticket price for all three games of the Final Four has nearly doubled in 10 years, from $140 to $279. On ticket-resale sites this week, three-game tickets were selling for an average of more than $1,000, according to ticket-resale aggregator TiqIQ. Mr. Dillon says he has sneaked alcohol into three-quarters of the 22 Final Fours he has attended with “Maguire University.” The fictitious school, invented by buddies trying to get tickets, has evolved into a drinking club that makes an annual pilgrimage to the Final Four. Another Maguire U affiliate, Art Duffy, said that the easiest method of sneaking in alcohol is to use a plastic flask so as not to set off metal detectors and fill it with rum or whiskey, which mix well with stadium sodas. Mr. Duffy said it is best to arrive close to tipoff when security officials are tired and ticket holders are impatient to get inside. He said he has brought in alcohol five or six times and has never been caught. The Final Four rotates among various cities around the country, and weather that calls for light clothing can create challenges for would-be booze mules. It was a 70-degree day in St. Louis when the Final Four was held there in 2005, recalled Greg Shaheen, an executive who ran the NCAA tournament from 2001-2012. That made the fan approaching the stadium in a bulging coat look suspicious. Sure enough, security guards found several beer cans stuffed inside the sleeves. “His argument was, could we just let him drink them there?” Mr. Shaheen recalled. They couldn’t. The man left with the beer. Another warm-weather city, San Antonio, brought out the party spirit in patrons of the 2004 Final Four. Six of them were surprised at the door by the no-alcohol policy but thought that, surely, the NCAA would allow only them to bring in some beer if they pledged not to tell anyone. Mr. Shaheen says they even offered to share it with him. This year, the Final Four teams include two-Wisconsin and Florida-that made the top 10 of the Princeton Review’s latest list of “party schools.” A Wisconsin spokesman declined to comment and a Florida spokesman called the list “an unscientific survey that we don’t take a lot of stock in.” Major-college football’s championship game does offer beer sales to the public. Owing to various historical quirks, that game is operated by a consortium of conferences rather than the NCAA. Clemson University in South Carolina doesn’t sell alcoholic beverages to the general public at games, athletic director Dan Radakovich said, but the Final Four is so high-profile that many fans expect them. “If you’re going to charge a lot of money and they can’t, for example, buy a beer at these marquee events, that could become a problem somewhere down the road,” said Mr. Radakovich. “I think that’s a factor that the people who are in charge of these events need to take a very objective look at.” An NCAA spokeswoman said any change to the policy, in place for 40 years, must come from the association’s executive committee. The issue hasn’t come up recently, said committee member E. Joseph Savoie, president of the University of Louisiana at Lafayette. AT&T Stadium hosted last season’s NCAA tournament South regional games, a kind of warm-up for this weekend’s championship. Cody White, manager at Spec’s Liquors in Dalworthington Gardens, Texas, near this year’s Final Four site, said “we do see people buy flasks or mini-bottles to sneak in the games.” The best-selling flask is plastic and holds 16 ounces, he said. Kevin Wombacher, the groom in the Indianapolis bachelor party last weekend, discussed the NCAA policy with students in an undergraduate composition class he is teaching as part of his Ph.D. program in health communications at the University of Kentucky. “They said, ‘How’d you have a bachelor party without drinking at the game?’ ” Mr. Wombacher recalled. “I said, ‘You can always go out before or after the game. It’s not the end of the world.’ “


France-based distilled beverages firm Pernod Ricard will open micro distilleries in 11 new cities across the US, Europe and Australia, in a move to launch its Our/Vodka brand beginning June. Currently available as Our/Berlin, the Our/Vodka brand was launched in Berlin in March 2013 under a partnership with a local distiller. As part of the proposed plan, Pernod Ricard’s Absolut will partner with urban micro distilleries in cities across the world to craft a range of vodkas, which will be made using locally-sourced ingredients and will have their own flavor. The micro distillery for Our/Detroit will open in June, with Our/Seattle, Our/New York, Our/Amsterdam, Our/Los Angeles and Our/London opening later in the year. The Our/Austin, Our/Miami, Our/Nashville, Our/New Orleans and Our/Melbourne are expected to be unveiled in 2015.Our/Vodka founder Åsa Caap said that finding the right partner in each city is crucial. “Since we hand over the responsibility of running the local brand and business to them, it has turned out to be our most critical task. In fact, we only team up with people who we could see ourselves spending holidays with,” added Caap. Our/Vodka is packaged in a simple milk bottle featuring metal crown cap.


There have been some pretty exciting spirits auctioned in the past year, including a six-litre crystal decanter of rare whisky and a long forgotten rum from the 18th Century. Auctions of rare and expensive spirits have long been a fascinating spectator’s sport. With high prices reflecting the rarity of coveted bottles, big sales frequently make big news in the spirits industry. Collectors and status seekers attend auction houses across the world with the hope of acquiring a unique and desirable expression, and paying a price to match. A new record for the most expensive spirit to ever be sold at auction has been claimed this year, but which other interesting and, inevitably, pricey lots went under the hammer?Click through the following pages to see our pick of the spirits auctions which got tongues wagging in the last 12 months or so.
The 10 most talked about spirits auctions