Utah: Herbert signs bill lowering blood-alcohol limit to .05 percent 

Monday, April 10, 2017 10:47:00 AM

Source: Deseret News

By Amy Joi O'Donoghue

March 23, 2017


Gov. Gary Herbert on Thursday signed the controversial bill that lowers the legal blood-alcohol limit to .05 percent, stressing repeatedly it is an issue of public safety.


Herbert said earlier in the day during his monthly press conference on KUED Ch. 7 that the decision came after thorough research and in consultation with multiple stakeholders.


The governor said he will call a special session in August or September, however, "to address the unintended and collateral consequences" of the law, which will be the first in the country to lower the standard for impaired drivers from .08 percent when it takes effect Dec. 30, 2018.


"I don't believe the legislation is finished. We will still need more thorough consideration on how this new standard is applied," Herbert said, adding that the issue will be taken up during interim legislative meetings in which the public will have an opportunity to be heard.


"Anything is on the table for consideration," he said, including pushing "pause" and waiting for other states to drop to a similar limit.


"I know there seems to be some reluctance to be first in the nation, although I would remind everybody we were first in the nation to go from .10 to .08 percent," he said, and the rest of the country followed suit.


Herbert said GOP leadership is on board for a special session, where lawmakers can explore options for invoking a two-tiered system or graduated penalties for someone who tests at .05 percent, among other possible changes to the measure.


The bill's sponsor, Rep. Norm Thurston, R- Provo, said he is open to changes to HB155.


"If there are issues that need to be addressed, whatever timeline (Herbert) choses, I would be supportive of that," he said.


Herbert's announcement that he will sign the bill provoked disappointment from the Salt Lake Area Restaurant Association, whose executive director Michele Corigliano predicted the lower limit will put independent restaurant owners out of business because their operational margin is already so slim. People will stay home to have a drink with dinner rather than risk the law, she said.


"Obviously, we are very disappointed that he is going to sign this bill despite public outcry," Corigliano said, adding that calls to Herbert's office from people were 10-1 against the measure.


"We feel like the unintended consequences of this bill will far outweigh the merits," she said. She did say her organization will work in "good faith" with lawmakers as changes to the bill are consider.


Although his office has been "inundated" with calls and the state targeted as punitive in a national advertising campaign by the American Beverage Institute, Herbert said his first charge as governor is to keep residents and visitors safe.


"Everybody agrees that public safety has got to be at the forefront of what we decide to do when we develop policy. Really, the role of government is, in fact, to make sure that we have safety - in our neighborhoods, on the streets and the things we do in life," Herbert said.


He later added that be believes lowering the legal blood-alcohol limit is good policy.


The governor insisted the lower limit in Utah does not make Utah "weird."


He pointed out that 85 percent of the world's population currently lives in countries with laws that have .05 percent blood-alcohol limits or less, including France and Italy.


Herbert bristled at the suggestion that the law is a religious or Mormon issue because of the state's predominant religion that encourages its members not to drink alcohol.


"There's not many Mormons in Rome and they're doing it there also," he said.


Herbert said the lower blood-alcohol content limit may be an opportunity for the state to take its "brand" and push the message that tourists can visit Utah and enjoy a place that has a crime rate half the national average and safer streets.


One local business leader is confident the measure will not be a long-term detriment to area commerce. Lane Beattie, president and CEO of the Salt Lake Chamber - the state's largest business commerce organization - said some of the same concerns were raised years ago when the state lowered the blood-alcohol level from .10 to .08.


"We had a lot of people say, 'This will destroy Utah's economy. No one will want to come here,'" he said. "(The bill) doesn't stop drinking, it stops drunk drivers. That's where the business community has been more supportive of the issue."


He said the evidence-based presentations made by public safety officials during the legislative debate were very convincing, which is part of why the measure gained so much traction.


"The only impact (this measure is) really going to have in the long-term is that you'll find many other states looking at the same (safety) information (and) in just a few years, it will be the standard across the country," Beattie predicted.


But Beattie's prediction flies in the face of claims made in an extensive advertising campaign launched by the American Beverage Institute, which took out full-page ads Thursday in both Salt Lake City daily newspapers and USA Today.


The advertisement asserts the law creates a new class of criminals - responsible adults who drink moderately.


It shows a booking mug of a woman whose crime was "had one drink with dinner." At the top, the advertisement reads, "Utah: Come on vacation, leave on probation."


Herbert pointed to another advertisement with a contrasting message by brewer Heineken that features race car driver Jackie Stewart. Stewart is repeatedly offered a drink, but refuses because he's still driving.


"The essence is if you are going to drink, don't drive," Herbert said.


Boyd Matheson, president of the Sutherland Institute, applauded the governor for his decision.


"Opponents of HB155 are attempting to make this law about Utah's public image - about limiting the choices of citizens and visitors to the state. HB155 will have no impact on what or how much individuals drink - it is focused on protecting lives by ensuring those who choose to drink also choose not to drive impaired."


But critics like the American Beverage Institute's Sarah Longwell said Utah's move to the lower limit will criminalize moderate drinkers, hurt tourism and divert law enforcement eyes from the hardcore drinkers who are the real danger on the streets.


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Illinois: Illinois legislation would allow minors to drink in restaurants 

Monday, March 20, 2017 4:26:00 PM

Source: Herald-Whig

By Matt Dutton

Mar. 14, 2017


Quincy restaurant owners are unsure about the ramifications of a bill that would allow older minors to drink in their restaurants.


If approved, Illinois House Bill 0494 would permit minors ages 18 to 20 to legally consume alcohol in restaurants when accompanied by their parents or legal guardians.


"It's kind of shocking, actually," said Ron Frese, owner of Pops Pizza, 936 Maine. "I'm curious whether it will be up to the restaurant to decide whether or not they will do it. Isn't the restaurant going to be liable for that young kid?"


Frese views the bill as essentially promoting or encouraging underage drinking.


House Bill 0494 excludes hard liquor, permitting minors to partake in only beer or wine. It also specifies that alcohol cannot be the "principal business carried out on those premises," which would eliminate bars and taverns from the equation.


"It's definitely a negative, but it doesn't surprise me in Illinois anymore," Frese said. "It probably would help business with the drinking side of things, but I don't know if that's a positive business or not."


Even if it becomes legal, Frese said he would not feel comfortable serving a minor in his restaurant. The bill does not specify whether compliance with the law would be up to the discretion of the business owner.


"I don't know who comes up with these ideas, but it was working perfectly well the way it was," said Mark Neiswender, owner of the Patio, 133 S. Fourth. "That's not a good way to do this. I think they should just keep it at 21."


The bill was sponsored by two Chicago-area legislators, state Rep. Barbara Wheeler, R-64, and state Rep. Kelly Burke, D-36.


"If it that's the law, I would abide by that," Neiswender said. "The kicker there would be how much have they had."


Neiswender said that although he will follow the new law if it goes into effect, he hopes the bill does not pass.


"I'm up in the air on this," said Rod McClean, who owns and operates several local restaurants, including the Abbey, Kelly's, Tower Pizza and Mexican, and Gem City Pizzeria and Mexican.


At Kelly's, with a slightly older clientele, McClean said he doubts the law would affect the restaurant much if approved.


The bill has been assigned to the Tourism, Hospitality and Craft Industries Committee and has been amended three times since being filed Jan. 20. No vote has been held.

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Monday, March 20, 2017 4:22:00 PM

Data reflecting 52 weeks ending 12.3.16

According to Nielsen CGA, 2016 was a year of heightened competition & battle for share...

Source: Nielsen

March 15, 2017


On premise is a complex, fragmented yet valuable market for the beverage alcohol industry.  Dominated by independently owned and operated restaurants and bars, the on premise is fast moving, challenging but highly profitable.  It remains the home of trial and experimentation with a strong correlation between frequency of on premise visits and willingness to trial new brands.

Within on premise, Wine's recovery at the back end of 2016 pushed its 52-week sales trend into positive territory for the first time in a year. 

Beer is hindering on Total BevAl performance. In 2016, main category growth came through Imported beer brands and smaller Craft.  Accordingly, Beer lost 0.7pp dollar share of on premise beverage alcohol sales to Spirits in 2016. If this trend continues through 2017, Spirits will replace Beer as the most valuable on premise mega category by the end of this year.

This highly competitive market brings a need for operational excellence.  On Premise Chains make 20-25% of (highly profitable) revenue from BevAl - However, most focus heavily on the food element of their offer - leaving On Premise Chains at risk of losing sales due to factors such as: non-optimal assortment, less than compelling pricing strategies or an overcrowded bar or back bar leading to confusion and difficult 'navigation'.

Scott Elliott, SVP Nielsen CGA commented, "2016 showed that while the on premise has its challenges, it remains a highly profitable channel where people are most open to trial and experimentation.  We remain convinced that there is a big opportunity for suppliers and wholesalers to better advise retailers in addressing the challenges of customer confusion, poor assortment planning and missed sales opportunities due to less than compelling pricing strategies.  The very first step to this is for suppliers to actually understand the profile, preferences and behaviors of a retailer's customers.  Without this retailer-specific insight it is virtually impossible to offer BevAl solutions that are exciting, encourage repeat visit and result in greater spend per visit."

2016 Beer Performance:

It's been a mixed year for Beer.  Top-line sales deteriorated over the duration of 2016, ending the year with volumes down -1.9% and dollar sales down -0.7% versus 2015.  Some segments performed well in 2016, though.  Import's 2016 volume sales were 4.8% higher than in 2015, driven primarily by the runaway success of Mexican beer (+9.5%).  Domestic Super Premium was the fastest growing subsegment last year, experiencing volume gains of 8.6% against the previous year.

Craft, which until recently had been the main source of Beer sales growth, performed less spectacularly in 2016.  On premise volumes were up 1.0% - a significant overperformance relative to Total Beer, but far from the stellar growth of recent years.  Craft is maturing, and its larger brands have a challenge to reconcile a large market share with the spirit of the craft movement.

Per the very large Nielsen CGA On Premise Consumer Survey, a third of craft beer drinkers feel that being too widely available prevents beer from being classified as craft.  Indeed, dollar sales of mature craft brands (> 1% share) are down -1.9% since Jan 2015, while maturing (> 0.1%) and newbie (< 0.1%) craft brands are up 6.8% and 11.8% respectively.

2016 Wine Performance:

Wine's recovery at the back end of 2016 pushed its 52-week sales trend into positive territory for the first time in a year - FY 2016 volumes were up 0.1% vs 2015, while dollar sales increased by 0.9%.  Although Sparkling Wine had been the main growth engine throughout much of 2016 it was a resurgent Table Wine segment that helped drag Wine over the line.

Sparkling Wine's best months came in H1 2016, softer performance in H2 saw the full-year volume trend rest at 5.4%, down from 6.4% in 2015.  Conversely, Table Wine's quarterly volume trends remained negative for H1 but  remained positive throughout H2, growth that culminated in 2016 volumes reaching near-parity with 2015 (-0.3%).

2016 Spirits Performance:

Spirits has been the top-performing mega category in the on premise throughout 2016, with FY volume sales up 1.3% versus 2015 (dollar sales up 3.1%). Of course, these gains were not experienced equally across all the Spirits categories.

Vodka and Whiskey, which together constitute more than half of on premise Spirits sales, had volume increase by 1.6% and 1.7% respectively in 2016.  Drilling down a level further still, it was Unflavored driving growth in Vodka (+2.3%) as Flavored Vodka continues to suffer from a proliferation of extensions in recent years.  Irish Whiskey is the main driver for category growth within Whiskey - volumes were up 12.6% in 2016.

Tequila and Cognac were the big winners of 2016.  Tequila, which last year added 240,000 9L case sales to its 2015 volumes, has been buoyed by the performance of high-end, 100% agave tequilas in 2016.  Cognac, which has been in double-digit growth through the year, increased sales by an extra 120,000 9L cases in 2016, largely due to gains in the VS segment.

At the other end of the spectrum Cordials has struggled throughout 2016 - full-year volumes down -3.4% versus 2015, making it the worst-performing category by some margin.  Its long-term momentum is more promising though, since 2015 volumes were down -4.4% on the previous year.


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Op-ed: Problems of lower alcohol limit are many, and the advantages are non-existent 

Tuesday, March 14, 2017 3:57:00 PM

Source: Salt Lake Tribune

By Sarah Longwell

Mar 10 2017


Pending Gov. Gary Herbert's signature, Utah will become the first state in the nation to lower its legal drunk driving threshold from 0.08 to 0.05 blood-alcohol content.


Unfortunately, the new law is unlikely to save lives. However, it is sure to ruin some.


A 120-pound woman can reach the 0.05 limit after little more than a single drink. Under the new law, if she drives, she can be arrested and subject to jail time, social stigma, thousands in fines and legal fees, increased insurance costs and the installation of an ignition interlock.


Harsh consequences would be permissible if this woman were impaired at 0.05, but she isn't. A University of Utah driving simulation study showed that a driver is more impaired talking on a hands-free cellphone than she is at the current 0.08 legal limit. Consider how often you talk on your phone in the car. Now consider that someone far less impaired than you are while talking on your Bluetooth will be arrested for DUI. It defies logic and common sense.


Then there's the damage this new law will inflict on the tourism and hospitality industries. Why would people choose a ski vacation in Utah over Colorado or Montana if they fear getting arrested for having a drink after a day on the mountain before heading back to their hotel? Utah already has a reputation for strict and quirky alcohol laws, but this new law will put it even further outside the mainstream.


As for restaurants, a lower legal limit introduces a whole new set of problems. There's the obvious issue of revenue. If most patrons are afraid to have anything to drink if they're going to be driving, then not only won't they order a drink with dinner, but eventually they may simply decide it's better to forgo a night out altogether.


But that isn't all. There's also the issue of alcohol server education programs. Restaurants have programs to train servers on responsible alcohol service. They are taught to spot patrons who are legally drunk to keep them from getting out on the roads. How is a server supposed to identify someone who is now legally drunk at 0.05, but shows no signs of impairment?


Bartenders and servers won't be the only people finding it hard to identify impairment. Highway patrol members who look for drunk driving indicators and administer sobriety field tests will also struggle with the new mandate. At 0.05, a driver won't exhibit the tell-tale behavior of drunk-driver-like weaving between lanes or making illegal turns. And he or she will have no trouble standing on one leg (assuming it's something he or she knows how to do in general) and walking in a straight line.


The damage to Utah's hospitality and tourism industries wouldn't be such a bitter pill to swallow if this law were going to have a serious impact on saving lives, but there's no evidence that will be the case. Most drunk-driving fatalities in Utah - a full 77 percent - occur at levels above 0.15 BAC. The average BAC of someone in an alcohol related fatal crash is 0.20 - four times the new legal limit. Only around 1 percent of traffic fatalities happen between 0.05 and 0.08. If you want to save lives, you have to target the real problem.


Of course Utah legislators want to save lives - we all do - but they missed an opportunity to truly target the drunk-driving problem by considering legislation that targets the hardcore drunk drivers who cause the vast majority of alcohol-related fatalities in Utah. Instead, they passed feel-good legislation that will criminalize perfectly responsible behavior while having no impact on extreme drinkers.


It's for this reason that the largest anti-DUI advocacy group in the country, Mothers Against Drunk Driving, declined to support the legislation.


It's clear that the state's unique relationship with alcohol played a significant role in passing this law so quickly and decisively. The National Transportation Safety Board-the main advocate for 0.05 laws-saw an easier legislative path in Utah than in other states.


Supporters of the legislation said it was time for Utah to "lead" on the issue of drunk driving. But when a law is as poorly thought out as 0.05 is, it's unlikely other states will follow.


Sarah Longwell is the managing director of the American Beverage Institute.

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The New Reality for Retailers: Is Consumer Choice at Risk? 

Monday, March 13, 2017 2:29:00 PM

Source: NBWA

MAR 9, 2017

America's independent beer distributors love their independent retailer customers. In many markets, small and independent retailers and beer distributors are some of the last family-owned and local businesses operating on Main Street. When independent retailers and local beer distributors are united on building brands, delivering consumer choice or advocating before the state legislature, great things happen.

Independent beer distributors are dedicated to the brewers of the beers they distribute. This includes brewers ranging from the largest, global, iconic brands to the newest, smallest, most local brewers. Much of the excitement in the beer category is driven by the innovation, energy and new products generated by thousands of emerging brewers across the country.

I've heard more than one beer distributor say that craft beer has made selling beer "fun" again. Beer distributors take immense pride in their ability to help small brewers get established, grow these craft brands and celebrate in their partners' successes. And sampling at the brewery has become one way that brewers can introduce their products to thirsty consumers. 

But as more and more brewery-owned retailers are established, and as breweries' direct-to-consumer sales continue to grow, the competitive landscape is being upended. In some states, brewers are aggressively expanding their retail privileges from their brewery location to stand-alone, non-brewery taprooms or tasting rooms. And these modern-day "tied houses" are often exclusive outlets, selling only alcohol products that they own.

The consumer, with $20 in their pocket, may have previously gone to an independent bar or restaurant for a burger and a beer or two. Now that same consumer can go to the local brewery taproom or brewery-owned retail establishment for beers and a complete dining experience. These taprooms are increasingly serving as competitors to licensed, independent retailers.

So is there anything wrong with this? That is up to policymakers in state capitols.

But imagine if this rationale were applied by global alcohol giants like Anheuser-Busch InBev, Diageo or Gallo? Competition would slow as these giants grew market power at the expense of brand building beer bars.

Beer industry overall sales are traditionally flat to up 1 percent. However, the fastest growing sales in the beer industry have been sales outside the three-tier system, specifically beer sold on brewery-owned premises.

The largest international brewers have noted this small brewer trend and are now doing the same thing. Anheuser-Busch InBev has bought numerous craft breweries in the last couple years and all of them have taprooms, which makes the company the fastest growing taproom brewery. Constellation's Ballast Point has noted plans for increased retail operations. And now Diageo is getting in on the game with a reported Guinness taproom slated to open in Maryland.

The open system of independent distribution and retail beer sales has been an unparalleled success, providing record choice to U.S. consumers and access to market for all brewers. Is that now all at risk?

The blurring of the lines between who is a brewer and who is a retailer presents both a business and political challenge for beer distributors and independent retailers. Retailers are distributors' customers, and brewers are their suppliers. Distributors' retail customers are losing sales and are not happy that their suppliers are no longer their partners but now are competitors. The common agreement that the three-tier system is the best path to the consumer is being challenged. Suppliers see money in bypassing the distribution and retailer tier, despite the long-term implications.

As independent retailers face this issue, they must be bold in telling their story. Thousands of Main Street jobs. Local investments. Access to retailers for all breweries. Consumer choice including a wide variety of brands. And long-lasting community partnerships. Independent retailers have a great story to tell.

The stakes are high, and independent retailers need to act to support the open and independent distribution system that serves consumers so well.

National Beer Wholesalers Association President & CEO Craig Purser provides industry commentary each quarter for ABL Insider, a publication of American Beverage Licensees (ABL), a national trade association for retail alcohol beverage license holders across the United States. Each column provides insight on issues of concern to beer distributors, their retail partners and others in the alcohol beverage industry. To learn more about ABL Insider, please visit

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Utah: Utah lawmakers pass toughest DUI limit in U.S. at 0.05 percent 

Monday, March 13, 2017 2:27:00 PM

Source: Chicago Tribune

Michelle L. Price

March 9th

Utah could soon have the strictest DUI threshold in the nation after state lawmakers on Wednesday night voted to lower the limit for a driver's blood-alcohol content to 0.05 percent, down from 0.08 percent.

The measure heads to Utah's governor, who has said he supports the legislation.

If Republican Gov. Gary Herbert signs the bill, it would take effect Dec. 30, 2018 - an unusual effective date for Utah laws that would ensure the harsher standard is in place before alcohol-laden celebrations on New Year's Eve.

Supporters of the legislation said it would save lives by keeping people off the road if they've been drinking. A mix of lawmakers, including Democrats and libertarian-leaning Republicans, opposed the measure. Some cited concerns that it could hurt tourism as the heavily Mormon state grapples with its reputation as an unfriendly place for drinkers.

The proposal would mean that a 150-pound man could get a DUI after two beers, while a 120-pound woman could get one after a single drink, according to the American Beverage Institute, a restaurant trade group that opposes the bill. A number of factors, including how much food is in someone's stomach, could impact how much a drink will raise someone's blood-alcohol content.

American Beverage Institute Managing Director Sarah Longwell said in a statement Wednesday night that the proposal will do little to make roads safer because more than 77 percent of alcohol-related traffic deaths in Utah come from drivers with a blood-alcohol content of 0.15 and above. "Utah legislators missed an opportunity today to target the hard-core drunk drivers who cause the vast majority of drunk driving fatalities and instead decided to criminalize perfectly responsible behavior," Longwell said.

Lawmakers in Washington are considering lowering the limit for blood-alcohol content this year, while a similar proposal recently died in Hawaii's Legislature.

Across the country, the blood-alcohol content limit for most drivers is 0.08, but limits vary among states for commercial drivers or drivers who have had a past DUI conviction.

Rep. Norm Thurston, R-Provo, who sponsored Utah's measure, said it's important because a person starts to become impaired with the first drink. He notes a number of foreign countries have blood-alcohol content thresholds at 0.05. or lower.

At a blood-alcohol content of 0.05 percent, a driver may have trouble steering and have a harder time coordinating, tracking moving objects and responding to emergencies, according to the National Highway Traffic Safety Administration.

For several years, the National Transportation Safety Board has encouraged states to drop their blood-alcohol content levels to 0.05 or even lower, though local officials have not adopted the standards, in part because of pressure from the hospitality industry.

The tougher stance on DUIs comes as Utah legislators passed changes Wednesday easing other liquor laws that deal with the preparation of alcoholic drinks in restaurants. That measure, waiting for approval from the governor, would let diners see their drinks being poured or mixed if restaurants set up child-free buffer zones around bars

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Bill allows young adults to drink w/parents 

Monday, March 13, 2017 2:25:00 PM

By: Raquel Martin

Posted: Mar 07, 2017 07:09 PM CST

Updated: Mar 07, 2017 07:09 PM CST

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Illinois-- - ILLINOIS -- Young adults could soon be able to order alcohol at restaurants around the state. Thanks to a new bill, people as young as 18 could be served wine or beer with a parent's permission.

Lawmakers who proposed the bill say they feel this type of change would be harmless since it's still the parent's decision.

"You know, it's okay to sit down and have a beer with my dad or have a cup of wine with my mom and sit down and have family time," says University of Illinois Springfield senior Malcolm Bennett.

This new bill could make this type of family time possible outside the home. 

"The normalizing of parental consent for 18- and 20-year olds, to me, that's the part that's making me raise the most eyebrow," says Sociology Lecturer Tiffani Saunders. She researches family structure and behavior at University of Illinois-Springfield.

She's worried this legislation enables young adults to start bad habits sooner.

"If you do have a family member who's an alcoholic, in general, we do question your judgment, so having that same family member, parent, for example, be the one who can say, 'Yes, you're allowed to drink,' that could be problematic."

She says young adults should be steered away, not towards, alcohol.

"People are still developing until the age of 25, which is why we like to delay alcohol as much as we can."

Many argue normalizing underage drinking leads to healthier usage in the future.

"I think it's a good way to introduce it to them because it's better than having them come completely ignorant to college and have them take advice from other individuals," says UIS freshman Alyssa McDonald. 

"You kind of have, like a mentor there to make sure you're okay if you drink too much, so I think it's just safer," says UIS freshman Austin Bransky. 

The bill would only allow young adults to be served beer and wine while with parents, so no hard liquor.

There are 10 states that have this law. Those include: Connecticut, Kansas, Louisiana, Massachusetts, Mississippi, Nevada, Ohio, Texas, Wisconsin and Wyoming.

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Tracking the Tobacco 21 Trend 

Monday, March 13, 2017 1:39:00 PM

Source: Cowen and Company

March 10th


The Cowen Insight

In 2017, more than 20 states have introduced bills to increase the minimum age to purchase tobacco products to 21. We continue to benchmark the roll-out of states increasing the tobacco purchasing age to indoor smoking bans, and maintain our estimate for states raising the tobacco purchasing age to have a ~10 bps volume impact on a progressive compound basis, over the next 5 years.


Where We Stand Today

In 2016, Hawaii and California became the first two states to raise the minimum age to purchase tobacco to 21, with Washington D.C. passing a similar measure last year. As such, 7% of U.S. cigarette volumes are now in states with a minimum purchase age of 21. Outside of states, we've also seen 212 cities and counties raise the minimum age to 21 according to, including major cities such as Boston, Chicago and New York.


Tobacco 21 Legislative Proposals Heating Up

In 2017, we've already seen 22 states introduce measures to raise the tobacco purchasing age to 21, though bills have already failed in 4 states. Indeed, we've seen similar legislation introduced at the state level over the past few years, but that pace of bill introduction has increased meaningfully, as just 15 states introduced bills to increase the tobacco purchasing age in 2016. Of these states with proposals introduced this year, many have not seen a tobacco 21 bill proposed in recent years, including Florida (6.5% of volumes).


Volume Impact Continues to Be Manageable

We maintain our belief that policy change raising the minimum tobacco purchasing age will progress similar to what we have seen for indoor smoking bans. While California was also the second state to pass comprehensive smoking bans in 1998, we saw other states follow California a few years after passage, with ~60% cigarette volumes being covered by states with comprehensive smoking bans by 2008. Similarly, we hold our assumption that ~60% of cigarette volumes will be covered in states with a minimum purchase age of 21 in 10 years. As such, we maintain our estimate for states raising the minimum age to 21 to have a ~10 bps impact on the 5-year volume CAGR, though we reflect a deterioration in youth incidence, offset by a stabilization in per capita consumption.


International Developments

Outside of the U.S. we've seen a bigger focus on utilizing excise taxes and graphic health warnings to fight against tobacco use, but initiatives to raise the tobacco age could gain momentum. Earlier this month, Thailand raised the minimum age to purchase tobacco products to 20, while Health Canada said that it would consider raising the tobacco purchasing age to 21. Meanwhile in Russia, we've seen a proposal this year to ban smoking for anyone born after 2015 and have seen proposals to raise the tobacco purchasing age in the past.

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Restaurant sales, traffic tumble in February 

Monday, March 13, 2017 1:36:00 PM

Industry performance declines despite improved results in January

Source: NRN

Mar 09, 2017

Same-store sales fell 3.7 percent in February, with traffic declining 5.0 percent. Unfortunately, January's improved results were not a turning point in declining industry performance. Trends are hard to discern since weather, holiday shifts in Valentine's Day and President's Day and winter breaks distorted weekly results.

A macro view leaves little room for optimism. Same-store sales averaged a 2.7 percent decline for the last three months. February's results were among the weakest in the last four years. This insight comes from data by TDn2K through The Restaurant Industry Snapshot, based on weekly sales from over 26,000 restaurant units and 145 brands, representing $66 billion dollars in annual revenue.

Guest checks plummet

Guest checks grew by a modest 1.2 percent in February, the lowest rate in four years. By contrast, checks had grown roughly 2.3 percent in the previous six months. This is a function of more conservative

pricing, customer trade downs or discount promotions. All segments experienced a decline in the rate of check growth last month. Casual dining and quick service were virtually flat compared with the prior year. The bar and grill sub-segment actually experienced a drop in average checks versus 2016.

The macroeconomic environment

"While the stock market soars and confidence jumps, the economy continues on its steady but unspectacular upward path," reported Joel Naroff, President of Naroff Economic Advisors and TDn2K economist. "Growth in the first quarter should exceed the tepid pace at the end of last year and with Europe finally starting to recover, the economy should pick up steam as we move through the year."

Consumers are spending, but they are being battered by rising inflation. The rebound in energy costs may be helping that sector but it is not doing much for households. Indeed, spending power has flatlined as wage gains are barely offsetting price increases. That is putting additional pressure on the restaurant industry.

Still, the labor market is as tight as it has been in decades. Rising wages should lead to better spending in the months ahead. One note of caution: "The higher inflation has given the green light to the Fed to raise rates and if Trump spending and tax policies are implemented, rates are likely to rise faster than most currently expect."

Income tax refund delay

The IRS delayed roughly 40 million tax refunds associated with families claiming the "Earned Income Tax Credit" or the "Additional Child Tax Credit" this year. These delays undoubtedly depressed sales in the early weeks of February. In 2014, almost 30 million families received more than $70 billion in Earned Income Tax credits. Even a small delay in refunds had the potential to greatly impact consumer spending. Looking forward, the release of refunds provides some upside for the industry in the coming weeks.

Fine dining and upscale casual winning the segment battle

Fine dining and upscale casual were the strongest segments in February. Fine dining was the only segment up overall. The weakest segments, both with same-store sales below -4.0 percent, were casual dining and family dining.

Upcoming: The Easter effect

Easter is in April this year instead of March. The potential impact varies by segment. Brands where diners tend to celebrate special family occasions, such as upscale casual and fine dining, typically see an increase in sales during these periods. For these segments, same-store sales growth will likely be hurt in March but aided in April. For the dining segments where the holiday shift is less likely to impact consumer behavior, the sales impact will be less pronounced.

The Restaurant Workforce

According to the Q1 2017 Workforce Index published by TDn2K's People Report restaurant operators predict staffing challenges to continue in 2017. However they are increasing at a slightly slower pace. One factor in this relative easing of labor woes is the slowdown in restaurant job growth reported in recent months. At the hourly employee level, 48 percent of restaurant companies reported that they planned to add staff during the first quarter, compared with 66 percent in the fourth quarter of 2016.

For restaurant managers, 50 percent of companies said they would add staff during the first quarter of 2017. The percentage of companies that expected to increase their management staff the previous quarter was 54 percent.

Job growth may be slowing, but both hourly and management turnover continue to rise. As a consequence, recruiting and retaining qualified employees is the top people-related challenge for restaurant operators. TDn2K analysis continues to reinforce that service and guest experience are the key drivers in performance. Best-in-class brands demonstrate that food and beverage are important, but people and service provide unique and indefensible competitive advantages.

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Illinois pitches sales tax for Netflix, Spotify, other streaming services 

Monday, March 13, 2017 1:34:00 PM

Budget + Tax / Article

March 3, 2017

By Joe Kaiser

A new proposal from state Sen. Toi Hutchinson, D-Chicago Heights, would tax internet streaming services in Illinois, much like the potentially illegal internet streaming tax implemented in Chicago.

Following efforts to raise the income tax and impose taxes on payroll, services, sugary drinks and more, some Illinois state senators now want to tax internet streaming.

An amendment filed March 2 would apply a 6.25 percent sales tax to cable and satellite TV, as well as internet streaming services such as Netflix, Spotify and Xbox Live. For Chicagoans, this means an additional tax on top of a 9 percent citywide “amusement tax” they’re already paying for those services.

State Sen. Toi Hutchinson, D-Chicago Heights, filed the amendment to Senate Bill 9, part of the package of bills that make up the Senate’s “grand bargain. In addition to TV and streaming services, SB 9 would expand the 6.25 percent statewide sales tax to an array of other services, including repairs, landscaping, laundry, tattoos, body piercings, tanning and much more.

With the 9 percent amusement tax and a 6.25 percent statewide sales tax, a Chicagoan’s Netflix bill for a standard $9.99 subscription, for example, would be roughly $11.50. The city’s amusement tax is not only regressive, but also legally questionable.

In 2015, Chicago’s Finance Department expanded the city’s 9 percent amusement tax to cover online streaming media services such as Netflix, Spotify and Xbox Live, among others. The Liberty Justice Center filed a lawsuit on behalf of customers against the city, arguing that the tax is illegal and unconstitutional under state and federal law. A Cook County Circuit Court judge denied the city’s request to dismiss the lawsuit in July 2016, allowing it to proceed.

The city issued notice in November 2016 that it was again expanding its 9 percent amusement tax, this time to businesses subscribing to paid programming – a creative way to skirt federal law prohibiting taxing satellite providers the same as cable providers, the latter of which the city already taxes. By directly taxing businesses – such as restaurants or bars that subscribe to satellite TV for sports packages – the tax is imposed directly on the consumer rather than the satellite provider. This means each business that buys an annual premium sports subscription, which can cost $5,000-$10,000, could be paying more than $400 in new taxes every year under that tax. And these same businesses would be hit again if the state implements the proposed sales tax on cable and satellite TV.

The Senate’s tax would be imposed on “the privilege of using [the taxable service] in this State,” according to the proposed legislation. That language makes the application and collection of a tax on streaming services ambiguous and potentially illegal. First, what does using a streaming service in Illinois mean? Does it apply to a person with a layover at O’Hare International Airport who is passing the time watching Netflix on her tablet? Or does it apply to any resident of Illinois regardless of whether she is within state lines when she uses Spotify or Netflix? The bill doesn’t say.

Second, this bill would require any company in the world that offers streaming services on the internet to become a tax collector for the state of Illinois simply by having one customer who lives (or uses) its streaming service in Illinois. That requirement is likely illegal. In 2013, the Illinois Supreme Court ruled unconstitutional the state’s “Amazon tax,” which forced online retailers to pay Illinois taxes regardless of whether they had a storefront or other physical presence in the state. In its ruling, the Illinois Supreme Court said the tax conflicted with the Internet Tax Freedom Act – a federal law enacted in 2000 – which prohibits states from imposing discriminatory taxes on electronic commerce.

Throughout the “grand bargain” discussions, taxpayers have been disregarded, as lawmakers opt for new taxes instead of the necessary budgetary reforms the state needs. The new proposals taxing services – including cable and satellite TV and internet streaming – offer nothing more than a bigger bill for taxpayers, especially in Chicago.

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