News

Does a soda tax work? Philadelphia gains $5.7m in tax revenue and sees drop in soda drinking 

Wednesday, March 01, 2017 9:49:00 AM

Source: BeverageDaily.com

February 27, 2017

In its first month of existence, the Philadelphia soda tax has brought in $5.7m, more than double its original projection of $2.3m, according to the figures from the city's revenue department. The rise in tax revenue also corresponded with a decline in soda consumption.

The 1.5-cent-per-ounce Philadelphia soda tax went into effect January 2017.  Cook County, Illinois, also approved a soda tax that will go into effect July 1, 2017. Other US locations including Boulder, Colorado, and three cities in California: Albany, Oakland, and San Francisco have also passed a similar tax legislation.

Broken down soda tax revenue

The $5.7m of city revenue translates into roughly 32m 12-ounce cans, meaning that each of Philadelphia's 1.5m residents drank an average of 21 sugary beverages last month.

According to recent data from the city of Philadelphia's public health department, residents consume an average of 60m gallons of sugar-sweetened beverages annually, which equals to roughly 53m 12-ounce cans per month or 35 cans per person every month, marking a nearly 40% decline in average consumption.

Philadelphia Mayor Jim Kenney said that the soda industry "makes enormous profits on the backs of poor people" and estimates that the soda tax could generate up to $91m in revenue, which would go towards the city's education programs and expanding pre-kindergarten opportunities for lower-income residents.

Philadelphia officials also said that the tax would reduce healthcare costs by $200m and 700 lives in the treatment of diabetes over the next ten years, according to a Harvard Study.

Coalition says soda tax hurts local business

Ax the Bev Tax Coalition, an organization engaged in the local community, said that the "steep drop-off in sales" will only get worst and hurt the Philadelphia community.

Mexico study finds soda tax does deter sales

A study conducted by the University of North Carolina at Chapel Hill found that a tax on sugar in Mexico was effective in curbing consumption of sugar-sweetened beverages in stores. Authors of the study pulled from date on beverages purchases by 6,253 households between January 2012 and December 2014.

Purchases of taxed sugary beverages decreased by an average of 6% in 2012, and rose to a decline 14% of sales by December 2014.

"Regardless of how much money the administration says it collected in the first month of this tax, the pain Philadelphia families and businesses are feeling is very real. The beverage tax is causing prices on thousands of items to skyrocket, sending shoppers outside the city and forcing steep declines in sales," the coalition said in a statement.

"This steep drop-off in sales is already causing layoffs and a reduction in hours in family-sustaining, union jobs. For the working families paying drastically higher prices and the businesses impacted by the tax, the pain is only going to worsen over time."

ABA holding strong against soda tax

The American Beverage Association (ABA) has been fighting the soda tax (called the Sweetened Beverage Act or SBT) in the Philadelphia County Court of Common Pleas, on the grounds that it is unconstitutional and that it adds to a sales tax already imposed on soda and sugary beverages.

The ABA also funded and formed a coalition called the Philadelphians Against the Grocery Store Tax made up of business owners, teachers, and faith organizations, who said in survey that 58% of Philadelphia residents oppose the tax.

Consumers experience sticker shock

While 33 US states already have a sales tax associated with sugar-sweetened beverages, the SBT per ounce surcharge can add up to a 50% additional tax as evidenced by the following receipts from Philadelphia retail stores.

Chicago has sights set on filling budget deficit

In Cook County, which includes the city of Chicago, a penny-per-ounce soda tax was passed and is expected to generate $74m in 2017 once it goes into effect July 1st. Officials hope it will put a dent in $174.3m county deficit.

The tax applies to all sugar and artificially-sweetened drinks including fountain drinks, carbonated soft drinks, energy drinks, and fruit beverages.

However, families in the Supplemental Nutrition Assistance Program will not be affected by the additional tax.

"I don't think that soda is a staple for every family, and I would be concerned if people were drinking soda all the time," Cook County Commissioner Larry Suffredin said during the approval process of the soda tax.

"This is not gasoline we're talking about. It's a consumption tax. It's a specific product."

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Why casual-dining restaurants should close thousands of units 

Monday, February 27, 2017 5:53:00 PM

Source: NRN

Jonathan Maze

 

 

Casual-dining restaurants have seen declining sales and traffic for a decade now, and as a result, there are fewer of them. The segment's share of the supply of restaurants in the U.S. has shrunk since 2007, according to BMO Capital Markets analyst Andrew Strelzik.

 

Yet there are still too many locations. Strelzik estimates the market is oversupplied by as many as 4,500 units, based on demand trends since the recession.

 

Closing restaurants, however, is easier said than done. For various reasons, the segment's oversupply is likely to persist - shifting sales from one chain to another as concepts work to lure from a declining share of the nation's restaurant business.

 

"When you look at the chains, they've been slow to adapt to the changing environment," Strelzik said. "There's just a pervasive optimism among management teams. When you're thinking of ways you can improve and ways in which your brand is different, there's an optimism that the brand can win."

 

Casual-dining restaurants are struggling for many reasons. For one thing, there are a growing number of competitors in the food business. Fast-casual concepts have been growing and adding units at a breakneck pace, and they get much of their business from casual dining.

 

In addition, grocers have added prepared food options. Consumers are also putting a premium on convenience and speed where casual dining is weakest.

 

"There are a lot more eating options out there," Strelzik said. "There's obviously a huge trend towards convenience, and casual dining doesn't hit on convenience."

 

As such, the share of restaurant traffic going to casual dining has been in a steady decline. Casual-dining traffic has increased in only four months since 2012, according to data from the MillerPulse restaurant survey.

 

Casual dining's share of restaurant industry transactions has fallen by 20 percent over the past eight years, according to Strelzik, to 8 percent in 2015, from 10 percent in 2007.

 

But the segment's share of restaurant industry locations has only declined by 10 percent, according to Strelzik. Twenty-three percent of restaurant locations were casual dining in 2015, down from 26 percent in 2007.

 

In his report, Strelzik estimates that for every 100-basis-point decline in transactions, the sector needs to close 800 to 850 locations to balance supply and demand. Casual-dining transactions have declined by 100 basis points every year for the past seven years, but unit count has not declined by more than 800 locations since 2009 and 2010.

 

Strelzik therefore estimates the sector is oversupplied by 3,000-4,500 locations in the U.S.

 

But closing units is not so simple. Executives are trying to grow sales and add locations, not reduce them. All of them believe they have plans that could reverse sales slides. Many of these strategies succeed, at least in the short term, so there's little incentive to shrink.

 

And there's always someone willing to take a chance on a brand name. A number of investors are willing to gamble on chains being sold for ultra-cheap prices.

 

Many brands are franchises, with franchisees who are not eager to close locations. And then there are independents, which are even less likely to close locations. Those operators are earning a living and are more likely to hold onto locations as long as they're generating cash flow - same-store sales and traffic are thus less important.

 

Also, a shift in focus over the years from owned real estate to leased locations makes closing units more difficult, Strelzik noted.

 

Several companies have declared bankruptcy this year and others have closed units, such as Ruby Tuesday's decision to shut 95 locations. Continued sales and traffic declines - and there's little to suggest an improvement - could force more of these decisions.

 

Still, demand for real estate is so high that many closed locations are quickly filled.

 

Also, there continues to be money flowing into the restaurant space from bankers and investors. For all of the industry's struggles, it is still in better shape than, say, brick-and-mortar retailers, and is thus a popular target for those looking to generate returns.

 

This continued investment promises that a correction is unlikely anytime soon.

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Industry: Philadelphia Soda Tax Killing Sales, Layoffs Loom 

Monday, February 27, 2017 10:41:00 AM

Source: Associated Press

February 23rd

 

Some Philadelphia supermarkets and beverage distributors say they're gearing up for layoffs because the city's new tax on soft drinks has cut beverage sales by 30 percent to 50 percent - worse than the city predicted.

 

Jeff Brown, who owns six local ShopRite supermarkets, told The Philadelphia Inquirer he expects to cut 300 jobs. Bob Brockway, chief operating officer of Canada Dry Delaware Valley, has predicted a 20 percent workforce reduction by March.

 

City officials expect business to rebound once customers get over sticker shock. They suggest the industry may be engaging in fearmongering to stop the spread of the tax to other cities.

 

Mayor Jim Kenney pushed through the 1.5 cent-per-ounce tax on sweetened and diet beverages to pay for nearly 2,000 pre-kindergarten slots and other programs. The tax amounts to $1.44 on a six-pack of 16-ounce bottles.

 

In dismissing reports of forthcoming layoffs, the Democratic mayor told the Inquirer he doesn't think it's possible for the industry "to be any greedier."

 

"They are so committed to stopping this tax from spreading to other cities, that they are not only passing the tax they should be paying onto their customer, they are actually willing to threaten working men and women's jobs rather than marginally reduce their seven-figure bonuses," Kenney said.

 

The city initially predicted a 27 percent decline in sales industrywide as a result of the tax. But Brockway said sales in Philadelphia were down 45 percent for his company, which distributes about 20 percent of the soft drinks sold in the city.

 

Brown said beverage sales decreased 50 percent at his stores from Jan. 1 to Feb. 17 compared with the same period in 2016.

 

"People didn't change what they drink," Brown said. "They changed where they're buying it."

 

Brockway claims beverage sales are up about 20 percent in suburban municipalities, and even that hasn't helped Canada Dry Delaware Valley break even.

 

To hit its annual target, the city needs to collect $7.6 million a month in tax revenue. The first collection was due Feb. 21, although details won't be available until next month.

 

Early projections from Philadelphia's quarterly manager's report have the city bringing in just $2.3 million from its first collection. City spokesman Mike Dunn said that number is expected to rise and Kenney's administration still believes it will hit its goal for the year.

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Washington: Should Washington lower the legal alcohol limit? 

Monday, February 27, 2017 10:40:00 AM

Source: K5

Heather Bosch

February 21, 2017

 

Washington state lawmakers are considering lowering the legal limit for driving under intoxication from .08 to .05.

 

"The research shows impairment begins with the first drink," said Representative John Lovick, D-44th District. "And I believe this after being a state trooper for 31 years."

 

Lovick said he based his legislation, House Bill 1874, on recommendations from the National Transportation Safety Board.

 

But the American Beverage Institute opposes the bill and similar legislation being proposed in Hawaii and Utah. The industry group claims only a small percentage of deadly car crashes are caused by drivers with a blood alcohol concentration between .05 and .08, and that a 120-pound woman could reach .05 with just little more than one drink. A 150-pound man could reach it after two.

 

"The move would target responsible and moderate social drinkers while ignoring the hardcore drunk drivers who pose the greatest threat to safety," said American Beverage Institute Managing Director Sarah Longwell.

 

Longwell says what's needed is better enforcement of current laws.

 

"We have to focus on the real problem and not be distracted by feel-good legislation that criminalizes perfectly responsible behavior," said Longwell.

 

Lovick agrees that current laws could be better enforced, but says lowering the alcohol limit to .05 would be "a great first step in letting the public know that we are serious about keeping people who drive drunk, off the streets."

 

Some bar patrons debated the proposal during happy hour Monday.

 

"Lowering it, I have no problem with it.   think people should be safe and .05 doesn't seem incredibly low to me," said Kevin Klein of Seattle.

 

Klein and his friends said they expect it to be an intensely debated topic in Olympia as well.

 

"As far as drunk driving goes -- the .08 versus point .05 limit -- it's not going to make any difference unless they actually start being really serious about enforcing it," said Gabriel Mathews.

 

A public hearing before the House Transportation Committee will be held Tuesday. The bill already cleared the House Public Safety committee, but not without controversy.

 

"There will be a few 'no' votes on this side of the aisle," Representative Dave Hayes (R-10th District) said during that hearing. "My personal viewpoint on this is just the fact that I don't believe it's necessary to reduce the blood alcohol level, based on testimony and my own personal experience in processing DUIs."

 

Hayes is a sergeant with the Snohomish County Sheriff's Office.  Lovick is the former Snohomish County Sheriff.

 

The National Transportation Safety Board has said that if every state lowered the legal blood alcohol limit to .05, it would save 1,000 lives every year.

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Nebraska: Restaurant owner not guilty in flap that put Salt in hot water 

Monday, February 27, 2017 10:39:00 AM

Source: WOWT

By Brian Mastre

Feb 08, 2017 

 

A jury has found a metro restaurant owner not guilty in a misdemeanor case involving a tweet.

 

The case took root with a simple tweet. Jurors were tasked with deciding whether John Horavatinovich's simple message was a violation of the law.

 

"I think it was a waste of taxpayer dollars," Horvatinovich told WOWT 6 News after the verdict.

 

He believes the way compliance checks are done should be re-evaluated. The state, however, stands by its decision to ticket the owner.

 

"The point I want to drive home is this - this is how our system works. If we believe we have the evidence to charge someone with a crime, it's our obligation to the people of Omaha to do that. And people like Mr. Horvatinovich have the right to have a trial and let the jury decide," said Omaha City Prosecutor Matt Kuhse.

 

In August, a compliance check operated by the Nebraska State Patrol and Project Extra Mile stopped at Salt. Two 17-year-olds tried to buy Bud Light beer but were turned away by staff.

 

Horavatinovich posted their photos from the security camera on Twitter and he used the word "sting" in the post. He says he had no way to know if actually was one since the organizers don't tell restaurants before or after a check unless they are caught.

 

Horavatinovich said, "We were presented with two minors trying to buy alcohol at our restaurant. Had I known they were minors working with authorities in a compliance check, I would have deleted it immediately. But we didn't find that until 12-days after the tweet."

 

Recently-retired Nebraska State Patrol Sergeant Robert Elliott canceled the operation that night. He was first to testify Monday. He said he worried the safety of the two 17-year-olds working with investigators could be jeopardized by anyone who saw their photo on social media.

 

On Monday the defense team questioned the witnesses, trying to lay the framework that the restaurant owner had no way of knowing it was a compliance check. After two-and-a-half hours of testimony on Monday and a two-and-a-half hours of testimony Tuesday, it was handed over to jurors.

 

They adjourned Tuesday without a decision and reached their verdict Wednesday morning.

 

Just hours after the verdict was read Horavatinovich was back to work behind the bar at Salt.

 

"It feels good to be back," he told WOWT 6 News. It was his first shift in a long time where paying a hefty fine or even facing jail time were no longer on the table; just the food and drinks he was serving up.

 

"We were able to stand up for ourselves and other businesses," he explained. Horavatinovich hopes that what he went through with his trial will set a precedent to protect other liquor license holders who are exercising their freedoms of speech.

 

When it comes to tweeting he tells us he keeps his tweets harmless and he won't hesitate to send the next out.

 

"I don't think that there's a pause on my side. Will other people think about it? Maybe.It'll be a thought but it's not going to stop me from sending it out."

 

Project Extra Mile Interim Executive Director Diane Riibe released a statement on the verdict Wednesday: "Compliance checks have a long history of success in Nebraska and across the country in preventing youth access to alcohol. Project Extra is thankful for law enforcement's professionalism in carrying them out over 20 years in the metro area with a primary focus on the safety of young people. There is abundant evidence to the effectiveness of compliance checks, and we've seen that value as the noncompliant rate in the Omaha metro area has fallen from a high of 41% in 1997 to a current, historically low rate of 6 percent. Put simply, compliance checks work, and we're committed to our continued support of the operations."

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Beer tops list of beverage of choice 

Monday, February 27, 2017 10:38:00 AM

Source: DBR

6 February 2017

 

A survey conducted by The Harris Poll finds that beer is the most favourite beverage of choice, and wine is the favorite alcohol among women, adults aged 65 and more, and those in high income households.

 

For nearly 4 in 10 regular drinkers (U.S. adults ages 21+ who drink alcohol several times a year or more), beer is that beverage of choice (38%), followed by wine (31%), and spirits/liquor (28%). But has it always been like this?

 

Most regular drinkers who say beer is their beverage of choice today also say it was their go-to alcohol beverage 2 years ago (83% of those 23+) and 10 years ago (73% of those 31+).

 

A majority of today's spirit choosers say the same as well, with 78% stating they preferred liquor/spirits 2 years ago (of those 23+) and 63% 10 years ago (of those 31+).

 

Wine drinkers, on the other hand, tell a slightly different story. While nearly three quarters of today's wine drinkers say they also preferred wine 2 years ago (73% of those 23+), just 4 in 10 say the same of 10 years ago (44% of those 31+).

 

Many of today's wine drinkers (ages 31+) had a different top pick a decade ago and say they were instead drinking liquor/spirits (26%) or beer (21%).

 

Nielsen's Beverage Alcohol Practice senior vice president Danny Brager said: "While many consumers will increasingly drink across all three major adult beverage categories, they still have their 'preferred' drink type.  At the same time, all consumers are not alike, and various demographic groups clearly have different favorites.

 

"For some, that 'go to' choice hasn't changed a great deal, but for a significant percentage of those who favor wine today, they did prefer another beverage type 10 years ago.

 

"Both life stage changes over that period of time as these consumers have aged, as well as today's younger generations being more open to wine, are likely driving those changes in preference."

 

These are some of the results of The Harris Poll of 2,148 U.S. adults ages 21+ (including 1,540 adults ages 21+ who drink several times a year or more, i.e., "regular drinkers") surveyed online between January 18 and 20, 2017.

 

Demographic distinctions

 

While beer may take the cake over the years, a deeper look shows it is not everyone's top pick. Beer is favored among men (55%), younger generations (21-34, 41%; 35-44, 44%; 45-54, 42%), and those residing in the South (43%).

 

Wine, however, beats out beer as the top pick among women (46%), adults ages 65+ (42%), and adults in high income households (37%, HH income of $100K+).

 

Spirits trail just a bit behind wine overall, but have generally equal strength in preference among various demographic groups versus larger variances seen in beer and wine across these same groups.

 

Favorite types

 

Adults whose current beverage of choice is beer favor domestic non-craft beer (38%), followed by craft beer (29%), and imported beer (23%).

 

Those who prefer wine say their favorite type is red (38%), followed by white (32%) and, more distantly, rose or blush (19%) and sparkling wine/champagne (10%). Men are significantly more likely than women to prefer red (49% vs. 34%).

 

The favorite liquor among spirit drinkers is vodka (29%), followed closely by whiskey (26%), and more distantly by rum (16%), tequila (8%), and cognac (7%). Men are significantly more likely than women to favor whiskey (40% vs. 14%), while women are twice as likely to choose vodka (38% vs. 19%).

 

Methodology

This Harris Poll was conducted online within the United States between January 18 and 20, 2017 among 2,148 adults (aged 21 and over).

 

Figures for age, sex, race/ethnicity, education, region and household income were weighted where necessary to bring them into line with their actual proportions in the population. Propensity score weighting was also used to adjust for respondents' propensity to be online.

 

All sample surveys and polls, whether or not they use probability sampling, are subject to multiple sources of error which are most often not possible to quantify or estimate, including sampling error, coverage error, error associated with nonresponse, error associated with question wording and response options, and post-survey weighting and adjustments.

 

Therefore, The Harris Poll avoids the words "margin of error" as they are misleading. All that can be calculated are different possible sampling errors with different probabilities for pure, unweighted, random samples with 100% response rates. These are only theoretical because no published polls come close to this ideal.

 

Respondents for this survey were selected from among those who have agreed to participate in Harris Poll surveys. The data have been weighted to reflect the composition of the adult population.

 

Because the sample is based on those who agreed to participate in our panel, no estimates of theoretical sampling error can be calculated.

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Restaurant Groups Urge Justices To Review Tip-Pooling Rule 

Monday, February 27, 2017 10:37:00 AM

Source: Law360

By Suevon Lee

February 3, 2017

 

Restaurant trade groups have petitioned the U.S. Supreme Court to hear their appeal of a Ninth Circuit ruling upholding a U.S. Department of Labor rule regulating when so-called "tip pools" can be instituted by employers, eviscerating the circuit court's "cavalier approach" to interpreting statute.

 

The National Restaurant Association, along with restaurant trade groups in Oregon, Washington and Alaska, argued in a Jan. 19 petition for writ of certiorari that the Ninth Circuit's majority holding that the DOL rule passes muster under the Fair Labor Standards Act confers too much power to the federal agency and also creates a split with the Fourth Circuit to warrant high court action.

 

"The Ninth Circuit deviated so substantially from this court's decisions under the FLSA and concerning federal agency authority more generally that summary reversal is appropriate," the petition argues.

 

The appeal follows a Feb. 23 ruling in which a split Ninth Circuit, reversing a district court, held that employers who choose not to offset minimum wage requirements with tips their workers earn - in a practice known as taking a "tip credit" - can only establish tip pools when they are composed exclusively of employees who are customarily tipped.

 

That means back-of-the-house staff, such as cooks and busboys, are denied the chance to share in customer tips.

 

The dispute harks back to the 2011 Department of Labor rule that the petitioners say flouted the 2010 Ninth Circuit decision in Cumbie v. Woody Woo. The rule reflects the view that tips are the property of workers whether an employer takes a tip credit or not, and that the employer is barred from using worker tips for such reasons as tip pooling.

 

The restaurant trade groups filed a complaint in Oregon in 2012, saying the regulation goes against Cumbie, in which the circuit court dismissed a waitress's lawsuit against her employer for requiring servers to contribute to a tip pool though it didn't avail itself of the tip credit, holding that the FLSA only imposes conditions on a tip credit but does not create free-standing requirements.

 

U.S. District Judge Michael Mosman ruled that the DOL exceeded its statutory authority in an April 2014 ruling. But a three-judge panel in the Ninth Circuit reversed, with Circuit Judge Harry Pregerson writing for the majority that under the Supreme Court's 1984 ruling in USA v. Chevron, and 2000 ruling in Christensen v. Harris, the Labor Department was within its rights to clarify and expand its regulations to cover even employers that do not take a tip credit.

 

The majority decision sparked a dissent from Circuit Judge N. Randy Smith, who argued that his colleagues were ignoring circuit precedent from the Cumbie ruling and that the department cannot legislate on its own.

 

When the panel declined to rehear the case or take it up before an en banc court in September, Circuit Judge Diarmuid O'Scannlain took on the mantle of dissent, skewering the majority for having "stumbled off a constitutional precipice" by upholding the agency's rule.

 

Judge O'Scannlain's dissent features prominently in the restaurant groups' cert petition, which argues that high court review is necessary to address a split the Ninth Circuit created with the Fourth Circuit, and also to cabin the overreaching scope of federal agency rule-making the groups argued had occurred.

 

"These issues are very important, as they potentially implicate every federal agency and the rights of every person affected by federal regulations," Paul DeCamp, a Jackson Lewis PC attorney representing the trade groups, told Law360 on Friday. "The [Ninth Circuit's] ruling endorses a theory of regulation that grants a previously unheard-of level of power to federal agencies to impose rules on the public utterly untethered to the laws Congress has enacted."

 

The arguments in the cert petition have fellow company: In August, Wynn Las Vegas, which was sued in Nevada by casino dealers alleging they were required to participate in a tip pool that violated the DOL regulation, also asked the high court to review the Ninth Circuit's ruling, which had reversed a Nevada district judge in consolidated appeals.

 

Wynn's petition, similarly, argued that the Ninth Circuit's position would give federal agencies "unprecedented, virtually unlimited power," and asked the Supreme Court to step in.

 

The National Restaurant Association argues that if its own cert petition is not granted, the high court should hold it pending a ruling in the Wynn case.

 

The petitioners are represented by Paul DeCamp of Jackson Lewis PC and Angelo Amador of Restaurant Law Center.

 

The U.S. Department of Labor is represented by Noel J. Francisco of the U.S. Department of Justice.

 

The case is National Restaurant Association et al. v. U.S. Department of Labor et al., case number 16-920, in the U.S. Supreme Court.

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Restaurants: Gap between actual and implied restaurant wage inflation expands to new highs  

Monday, February 27, 2017 10:36:00 AM

Source: Goldman Sachs

03 Feb 2017

 

The Bureau of Labor Statistics (BLS) reported the detailed breakdown of wages data for December on 02/03. The gap between the implied impact of minimum wage increases and actual restaurant wage inflation expanded to new peaks in December, supporting our view that restaurant wage inflation will remain a headwind into 2017 regardless of any federal minimum wage increases. More broadly, low-end wage growth further accelerated in December, remains elevated relative to post-recession levels, and continues to outpace higher-end wage inflation (which decelerated in December). We provide other key takeaways below:

 

Limited service wage pressures in excess of minimum wages continue: Limited service restaurant wages tend to correlate strongly with changes in minimum wages (as they fall at or just above minimum wages, Exhibit 4); however, this relation broke starting in 2014 and suggests additional pressure as a result of tighter labor markets. Limited service wage inflation accelerated to +5.4% in December (vs +4.7% in November), outpacing the impact of minimum wages by 3.6% (representing a new peak gap). Taking into account an additional 70bps of national pressure from state minimum wages increases taking effect 12/31/16 or 1/1/17 and maintaining this 3.6% gap suggests 5.8% inflation in 2017 vs 4.4% in 2016.

 

Casual dining inflation also remains elevated: Casual dining wage inflation also accelerated to new peaks at +5.6% yoy. Note that this level is ahead of the guidance ranges provided by companies.

 

Low-end income growth supportive of industry demand: Low-end wage growth accelerated to 3.0% in December (vs 2.7% in November). Income growth (the sum of wage and job growth) also accelerated to +4.5% yoy in December. We continue to view this as supportive of industry demand trends; however, would note secular share losses are acting as a meaningful offset (particularly among casual diners; see "2017 Outlook: Challenging year for sales and wages; PNRA up to Buy", published 19th January, 2017).

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Picture of the Week Vol. 5 - Drinking at home 

Monday, February 27, 2017 10:35:00 AM

Source: RBC Capital Markets

Nik Modi

February 3rd

 

In this week's picture: We take a look at different locations where people consume spirits and wine and discuss the reasons people choose to drink at home rather than on-premise.

 

More people drinking at home than on-premise: On-premise consumption has always been an important area of the beverage alcohol industry (as trends on-promise typically move into off-premise channels). However, research from the IWSR shows that more consumers are choosing to consumer their beverage alcohol products at home. Survey data shows that ~51% of people drink spirits at their homes or someone else's home, and ~60% of them drink wine at home vs. on-premise.

 

Reasons to drink at home: Many reasons favor drinking at one's own home or someone else's home over drinking at a bar, a restaurant, or other locations. First is that home get-togethers are naturally pre-screened for selective social interactions. It can also be more entertaining to watch friends and families showing their home-bartending skills, and home owners are incentivized especially if they have nice home bars. In addition, the price of spirits or wine consumed is much more transparent at home, while drinks at restaurants and bars are sold at significant mark-ups. Moreover, as pointed out in our previous notes, more high-end restaurants such as Olive Garden and Red Robin Gourmet Burgers are providing better quality take-out/prepared foods and upgrading their digital capabilities to ensure mobile orders and easy delivery to home, making it much easier to organize parties at home.

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House and Senate Members Reintroduce the Craft Beverage Modernization and Tax Reform Act 

Monday, February 27, 2017 10:33:00 AM

Source: Wine America

By Michael Kaiser, Vice President

1.31.2017

 

On Monday January 30th, leading House and Senate Members reintroduced the Craft Beverage Modernization and Tax Reform Act. This comprehensive bill would drastically reduce the federal excise tax (FET) burden on wineries, breweries and distilleries. Every congressional district in the United States includes a brewery, winery, distillery, importer or industry supplier, all of whom operate under an outdated tax structure.  A reduction in the FET will result in consumers benefiting from greater choice and allow businesses to invest in product development, improve infrastructure and stimulate employment in communities across the country. WineAmerica strongly supports the passage of the Craft Beverage Modernization and Tax Reform Act.

 

Senate Introduction

 

The Senate version of the bill (S.236) was introduced by Senator Ron Wyden (D-OR). Senator Wyden has been the main architect of this bill and originally conceived it in June 2015. He was joined by eleven of his fellow Senators on the new version of the bill. This bipartisan piece of legislation features six Democrats and six Republicans as original co-sponsors, they are:

 

Democrats

Tammy Baldwin- WI

Michael Bennet- CO

Thomas Carper- DE

Robert Casey- PA

Debbie Stabenow- MI

Ron Wyden- OR

 

Republicans

Roy Blunt- MO

Shelly Moore Capito- WV

Cory Gardner- CO

Jerry Moran- KS

Rob Portman- OH

Pat Roberts- KS

 

Senator Blunt of Missouri has also been tireless in his support for the bill, he is the chief sponsor on the Republican side.

 

House Introduction

 

The House version of the bill (H.R. 747) was once again co-sponsored by Reps. Erik Paulson (R-MN-3) and Ron Kind (D-WI-3). They are joined by a diverse and bipartisan group:

 

Democrats:

Earl Blumenauer (OR-3)

Peter DeFazio (OR-4)

Ron Kind (WI-3)

Chellie Pingree (ME-1)

Mike Thompson (CA-5)

 

Republicans

Mark Amodei (NV-2)

Tom Emmer (MN-6)

Mike Kelly (PA-3)

Patrick McHenry (NC-10)

Dan Newhouse (WA-4)

David Reichert (WA-8)

Patrick Tiberi (OH-12)

 

Major Provisions for Wine

 

The major tax relief provisions specific to wine are nearly identical to the previous amended version of the bill, with some minor additions:

 

Expand Excise Tax Credit for Wineries

Under present law, wine is subject to an excise tax of between $1.07 and $3.40 per gallon, based on alcohol content and carbonation level. Qualifying small domestic wineries producing 250,000 wine gallons or less are eligible for a tax credit generally equal to 90 cents per gallon on the first 100,000 gallons produced, with that benefit phasing out between 150,000 gallons and 250,000 gallons. Hard cider is taxed as wine, subject to lower rates and a reduced credit amount. This provision removes the phaseout and replaces the credit with a new tiered credit system for wine produced in the U.S. or imported as follows: $1.00 for the first 30,000 wine gallons, $0.90 for the next 100,000 wine gallons, and $0.535 for the next 620,000 wine gallons. In addition, this provision removes the existing prohibition against claiming the credit for naturally sparkling wines. Conforming expansions are made to the cider credit. Find an estimate of your new tax rate here

 

Expand Alcohol Threshold for Certain Wines

Under current law, still wine is taxed at different rates based on alcohol content. Still wine containing not more than 14 percent ABV is taxed at $1.07. Still wine above 14 percent and less than 21 percent ABV is taxed at $1.57 per gallon. For labeling purposes only, alcohol content in wine may vary from the stated amount within certain tolerances, however no such tolerances exist for tax purposes. This proposal would provide that wines up to 16 percent ABV may qualify for the $1.07 tax rate, in order to provide more certainty for wine producers. 

 

Increased Carbonation Tolerances for Certain Low ABV Wines

Present law provides a tolerance for still wine of 0.392 gram of carbon dioxide per hundred milliliters of wine, which is generally taxed at $1.07 per wine gallon. Wines exceeding this limitation are taxed as "sparkling wine" at either $3.30 or $3.40 per wine gallon. This provision would increase that tolerance to 0.64 gram of carbon dioxide per hundred milliliters of wine for wines produced primarily from grape or solely from honey and water, which do not contain any other fruit and contains no more than 8.5 percent ABV.

 

Reduce Compliance and Tax Burdens for all Producers, and Improve Excise Tax Administration

The bill exempts beverage producers from complex capitalization rules for aged products, removing the requirement that bottle aging be considered in production time.  The bill also continues TTB funding increases that were secured in for FY 2016 of $5 million for label and formula approval and $5 million for fair trade practice enforcement. The increases are to be authorized for FY 2017 and FY 2018, along with an additional $5 million for the cost of implementing the bill, including new federal permit approvals.

 

Next Steps for WineAmerica

With the reintroduction of the bill, WineAmerica will now begin the process of securing additional co-sponsors. At the end of the last legislative year, the bill had nearly 300 House co-sponsors and 53 Senators. Along with our alcohol industry partners, our goal will be to match or exceed the totals from 2016. Concurrently we will be meeting with the relevant House and Senate Committees as the agenda for tax reform is set. We look forward to working with our members and Congress to to ensure the FET burden on the beer, wine and spirits sector is at the forefront of the discussion.

For more information please contact Michael Kaiser, mkaiser@wineamerica.org

 

WineAmerica is the national voice the American wine industry. Based in Washington, D.C., WineAmerica represents wineries in 43 states and leads a coalition of state and regional wine and grape associations. As an industry leader, WineAmerica encourages the dynamic growth and development of American wineries and winegrowing through the advancement and advocacy of sound public policy.

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