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STAMFORD, Conn. - In an unusual business move, Guinness Bass Import Company, a division of Diageo, is offering to reimburse its distributors to remove its discontinued Captain Morgan Gold brand, a flavored malt beverage that didn't perform to the company's expectations.
The alcohol maker on Tuesday sent a letter to distributors saying it will reimburse them 50 percent of laid-in costs for inventory in their warehouses by mid-November. In addition, the company will offer an extra 50 percent reimbursement to distributors who continue Smirnoff Ice programming, return beer DSIs to appropriate levels, and remove retail inventory at their own cost. The practice is unusual in an industry where retailers are typically left to discount discontinued products.
"We are taking this rather unprecedented step for two reasons: 1. We believe in the long-term viability of FMBs (flavored malt beverages) and have every intention of introducing many successful brands in the future; and 2. We believe this is the best thing for our business and for our relationship with you," said the letter, signed by David Eickholt, Northeast president of Guinness UDV.
The company pointed to its Smirnoff Ice brand, which it called "indicative of the potential for FMBs." FMBs represent 4.5 percent of total malt beverage grocery annual sales dollars, and FMB sales in grocery jumped 34 percent this past summer, according to the company, which has invested some $340 million in marketing support since the introduction of Smirnoff Ice.