This morning, Diageo (NYSE: DEO), the world's largest spirits maker, announced that annual profit increased 7%. The company's net sales for the year increased 15% to 9.3 billion pounds thanks to solid performance in its international segments.

Diageo's sales increased during the past few quarters, thanks to investment in major brands like Johnny Walker, Guinness, and Smirnoff. This investment has helped the company weather the global economic downturn better than most of its major rivals.

Good morning! A New York Times article reports that cheap booze is seeing a nice sale spike as folks swap out premium or even mid-market brands for rotgut. Popov & Tonic, anyone? The Prince of Darkness over at Zero Hedge illuminates us as to the possibility that a major supplier of financing to rural electrical cooperatives could go dark, taking down dozens of utilities in the sticks with it. Maverick ratings agency Egan Jones began calling this a while back.

Blogger Paul Kedrosky posted a fascinating Bloomberg chart showing that alcohol consumption in the U.S. has started to decline. He opines people feel so poor that they have cut back on booze -- which casts aspersions on the defensive status of booze stocks. Piqqem Sentiment on Molson (NYSE: TAP), considered the best of the brewery companies, is modestly positive with rising sentiment.

Are you ready to ring in the new year? I sure am. My wife and I have a bottle of champagne in the fridge and we can't wait to toast 2009.

Normally, we are not big drinkers, but I figured this year would be different. I can't say goodbye to 2008 fast enough. What will go down as one of the worst years in stock market history is plenty reason for us to break out the real stuff.

I suspect we are not alone in our craving for an adult beverage. It is true that during difficult times sales of libations increase. There is good reason for that, as many seek to escape, even for a moment, the challenges faced on a day-to-day basis.

I have thus far in my parenting career managed to avoid Chuck E. Cheese. As someone who wants to run screaming out of the local public pool (the noise! the smell of chlorine! the constant frantic need to protect your babies from certain watery death!), Chuck E. Cheese with three little boys, well ... whoops, how did I lose that invitation?!? It turns out my instincts are shared by others, who are, perhaps, less willing to dispense with social graces and their children's begging and pleading.

As the Wall Street Journal reports today: Chuck E. Cheese birthday parties have been known to get a little out of hand. So out of hand, in fact, that the restaurant has begun to give up liquor licenses in some restaurants, and post armed security guards in others. In Brookfield, Wis., the Chuck E. Cheese gets way more calls than the biker bar down the street, according to the town's police chief. Typical of the fare: adults have too much to drink and one parent decides someone else's child is hogging a machine, voicing their complaints in loud and unsavory language. Next, here comes mama bear (or, upon occasion, papa) to protect his, or her, babe. One fight involved 40 people slinging punches and insults.

Bad news in the market means good news for Constellation Brands Inc. (NYSE: STZ) which manufactures and markets spirits, wines and beers under a variety of labels. Brands include Robert Mondavi wines, Corona beer and Black Velvet whiskey. When the economy is good, folks drink to celebrate. When the economy starts to tank, people drink to commiserate. Constellation benefits either way. The company just released 1Q 2009 results. Profits jumped 50%! Diluted (no pun intended) EPS was $0.20, up from $0.13 in 1Q 2008. Consoldiated net sales increased 3%, with wine sales up 15% and spirit sales, led by vodka, up 9%. Constellation offloaded several lower profit margin lines including Almaden and Inglenook wines, and added higher product margin line wines Clos du Bois and Wild Horse.

Investors, whether drinkers or tea-totalers, like the numbers. The stock is up over 5% in the last two days, closing on July 2nd at $21.22

The bulls got to lead the first day of the quarter, although we would note that if today was the norm that trading volatility isn't slowing down regardless of the direction. Oil rose again toward session highs on tensions and the usual myriad of reasons we cite for oil rising (yes, it's that routine). Here are today's unofficial closing levels:

• DJIA 11,381.77 (+31.51)
• S&P500 1284.89 (+4.89)
• NASDAQ 2304.97 (+11.99)
• 10YR T-Note 3.992% (+0.013%)
• 52-WEEK LOWS

We actually saw many financial sector upgrades from research firms today, which sent many of the corresponding shares higher in what feels like a "for once" statement. We would caution that later in the day an analyst report did note other banks would need more capital (again).

When the Swedish government put Vin & Spirit, parent company of Absolut Vodka, up for sale more than a year ago, industry experts estimated it would fetch over $4 billion.

Now, Pernod Ricard, a French liquor company, is buying the brand for $8.89 billion. Absolut is the third largest spirit brand in the world, and the sale attracted the interest of many of the industry's top players: Fortune Brands (NYSE: FO), Diageo and Bacardi.

What makes the high valuation afforded to Absolut so interesting is that Pernod Ricard is paying nearly $9 billion for a brand that only really came to prominence in its current form in the 1980s.

With its racy and provocative ads (like the one on this post), Absolut was one of the first mainstream brands to aggressively target the gay community. Back when the sale effort was first announced, I opined that targeting gay media outlets was a decision that paid off, as this large, and often affluent population group, now counts Absolut as its vodka of choice. Perhaps a company like Budweiser, which has been widely criticized for spending money on ads (such as the Super Bowl) that have done little for the brand, could learn something from Absolut's edgy marketing.

The M&A field is in a rough patch right now, struggling from a tough debt market and general economic malaise. But apparently, strategic buyers are still able to pay up for strong brands.

This Kirkland Signature Hefeweizen is for you!

Already the leading seller of wine in the U.S., Costco (NASDAQ: COST) has applied to sell its own brand of beer. The beer, to be brewed by California crafter Gordon Biersch Brewing Company, will come in pale ale, hefeweizen, amber ale, and lager varieties.

With Trader Joe's-branded varieties of beer and wine already a staple at the parties I attend here in Portland, I wonder if this move will be a major market force in the premium beer market. (Gordon Biersch produces beer for Trader Joe's, already.) All of the big brewers have recently been making forays into premium brews as a reaction to the growing influence of smaller breweries like Sam Adams and Sierra Nevada, as well as the groundswell of regional microbreweries. Craft beer made up 3.6% of the U.S. market in 2006; but had grown by 31.5% over the 2003-2006 period, as opposed to low-single-digit growth in the beer market as a whole.

It is increasingly obvious to a substantial segment of the population that neither Bud nor Miller tastes great. The production of high volume, high quality Costco-branded beer will only magnify that realization and could be a serious challenge to the market dominance the large breweries have enjoyed for several decades. As for Costco? The company's obvious success in wine means it should find an easy time convincing its customers to become regular drinkers of Kirkland Ale and perhaps provide a good avenue for bottom line earnings growth.

In the competitive brewing business, sometimes it's just hard to play nice. Over the weekend, Miller Brewing Co. -- a subsidiary of SAB Miller -- launched what appears to be a potential salvo in a ramped-up version of the "beer wars" of yesteryear.

A new commercial for Miller Lite, which debuted during football games and NASCAR events, uses the iconic Dalmatian-and-Clydesdale image -- used for decades by Anheuser-Busch (NYSE: BUD) -- to pay tribute to its own number-two product. The Clydesdale-drawn wagon features a sign advertising "Miller Lite. Half the carbs of Bud Light." At the end of the commercial, the dog exits the wagon for a Miller truck, which speeds away.

BUD advertising officials were quick to respond, taking out a full-page-ad in yesterday's USA Today, imploring Miller to "keep up the bad work." Launching back, Miller representatives revealed plans to continue hammering home the facts that Miller Lite has "fewer carbs and more taste."

When you think of the professionals running the world's wine businesses, filthy mouths and public urination are probably not the first character traits to come to mind. But Fred Franzia is no ordinary vintner. CEO of Bronco Wine, now the fourth-largest wine maker in the country, Franzia hasn't let success affect his head ... or his manners.

Joel Stein of Business 2.0 magazine recently had the "pleasure" of profiling Franzia in a lengthy piece that describes the brusque Franzia relieving himself against the side of his Jeep, cursing out the competition, and claiming "We can grow [grapes] on asphalt."

Bronco Wine was put on the map with the Charles Shaw brand of wine, affectionately known as "Two Buck Chuck" and available exclusively at privately-held Trader Joe's. The Chardonnay varietal of this bargain-basement-priced beverage recently nabbed a top prize at the 2007 California State Fair Commercial Wine Competition. The label, which was first available at Trader Joe's in 2002, is now one of the fastest-growing brands in America, selling 5 million cases per year.

28 state attorney generals, along with the District of Columbia and Guam, are going after the manufacturers of "alcoholic energy drinks".

According to the St. Louis Post-Dispatch, Anheuser-Busch's Bud Extra, Miller's Sparks, and Liquid Charge and Liquid Core from Charge Beverages of Oregon are among the drinks being targeted.

The lawmen are concerned that consumers are not being advised of the risks of combining alcohol with caffeine. Studies have shown that caffeine can lead intoxicated individuals to believe that they are well enough to drive, and can also mask some of the symptoms, fooling those around them as well.

For now, sales of these beverages are not a large enough portion of sales for the big alcohol companies for the suit to be a concern for investors.

According to news reports, the Treasury Department is considering a new rule that would require beverage companies to add informative labels to alcoholic drinks. All alcoholic drinks. The labels would have to show information regarding alcoholic content as percent of volume and, most importantly, a "serving facts" panel, which would list, much like other foods and beverages do, the number of calories, carbohydrates, fat and protein for a standard serving size.

Already on Friday last week, I hailed PepsiCo Inc.'s (NYSE: PEP) decision to change the label on its Aquafina bottled water to say "Public Water Source," meaning, basically, tap water. I thought this was a first, small step into explaining the futility of this needless industry called bottled water.

Now this makes me just as happy, if not more. You see, I most certainly like to consume alcoholic beverages on occasion, but as conscious as I've always been about nutritional and calorie intake from soft drinks and juices, I never have an accurate measure when it comes to alcohol -- how many calories a pint has, a glass of wine or an ounce of vodka? Sure, there are sources that tell you approximately, but I'm certain these vary from one manufacturer to another. And why should alcoholic beverages be any different from the rest of the food and beverages we consume? Why shouldn't these companies have to report nutritional content for the consumer?

In my post: Don't forget to count drink calories when dieting, I finished by saying, "Alas, this goes for beer and martinis as well..." Then, not too long ago, AOL ran a feature detailing the Highest Calorie Cocktails. One of my faves, the margarita, held the second place with 740 calories!!! Naturally, a cocktail won't come with a label, but awareness is the first step, right?

By the way, it seems that industry execs actually support this step as well, as they felt consumers' demand for it, but the process could still take three years. Until then, and while I'm still blissfully ignorant of how many alcoholic calories I consume, I think I could use a martini. Cheers.

Is there a smart way to drink? Clearly, the first answer is "in moderation" and "with someone else behind the wheel." But when it comes to the etiquette and the economy of drinking, is there a way to come out on top?

While I'm not exactly I barfly, I do know my way around a pint of Guinness or a gin and tonic. I've dated bartenders (a tricky proposition for someone in the 8-to-5 workplace) and now have one in my family (my sister-in-law has poured drinks for almost four years). There are things I learned being around this environment ... 50% of the time, for example, someone will order a Bud Light - good news for Anheuser-Busch (NYSE: BUD), but maybe that's because I live in St. Louis. The most annoying customers (aside from bachelorette parties) are those who approach the bar without a clear idea of what they are ordering. And be ready to show you're willing to tip from the very first drink, or you could be subject to shoddy service.

There are apparently some secrets that my former friend and my sister-in-law have kept to themselves, however, but SmartMoney brought them to the surface this week - things your bartender doesn't want you to know...

If your Final Jeopardy question read "What U.S. state is home to the biggest wine producer in the world?", would you answer California? You'd be wrong. It's New York! In fact, the Fairport, N.Y. firm in question sells more than 250 brands of flavored ethanol.

Constellation Brands (NYSE: STZ) produces and markets wine, spirits and beer. The Wines division is responsible for such brands as Robert Mondavi, Inniskillin, Simi, Arbor Mist and Blackthorn (cider). The Spirits division distills such brands as Black Velvet, Chi-Chi's, Fleischmann's, Canadian LTD and Mr. Boston. The Imports division has the right to import, market, and sell Corona Extra, Corona Light, Modelo Especial, Pacifico and St. Pauli Girl. The firm distributes its products through wholesalers, government beverage control agencies and various retailers in some 150 countries. Diageo (NYSE: DEO) and Fortune Brands (NYSE: FO) are major competitors.

The company pleased investors late last month, when it reported solid Q1 results and guided FY08 EPS in-line with the average Street estimate. The CEO announced an acquisition strategy focused on European expansion, premium spirits and niche wines. Banc of America Securities subsequently reiterated its "buy" rating on the issue and boosted its price target to $27. The news kept STZ shares cycling through a positive 10-week trading channel. The price is currently moving near the base of that channel, where oversold CCI, Stochastic and Momentum technical parameters suggest the potential for a rise back toward the top.

Altogether, brokers recommend the issue with two "strong buys," one "buy," eleven "holds" and one "sell." Analysts see a 22% growth rate through the next year. The STZ P/E ratio (20.60), Price to Sales ratio (1.02), Price to Book ratio (1.73) and Price to Cash Flow ratio (11.93) compare favorably with industry, sector and S&P 500 averages. Institutions own about 84% of the outstanding shares. The stock is one of those used to calculate the S&P 500 Index. Over the past 52 weeks, it has traded between $18.83 and $29.17. A stop-loss of $20.50 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the vice president of Stockwinners.com.