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Diageo fights Californian alcopop ban

Published:  23 July, 2008

US: California authorities have vowed to ban the sale of Smirnoff Ice across the state

The crackdown, which the state's authorities say will help curb underage drinking, is also being accompanied by a tax rise that will almost double the price of Diageo's best selling alcopop.

The California Board of Equalisation voted on Thursday last week to reclassify Smirnoff Ice and similar drinks from their current category, as malt beverages akin to beer, to the more heavily restricted spirits category.

The move has led to drinks company Diageo, triggering a public fight-back campaign to prevent the new laws coming into effect on July 1 2008.

The world's largest drinks company has sparked discussions on local Californian radio stations and has orchestrated a letter-writing campaign.

Guy Smith, executive vice-president of Diageo North America, said: "Underage drinking is a very serious issue, but raising taxes and falsely claiming it will address the issue is fiscally irresponsible and socially misguided.

"The outcome will affect law-abiding consumers, distributors and retailers in an already fragile market."

Sales of alcopops are falling across North America, but Diageo's most recent full-year results show that it has managed to keep the revenue slide to 1% because of price rises and the launch of new flavours.

California's reclassification of alcopops as spirits rather than flavoured beer is the latest twist in a long-running battle over the status of the drinks in North America.

The board of equalisation in California decided on a 3-to-2 vote that it would create a presumption that all non-beer drinks are distilled spirits and should be regulated accordingly, hence the ban.