Advocates Scold Diageo For Threatening Lawsuit

SAN RAFAEL, Calif., June 12 /PRNewswire/ -- Marin Institute, the
alcohol industry watchdog, applauded the California Office of
Administrative Law (OAL) today for their final approval of the California
Board of Equalization's (BOE) history-making decision to tax alcopops as
distilled spirits, not beer.

As a member of the California Coalition on Alcopops and Youth, a
collaboration of youth, community, policy, people of color and consumer
organizations, Marin Institute participated in a year-long campaign to
convince the BOE to correct the tax on alcopops, at $3.30 per gallon,
instead of the current beer tax rate of $.20 per gallon. The tax correction
will take effect October 1, 2008. Alcopops are called "flavored malted
beverages" by the alcohol industry.

According to California law the beverages should be taxed at the higher
rate because they fall under the category of distilled spirits. As
distilled spirits their cost will increase, and their appeal and
availability to youth will decrease. This has been proven in country after
country where the beverages are sold.

"For years, Big Alcohol has fraudulently evaded proper taxation on
these products. Now, both the state and our youth will benefit," said Bruce
Livingston, executive director of Marin Institute.

California, Utah and Maine regulators and legislators have now
corrected the tax rate on alcopops, while Maryland and several other
smaller states have permanently declared that alcopops are beer, under
intense lobbying by Diageo and other producers.

A Marin Institute report detailed the costs of alcopops consumption
among underage youth in California. The study estimated that alcopops cost California $1.25 billion and cause 60 deaths annually. With the new tax in place, the lives of 21 youth could be saved. The new tax is expected to reduce underage alcopop consumption in the state by 35 percent, resulting in a cost savings of $437 million.

Diageo and the Flavored Malt Beverage Coalition threatened a law suit against the tax correction two days ago. As Diageo is the company behind the leading alcopops brand, Smirnoff Ice, it has much to gain by taxing alcopops as beer.

"Diageo is still trying to protect their old, fraudulent tax rate on
Smirnoff Ice, at a rate that allows kids to buy their product," added
Livingston. "Any court delays by Diageo will keep Smirnoff Ice prices low,
and harm and sometimes kill the youth of California."