Diageo Expresses Disappointment in Nebraska Court Ruling Regarding Classification of Flavored Malt Beverages as Distilled Spirits

Decision Would Raise the Price on a Legal Product that is Sold and Marketed to Adults

News provided by

Feb 18, 2011, 06:48 ET

LINCOLN, Neb., Feb. 18, 2011 /PRNewswire/ -- Diageo, the world's leading premium spirits, wine and beer company today expressed its disappointment with the recent court ruling in Lancaster County, Nebraska that goes against the federal standard when it comes to classifying flavored malt beverages. Diageo fully supports the Nebraska Liquor Control Commission's 2008 decision to codify Nebraska's longstanding practice of following federal standards when it comes to classifying flavored malt beverages as beer and believes the court's decision incorrectly classifies these beer products as distilled spirits. Flavored malt beverages are malt based, contain the same alcohol as traditional beer, and are regulated and taxed as beer in nearly every other state across the country. Diageo hopes the State will appeal this decision so flavored malt beverages can continue to be sold at a reasonable price and enjoyed responsibly by adult consumers in Nebraska.

In 2008, the Nebraska Liquor Control Commission codified Nebraska's longstanding practice of following federal standards when it comes to classifying malt beverages as beer. The US Treasury's Alcohol and Tobacco Tax and Trade Bureau ("TTB"), the federal agency responsible for regulating alcohol, affirmed the longstanding classification of flavored malt beverages as beer in 2005, after an extensive investigation and comment period.

"This misguided decision goes against both federal and the majority of state rulings when it comes to the treatment of flavored malt beverages and takes Nebraska out of alignment with the federal government and almost every other state in the country," said Winn Atkins, Senior Director of State Government Relations, Diageo North America. "Further, this ruling directly impacts our consumers, as the cost of malt based beverages would likely increase if indeed the higher distilled spirit tax rate was imposed on these beer products."

Some groups in Nebraska, like Project Extra Mile, advocated raising taxes on flavored malt beverages in a misplaced attempt to reduce underage drinking. Raising taxes on flavored malt beverages, which represents less than 2% of the beer market, will not effectively combat underage drinking. According to the Department of Health and Human Services, 90 percent of underage drinkers were either given alcohol for free or had someone else purchase it for them.

"Raising taxes is not the solution to combat underage drinking and will only punish responsible adult consumers and small businesses that are already under pressure in the current economic environment," said Atkins. "A meaningful effort to combat underage drinking needs to target the adults who are illegally providing alcohol to kids, rather than targeting a specific product and consumers who enjoy flavored malt beverages legally and responsibly."

ABOUT DIAGEO

Diageo is the world's leading premium drinks business with an outstanding collection of beverage alcohol brands across spirits, beer and wine. These brands include Johnnie Walker, Crown Royal, J&B, Windsor, Buchanan's and Bushmills whiskies, Smirnoff, Ciroc and Ketel One vodkas, Baileys, Captain Morgan, Jose Cuervo, Tanqueray and Guinness.

Diageo is a global company, with its products sold in more than 180 countries around the world. The company is listed on both the New York Stock Exchange (DEO) and the London Stock Exchange (DGE). For more information about Diageo, its people, brands, and performance, visit us at Diageo.com. For our global resource that promotes responsible drinking through the sharing of best practice tools, information and initiatives, visit DRINKiQ.com.

Celebrating life, every day, everywhere.

SOURCE Diageo