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Developing Brand Loyalty Developing Brand Loyalty at an Early Age at an Early Age � “ “Diageo rolled out Smirnoff Ice Diageo rolled out Smirnoff Ice � in the US market...it suddenly in the US market...it suddenly put the once- -stodgy Smirnoff stodgy Smirnoff put the once name on the tips of millions of name on the tips of millions of echo boomers’ ’ tongues tongues” ” – – echo boomers ( Im pact Im pact , May 15, 2003) , May 15, 2003) ( � Echo Boomers Echo Boomers: : � � Americans born from 1977 Americans born from 1977- - � 1994 1994 � currently 12 currently 12 – – 29 years old 29 years old �

Tax and Trade Bureau Description of Tax and Trade Bureau Description of “Flavored Malt Beverages Flavored Malt Beverages ” ” (Alcopops) (Alcopops) “ � “ “Flavored malt beverages exhibit little or no Flavored malt beverages exhibit little or no � traditional beer or malt beverage character. … … traditional beer or malt beverage character. Brewers … … remove the color, bitterness, and remove the color, bitterness, and Brewers taste that are generally associated with beer. … … taste that are generally associated with beer. This leaves a base product to which brewers add This leaves a base product to which brewers add various flavors, which typically contain distilled various flavors, which typically contain distilled spirits, to achieve the desired taste profile.” ” spirits, to achieve the desired taste profile.

Why Distilled Spirits Are Added to Why Distilled Spirits Are Added to Alcopops Alcopops According to the Flavored Malt Beverage Coalition: According to the Flavored Malt Beverage Coalition: “Flavoring ingredients that are added to a malt Flavoring ingredients that are added to a malt “ beverage base to produce an FMB need to be beverage base to produce an FMB need to be stronger … … because of the pronounced because of the pronounced stronger organoleptic [sensory] qualities of the base organoleptic [sensory] qualities of the base itself.” ” itself. Fact Sheet, February 2003 Fact Sheet, February 2003

Production Schemes to Gain Production Schemes to Gain Regulatory Advantage Regulatory Advantage � Smirnoff Ice has a different formulation in the United States than in other countries where it is identified as a spirits-based beverage. � Hooch has a malt base in the United States, a spirit base in the United Kingdom and a fruit wine base in Germany.

“The beauty of this category is that it brings in new drinkers, people who really don’t like the taste of beer,” said Marlene Coulis, A-B’s director of new products. (Advertising Age, April 22, 2002)

No. No. IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT, DIVISION _____ FIRST APPELLATE DISTRICT, DIVISION _____ JOAN KILEY, COUNTY OF ALAMEDA, et al. JOAN KILEY, COUNTY OF ALAMEDA, et al. Petitioners Petitioners vs. vs. CALIFORNIA DEPARTMENT OF ALCOHOLIC BEVERAGE CALIFORNIA DEPARTMENT OF ALCOHOLIC BEVERAGE CONTROL CONTROL Respondent. Respondent. PETITION FOR WRIT OF PETITION FOR WRIT OF MANDATE, CERTIORARI, MANDATE, CERTIORARI, AND/OR OTHER AND/OR OTHER APPROPRIATE RELIEF APPROPRIATE RELIEF LOUISE H. RENNE, State Bar #36508 LOUISE H. RENNE, State Bar #36508 RENNE SLOAN HOLTZMAN AND SAKAI LLP RENNE SLOAN HOLTZMAN AND SAKAI LLP Public Law Group Public Law Group

CA Business & Professions Code § 23004 CA Business & Professions Code § 23004 � “ “Alcoholic beverage Alcoholic beverage” ” includes includes … … every liquid or every liquid or � solid containing alcohol, spirits, wine, or beer … … solid containing alcohol, spirits, wine, or beer which is fit for beverage purposes either alone or when which is fit for beverage purposes either alone or when diluted, mixed, or combined with other substances . .” ” diluted, mixed, or combined with other substances

Purpose of the ABC Act Purpose of the ABC Act [The Act’ ’s purpose is to protect] the safety, welfare, s purpose is to protect] the safety, welfare, [The Act health, peace, and morals of the people of the health, peace, and morals of the people of the State… … . It is hereby declared that the subject State . It is hereby declared that the subject matter of this division involves in the highest matter of this division involves in the highest degree the economic, social, and moral well- -being being degree the economic, social, and moral well and the safety of the State and of all its people. All and the safety of the State and of all its people. All provisions of this division shall be liberally provisions of this division shall be liberally construed for the accomplishment of these construed for the accomplishment of these purposes. purposes. § 23001 Business & Professions Code § 23001 Business & Professions Code

Purpose of the ABC Act (Cont.) Purpose of the ABC Act (Cont.) California law seeks to promote the “welfare which will be achieved by strict regulation and curtailment of the use of liquor and the economic benefits resulting to the people from the promotion of tolerance, rather than those resulting from the prom otion of the liquor industry .” ( Pronto Market No. 1 Inc. v. Alcoholic Beverage Control Appeals Bd. (1976) 61 Cal.App.3d 543, 556 [emphasis added].)

Federal Regulatory Criteria Federal Regulatory Criteria � The Tax and Trade Bureau based its decision primarily on the potential economic and regulatory burdens placed on the alcohol industry. � “The TTB is persuaded that [strict limits on the distilled spirits content in alcopops] might impose economic burdens on a sector of the FMB industry ….” TTB, Flavored Malt Beverage And Related Regulatory Amendments, J anuary 3, anuary 3, TTB, Flavored Malt Beverage And Related Regulatory Amendments, J 2005, 70 FR 194, 209. 2005, 70 FR 194, 209.