News briefs: Diageo vs. California, exploding kegs and InBev

By Neil Merrett

- Last updated on GMT

Related tags Grupo modelo Alcoholic beverage

This week, Diageo heads to the court over new taxing measures in
California, a major US roadway is closed over beer-induced chaos
and InBev expresses its concerns to potential takeover target

Diageo strikes back over tax The US arm of Diageo is suing the California Board of Equalisation after the body last week approved new tax regulation that will significantly raise the duty on malt-beverage products such as ready-to drink (TRD) flavoured beers.

The complaint, which was filed at the California Superior Court in the US, alleges that the new law that classes malt based flavoured beer - referred to as 'alcopops' - as a distilled spirit has led to a 1,600 per cent tax hike on the products.

Kellye Walker, general counsel of Diageo North America claimed that the state's Board of Equalization (BOE) which approved the measure, was not entitled to reclassify the products and had gone beyond its legal remit.

"The Board of Equalization has the authority to tax within existing classifications, but it does not have the authority to reclassify alcohol beverages for the purpose of taxation," he stated.

"The power to reclassify lies solely with the Department of Alcohol Beverage Control."

The California BOE has defended the tax as a necessary step in combating concern over alcohol abuse particularly in young people, a demographic that some organisations have accused RTD manufacturers of targeting.

Beer blow-up hits US roadway On top of numerous worries over fuel and environmental costs of distribution, exploding beer this week proved to be another concern for some US Motorists, according to press reports.

Officials in Nevada yesterday found themselves closing a section of the Insterstate 15 road in Las Vegas after an unspecified number of kegs blew up in the back of a truck, according to the United Press International (UPI) news service.

Police said the truck, which was carrying 278 beer kegs, began emitting smoke forcing its driver to exit the vehicle as the beer within went ballistic, UPI reported.

Carbon dioxide stored in the kegs is thought to be behind the explosion, according to the officials.

Inbev details bud-brewer concerns InBev has sent a second letter to Anheuseur-Busch informing its US-based rival of its concern over reports it may itself try to increase its existing shares in Mexican brewer Grupo Modelo.

Carlos Brito, writing on behalf of InBev's group of directors, informed the head of Anheuseur-Busch that it's $65 per share cash offer related to the Budweiser brewers' current assets and structure.

"We are committed to entering into a constructive dialogue with you to achieve a friendly combination of our two companies," he wrote.

"We also stated that we have the greatest respect for Grupo Modelo and its management and look forward to the opportunity to work with them to explore possible ways to expand the availability of the Grupo Modelo brands outside of North America."

Speculation over the move has led analysts to suggest that such a move by Anheuseur-Busch, which owns 50 per cent of Grupo Modelo could prove to be a risky strategy.

The Reuters news agency, citing analyst predictions, said that the Mexico-based brewer, which produces the leading US beer import Corona, may yet favour working under the new ownership of InBev in the long-run.

InBev is renowned for supplying popular brands like Stella Artois lager worldwide.

Related topics Manufacturers Diageo

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