Taxes to cut under-age drinking threaten sales hopes for RTDs

Related tags Alcoholic beverage

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Manufacturers of ready to drink (RTD) alcoholic drinks could see sales dwindle in Europe following moves to discourage under-age drinkers by ramping up taxes.

Germany has already imposed a levy of around 80 cents (55p) a bottle, practically doubling the price of the drinks, which are popular among young people. Austria plans to do likewise.

The German tax came as a blow to drinks companies such as Bacardi-Martini, which makes Bacardi Breezer, and Diageo, owner of the leading RTD brand Smirnoff Ice, whose hopes of offsetting a 12% slump in UK sales with growth in other European markets could be thwarted.

Diageo is attempting to head off a rash of copycat taxation by pursuing a challenge against the German government in the high court.

"Public health objectives are not best served through tax measures," said Diageo.

"If governments truly want to address issues such as binge drinking and under-age consumption they should introduce evidence-based measures that promote responsible drinking."

The company added that the idea that RTDs encourage binge drinking by young people was not supported by studies of their drinking patterns.

John Band, consumer markets analyst at the research company Datamonitor, said that the impact of the tax would be greatest in the off trade, which is driving the market for RTDs in Germany. "It is not going to be good news for manufacturers. It will hit the market quite hard and could well lead to market decline," he said.

According to a report by Datamonitor, global RTD sales will decrease by almost a quarter by 2008, to £1.1bn a year.

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