James F. Mosher, JD, Center for the Study of Law and Enforcement Policy, Pacific Institute for Research and Evaluation, 6062 Graham Hill Road, Suite B, Felton, CA 95018, 831-335-1000, jmosher@pire.org

Flavored "Malt" Beverages (FMBs), a relatively new type of alcoholic beverage, have been developed and distributed mostly by distillers and often carry distilled spirits’ brand names (e.g., Smirnoff Ice). They are produced by taking a liquid that is derived from malt, filtering it to remove most or all taste, odor, and alcohol, and adding “flavoring” which includes distilled alcohol. Distillers then distribute the products as beer instead of distilled spirits. This has three major marketing advantages when targeting the underage drinking market. Beer is: (1) more widely advertised on electronic media; (2) taxed at substantially lower tax rates; and (3) available in a greater number of retail locations, particularly those likely to be frequented by underage drinkers. The Bureau of Alcohol, Tobacco and Firearms ruled in 1996 that FMBs should be treated as distilled spirits and not beer under federal law. The ruling is applicable to most state laws. Yet BATF and state Alcoholic Beverage Control agencies failed to enforce its ruling, and the distillers have continued to market FMBs as beer, denying state and federal governments $100 million or more in tax revenues and gaining access to the underage market and increasing brand recognition among underage drinkers. Recent surveys show that these beverages are popular with young people. This paper will detail this fraudulent marketing scheme and government responses to it, assess its impact on the underage drinking market, and discuss corrective steps being taken by state governments and public health organizations.

Learning Objectives: At the end of this session, participants will be able to

• Describe the fraudulent marketing practices associated with Flavored Malt Beverages;
• Assess the impact of the fraudulent practices on underage drinking practices and on state and federal tax revenues;
• Evaluate the need for additional research on the marketing and use of these beverages;
• Describe steps being taken by state governments and public health agencies to end the fraudulent practices.

Keywords: Alcohol, Policy/Policy Development

Presenting author's disclosure statement:
I do not have any significant financial interest/arrangement or affiliation with any organization/institution whose products or services are being discussed in this session.