New Rules Lead to Formula Change

Miller Brewing Co. and other alcoholic-drink makers will have to change their formulas for flavored malt beverages, such as Skyy Blue and Smirnoff Ice, because of a new government rule.

The U.S. Alcohol and Tobacco Tax and Trade Bureau published regulations that restrict the alcohol content of flavored malt beverages. The new regulations require at least 51% of alcohol in flavored malt beverages be the product of brewing and not from distilled spirits flavors added to the drinks.

The issue arose because drinks such as Skyy Blue are created with a malt base -- the same process used to brew beer -- before adding vodka, rum and other spirits flavors. Beer is taxed at a lower rate than distilled spirits, and alcohol regulators have questioned whether flavored malt beverages should be taxed as beer or spirits.

The new standard allows only half the amount of added spirits flavors found in many flavored malt beverages, according to the alcohol bureau. Drink makers will be given one year to comply with the new rule to give them time to change their formulas and production processes, the bureau said in a statement.

The new rule "is an improvement over the current situation in which various products being sold as beer are actually more like distilled spirits," said Jeff Becker, president of the Beer Institute, a Washington, D.C.-based trade group.

The new rule will require most flavored malt beverages to be reformulated, Becker said in a statement. Brewers will be able to meet the new requirements before the rule takes effect in January 2006, he said.

Demand for flavored malt beverages has cooled after the trend peaked in 2002. That year, Miller launched four such drinks: Skyy Blue, Stolichnaya Citrona, Sauza Diablo and Jack Daniel's Original Hard Cola. They made up just more than 1% of Miller's overall sales volume in 2003.

In February 2004, Miller announced it was dropping production of three of those drinks, because of poor sales, keeping just Skyy Blue.