Smirnoff Treads Lightly With New Libation

July 19,, 2007— -- NEW YORK - Diageo is trying to pump new growth into the business of flavored malt beverages with Smirnoff Source, billed as "pure spring water + alcohol" and packaged to look like designer bottled water.

Source is a malt-based alcohol beverage that tastes like vodka - but doesn't contain any - with a hint of citrus flavor. After a trial run in Dallas last fall, it has been expanded to 15 states and is expected to go national by January.

The packaging and marketing play up a "natural" image. The 16-ounce clear bottle has blue lettering on a frosted label that appears to have a smattering of trees etched into it.

The company recruited tennis pro Anna Kournikova in June to host a fundraiser for The Nature Conservancy, an environmental group. TV ads now airing in the Northeast show bursts, drops and trickles of water in sync with the music.

Source aims to take sales from domestic light beers, says Diageo Vice President Mark Breene.

It is being marketed as an "alternative to light beers in the market today but a little more premium," Breene says. "This is designed deliberately to be lighter in taste, lighter in calories, lighter in carbonation and lighter in alcohol."

It is also lighter than other flavored malt brews. The alcohol content is 3.5 percent, in light beer territory and less than the 5 percent common in the first generation of flavored malt beverages and regular beer.

It is also about a third less sweet than most flavored malts - whose sweetness earned them the nickname alcopops - and has fewer calories at 115 per 16-ounce bottle. Smirnoff says it took about 18 months to develop the right vodka flavor.

One thing that is not light: the price. Suggested retail for a four-pack is $9.49 to $9.99, and single bottles sell for upwards of $6 in bars and clubs.

Alcopop sales took off in 2001 but leveled within two years, amid charges by advocacy groups and lawmakers that they attract underage drinkers.

Sweet, ready-to-drink, alcoholic beverages continue to draw scrutiny. Anheuser-Busch in May pulled malt-based Spykes off the market after advocacy groups and more than two dozen state attorneys general complained that the 2-ounce, fruit-flavored shots appealed to minors.