A Lion Nathan subsidiary has been fined NZ$28,000 for the use of a misleading label on one of its RTD brands, Kentucky Rebel Bourbon and Cola, the New Zealand press reported today.

An Auckland District Court heard that the country's Commerce Commission accused the Lion Nathan subsidiary, Indio Beverages New Zealand, of failing to disclose that Kentucky Rebel Bourbon and Cola also contained as much as 50% neutral spirit, on top of the Bourbon and cola content.

"Consumers had no way of knowing that the Bourbon was diluted with a neutral spirit. In addition, this was the third time that a Lion Nathan company had come to the attention of the Commission for misleading the public through claims made on its labels," Commission fair trading director Deborah Battell said.

"Indio Beverages included a neutral spirit so that it could achieve a cost advantage over its competitors."

One of those competitors, Independent Liquor (NZ) Limited, last year commenced civil proceedings against Indio Beverages under the Fair Trading Act over the contents and labelling of the RTD, claiming the Lion Nathan subsidiary was unfairly able to sell its RTD at a discount to its own product Woodstock.

Lion Nathan New Zealand's managing director, Julian Davidson, said the company had not set out to deceive but that it accepted it was in the wrong. "We look for ways to engineer products that can be sold to consumers at as low a price as possible," Davidson was quoted as saying. "So we created a formulation that had a neutral spirit in it but we failed to put on the packaging that it contained a neutral spirit."

Davidson explained that the team working on the development of the drink worked outside a labeling control system which Lion operates for all its beer brands. "Since this was brought to our attention," Davidson said, "we've placed all our beverage labeling development within the same vetting system."

Press reports said today that the case was settled out of court, and included a NZ$250,000 payment to Independent Liquor and an agreement that Indio Beverages would withdraw all stock that did not contain 100% Bourbon as its spirit.

Kentucky Rebel Bourbon & Cola now contains 100% Bourbon. However, the commission found that 25,000 case lots were sold with "misleading" labelling, which listed the word "spirit" under ingredients between July 2001 to July last year.

Lion Nathan has run into the Commerce Commission on two other occasions. Once for wording on bottles of the Lion Breweries-owned Speights Gold Medal Ale and once when it was warned that labels on its Mac beers wrongly suggested that an independent, family brewery produced the beer.