Two Dogs, one of the founding brands of the alcopop category, is to be withdrawn from the Australian market, having been crippled by price increases from the new tax system.

The brand's owners are planning to replace the alcopop with a Two Dogs beer. The beer would be a more competitive option because beer is subject to a cheaper excise levy.

According to Australian papers, the decision follows unsuccessful attempts by Two Dogs chairman Duncan MacGillivray, to reverse the decision by the federal government to place alcopops in the same tax category as mixed spirits.

Two Dogs already has a lemon-based beer for the European export market, which is brewed by Lion Nathan. Sources believe that Two Dogs is negotiating with Lion Nathan to brew the beer for the domestic market as well.

Under the new tax regime the price of a bottle of Two Dogs has risen from A$4 to A$5 and domestic sales have fallen from 300,000 cases to 150,000 since 1996.