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NELSON-PADBERG CONSULTING Mr. Jack Kelly Senior Vice President The Tobacco Institute 1875 I Street, NW 8th Floor Washington, D.C. 20006 May 4, 1983 Jihlt c:.t _!) iytfg C SUBJECT: Consumer Tax Alliance Dear Jack: Recent conversations with several interest groups in California indicate that support for creation of a Consumer Tax Alliance may be waning. Unless this trend reverses in the near future, there will be little hope for creation of a broad funding base for the- proposed organization. Soft drink bottlers appear to be the only business group which is actively considering the program. It may be that they will eventually choose to support the endeavor; however, there is no certainty of this at this time. E& J Gallo Wines have told us they are not interested, which is probably an,indication the Wine Institute will not be involved. Likewise, the Amusement Games Association has informed us that they cannot provide financial assistance. There remains some hope that the beer companies will become involved. Despite recommendations from their California staff to reject the proposal, the corporate office of Anheuser-Busch has ~ not yet made a final rejection. We believe that a decision by, Miller Brewing Company to support the effort to the extent of their market share in the state would provide the leverage needed to bring Anheuser-Busch into the fold. If these two organizations , join the effort, it should be relatively easy to immediately include Adolph Coors. The California Beer Wholesalers Association and United States Brewers Association have not yet made a final response to the proposal; but their support is unlikely without the support of major brewers. . , - . I The Distilled Spirits Council has not yet reached a conclusion on the proposal, but we doubt their eventual support, due to their present national effort to shift to "absolute alcohol" tax formulae; such formulae are inimical to the best interests of the wine and beer industry. 2900D Bristol'Street, Suite 201 • Costa Mesa, California 92626 .(719) 957-1010

A '-;Mr. Jack Kelly May 4, 1983 Page Two C C Anheuser-Busch has indicated they would be more interested in the concept if it were national in scope. We are not yet aware of the feelings of other organizations in this regard, but would be happy to pursue this angle if you desire. Such an organization would be more cost-efficient, as much of the research can be conducted as easily -- and at the same basic cost -- as a state study. Also, there would be some economies in management, office overhead, etc. We have not prepared a detailed plan for such a national effort, but estimate an annual budget of about $500,000; roughly twice that for a California endeavor. Please advise us if you wish more information in this regard. _ . We have been dismayed at the formal responses to the CTA proposal. Prior to writing the proposal, we received help and the - encouragement from all potential participants. All major groups participated in the Sacramento meeting, and their initial reactions were very encouraging. Some of this shifting of opinion is due to a very unstable political situation in California vis-a-vis excise tax issues. At least one potential member of our organization was told in a private meeting with Speaker Willie Brown that there was no possibility of a tax increase on his products; based on this - assurance, that cpmpany raised questions about the need for a group like CTA. Yet, three weeks later, Brown has declared support., for such an increase in that industry. We are also informed that Governor Deukmejian may support increased excise taxes on several._. consumer products -- including cigarettes, beer, wine, and candy -- despite his public protestations that he will not support such . taxes. there appears to be three options for you to consider:: financial base for CTA in its initial year. This being the case, concern over the issue, we do not see potential for a broad In conclusion, unless there is a major change in the beer industry . . . , _ - --- - :.,. _._ : .-... - _ - .. .- _ • Abandon the project. • Pursue creation of a national CTA coalition with the same.- - goals.and basic strategies as was recommended for California;'- • Provide funding for start-up costs and a skeleton budg,et _ for CTA; continue to solicit support from.other interest groups, and enhance programs in relation to new revenue.'-`.; If we can provide any further information in this regard, please let us know. ely, Robert E. Nelson ._ Eileen E. Padberg REN/EEP:dm