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Leading brewer Diageo plc’s (DEO - Analyst Report) subsidiary, Ketel One Vodka has sued Arcadia Imports for copying the bottle design and labels of its iconic vodka.

Ketel One has accused Arcadia of confusing consumers by imitating its flagship brand’s packaging. Management has proceeded to take legal action against Arcadia's deceptive trade practices by defending its design and label.

Diageo owns 50% of Ketel One by Diageo in a 50-50 joint venture with The Nolet Group formed in 2008. Under the venture, Diageo was granted the perpetual exclusive global rights to sell, market and distribute super-premium Ketel One Vodka and Ketel One Citroe.

Arcadia Imports has allegedly duplicated the looks of Ketel One Vodka in its Dutchcraft vodka bottle. Established in 2006, Connecticut-based Arcadia has introduced Dutchcraft as a small-batch, super-premium vodka from Holland. Significantly, Ketel One commands dominant market share in Holland.

The similarity in design and labeling may affect sales of Diageo’s flagship Ketel One vodka, whose sales reached to one million cases in 2002.

In Oct 2013, Diageo reported interim management statement for the first quarter of fiscal 2014 ended Sep 30. While organic sales increased 3.1%, volume rose 0.6% from the year-ago period backed by decent sales in almost all geographical regions.

Diageo is increasing marketing investment in all its geographical segments, and the company is improving its margins consistently by focusing more on the high-priced premium brands.

Currently, Diageo carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the same sector include Constellation Brands Inc. (STZ - Analyst Report), Green Mountain Coffee Roasters Inc. (GMCR) and Con Agra Foods Inc. (CAG). All these stocks carry a Zacks Rank #2 (Buy).

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