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BANNING LIQUOR ADVERTISEMENTS – AGAIN
In June 2002, the Information and Broadcasting (I&B) Ministry of India ordered leading television (TV) broadcasters to ban the telecast of two surrogate ads of liquor brands, McDowell’s No. 1 and Gilbey’s Green Label. The Ministry also put some other brands – Smirnoff Vodka, Hayward’s 5000, Royal Challenge Whiskey and Kingfisher beer – on a ‘watch list.’ The surrogates used by these advertisements ranged from audiocassettes, CDs and perfumes to golf accessories and mineral water. By August 2002, the I&B Ministry had banned 12 advertisements. Leading satellite TV channels, including Zee, Sony, STAR and Aaj Tak were issued show-cause notices asking them to explain their reason for carrying surrogate liquor advertisements. The channels were asked to adhere strictly to the Cable Television Regulation Act 1995 (Cable TV Act, 1995). As a result, Zee and STAR stopped telecasting the advertisements; Aaj Tak and Sony soon followed suit. In addition, the I&B Ministry hired a private monitoring agency to keep a watch on all advertisements for violations of the Act. These developments led to heated debates over the issue of surrogate advertising by liquor companies. Though the liquor companies involved protested strongly against the I&B Ministry’s decision, they had no choice, but to comply with the regulations. Analysts remarked that the government’s policy was hypocritical. One said, “On the one hand they allow these ‘socially bad’ products to be manufactured and sold (in order to garner revenues) and then they deny the manufacturers the right to propagate knowledge of their products in order to drive sales. If something is bad and cannot be advertised, why allow it to be sold at all?” Meanwhile, the government also seemed to be in dilemma. On the one hand, it had to encourage the sales of liquor and tobacco because they were the highest taxed sectors of the Indian economy. On the other hand, there was also the need to take the high moral ground and reduce the consumption of such products.
THE INDIAN LIQUOR INDUSTRY
The Indian liquor industry can be divided into two broad segments: Indian Made Foreign Liquor (IMFL) and country-made liquor. IMFL comprises alcoholic beverages that were developed abroad but are being made in India (whisky, rum, vodka, beer, gin and wine), while country-made liquor comprises alcoholic beverages made by local breweries. While many players were present in the IMFL segment, breweries in the unorganized sector accounted for almost 100% of the country-made liquor segment. During 1999-00, the Rs 60 billion Indian liquor industry grew at the rate of 10-12%. While IMFL was consumed by the middle and upper classes of society, country-made liquor was consumed by the economically backward classes. In India, 40-50% of all males and 1% of all females consumed alcohol. Almost 62% of the drinkers could be classified as light drinkers (i.e. social drinkers), 29% percent as moderate drinkers, and about 9% as hard drinkers. The organized industry was dominated by Shaw Wallace and United Breweries, which together accounted for around 53% of the total market (Refer Table I, Exhibit I and Exhibit II).
TABLE I INDIAN LIQUOR INDUSTRY – PLAYER PROFILE
Company United Leading Brands Kingfisher (Beer), McDowell’s No. 1 and Bagpiper (Whiskey)
In the first half of 1998. Doordarshan. They started sponsoring events that projected the ‘glamour’ of the brands. Lal Toofan Beer Aristocrat Whiskey. as most of the channels were uplinked from outside India. The license was given to the highest bidder. the I&B Ministry barred TV channels from telecasting liquor and cigarette advertisements in September 2000. Binnie’s Fine 8 PM Rare Blend Whiskey. it expected to acquire a significant share of liquor advertisement revenues. 1995. There were around 25. hotels and restaurants serving liquor. Director’s Special (Whiskey). There were restrictions on the location of these outlets and their business hours. like track racing. While the Indian government could not take action on most of the channels for violating the codes. Companies were not allowed to expand capacity without prior approval from the concerned state government. Under the auction system. Antiquity. Royal Challenge. in addition to the bars. Bonnie Scot. wines and other intoxicants. car rallies etc. White Mischief Vodka. which became an annual event. one of the leading liquor companies in India. Captain Henry. The I&B Ministry also took steps to monitor the advertisements broadcast by these companies. However. With a reach of 70 million homes. Moreover. With pressure increasing from public interest groups to ban liquor advertisements. Contessa XXX Rum. was the only one that adhered to it. Contessa Vodka THE INDIAN LIQUOR INDUSTRY Contd.. Golconda. Whyte and Mackay Scotch Whiskey. (SWC). Contessa Deluxe Doctor’s Brandy. the open-market system and the government-controlled system. Since liquor ads generated such high revenues. liquor. the telecast of such advertisements continued blatantly over the years. the government had to make amendments to the Cable TV Act 1995 (Refer Exhibit III). the cable operators were punishable under Indian law. In the government-controlled system. the Act did not apply to them. for instance Shaw Wallace Co. Due to the ban. The broadcasters were also bound by the Cable TV Act. Some companies also . The liquor industry was heavily regulated by the government. States following the open-market system gave companies freedom to choose their distributor and to determine the price and the discounts. The distribution of liquor was also controlled in many states through auction system. liquor was distributed by state agencies such as BEVCO (in Kerala) and the Andhra Pradesh Beverage Corporation (in Andhra Pradesh).Breweries Shaw Wallace Jagatjit Industries Radico Khaitan Hayward’s. conducted the Royal Challenge Invitation Golf tournament.70 million in revenues. The regional channels managed to get about Rs 0. STAR reported revenues of Rs 127. Contessa Premium Extra Dry Gin. Even as Doordarshan was considering the above option. pubs. the state-owned TV channel. In the peak seasons for the sale of liquor. satellite channels did not want to follow this code because they garnered about 50% of their advertisement revenues from liquor. the government fixed a floor price for the shops and the bidders had to quote prices.000 licensed retail sales outlets in the country. this revenue almost doubled. liquor companies focused more on promotions for brand building.9 million from liquor advertisements while Zee reported revenues of Rs 40 million . Doordarshan also planned to air such ads in 2000. as they did not uplink from India.000-27. Liquor producers spent heavily on advertising on the electronic media because of the reach of satellite and cable TV. This was because the code was only a code of conduct. Though the broadcasters were bound by a 30year old advertising code which banned them from airing advertisements that related to or promoted cigarettes and tobacco products. not a legally enforcing code. Doordarshan estimated that its revenues would increase three times from cricket matches alone if it were permitted to air liquor advertisements. Hi-Five Beer.
In the mean time. It also announced that India’s flagship Golfing Event – the Indian Open – would be sponsored by the company till 2006. but using the established brand of the original product. Such advertisements or sponsorships help in brand building and contribute to brand recall. The company also entered into agreements with the Indian Golf Union and the International Management Group to promote the game in India. In 2002.’ The surrogate could either resemble the original product or could be a different product altogether. then the firm is entitled to use the same brand for that product. who were members of the Indian Broadcasting Foundation (IBF). following the ban on advertising. it named it soda water Royal Challenge Premium Sparkling Water to leverage the company’s flagship liquor brand Royal Challenge. SWC was launching Sparkling Water to use it as a surrogate for its liquor brand. in mid-2001. However. In late 2001. distributing free gifts like caps and T-shirts with the brand name and using glow-signs outside the retail outlets. ABOUT SURROGATE BRANDS Even after the ban. the I&B ministry accepted the recommendations of the broadcasters. which do not have a minimum turnover of Rs 10 million and where the products are not manufactured in bulk quantity. liquor companies continued to advertise their drinks in the form of surrogate advertisements. It also launched a new range of golf accessories.’ The broadcasters also urged the government to allow them to telecast socially responsible advertisements sponsored by liquor companies. After more than six months. SWC announced its decision to enter the packaged water market. some liquor producers entered new segments under the liquor brand or advertised these products under the liquor brand. including graphite shafted golf sets (with lifetime warranty). surrogate advertising on TV became more popular. which has a turnover of Rs 1 crore (Rs 10 million). a product other than the banned one is promoted using an already established brand name. However. If a company makes a product other than liquor (or tobacco). Under the recommendation. this decision was not formally announced because there was same dispute over the issue of hoardings of these ads at sports events being broadcast on television. In this type of advertisement. “We have sought the sports ministry’s comments on the issue and are awaiting their response before announcing the norms.promoted their products through corporate advertising. The sponsoring of sports/cultural/leisure events and activities using a liquor brand name also falls in the category of surrogate advertising. surrogate advertising would comprise ‘the products of the liquor companies. SWC started marketing its range of golf accessories under the liquor brand Royal Challenge. Most of liquor producers entered into the packaged water segment. liquor companies were forced to look at innovative ways of building their brands . SWC also started a quarterly golf publication that which provided information on the latest happenings on golf. golf bags. the company franchised its bottling and sale of purified drinking water and soda and made them available in more than 75 cities in the country. In late 2000.” She announced that a formal decision would be made after the sports ministry’s comments were received. caps. such as Kingfisher Mineral water. under its well-known beer brands Hi-Five and Lal Toofan. submitted their recommendations on surrogate advertising to the I&B Ministry. They requested permission to telecast such advertisements because the Indian television industry’s revenues had reportedly decreased by about 7-11% (about Rs 1 billion per annum) after liquor and tobacco ads were banned. Some companies seemed to be using the ban to their advantage. as the TV was the most effective medium of advertising. The product shown in the advertisement is called the ‘surrogate. a group of broadcasters. To expand this segment. McDowell’s mineral water and soda brands served as surrogates for their liquor brand and also generated additional revenues for the company. In early 2001. and gloves. According to industry watchers. They were of the view that. The I&B Minister Sushma Swaraj said.
One must see the spirit behind an advertisement to find out whether it’s promoting liquor or not. As the authorities were finding it difficult to track down the increasing number of violations. It promoted its 100 Pipers brand by sponsoring a series of performances by fusion music artists under the name 100 Pipers Pure Music. The advertisements were telecast during Christmas and New Year’s Eve. The I&B Ministry’s decision to ban such advertisements was thus viewed as a logical and necessary step by their critics. In the same sort of way. CEO. Bhuvan Lal.S.” (Refer Exhibit IV and V for sample surrogate advertisements). water. there were many surrogate advertisements of liquor brands on satellite TV channels. It’s just another corporate advertisement through a social message. STAR TV said.” L. Liquor producers felt that while the government . when it’s one for the road. Seagram also sponsored events such as the Chivas Regal Polo Championships and the Chivas Regal Invitational Golf Challenge for corporates. companies were not interested in showing liquor advertisements in the garb of social messages. Whyte & Mackay. clothing. the Ministry hired a private monitoring agency. in a self-disciplinary move. these advertisements were perfectly legal as they did not lead to sale. said. It cannot be classified as a liquor advertisement because Seagram is not a liquor brand. and we are told the man is drinking apple juice! The girl who is avidly watching him immediately rewards him with a kiss.’ Another advertisement of Seagram read. One of these ads by Seagram wished the viewers with ‘Season’s Greetings. The agency – Time Monitoring (Delhi-based) – was responsible for scanning all advertisements on all private satellite channels including regional channels.” Some of the broadcasters said that because the I&B Ministry was taking a long time deciding about the use of socially responsible advertisements by liquor companies. Vice President (Sales and Marketing). In late 2001. liquor companies that had not entered into any agreements with satellite channels for airing socially responsible and for surrogate advertisements started processing such agreements. These advertisements attracted a lot of criticism. Seagram’s Royal Stag was promoted by sponsoring movie-related activities and Indian pop music under the banners Royal Stag Mega Movies and Royal Stag Mega Music. it’s got to be coffee. television broadcasters began airing socially responsible advertisements sponsored by liquor companies. they had started using them without the Ministry’s consent. THE DEBATE The banning of surrogate advertisements for liquor brands became a very controversial and sensitive issue. “Tonight. asked all TV channels to stop telecasting surrogate liquor advertisements. Whyte & Mackay began negotiating agreements with various TV channels. soda and other harmless liquors stand in for hard liquor and beat the ban. But with the government imposing restrictions. CDs. There were numerous other advertisements selling music cassettes. water.The number and range of surrogate advertisements increased as liquor producers started sponsoring movies. including Star TV.Nayak. At the same time. consumption and promotion of liquor. reportedly argued that there was nothing wrong with airing such advertisements because they did not violate the government’s guidelines restricting the telecast of direct/indirect liquor ads. and other programs attracting youth. the Confederation of Indian Alcoholic Beverage Companies (CIABC). especially at the regional level. Soon. “We see a brown liquid poured into a glass under a well-known brand name. The government’s guidelines stated that ‘advertisements which lead to sale.” By early 2002. “As long as there was no ban. “It’s not a liquor advertisement at all. even though the government had not issued any notification permitting the airing of socially responsible ads on TV. music shows. Blenders’ Pride sponsored a series of performances by troop dancers and artists under the banner of Blenders’ Pride Magical Nites. Star TV and Sony were among the leading broadcasters telecasting such advertisements included STAR TV and Sony. consumption and promotion of liquor should not be allowed. IBF’s Executive Director. For instance. Amar Sinha. According to an analyst . For instance. fashion accessories and sports goods – many of them accused of being sexually provocative and offensive.’ According to Bhuvan Lal. social messages are a route to liquor advertising for many.
were expected to increase by 50%. the ban was also expected to improve margins for these players. sponsorships. some analysts argued that the ban would not affect the established domestic players severely.. including direct consumer promotions programs. MNCs had unrestricted license to sell their products. companies reportedly spent about 3-4% of sales revenue. companies could save 3-4% sales or gain in margins.com On an average. McDowell No. these MNCs would not have access to the quickest and most effective form of advertising – the TV. Industry watchers felt that since distribution and reach would become more vital after the ban. After the ban. Moreover. liquor companies spent about 10-12% of sales revenue on advertising. Thus MNCs who had recently entered the Indian industry were expected to face difficulties in building their brands. According to broadcasters. 1. TABLE II AD SPENDS OF LEADING INDIAN LIQUOR COMPANIES Company McDowell United Breweries Shaw Wallace Radico Khaitan Jagatjit Industries Year Ending Mar-00 Mar-00 Jun-99 Dec-99 Mar-99 Ad expensess As %age of Sales (in Rs million) 1.allowed them to do business. On TV alone. The restrictions on the liquor industry were viewed by many critics as attempts by the government to disassociate itself from the social evils associated with alcohol consumption. However. as these companies had already spent heavily on advertising and other promotional activities. The smaller companies in the domestic market also seemed to have an advantage. The said that TV was the most effective medium of advertising for these products and thus the restriction would hamper brand building. which somehow struck a balance between the social and monetary aspects of the business of alcohol.00 737 565 78.1 523 13% 28% 7% 8% 13% Source: www. the government should put in place a ‘reasonable’ policy. McDowell’s operating margins ranged between 5-7% and after the ban. It would only affect new launches and new brand building activities of these companies. The issue of surrogate advertising involved even media companies.indiainfoline. THE DEBATE Contd. it also earned a significant portion of its revenues (Rs 200 billion in 2000 for the whole country) through levies on liquor sales. and print and electronic media advertisements. if not for their brands. as they had to forego substantial revenues as a result of the ban. According to a WTO agreement signed in March 2001. (Refer Table II). Liquor companies argued that the ban would severely affect the sales. KingFisher. This meant that after the ban. For instance. smaller companies might be acquired by the larger ones for their distribution network. Apart from reducing foreign competition. . some critics observed that while the government imposed many restrictions on the liquor company. The ban would also affect the entry decisions of MNCs that were planning to enter the Indian liquor industry. it did not allow them to do so in a profitable manner. Hayward’s and Royal Challenge) would not be affected by the ban. However. some analysts were of the opinion that the ban could turn out to be advantageous for domestic players.089. Players who already had very strong brands (E.g.
IBF set up a sub-committee that included among others. what measures would you suggest to overcome the limitations imposed due to the ban on surrogate advertising? Does the use of ‘socially responsible’ advertisements go against the interests of a liquor company? Analyze. President. with L. “We would like to clear any such advertisement with the committee and nip any offending advertisements at the drawing table. even before the I&B Ministry took concrete steps in this regard. 3. discuss the advantages and disadvantages of using surrogate advertisements (for a liquor company in particular and also for any other type of company). the government is trying to disassociate itself from the social evils associated with alcohol consumption. Industry watchers remarked that the ban would affect the channels more than the liquor companies themselves. Do you think surrogate advertisements by liquor companies were banned because of the criticism they received? Give reasons to support your answer. The companies might actively resort to sponsorships of sports events. Star TV). As a part of a team responsible for the marketing of a leading liquor brand. broadcasting industry sources revealed plans to put in place measures for self-regulation and monitoring. ‘By banning advertisements for liquor. dance and music programs. Bhuvan Lal said.’ Critically comment on this statement in light of the ban on direct and surrogate advertisements for liquor. . ESPN-Star Sports). most liquor companies again explored alternative promotional activities. Some of the major domestic companies were considering the use of the Internet as an effective marketing medium.WHAT LIES AHEAD In August 2002.” Around the same time. apart from the 12 ads banned earlier. Ashoke Bijapurkar. QUESTIONS FOR DISCUSSION: 1. the I&B Ministry was in the process of issuing show-cause notices to AXN and Zee for two advertisements promoting Aristocrat Apple Juice and Whytehall. S. Also. announced that they would come up with an advertising code specific to surrogate advertising. The broadcasters who were members of the IBF. B-MRP Communications said. 2. Nayak (Executive Vice President. G Krishnan (CEO. Apart from formulating the advertising code. TV Today) and Manu Sawhaney (MD. the committee would monitor the advertisements that appeared on the TV channels. and other fun-filled activities. “This brings us to the question being debated: should surrogate advertisements be banned? I feel the real question to be asked is: should liquor and tobacco advertising be banned?” Following the ban. The controversy surrounding debate surrounding surrogate advertising was undoubtedly the result of the government’s and liquor industry’s age-old tussle of revenues versus morality.
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