Alcoholic Beverages Promotion-Nitin R-0428

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Project Report On

A STUDY ON ALCOHOLIC

BEVERAGES PROMOTION

Submitted in Partial Fulfillment of the

Requirements of the Masters Degree in Business

Administration course of Bangalore University

By,

NITIN.R

04XQCM6060

Under the Guidance of,Prof N.S.VISWANATH

M.P. Birla Institute of Management

Associate Bharatiya Vidya Bhavan

Bangalore 560001

2004-2006


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Declaration

I hereby declare that the project report titled A STUDY ON ALCOHOLIC

BEVERAGES PROMOTION " is a record of independent work carried towards the

partial fulfillment of the requirements for the Masters Degree in Business Administration

course of Bangalore University, at M.P. Birla Institute of Management Associate

Bharatiya Vidya Bhavan, Bangalore 560001.

This has not been submitted for the purpose of an award or degree of any

other institution.

Place: Bangalore

Date :

(Mr. Nitin.R)

04XQCM6060


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Acknowledgement

At the very outset, I take the opportunity to express my sincere regards and gratitude

for every individual linked with my Research Work.

One such person is my guide for the semester Prof N.S.VISWANATH, whose inspiring

words made me put in all I had to offer. His continuous guidance and suggestions are

the cardinal aspects that have ultimately led me to see this fruitful end.

I thank our Principal Dr. Nagesh Malavalli, for providing me with the academic

support.

Last but not the least; I would like to thank the Almighty for being there always, and

all others who have directly or indirectly helped me in this endeavor.

(Nitin.R)

Place: Bangalore

Date:


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EXECUTIVE SUMMARY

Advertising is a powerful tool through which a company reaches its target audience, and conveys

the benefits, features, price, and availability of the product, service, or idea in the offering. It isthe paid form of communicating the message. Advertising is persuasive, informative, and is

designed to influence the purchasing behavior of the prospective customer.

In an ideal situation, the advertiser can directly communicate to the target group without any

impediments. But, in practicality, this does not take place. There exist certain roadblocks in this

exercise. These roadblocks are created either inside the minds of the consumer/public or have

been laid down by a regulatory body. In the latter case, the Government prohibits the advertising

of certain products due to the concern of the health and safety of its citizens. The products that

come under this purview are Tobacco, Alcohol, and OTC Drugs. This paper specifically

concentrates on issues related to promotion of Alcoholic beverages.

This research work extensively deals with effect of alcoholic beverages promotion

and the findings and recommendations are presented as the deliverables. The

project is an anatomical study as it covers all the perspectives related to effects of alcoholic

beverage promotion and the publics view upon promoting alcoholic beverages

One of the key outcomes of this research work is that the governments ban on advertising of

alcoholic beverages while allowing their production and consumption is not an ideal solution

to the problem. All businesses have a right to promote their products and government

intervention to curb that right is not the answer to curb this social evil.

In coming to this conclusion I have analyzed data from several sources such as consumer

views, journals and articles, focus group analysis, previous research work, current news and

views etc.


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Table of Contents

Chapter 1 Theoretical Setting1.1 Prelude

1.2 History of Advertising

1.3 Objectives of Advertising

1.4 Types of Advertising

1.5 Advertising Techniques- An Overview

1.6 Research Design

1.7 Kaleidoscope of Surrogate Advertising

Chapter 2 Advertising of Alcoholic Products

2.1 Advertising of Alcoholic Products

2.1.1 Arguments in favor of promotion of alcoholic beverages

2.1.2 Arguments against promotion of alcoholic beverages

Chapter 3 Final analysis

3.1 Analysis and Interpretation

3.1.1 Focus group opinions

3.2 Findings and Recommendations

3.3 Conclusion

ANNEXURE

I Select Bibliography

II Research Instrument


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Chapter 1

Theoretical Setting

1.1 Prelude

1.2 History of Advertising

1.3 Objectives of Advertising

1.4 Types of Advertising

1.5 An Overview of Advertising Techniques

1.6 Research Design

1.7 Kaleidoscope of Surrogate Advertising


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Chapter 1.1

PRELUDE

Advertising is the paid promotion of goods, services, companies, and ideas,

by an identified sponsor. Marketers see advertising as an overall promotional

strategy. Along with Price, Product, and Place, advertising is one of the

elements of the 4th P of marketing, i.e. Promotion. The other elements of the

promotional strategy include - sales promotions, public relations, etc. An

effective marketing mix translates in to an effective run for the product in the market.

One of the vital elements of the whole marketing strategy is the Promotional

Strategy, and in a more specific sense, the Advertising Strategy.

Advertising is sometimes confused with marketing. Unlike advertising, marketing

is the systematic planning, implementation, and control of a mix of business

activities, intended to bring together, buyers and sellers for the mutually

advantageous exchange and transfer of products and services.

First marketers develop a marketing plan, which is a blue print of a planned

marketing activity that strives to create a competitive advantage for a product,

service or idea. There are 5 stages involved in a marketing plan:

I. Research Stage: The planner analyses the marketing environment

II. Strategic Stage: The planner develops objectives, along with the

strategies to achieve them

III. Tactical Stage: Specific tools are selected

IV. Implementation Stage: Co-ordination of marketing strategy with the

activities

V. Evaluation Stage: Marketer assesses how well the objectives were

achieved


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Chapter 1.2

THE HISTORY OF ADVERTISING

In ancient times, the most popular form of communication was by the Word-of-

Mouth. Commercial messages were found in the ruins of Pompeii. As printing

developed in the 15th and 16th century, the first steps towards modern advertising

were taken. In the 17th century, advertisements started appearing in weekly

newspapers in England. A century later, advertising had become a popular thing.

As the economy was expanding in the 19 th century, the need for advertising grew

at the same pace. In 1843, the first advertising agency was set up by Volney

Palmer in Philadelphia. The advertising boom was seen in the 1920s when the

advertisers and their agents came to realize the possibilities of the radio as a

strong media vehicle. Wit hits drama and immediacy, the radio could convey the

message directly to the consumer, free of cost. There was no need for the

consumer to buy any publication or even be literate. In the 1950s came the

television which developed into the most wanted and the most popular choice of

media for the advertisers. Advertisers could demonstrate their product as well as

present well known figures to praise it. They could also arrange emotions throughthe television.


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Chapter 1.3

THE OBJECTIVES OF ADVERTISING

The purpose of advertising is to stimulate demand for a product, service or an

idea. The other factors influencing demand are-

Price Sustainability

A successful advertising program may stimulate demand and create a brand franchise.

Sony's "Walkman" or Apples ipod, for example, can distinguish themselves as types

of music players. But, because they have successfully attained a brand franchise among

consumers, they are frequently used as generic terms. A brand franchise can be

established to a greater or lesser degree depending on the product and market. In Texas it

is common to hear people refer to soft drink as coke regardless of whether it is

actually produced by Coca-cola, or any other company.

A legal risk of brand franchising is that the name can become so widely used that it

becomes a generic term, and loses trademark protection (Escalator and Aspirin).

Other objectives of advertising include:

Increase in sales Market share Awareness Product information Image improvement

These objectives can be put in the form of advertising roles as

follows:


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The Marketing role The Communication role The Economic role and The Societal role


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Chapter 1.4

TYPES OF ADVERTISING

Advertising is considered complex because there are several types of advertisers

trying to reach out to different types of audiences. These audiences overlap since a single

household may require several appliances each of which follows a different advertising

strategy.

Nine major types of advertising are identified:

1. Brand advertising2. Retail/ Local advertising3. Political advertising4. Directory advertising5. Direct-Response advertising6. Business to Business advertising7. Institutional advertising8. Public Service advertising9. Interactive advertising

Brand Advertising focuses on the development of a long term brand identity and image.

Retail Advertising is local, and focuses on price, availability, location, and hours of

operation.

Politicians use Political Advertising to persuade voters to vote for them. Some critics feel

that political advertising focuses more on image than on issues.

The best known form ofDirectory Advertising is the "Yellow Pages". In this kind

of advertising, ads are placed in the yellow pages/ directory, which the people

refer to while buying a buying a product. Pizza Hut and Dominos are known to be

the best advertisers in the Yellow Pages.

Direct Response Advertising is used to directly stimulate sales. Telephone or

mail (e-mail) is used by the customer to respond, and the delivery of the product


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takes place through the conventional mediums.

Business to Business Advertising includes messages directed to retailers,

wholesalers, distributors, etc. as well as industrial purchasers, and professionals.

Institutional Advertising (Corporate Advertising) aims at establishing a

corporate identity or winning the public to the organization's point of view.

Public Service Advertising communicates a message on behalf of a good

cause. These are usually created by professionals free of cost and the media

often donate space and time.

Interactive Advertising is done to individual consumers who have access to a

computer and the internet power is made use of. The consumer can respond to

the ad, modify it, expand it, or ignore it.


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Chapter 1.5

AN OVERVIEW OF ADVERTISING TECHNIQUES

Advertisers use several recognizable techniques in order to better convince the

public to buy the product. The main techniques included are:

Repetition:

Some advertisers concentrate on making sure that their product is widely

recognized. To that end, they simply attempt to make the name remembered

through repetitive advertising.

Bandwagon:

By implying that the product is widely used, advertisers hope to convince

potential buyers to "get onto the bandwagon" i.e. to join the group of existing users.

Testimonials:

Advertisers often attempt to promote the superior quality of their product through

the testimony of ordinary users, experts or both. The appeal of both authoritative figures

and the common man is extremely convincing in this scenario.

Pressure:

By attempting to make people choose quickly and without long consideration,

some advertisers hope to make rapid sales. They do this by setting a deadline during

which there is some kind of a discount on the product.

Association:

Advertisers attempt to associate their product with desirable things in order to

make their product more desirable! The use of attractive models, picturesque

landscapes, and other imagery aims to make the product desirable.


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Some of the other commonly used techniques are: advertising slogans, and

controversies.

Yet another technique used in advertising is Subliminal Advertising. Generally we

assume that the messages are seen and heard consciously. However, it is possible to

communicate symbols that convey meaning below the threshold of normal perception.

These kinds of messages are called Subliminal. These are transmitted in such a way that

the receiver is not consciously aware of receiving it.

In an ideal world, every manufacturer would be able to talk to his audience about the

product or service being offered for sale. But, Utopia is a fairy tale. Not always can an

advertiser convey what he wants, to his/her target audience. There are quite a few

inhibiting factors in this regard. These factors impede an effective advertising strategy.

We look at two ends of the spectrum in this context, at one end is the laws and

regulations which the Government has derived, and at the other end of the spectrum,

quite surprisingly, are the `Consumers' themselves. These factors are:

Government Laws that prohibit certain products to be advertised Cap on TV Channels to telecast ads of certain products (the Cable TV

Regulation Act)

Inhibition on the part of the audience to expose themselves tocertain ads

Most articles and research papers take a positive stand on the ban on advertising for

alcoholic beverages. However, some experts say that such a ban gives ample opportunity

for the produce and sale of lower quality liquor which is the single most important cause

for health problems arising due to alcohol consumption. They argue that the lifting of the

ban could in fact reduce the number of alcohol related hazards since major brands can

send their message across to people making them knowledgeable to the hazards of cheap

quality liquor.


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It does not always happen that the advertisement shown by the advertiser is seen by the

target. There could be various reasons for this; the invention of the modern TV has

changed the way of viewing TV, during a break or an interruption, the viewer just

switches the channel, thanks to the remote control. Due to this, more often than not, the

advertisement fails to reach its target. Another factor in this context is the act of ignoring

certain ads, like those of condoms and ladies' sanitary napkins, by the user. These ads

(PSA) are used to bring about awareness in the minds of consumer regarding a social

issue (AIDS being the one in this case), but fail to do so due to the blocked mindset of the

average audience. In either of the cases, the advertiser finds a supporting method to make

the essence of the product reach out to the target market.

In the latter case, the advertisers go for either repetitive advertising, or channel block, to

ensure that the target is bombarded with the ad, and the message is delivered. To bring

about awareness about a certain issue, the advertisers carry out support activities, like

organizing walks, marches, dedicating a day for the cause, etc. These are not issues as the

Government has no hassles with the method of advertising or the product or service being

advertised. The issue lies in the former case.

These products are injurious to health and potentially hazardous in nature. They also need

a certain qualification on the part of the buyer in order to make an appropriate choice.

There exists a Legal perspective to this issue, and thus the case is highly complex and

debatable. Since direct advertising of these products are not allowed, advertisers revert to

an indirect medium, known as SURROGATE ADVERTISING. The following pages in

the report deal with the issue in depth, deal with the pros and cons and bring about the

impact of this method of advertising on the audience and the marketers.

The details of Surrogate Advertising will be covered in the subsequent sections.


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Chapter 1.6

RESEARCH METHODOLOGY

BACK GROUND OF THE STUDY:

The government has banned the advertising of alcoholic beverages due to health related

and other reasons and has created hurdles to deliver message to the audience. Some of the

people agree to the ban on promotion of alcoholic beverages as it has ill effects on

society.

On the other hand some people disagree on ban as the wisdom of the Government

extends only to banning the advertising of tobacco or liquor, not to the manufacture or

marketing of these supposedly deadly substances. According to them it is legal to

manufacture liquor but is it illegal to advertise?

This paper deals with pros and cons of promotion of alcoholic beverages and try to come

out with its effects on concerned people.

PROBLEM STATEMENT

Has the ban really worked and more importantly is there a need for the ban in the first

place? Does the promotion of the alcoholic beverages influence the society?

METHODOLOGY

COLLECTION OF DATA

Primary and Secondary data

Primary data: Is collected through Focus group method

A focus group method has been used in order to obtain both the sellers and consumers

point of views regarding the promotion of alcoholic beverages. A focus group interview

is a structured group process, conducted for the purpose of obtaining detailed information

about a particular topic, product, or issue. Focus group discussions are useful when the


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evaluator does not know precise issues or nuances that would permit a more specific

research technique, such as a sample survey. In this regard, focus groups are useful in the

early stages of inquiry, both to gather data and to lay the groundwork for more precise

evaluation methods.

Advantages of Focus Groups

In certain respects, focus groups are relatively easy to undertake. In particular, it is

efficient to interview a number of people at the same time, and results can often be

obtained in a reasonably short time span.

Social interaction within the group yields freer and more complex responses, due to

interactive synergy, snowballing, spontaneity, and security of participants within the

group. In short, people tend to express views that they might not express in other settings,

or if interviewed as individuals.

The researcher can probe for clarification or greater detail, and unanticipated but

potentially fruitful lines of discussion can be pursued.

Responses have high face validity due to the clarity of the context and detail of the

discussion.

Focus groups can work well with any particular population and with a diverse population.

This includes people who may have limited education, modest verbal skills, and low self-

esteem, and lack of prior experience expressing personal views.

Limitations of Focus Groups

Focus group moderators must be trained and skilled at stimulating and managing a

guided group discussion. The skill of the moderator can have a tremendous impact on the

"success" of the group, i.e., whether discussion flows freely.

Groups are often difficult to assemble, and considerable care must be taken to provide a

setting and conditions conducive to discussion.

Individual responses are not independent of one another.


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The evaluator has less control than in an individual interview.

There is a great deal of specific information, some of it very tangential to the topic,

making analysis and summarization of results challenging.

Because participants are not randomly sampled from the population, the evaluator cannot

freely generalize from the results.

Methods

The focus group method is designed to explore, in a group setting, what people think and

how they feel about a particular issue. The group consists of participants, a moderator,

and a recorder.

The goal is to get as much information on the table as possible. Open discussion is

encouraged under conditions of complete confidentiality. Group interaction is used to

probe and bring out additional information. The moderator, only as necessary, stimulates

the discussion and keeps it on course. Both concrete information and opinions are

considered relevant. Every response is considered valid. There is no attempt to support or

criticize any response, resolve any issue, address any individual problem or concern, or

reach any conclusion. The goal is only to gather as much information from as many

different viewpoints as possible.

Steps in the focus group process are as follows and in approximately this order:

1. Formulate the research question.2. Identify and train moderators.3. Generate, pre-test, and revise the interview guide.4. Develop the sampling frame, i.e., decide what types of people will participate in

the groups.

5. Recruit participants.6.

Make arrangements for the setting, equipment, food and drinks, and child care ifnecessary.

7. Schedule and conduct the groups, using tape recorder and/or a systematicrecording form.

8. Prepare data and analyze.9. Report.


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Desirable Characteristics of Groups

The membership of each group should be homogeneous, representing a particular

segment of the population, but group members should not be close friends. The aim is to

create conditions that promote both comfort and independence of thought, in order to

maximize discussion and self-disclosure.

Focus groups can consist of 4 to 12 members, in addition to the moderator and the

recorder. Smaller groups tend to be dominated by one or two members. On the other

hand, larger groups inhibit participation by all members. Seven to eight has been shown

to be a good number for many types of group interactions, yielding both variety of

viewpoints and good participation.

A time limit of approximately one and one-half hours is desirable, and two hours is the

maximum for a focus group session. Beyond two hours, any group discussion loses

momentum.

Sampling Frame

The sampling frame is developed by identifying key population groups that are likely to

represent different views of the topic at hand. The population may be divided along

several different characteristics (e.g., age, income, gender, marital status, ethnicity)

and/or particular groups might be identified (e.g., single mothers, the unemployed,

university students) where these are thought to be relevant. Evaluators should decide how

many "levels" of each characteristic are meaningful for the purposes of the study (e.g.,

perhaps four income levels, two for gender, one for unemployed) and form a group for

each level of each important characteristic.

Identifying and Recruiting Participants

Within the sampling category, convenience recruiting is the most common. However

stratified random sampling has been used in this research paper to avoid systematic bias

and to avoid friendship groups. At times, more systematic (even random) procedures are

desirable.


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After establishing initial contact and assuring confidentiality, the organizer may ask

several questions to assess whether the respondent indeed fits the desired characteristics

for participation and to clarify expectations. Next, the organizer assesses potential interest

on the part of the respondent. If it is a good "fit," verbal confirmation of participation

should be followed by written confirmation, and participants should again be contacted

by phone within 24 hours of the group discussion.

Incentives or support for participation are often desirable. These may include any or all of

the following: snacks or a meal following the discussion, an attractive location, child care

services, transportation, a token gift, and feedback on study results.

Designing the Interview Guide

The purpose of the interview guide is to provide an overall direction for the discussion. It

is not the equivalent of a survey instrument and is not to be followed in detail or even

necessarily in order. The guide provides the moderator with topics and issues that are, to

the extent possible, to be covered at some point during the group discussion. The guide is

loosely structured and does not suggest potential responses.

When designing the guide, it is often best to proceed logically from one topic to another,

and from the general to the specific. Also, to the extent possible, questions that are more

important to the research agenda should be presented early in the session.

Questions should be unstructured, unbiased, non-threatening, and very simple.

Specification should almost always be left to the participants, unless the discussion is

decidedly "off track," at which time the moderator should gently redirect it.

The guide should not be overly detailed or have too many questions. A good focus group

interview guide consists of twenty questions or less. Pretesting the guide with several"mock" focus groups is essential. The aim is to structure questions so that they are clear

and stimulate discussion. Several stages of revisions may be necessary before the guide is

ready to be used.


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Facilitating the Discussion and Recording

As mentioned previously, each focus group should have a moderator and a recorder.

The moderators task is to make participants feel at ease and to facilitate open

communication on selected topics by asking broad, often open-ended questions, by

probing for additional information when necessary, and by keeping the discussion

appropriately focused. The moderator should generally follow the interview guide, but

participants should have ample opportunity to express opinions, experiences, and

suggestions and should be allowed to lead the discussion in new directions as long as the

topics pertain to the subject of discussion. Therefore, the discussion may not follow the

interview guide in the order suggested.

Secondary data: Is collected through

Journals and Periodicals

Books and Articles by well known authors

Newspapers and Magazines

The Internet


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Chapter 1.7

KALIEDOSCOPE OF ALCOHOLIC BEVERAGES PROMOTIONAL

TECHNIQUES

The main objective of advertising is to communicate the price, features,

availability, and sustainability of the product, service, or idea, that has been kept

for sale. The basic idea is to drive sales. This means that, the advertisement

should be effective enough to convey the right message to the target audience,

and in the course of this, it should help the product or service to sell in the

market. In an ideal situation, every advertiser and marketer can talk directly to his

or her audience and promote the product. But, this does not happen all the time.

In the previous sections, this issue has been dealt with. The addressed issues

are:

Government laws and regulations Inhibition on the part of the consumers

The topic being dealt with in this research is with the issue concerning the pros and cons

of the ban on certain products to be advertised. The ban has been placed by the

government, through certain laws and regulations.

Now consider this situation, if there is a certain product `X', which comes under

the government ban, does the marketer stop advertising the product totally? The

answer is NO. Even if there was no competition in the market, and it was a pure

monopolistic market structure, the marketer would have to promote the brand or

the product. Now, the next question is, how to advertise and promote even whenyou are not allowed to? The answer to this lies in "SURROGATE

ADVERTSING". This is a tool that the advertisers and marketers adopt when

their product comes under the purview of Government ban.

So, what exactly is Surrogate Advertising?


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The literal meaning of `Surrogate advertising' is duplicating the brand

image of one product extensively to promote another product of the same

brand. When resorting to this approach to promote their product, the advertisers are

unable to send across important messages about their products since they are promoting

some other product of the same brand. This reduces the effect of advertising and allows

lower quality brands to compete in the same market.

The product categories that come under the consortium of being banned from

advertising:

Tobacco (Tobacco Based) Products Alcohol (Alcohol Based) Products Pharmaceutical (OTC) Drugs


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Chapter 2.1 ADVERTISING OF ALCOHOLIC PRODUCTS

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. (Source: icmr.icfai.org)

The liquor industry was heavily regulated by the government. Companies were

not allowed to expand capacity without prior approval from the concerned state

government. The distribution of liquor was also controlled in many states through

auction system, the open-market system and the government-controlled system.

Under the auction system, the government fixed a floor price for the shops and

the bidders had to quote prices. The license was given to the highest bidder.

The Indian liquor industry was making hay in the sunshine, until; the advertising

ban came on its face. It started with the companies having to prop up statutory

warnings, and then going to the ban of direct advertising of these products.

The Information & Broadcasting Ministry, under the Cable Network Rules, 1994 has


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imposed a ban on advertisements of tobacco and liquor products on satellite channels

effective from 6th October 2000. The government's aim obviously is reducing the

exposure of such ads to teenagers in habit forming years. While advertising on

Doordarshan has always been banned, the restriction on private channels has done away

with one of the most effective channel of communication for the players in this industry.

The ban includes both direct as well as surrogate advertisements in its ambit.

Additionally there is also pressure from public interest groups to ban print and hoarding

advertisements too. If the Government does accept it that would close all the doors of

communication for the industry, which would then have to solely depend on their

established brand equity or direct promotions to grow their markets. Coming at a time

that it has just a few months before the sector is opened up for free imports (March 2001),

one really wonders if there hasn't been some lobbying by the local players

themselves for imposing this ban.

Why would the players be in favor of such ban? Infact the ban has divided the entire

industry between multinationals and local home grown companies. From the point of

view of Indian players ', the biggest threat today is the entry of global majors who will

have an unrestricted license to sell once the free import regime as per the WTO

commitment comes into force from March 2001. These MNC's not only have well known

brands, but also have deep pockets. And advertising is their most potent weapon.

Television would be the quickest and the most effective way to reach the maximum

number of people, throughout the country, in the shortest possible time. Print media has

its own shortcomings, with the multiplicity of languages th at people speak in India. Also

print media cannot beat the effectiveness of the audio visual medium of television.

Adding to the woes of the international players would be the legislative hurdles in settingup a distribution network. Given the fact that liquor distribution remains a state subject

and involves several restrictions and legal impediments, building a distribution

infrastructure is a long term game plan, which would take a few years at least. Resorting

to a retail push therefore would be a difficult proposition for the new entrant. So the best

bet for him would have been that of generating a consumer pull through effective


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advertising. And that no longer exists. For the existing domestic liquor players, such as

United Breweries, McDowell, Shaw Wallace, Radico Khaitan, Jagatjit Industries etc,

who have strong brand equity, as well as an established distribution network, the impact

of the ban would certainly not be so severe. Of course new brand building and re-

launches would certainly become difficult. However, the ban is likely to have a positive

impact too. Besides keeping the foreign competition at bay, it is also likely to help

improve margins of these domestic players.

The domestic players have established a strong equity for their brands like KingFisher,

Haywards, Royal Challenge, McDowell No.1, Aristocrat, Bagpiper, Contessa, 8 PM, etc

in the national and regional markets. Ad spends of leading player's range anywhere

between 7% and 13%. Infact UB spends about 28% of sales on advertising and sales

promotions. If a player on an average spends about 10-12% of sales and assuming

that 50% of the spend would be on direct consumer promotions and surrogates such as

sponsorships, the rest would be spent on advertisements. While this would be shared

between the print (mainly magazines) and the television media, television advertising

would certainly form a larger proportion in value terms. If this advertising is done away

with, it would mean a saving of at least 3-4% of sales. For companies like McDowell,

whose operating margins hover around 6%, this could mean up to 50% gain in margins.

More importantly, the anticipated rise in spending on television media expected in future

would not happen. This would certainly help these companies prop up their bottom line.

Global players who are already in the market such as Bacardi, Pernod Ricard, UDV,

Fosters, etc, who would have been relying on building up their brand equities in the local

markets are in for a tough time. It could even have some fall out on the considerations of

some global players who have not yet firmed up India plans. Another big advantage that

smaller domestic players will have is that they will become more attractive acquisition

targets, if not for their brands, at least for their distribution reach which will now be even

more critical in a scenario of restricted advertisements.


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While analyzing the research findings we found two contradicting points of view with

relation to the promotional strategies used by the producers. Both are analyzed below.

Arguments in favor of promotion of alcoholic beverages

The Rs 60,000-crore Indian beverage alcohol industry has always been operating in a

restricted and controlled environment. It is a real shame that an industry that is a

legitimate business in the country and which contributes a whopping Rs 22,000 crore just

in revenues to the government, is not allowed to market its products freely and

communicate to its consumers directly. This restrictive environment is also applicable to

the beer and wine industry.

Product advertising for liquor and cigarette companies is banned in the country since

1995 by Cable Television Network (Regulation) Act. According to Rule 7 (2) of the Act,

no broadcaster is permitted to show advertisement which promotes directly or indirectly

promotion, sale or consumption of cigarettes, tobacco products, wine, alcohol, liquor or

other intoxicants, infant milk substitution, feeding bottle or infant food. This ban is now

likely to be extended to advertising of extended brands.

In fact, recently the government of India has in a unilateral move sought an amendment

in the Trade and Merchandise Marks Act of 1958 to explore possibilities of denying

extension of registration of trademarks used for brand names of cigarettes, tobacco

products, wine, alcohol, liquor and other intoxicants to other products.

This has ostensibly been done to check surrogate advertisements ofother products of

liquor companies. The sales volumes of these products advertised do not justify

advertisement expenditure incurred by the companies, it is argued.

The alcohol beverage industry is justifiably upset with the proposed axe on advertising

and promotions of legitimate economic activity through trademark extensions. These

should not be confused with surrogate advertising wherein no products may exist.


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Freedom of commerce should be preserved and brand extensions of cigarette tobacco and

liquor products should not be banned notwithstanding similar graphics, if they do not

propagate smoking or drinking merely on the ground of the brand names being similar.

Genuine businesses

The ban on advertising of alcohol beverage products has severely handicapped

communication with consumers. The industry is naturally compelled to make the best use

of the channels and media of communications still open to it. Companies with liquor

brands are not advertising liquor products; instead they have extended the equity of their

brands into other fields. Over a period of time these products have become independent

businesses for companies.

Some of the product extensions like water, soda, and music cassettes have sales which

run into millions in value and volume. McDowell's sold 1.5 million cases of water and

soda, through its 20 franchise plants. Water and soda are added to our core liquor

product, they are legitimate businesses.

Umbrella branding is a known phenomenon in marketing and today, we have omnibus

brands like Nestle, Amul, Samsung etc which sell many products under one brand

umbrella. Surely, the reverse logic would also apply that if any of the above-exemplified

companies were to come out with a beverage alcohol, their original products cannot be

banned.

Brand building

As far as co-relation between value of goods being sold and quantum of advertisement is

concerned, this is a commercial decision why companies spend more than their turnover

on a set of products. However, for brand building exercises, huge investments are

undertaken and they at times can exceed the value of the sales turnover.

The Advertising Standards Council of India (ASCI) has clarified that as per its code, the

mere use of a brand name or company name that may also be applied to a product whose


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advertising is restricted or prohibited is not reason to find the advertisement objectionable

provided the advertisement is not objectionable and the product is produced and

distributed in reasonable quantities and the objectionable advertisement does not contain

direct or indirect cues for the product that which is not allowed to be advertised.

Liquor companies do not need any approvals to advertise products other than liquor.

Therefore, denying any trade Mark Registration for products other than liquor, will not

affect their business unless the Trade Mark Act is amended to categorically deny

products having liquor brand names for brand extensions.

As of today, this does not lie under the purview of the Trade Mark Act. According to

legal experts, any amendments that seek to prevent trademark registration of industry

specific brand names in other classes of products or services would be ultra virus of the

Trade Mark Act. According to them, the Trade Mark Act Common Law permits brand

owners to use and protect even their unregistered trademarks. Therefore, a brand owner

could still use their trademark for other goods and services even though they may not

have obtained trademark registration.

Responsible industry

The industry is fully sensitive to the need for shielding the young and the impressionable

from getting carried away. Rather than an outright ban on advertising, the government

should endorse the Code of Conduct which specifies the timings when the ad should be

aired, non-targeting of children, disallowing teenagers in ads etc.

Instead of an outright ban, the industry has been underlining the need for dialogue and

subsequent guidelines outlining dos and donts of advertising. It could specify timings

when the ads should be aired, not target children, disallow teenagers in ads, not allow ads

that are glamorous or suggest increased attractiveness to the opposite sex after alcohol

consumption.

The industry on its own has shown restraint. Society For Alcohol Related Social Policy


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Initiative (SASPI) is a self-evident initiative in this direction. McDowell's and Seag-

rams have undertaken campaigns for responsible drinking.

For the government to make progress in an affirmative manner, the Government should

consider the alcohol beverage industry's self-imposed Confederation of Indian Alcoholic

Beverages Companies (CIABC) code on advertising, benchmarked against guidelines in

the US and UK.

THE CIABC code clearly lays down that while advertisements for promotional items,

accessories or services using brand names of alcoholic beverages should not feature

bottles, copy matter directly suggesting alcoholic beverages (or drinking vessels filled

with alcoholic beverages or what appears to be alcohol beverages) nor should they show

people drinking such products. The alcohol beverage industries have a genuine intent to

not just market their products in a socially responsible manner but to also comply with

the appropriate Federal or state laws concerning the marketing of alcohol beverages.

Their view is that it is regrettable that an industry which is allowed to sell its products, is

not allowed to advertise the same products even after making a mandatory statement

advising customers to use in moderation; (or with a health warning). Brands need to be

advertised, and the consumer makes his brand choice partly by the process of commercial

communication to the cable and satellite networks. And the advertising industry, which is

just recovering from a couple of disastrous financial years, is loathe to let go of the Rs

900 million being spent annually on surrogate advertising.

Arguments against promotion of alcoholic beverages

Speaking of millions, a market survey done in 2001 revealed that advertising has a direct

influence on the consumption habits of 431 million people in India and an indirect impact

on 275 million aspirants from the lower income group. And given the conservative cable

penetration estimates of 50 per cent, this is still a big number that can be persuaded by

surrogate advertising.


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There are brands and brands. Do all the surrogate brands that are so heavily advertised

exist? In 2002, Jagatijit Industries, the maker of Aristocrat Whisky, advertised a product

called Aristocrat Apple Juice. The company reportedly confirmed availability of the

fruit juice in Delhi, Haryana, Punjab and Rajasthan. Yet no reputed shop in Delhi has

ever seen it. Leave alone sell it. I remember in the late 70's, the walls of BEST buses in

Bombay (as it used to be called then) being plastered with a brand of tea called Black

Stallion Tea.

It turned out to be a real dark horse as the tea never found its way to kirana stores. But

co-incidentally, a whisky of the same name made its way to liquor stores and bars.

Clearly, if these are brands, then where are they today? If Royal Challenge is promoting

its golfing accessories so heavily, then should not one find it in the golf course itself?

The consumer is not a moron. Shes your wife, said David Ogilvy. And yet, are our

marketers underestimating our consumers? And will irresponsible marketers ultimately

get what they deserve? Only time will tell.


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ANALYSIS AND INTERPRETATION

A vast collection of data has been collected from different sources, and has been analyzed to

generate this report. The research is highly qualitative in nature. The views of focus group

have been considered as inputs for the research. As a result of these, no statistical tools have

been used for the purpose of the research. The output of the research is based upon the focus

group participants and the analysis of the author.

Focus group opinions:

Five of the nine participants were of the opinion that direct advertising ofalcoholic beverages poses a threat to both adolescents and adults.

Six participants felt that surrogate advertising is not harmful. Six participants felt that surrogate advertisements would not attract non-

consumers.

Eight participants opinionated that excessive consumption of alcohol is a socialevil.

Seven of them were strongly in favor of the fact that banning the advertising ofthese products while allowing their production is not the ideal solution to the

problem.

All nine of them felt that word of mouth is powerful enough for people to startdrinking alcohol.

All nine participants were of the view that the government should use Advertisingas a way to inform the citizens of the ill-effects of alcohol consumption.

Probably the most important view that was agreed upon by the whole group wasthat excess consumption of alcohol is not just harmful for the health of the

consumer, it also affects people who are a part of the consumers life such as

spouse, children, friends etc. Hence it is a social evil and proper steps must be

taken to control it.

Also, all participants were of the belief that alcohol producers must createawareness about the harmful effects of excessive drinking.


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When asked about the producers right to promote their products and their right to dobusiness and compete in the marketplace, the opinions were divided with three people

voting for the producers right to promote their products since they were allowed to

produce them and three people voting against saying that promotion would attract the

under-aged population. Three people were neutral and did not vote either way.

The research study is highly significant considering the current scenario prevailing in India.

The government has banned the advertising of certain products such as alcoholic beverages

due to health related and other reasons. One cannot stop anyone form either smoking or

drinking, and neither can they stop the sale of these goods in the market as they are not

illegal. But what the Government has done is, it has created hurdles in the way the message

would be delivered to the audience. But, has this ban really worked and more importantly is

there a need for the ban in the first place? This is a highly debatable issue, and there is lot of

uncertainty regarding this. But, there have been only a few articles that would not agree with

the fact that such a ban or imposition would reduce the alcohol and tobacco consumption.

Most articles talk about the ill-effects of alcohol and its promotion but there are very few

articles which talk in favor of alcoholic beverage producers right to promote their products

especially since promotion plays a major role in the beverage industry.

For instance, according to a test conducted to understand the importance of promotion in

building brand loyalty, it was found that consumers relied more on promotion than on other

factors like taste or quality in selecting a particular brand.

One article says that, "alcohol advertising ban may actually lead to the increase in sales

of alcohol, in turn increasing the alcohol consumption". Yet another article that holds

regard in this context is the one by Prof. Sydney Houston, Institute of Economic Affairs,

London, who is of the idea that "Children do not necessarily become smokers or drinkers

after looking at likeable cigarette or alcohol ads ".

The governments decision to ban advertising these specific products while allowing their

production and consumption may not be the ideal solution as seen from the above


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abstracts. This has spurned us to conduct this research to come up with better solutions

than simply banning advertisements.

Observers believe that when the license to set up the industry, manufacture and sale is given,

it would be suicidal for the authorities to take a high moral ground and stop the

advertisement. The tobacco and liquor industry provide a major chunk to the exchequer in

the form of the Central and State excise and under other tax heads. The government is keen

that surrogate advertising does not advertise liquor; to that extent the surrogate advertising is

wrong. But manufacturers have every right to sell the product. Moreover, marketing experts

believe that Surrogate advertising does not attract new customers and does not impact the

sales of the product; it only helps in leveraging brand equity.

Additionally, the Government ban on Surrogate advertising has several loopholes which are

constantly being scrutinized and used by the manufacturers. We know that the Cable

Television Act, for instance includes cigarettes, tobacco products, wine, alcohol, liquor,

feeding infant milk substitution, feeding bottles and infant food. The wider the subjects, the

greater the confusion and the more the loopholes. Clearly the health hazards from tobacco are

more clearly documented than liquor. So the legal network will be a lot strict eventually.

Liquor must fight its own battles and not look for support from tobacco. It must voluntarilydo things like scheduling ads after 9 PM like in the Western countries. They should try not to

hoodwink people saying that branding is an investment etc., when they have no intention of

building the surrogate brand. Today, India is shining. And is part of the global economy and

the WTO. People are more literate, more knowledgeable. And there are more activists

waiting to get into the limelight that the media is all so keen to provide.

Society for Alcohol Related Social Policy Initiative (SASPI) is a self-evident initiative in this

direction. Mc Dowell's and Seagram's have undertaken campaigns for responsible drinking.

People have been drinking for ages. And will continue to do so. The liquor industry has a

role to play in our economy. Its members also have a role to play as responsive and

responsible corporate citizens. It has shown responsibility on occasions by doing public


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service advertising (as Seagrams had done earlier). The challenge is to build brands

within the framework of the law. Not around it.

A market survey in 2001 revealed that advertising has a direct influence on the consumption

habits of 431 million people in India and an indirect impact on 275 million `aspirants' from

the lower income group. Considering this and realizing that nearly 50 per cent of the

television owners have access to cable channels the government should make certain that the

public should not receive wrong messages at the behest of promotional strategies.


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Below are some of the advertisements where the manufacturers have used two different

kinds of promotional techniques to promote there brand. In the first method the promoters

have used an indirect method called surrogate advertising and in the later case they have

used direct promotion.

Below are some examples of surrogate ads:

Headline: The new look

Subhead: 'It's flying'

Bodycopy: Packaged drinking water

Baseline: -

Agency: JWT

Client: Kingfisher


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Headline: Normal screen. Flat screen. Or no screen.

Subhead:Foster's and IAGT bring you a dream chance to

get to the Melbourne Grand Prix 2002. To find out how,

pick up the latest copy of IAGT - a guys magazine fromThe Times Group and take part in the F1 Grand Prix Feel-

your-Adrenaline contest.

In the above two ads they have used surrogate advertising which means i duplicating the

brand image of one product extensively to promote another product of the same

brand. In the first case promoters have used the brand name in promoting package water and

in the second case they have used brand name by conducting a contest.


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These are some examples of direct promotional ads:

Below are some of the examples where they have used there brand name directly by not

mentioning any product .These kind of advertisements may influence other segments also

which have not been targeted by generating curiosity.

Headline: Keep walking


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Headline: "I am a slow walker, but I

never walk backwards." Abraham

Lincoln

Subhead: -

Bodycopy: -

Baseline: Keep Walking

Agency: -

Client: Johnnie Walker


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Headline: -

Subhead: Sir Charles

Spencer Chaplin (1889-1977)

The essence of his art was

pantomime; only five ofhis films had spokendialogue.

Bodycopy: -

Baseline: Genuine qualityspeaks for itself.

Agency: Bates

Client: Allied DomecqSpirits and Wine India


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Headline: -

Subhead: The power of

consistency. The strength

of maturity. Glen McGrath.Truly Royal Stag.

Bodycopy: -

Baseline: Truly world class

Agency: -

Client: Seagram's


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FINDINGS AND RECOMMENDATIONS

Indirect advertising like surrogate advertisements do not have much effect on nontargeted group

Surrogate advertising mainly serves the purpose of brand recall. It does not necessarily increase the sales of the product. It is not successful in attracting new customers but serves the purpose of

reminding existing consumers only.

There is a lesser chance of adolescents getting influenced by such advertisements. Rather than an outright ban on advertising, the government should endorse the

code in operation which specify the timings, mediums and programs when the ad

should be aired. Commodities such as alcohol, tobacco and cigarettes are habit-forming with a

high degree of brand loyalty and rely on word-of-mouth product information

rather than promotional strategies.

Consumers should be given a choice to gain knowledge about the market andmake rational decisions. In the absence of this there will be bootlegging and

adulterated products lining up on the shelves.

The industry on its own has demonstrated the maturity and sense of responsibilityto promote restraint and moderation in consumption of alcoholic products.

Freedom of commerce should be preserved and brand extensions of cigarettetobacco and liquor products should not be banned notwithstanding similar

graphics, if they do not propagate smoking or drinking merely on the ground of

the brand names being similar.

Regulations should be put in place to see to it that messages which mightinfluence adolescents should be avoided.

The ill effects due to consumption of alcoholic beverages should be made clearduring the advertisement itself.

Government should take concrete steps to propagate the health hazards caused byits consumption.


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Direct marketing of alcoholic products should be avoided and banned because itmay attract under aged and teetotalers to start consumption


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Conclusion

Alcohol consumption is a social evil but after analyzing the research findings, I am of the

opinion that the governments ban on advertising of alcoholic beverages while allowing

their production and consumption is not an ideal solution to the problem. All businesses

have a right to promote their products and government intervention to curb that right is

not the answer to curb this social evil.


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Documents

Alcoholic Beverages Promotion-Nitin R-0428