Banning Liquor Surrogate Advertising

The Debate Contd...

On an average, liquor companies spent about 10-12% of sales revenue on advertising, including direct consumer promotions programs; sponsorships; and print and electronic media advertisements. On TV alone, companies reportedly spent about 3-4% of sales revenue. This meant that after the ban, companies could save 3-4% sales or gain in margins. For instance, McDowell's operating margins ranged between 5-7% and after the ban, were expected to increase by 50%. The smaller companies in the domestic market also seemed to have an advantage. Industry watchers felt that since distribution and reach would become more vital after the ban, smaller companies might be acquired by the larger ones for their distribution network, if not for their brands.

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, some critics observed that while the government imposed many restrictions on the liquor company; it also earned a significant portion of its revenues (Rs 200 billion in 2000 for the whole country) through levies on liquor sales.

The issue of surrogate advertising involved even media companies, as they had to forego substantial revenues as a result of the ban. According to broadcasters, the government should put in place a 'reasonable' policy, which somehow struck a balance between the social and monetary aspects of the business of alcohol.

What Lies Ahead?

In August 2002, broadcasting industry sources revealed plans to put in place measures for self-regulation and monitoring, even before the I&B Ministry took concrete steps in this regard. The broadcasters who were members of the IBF, announced that they would come up with an advertising code specific to surrogate advertising.

IBF set up a sub-committee that included among others, with L. S. Nayak (Executive Vice President, Star TV), G Krishnan (CEO, TV Today) and Manu Sawhaney (MD, ESPN-Star Sports). Apart from formulating the advertising code, the committee would monitor the advertisements that appeared on the TV channels.

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Case Details

Case Code : MKTG024
Themes: Advertising and Promotion
Case Length : 13 Pages
Period : 1999-2002
Organization : Archies Greetings
Pub Date : 2002
Teaching Note : Available
Countries : India
Industry : Advertising

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