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In terminal decline?

The liquor and advertising industries are bracing themselves for next month, when government is expected to say whether it will forge ahead with plans to ban alcohol advertising.
The Industry Association for Responsible Alcohol Use's (ARA) Adrian Botha says the department of trade & industry, tasked with commissioning a study into the effects of alcohol advertising, is to present the findings in May.

Prohibiting alcohol advertising has been on government's agenda from as far back as 2006, and pressure groups have been active for at least a decade longer. They point to reports that the social and economic effects of alcohol abuse are costing the state around R9bn annually. In 2006, the health department said alcohol abuse was costing it about R800m/year in emergency medical assistance.

Last year transport minister Jeff Radebe also added his voice when he made amendments to national road regulations, calling for alcohol advertising to be banned on public roads. These have yet to be implemented.

Ad revenue losses


However, Odette Roper, CEO of the Association for Communication & Advertising, says Radebe's call will have unintended consequences. She says the proposed legislation will negatively affect not only the entire communications and advertising industry, but also small enterprises whose business it is to install and maintain many of the billboards. The outdoor advertising industry will be the hardest hit.

Historically, the alcohol industry has been one of the largest buyers of outdoor advertising space, accounting for 20% of R1,2bn in revenue last year.

In total, alcohol manufacturers spent R720m on above-the-line advertising (TV, radio, print and outdoor) in 2008. Though this was an increase of almost 11% from R650m in 2007, according to the ARA, and double the R342m the industry spent in 2002, some of the manufacturers are beginning to cut back, notably SABMiller and Distell.

SABMiller, which has over 90% of the beer market, spent R245m in advertising last year, down from R273m. Distell cut its budget by 9,2%, spending R19m less for the year, at R227m. But Brandhouse, which says it owns 14% of the total liquor market, increased its spend to R233m from R199m. Other liquor advertisers, though relatively small, include KWV, Pernod-Ricard, and liquor retailers and distributors.

Change in focus


While the decrease in advertising spend can be attributed to the general cost-cutting that's taking place across all industries, it's also an indication of some manufacturers' changed marketing focus, probably in preparation for the ban.

Tobacco companies also began slowly reducing the above-the-line spend when government announced its intention to prohibit them from advertising their products 10 years ago.

There's already evidence of liquor companies' change in focus. More of them are channeling their energy into direct promotions such as events sponsorship and in-store promotions. These forms are not regulated and have proven to be successful for tobacco companies.

British American Tobacco's communications manager, Wardah Hartley, says since the ban, “adult smokers are made aware of any brand enhancements via pack inserts, at point of sale within the retail outlets or through one-on-one communication with adult smokers who have consented to receiving direct communication”.

Impact on consumption


Though the anti-smoking association Cansa claims the ban on tobacco advertising in SA has resulted in a 16% drop in tobacco consumption, research shows a decline of less than half this figure.

Research firm Eighty20 says the number of smokers decreased 7.16% between 2000 and 2008 from under 7,72m to below 7,17m — showing the effect that advertising, or rather the lack thereof, has on users.

Hartley, however, says the firm's share of the market has stayed relatively stable over the past five years. This is despite a drop, from 27 to 20 in the number of brands it owns.

“In our view an alcohol advertising ban will have little or no effect on consumption levels,” says Brandhouse corporate relations director Andre Martin. He, too, points out the absence of a conclusive study showing the existence of a causal link between advertising and alcohol abuse.

SABMiller communications manager Janine van Stolk agrees.

She says SABMiller believes that information about the attributes and availability of its brands should be available to adults “because it helps them to make their own choices”.

“Secondly, it would not be in the interests of our own brands to eliminate an important source of information around brand decision making. It's also important that in a free market economy, the regulation or banning of any specific advertising category should be undertaken with great caution.”

Activation marketing


Reflecting on the impact the banning of tobacco advertising had on the communications industry, TheMediaShop's Donald Liphoko says it changed the media advertising model.

“It placed renewed focus on activation marketing. At the time, there weren't any major independent media agencies, so it didn't really affect media agencies, but the integrated agency model was shaken.”

Fortunately for the industry, the involvement of beer giant Budweiser as one of FIFA's official sponsors for 2010 should buy it some time. The industry expects government to implement the ban, should it go ahead, after the sporting event.

Source: Financial Mail

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