Banning Liquor Surrogate Advertising

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Themes : Advertising and Promotion
Period : 1999-2002
Organization : Archies Greetings
Pub Date : 2002
Countries : India
Industry : Advertising

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Case Code : MKTG024
Case Length : 13 Pages
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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 Rs³ 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).

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.

States following the open-market system gave companies freedom to choose their distributor and to determine the price and the discounts. In the government-controlled system, liquor was distributed by state agencies such as BEVCO (in Kerala) and the Andhra Pradesh Beverage Corporation (in Andhra Pradesh). There were around 25,000-27,000 licensed retail sales outlets in the country, in addition to the bars, pubs, hotels and restaurants serving liquor. There were restrictions on the location of these outlets and their business hours.

Liquor producers spent heavily on advertising on the electronic media because of the reach of satellite and cable TV. Though the broadcasters were bound by a 30-year old advertising code which banned them from airing advertisements that related to or promoted cigarettes and tobacco products, liquor, wines and other intoxicants, the telecast of such advertisements continued blatantly over the years. This was because the code was only a code of conduct, not a legally enforcing code. Doordarshan, the state-owned TV channel, was the only one that adhered to it.

The broadcasters were also bound by the Cable TV Act, 1995. However, as most of the channels were uplinked from outside India, the Act did not apply to them. Moreover, satellite channels did not want to follow this code because they garnered about 50% of their advertisement revenues from liquor. In the peak seasons for the sale of liquor, this revenue almost doubled. In the first half of 1998, STAR reported revenues of Rs 127.9 million from liquor advertisements while Zee reported revenues of Rs 40 million⁴. The regional channels managed to get about Rs 0.70 million in revenues.

Since liquor ads generated such high revenues, Doordarshan also planned to air such ads in 2000. With a reach of 70 million homes, it expected to acquire a significant share of liquor advertisement revenues. Doordarshan estimated that its revenues would increase three times from cricket matches alone if it were permitted to air liquor advertisements.

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3] In November 2002, Rs 48 equalled 1 US $.
4] Zee could air liquor ads only after 9.30 pm as it was aired in the Middle East also.