Alcohol Marketing and Advertising Essay Example

compliance with code standards, particularly to address complaints about underage appeal. The present study provides evidence that the proceedings of the Code Review Board of the Distilled Spirits Council of the United States (DISCUS) provide a critical review of spirits company compliance with the DISCUS Code.Additionally, Coors Brewing Company now participates in a third-party review program run by the Dispute Resolution Division of the Council of Better Business Bureaus, and two other companies have stated that they will adopt alternative approaches to obtain third-party input regarding their compliance with self-regulatory standards. The Commission continues to believe that third-party review provides an important measure of credibility to self-regulation and encourages all companies to adopt some form of an external review process. The largest improvements have occurred in the area of ad placement.

In 2002, the alcohol companies surveyed achieved 99% compliance with the standard that at least 50% of the relevant ii media audience be adults. More importantly, the industry now has committed to adhere to a 70% placement standard and to implement post-placement audits. The study also revealed added industry attention to the issue of ad content. This area is particularly sensitive, given that minors are present in nearly every venue where ads are disseminated. Company documents show many examples of ad concepts being rejected, and ad content being modified, to reduce the likelihood of appeal to minors.

Still, a visible minority of beer ads eature concepts that risk appealing to those under 21. Unless care is taken, alcohol ads targeted to young legal drinkers also may appeal to those under the legal age. Because of significant constitutional issues, the Commission continues to recommend enhanced selfregulation to

address concerns about alcohol advertising’s appeal to minors. In addition to self-regulation of advertising, a comprehensive alcohol policy also must address the means by which teens obtain alcohol for consumption. Younger minors obtain alcohol primarily from noncommercial sources; this social availability can be addressed by changing adult attitudes about teen use.

Changes also are needed to reduce underage alcohol purchases from commercial outlets, a source of alcohol for older minors. Support is needed for the efforts of organizations that can conduct rigorous field studies of the efficacy of alternative approaches to improving enforcement of minimum age purchase laws. The Commission will continue to monitor alcohol industry self-regulation, particularly the implementation of the new placement standard requiring that adults constitute at least 70% of the audience for advertising.Additionally, the Commission will monitor the effectiveness of thirdparty review programs and will continue to evaluate new advertising programs that may have undue appeal to underage consumers.

introduction

In March 2003, the Conferees of the House and Senate Appropriations Committees directed the Federal Trade Commission to study the impact on nderage consumers of the significant expansion of ads for new malt beverages. 1 In addition, the Conferees asked that the Commission study and report on whether the beverage alcohol industry has implemented the recommendations contained in the Commission’s 1999 report to Congress regarding selfregulatory efforts to limit the appeal and exposure of alcohol advertising to underage consumers (1999 Report).

This report sets forth the Commission’s findings on these subjects. Concerns about the marketing of alcohol reflect the serious costs of underage alcohol use.Underage drinking has declined significantly since all states adopted 21 as the minimum legal drinking age two decades ago, as shown

by Figure 1,3 but drinking by minors remains high. In 2002, one-fifth of 8th graders, over one-third of 10th graders, and nearly half of 12th graders reported drinking within the past 30 days, and significant numbers reported engaging in binge drinking.

The manner in which minors drink places them at risk of significant harm. Excessive drinking is associated with a variety f risky behaviors and injury, including drunk driving accidents, suicide, sexual assault, and highrisk sexual activity.

Public health organizations, the government, and the alcohol industry have all recognized that it is important to reduce underage drinking in order to lessen drinking-related harm.

Given the risks of underage drinking, all involved agree that the alcohol industry advertising must avoid targeting minors. This report evaluates the status of self-regulatory efforts by the industry to meet that goal.

Section II addresses the marketing of the new flavored malt 2 beverages;

Section III contains an update on alcohol industry self-regulation;

and Section IV contains the Commission’s recommendations. This report’s findings are based upon information obtained following issuance of compulsory process orders to nine major alcohol industry members,8 as well as discussions with a wide variety of entities, including interested consumer groups, researchers, and industry trade associations.

Flavored Malt Beverages

Background In recent years, flavored malt beverages (FMBs) have become increasingly popular. These products combine beer and distilled spirits characteristics. To produce a FMB, a brewer starts with a base of beer, uses filtering techniques to remove a portion of the beer taste, and adds flavors derived from spirits to achieve the desired taste and alcohol level. FMBs are marketed in traditional beer bottles, and have an alcohol content of 4% to 6% by volume, similar to

other beers.Marketers introduced citrus-flavored FMBs, including “hard” lemonades in the late 1990's. 10 More recently, brewers have entered into agreements with distillers to introduce spirits-branded FMBs that typically taste like a combination of light beer and citrus or other fruit. 11 Other FMBs have flavors similar to wine coolers or cocktails (such as bourbon and cola). 12 FMBs are relatively new products.

As a result of efforts to introduce them into the marketplace, a disproportionate share of beer advertising expenditures currently are directed to FMBs. 3 As new products have been introduced over the last five years, these expenditures have increased dramatically, from 2% of beer advertising in 1998 to approximately 17% of beer advertising in 2002. 14 During that same period of time, FMB sales grew at a far slower pace, from 1. 3% of beer sales in 1998 to approximately 3% of beer sales in 2002. 15 Over this time, total per capita beer consumption has increased modestly, by about 1% per annum; a substantial portion of FMB sales are derived from consumers who have reduced purchases of other malt beverages. 16 See Figure 2 (page 6).

B.Prior FTC Investigation of FMB Marketing In 2001, in response to a complaint filed by the Center for Science in the Public Interest (CSPI), the FTC conducted an investigation to determine if FMBs were being targeted to minors. Among other things, the Commission staff reviewed whether the products were placed among non-alcoholic beverages in retail outlets; whether the advertising for these newer products was targeted to an underage audience; and whether consumer survey evidence proved that teens were more likely than adults to be aware of and use

the products, as alleged in the CSPI complaint.

The investigation was conducted in collaboration with the U. S. Treasury’s Alcohol and Tobacco Tax and Trade Bureau (TTB, formerly the Bureau of Alcohol, Tobacco and Firearms). The Commission obtained proprietary information from marketers of the five products identified in CSPI’s complaint, including internal documents relating to product development, marketing plans, consumer research, and distribution plans. In addition to a review of the documentation, the investigation included a ten-city survey to determine where the newer malt beverages were placed in retail outlets.

With respect to the placement of FMBs in retail outlets, industry documents obtained by the FTC showed that the alcohol companies had expressly urged distributors to place the products with other alcohol products, generally with imports and microbrews. 18 The FTC/TTB survey of retail outlets in ten cities confirmed that the beverages were not co-mingled with non-alcoholic products in retail outlets.

The Commission’s review also found no evidence of intent to target minors with the FMB products, packaging, or advertising.For example, the internal company documentation, including planning materials and consumer research results, demonstrated that the marketers tested alternate product and packaging versions on adults aged 21 to 29 to determine the optimal product taste profiles and packaging styles and that they tested the appeal of advertising by surveying adults above the legal drinking age.

Finally, the Commission reviewed the consumer survey evidence submitted in support of the proposition that the new malt beverages are predominantly popular with minors.The Commission concluded that flaws in the survey’s methodology limit the ability to draw conclusions from the survey data. 19 4 C. Results of Updated FTC Investigation In response to the Committee’s

March 2003 request, the Commission initiated a new review of the advertising and marketing of FMBs. The Commission sent compulsory process requests to nine alcohol industry members, eight of whom market one or more beverages that compete in the FMB category.

The compulsory process requests required the companies to produce internal documents relating to the marketing of these products, including documents describing the target audiences and relating to advertising development and placement.

FMB Ad Placement The Commission obtained marketing plans discussing the advertisement placement strategies for the FMBs as well as data showing the age composition of the audience for FMB ads. As discussed below,21 in 2002 the industry codes required that at least 50% of the audience for alcohol advertising consist of adults aged 21 and over. The Commission’s review shows that, in 2002, over 99% of the dollars spent to advertise FMBs on television, radio, and in print media were expended in compliance with this goal.

Although compliance with the 50% standard was quite high, the standard still permitted ads to be placed in venues with a substantial underage audience composition. To limit the likelihood that ads for FMBs (or other alcohol) would appear in such venues, five companies also maintained lists of programs on which they would not place ads (“no buy” lists).Typically, they instructed their media buyers not to place ads on MTV or the UPN network, on wrestling or extreme sports shows, or on teen-oriented shows such as “Malcolm in the Middle,” “Gilmore Girls,” “Boston Public,” “Sabrina,” “Grounded for Life,” “Celebrity Death Match,” “Dawson’s Creek,” “Moesha,” “7th Heaven,” and “Popular. ” A sixth company limited the likelihood of placement on teen-oriented shows by

requiring a 70% adult audience for placements. Finally, two of the companies marketing FMBs did not advertise their products in print or broadcast media.The companies’ documents showed that on a few occasions, FMB ads appeared on individual episodes of teen-theme shows in individual TV markets in 2002. Given the high overall compliance, however, these incidents appeared to have been inadvertent, rather than deliberate attempts to target teens.

Content of Advertising for FMBs The alcohol company documents submitted in response to compulsory process consisted of planning and operational documents prepared in the ordinary course of business.These documents indicate that the companies target advertising for the FMBs to persons of legal drinking age and older. Marketing concepts (including advertising and packaging) are directed to a specific “target” category of consumers. The company documents show that the intended targets for FMBs were above the legal drinking age, generally 21-year-olds to 27- or 29-yearolds. The companies’ documents further indicate that before ads are disseminated, the alcohol companies often use consumer research to test them for persuasiveness and efficacy.

Research participants are screened for target demographic characteristics including age, generally 21 to 29, and are asked a wide range of questions, including questions designed to elicit whether the ad is appealing and whether it communicates that the advertised brand appeals to the target.