Group Case Analysis: Alcohol and Advertising
Group Case Analysis: Alcohol and Advertising BGSO 4000
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Alcohol Advertising By: Alicia Briski, Vidal Felix, Rochelle Grambihler, Jennifer Mast, Jessica Riley, and Barbara Root Table of Contents Executive Summary..............................................................................3 Problem and Issue Identification...........................................................4 Analysis and Evaluation........................................................................5 Recommendations................................................................................7 Bibliography.......................................................................................10 2 Executive Summary This report and case analysis is on the alcohol industry’s attempts to increase their presence in the marketplace through various advertising methods and the concerns these practices raise. These concerns are: opponents of the alcohol industry say that younger adults and certain groups these advertisements are targeting are more susceptible to advertisements, and so are more likely to drink. Also, these opponents claim that these advertisements encourage people to abuse alcohol. The alcohol industry defends their tactics by saying that they are following the guidelines as set forth by various regulatory bodies already (and their own voluntary codes), and that advertising by itself does not cause the social problems caused by abusing alcohol. Also, the alcohol industry claims that their opponents shortchange the intelligence of the public. Critical thinking is applied to the forms the advertising takes, the arguments given by both the alcohol industry and their opponents, and on the restrictions the alcohol industry currently operate under. Sources for this information can be found in the bibliography. Our findings indicate that alcohol sales are declining, despite the increased spending on advertising by the alcohol industry. This can be attributed to the increased awareness of the public to the social problems caused by alcohol abuse by the opponents of the alcohol industry (especially in this new age of social media). What is more, the alcohol industry itself has acknowledged the social problems of alcohol abuse and have taken steps to self- regulate, though they do everything they can to skirt those rules. Our conclusion is that alcohol advertising is not as great a problem as the opponents of alcohol perceive. Having said this, the social problems caused by alcohol abuse is still prevalent, and these problems will continue to be pointed out (and possibly amplified) by opponents of the alcohol industry. Also, the alcohol industry will still make and advertise their products however they can within the restrictions placed upon them. Our recommendations include increasing advertising regulations to curb any shady marketing tactics used by the alcohol industry and conduct an extensive multi-year marketing study to find out how the alcohol industry advertises, and how this actually affects the public. What’s more, the alcohol industry should diversify their products to include non-alcoholic beverages so they don’t need to solely rely on alcoholic products to stay viable. Finally, more support should be given to successful campaigns that curb drinking and driving. 3 Problem and Issue Identification From the late 1800’s to present there have been multiple issues with alcohol. These issues have caused people to rally and create new restrictions for those businesses that market and sell alcohol. These activists claim several issues including; the advertising of alcohol is encouraging underage consumers to buy into the products, encouraging consumers to abuse the product and that the advertisements encourage an increase of consumption. These claims from anti-alcohol activists have managed to shut down product lines, such as Spykes from Anheuser-Busch. It has also caused other companies to stop specific advertisements for their products. Even though there have been several studies conducted about how advertisements influence underage drinking, there has been no conclusive evidence supporting the statements made by anti-alcohol activists. From this information, it can be said that there may never be any accurate results on how alcohol advertisements influences individuals. Due to multiple underlying facts there is no clear evidence that advertising is the main contributor to underage consumption, and increased consumption. The studies have not accounted for inherited traits of addiction or how responsible consumers of the adult beverage are. With no definite proof, there are still imposed advertising guidelines that each adult beverage company must abide by when advertising products. These guidelines differ from state to state and from city to city. Such guidelines restrict the locations in which the advertisements can be placed, allow for an advertisement to be taken down if it is misleading and the times of day their advertisements can be run on television. Even though there are so many restrictions already set, the adult beverage companies choose to follow these guidelines loosely. With so many constraints, it is hard to imagine that the adult beverage companies are able to meet all regulations while also coming up with new forms of advertisements for their products. When a new product is finally marketed and launched, it costs the company millions of dollars. Once these anti-alcohol activists criticize so much so that the company must then end all production, the company must spend money to stop the manufacturing, pay to have the products sent back, and properly dispose of the returned merchandise. Such expenses can increase rapidly and make the company question their ability to recover from such a huge loss. The alcohol industry continuously has their advertisements and ethics put to question. It is imperative that this topic should be studied in order to understand the motives behind the alcohol companies. Accusations of advertisements targeting underage consumers, forcing consumers to abuse alcohol, and that it is improperly targeting other groups of citizens. There should be a study conducted where a researcher who has a vast understanding of marketing goes to all adult beverage companies and finds out exactly what their marketing process is. After this research is completed a comprehensive review of the marketing process of each company should include, the methods used, what the motives of the advertisements are, and what the target market for the product is. Another method of invagination should be conducted with the students who were evaluated to be drinking underage to see who had family members, or guardians, in their house that drink alcohol on a regular basis. This detail has been overlooked in the case can greatly skew the numbers on the studies conducted about advertisements influencing underage consumption. An overall issue that is avoided is that it is not alcohol advertisements alone influencing minors to consume the age restricted product, there are multiple outside influences that are key factors. 4 Along with the studies about the marketing process and guardians that drink on a regular basis, there is another issue not mentioned in this case. How the negative attacks on the alcohol industry has impacted the companies financially. It would be informative to see how much money the companies expends in order to follow marketing and creation guidelines, and how their profits fluctuate based on the advertisements that are shown for new products. Analysis and Evaluation The stakeholders in this case include: the alcoholic beverage companies, alcohol consumers, and all members of the public, including minor children, as well as a “coalition of anti-alcohol groups that faults the alcoholic beverage industry for social problems caused by drinking” (Steiner & Steiner, 2012). The case involves an analysis of the currently restricted advertising arena that the alcoholic beverage companies contend with daily in their effort to reach consumers and gain new customers. These companies face the challenge of advertising in creative ways in order to reach their sales goals despite many layers of governmental restrictions on both national and local levels. Although there is little to no evidence that alcohol advertising has any significant impact on consumption levels, anti-alcohol activists use underage drinking, a universally recognized issue, as a gateway to rally public support for their cause. This rising public concern about a single social problem involving alcohol has led to public outcry over alcohol advertising in general, resulting in complete product line failures within the alcohol industry. Calls for increased restrictions on alcohol advertising, along with direct attacks on products aimed at younger generations, have already negatively impacted the reputations and financial positions of many alcoholic beverage companies. Increasing public concern about alcohol advertising also affects alcohol consumers of legal age, whose ability to discover new products via media outlets is hampered by restrictions on what, when, and where alcohol companies can advertise. In other countries around the globe (Steiner & Steiner, 2012), advertising restrictions for alcohol companies exceed those in the United States, even going so far in some countries as to allow televised alcohol ads only after a certain time of night. Although commercial speech is afforded fewer protections under the First Amendment, legal precedence for the restriction of commercial speech would most likely prevent any similar time-sensitive restrictions on alcohol advertising in the United States. However, one of the main arguments from the anti-alcohol activists is the spillover in appeal from products and advertisements aimed at young adults in their 20’s, due to the huge overlap in the interests, behaviors, and lifestyles of young people in their teens and early- to mid-20’s. Placing greater restrictions on alcohol advertising to protect underage drinkers can lead to information being less readily available to consumers whose interest in the product is completely legal. Since the failure of Prohibition in 1933, alcohol has continued to become a staple in the American economy and culture; along with that cultural shift has come a host of alcohol- related social problems such as alcoholism, drunk driving, and, of course, underage drinking. Because of this, even members of the general public who consume no alcohol have a stake in the way alcohol advertising permeates the culture. If future studies can prove a significant correlation between the current restrictions on alcohol advertising and a rise in the aforementioned social issues, the next step in helping alleviate those issues may very well be to increase restrictions on alcohol advertising. Inevitably some of the viewers of alcohol advertisements are children and teenagers, and future research may show a higher correlation between the viewing of such advertisements and underage drinking than current studies have been able to prove. 5 The anti-alcohol activists central to this case pose a potentially serious threat to the current state of the alcohol industry if their attacks on the industry continue. Depending on the amount of public support the activists are able to garner for their cause, sales of certain products could continue to decline, and future product launches could fail before even getting off the ground. The example of the rapid demise of caffeinated alcoholic beverages indicates the possible need for a change in tactics when it comes to the ways alcohol companies advertise. Ongoing harassment by activist groups creates a drain on the alcohol industry through losses of sales, harm to companies’ reputations, and company resources dedicated to maintaining market share and keeping afloat financially, rather than to competing within the industry. The economic contribution of the alcohol industry in the United States is sizable; in 2010, the industry added over $400 billion to the nation’s economy (Distilled Spirits Council of the United States). In this sense, the industry has an economic responsibility to make every effort to keep offering popular products at competitive prices, not to mention continuing to provide jobs for the almost 4 million Americans whose livelihoods depend on the ongoing success of the alcohol industry. In addition, the legal responsibilities of the alcohol companies obviously include the duty to follow existing laws pertaining to the industry, especially those regulating advertisements, and whatever precautions are necessary beyond that to ensure minimal liability in any possible court cases that could result from alcohol consumption. Companies within the alcohol industry do have an ethical responsibility to society to prevent any exacerbation of existing social issues involving alcohol due to the industry’s own actions and regulations, within reason. History has made it apparent that complete dissolution of the industry would create more problems than it would solve, so alcohol companies have taken the necessary steps to self-regulate and maintain their industry with minimal negative impact on society as a whole. The industry obviously feels an ethical and moral duty not only to be forthright and truthful, but also to acknowledge that 20 percent of all alcoholic drink sales, totaling $8 billion per year, can be attributed to underage drinking. Without backing down from the companies’ right to target potential younger and newer drinkers and the companies’ desire to portray alcoholic beverages as cool and sophisticated, they have voluntarily funded ad campaigns teaching the younger consumers about moderation and limited the overt sexual content in ads. The author even sees this, at times, as a “cat-and-mouse game in which companies find new product and marketing innovations to replace initiatives blunted by critics and regulators” (Steiner & Steiner, 2012). Unfortunately, the regulations voluntarily set in place by the industry itself are all too often treated more like guidelines than actual rules. So while ethical responsibilities and actions depend on each individual company’s stance, the legal restrictions provide a foundation for the regulation of alcohol advertising. The featured company in the case, Anheuser-Busch, as well as the numerous other companies listed that were forced to adjust their product lines and marketing tactics because of the uproar over caffeinated alcoholic beverages, attempted to appease the anti-alcohol activists by removing the caffeine from the beverages in question. When that proved ineffective at quelling the activists’ concerns, the companies chose to completely cease the marketing and sales of those products. The industry has found itself in an unfortunate predicament: in a sense, they are now trying to negotiate with terrorists. The main backing of the cries for increased restrictions on alcohol advertising come, not from average citizens concerned about the very real issue of underage drinking, but from activists opposed to the alcohol industry altogether. The alcohol companies face a group whose ultimate goal is eliminating the presence of alcohol from American society entirely, not just from the hands of would-be consumers under the age of twenty-one. The response 6 of the alcohol industry to these attacks and subsequent attacks on the current regulatory standards has been one of reluctant acceptance. Companies can only fight back to a certain extent before the intended vilification of the industry by the anti-alcohol activists becomes a more pressing concern than lost sales and revenues from dying product lines. Although few people would argue that the alcohol industry is a completely wholesome business, companies still have reputations to maintain, so the eventual compliance of the industry with the demands of the activists was the wisest choice to avoid additional consequences. Alcoholic beverage companies affected by advertising restrictions will continue to struggle with governmental expectations, while seeking to implement the latest ideas and technologies (including online advertising) in their fight for market share and survival in an ever-competitive beverage market. By continuing to pool resources and band together to counter restrictive regulators, the companies are being efficient and sensible. They cannot deny that their products do cause harm when misused. Therefore any other approach would certainly create a consumer backlash, which would be unacceptable to shareholders, who are the final stakeholders in the equation, and could ruin the company itself. Recommendations As stated in the case, alcoholic beverages are a mature industry dating back to Prohibition, and most Americans drink as much alcohol as milk or coffee (Steiner & Steiner, 2012). This means that alcohol is an industry that is not going anywhere regardless of exposure to advertisements. The company Anheuser-Busch featured reacted in the best way they could, as they didn’t anticipate such an attack. So when the issue became clear and they were under attack, they did remove the caffeine and, after further attacks, removed the product altogether. The company reacted as best they could in this situation and is justified in their actions. These attacks were based on exposure to advertisements and race but considerations found in a study said that the study "doesn't take into consideration some of the other risk factors that might cause or lead someone to be more receptive to alcohol advertising," such as a person's genetics or family history of alcohol problems (Preidt). Those are variables that will occur despite advertising. Furthermore the case detailed that young adults 21 to 25 share numerous interests and behaviors with those just below the legal drinking age and inevitably some advertising appeals to them as well as ads aimed at minorities are also valid as market segmentation and the targeted advertisements that makes it work are standard in many industries (Steiner & Steiner, 2012). There is no evidence that targeting raises consumption. Recommendations considered are to increase alcohol marketing laws and internal industry advertising regulations, conduct an extensive marketing study, diversify by offering non- alcoholic beverages, give more support to drinking and driving campaigns, and eliminate bright and colorful images and finally increase the size of the product so it can’t be sneaked. All of which also have accompanying benefits and disadvantages and very well could be eliminated. Actions taken by the company can vary from simple to complex strategies. First action the company should take now is to increase alcohol marketing laws and internal industry advertising regulations. Identified in the case, the Beer Institute’s Advertising and Marketing Code prohibits depictions of excessive consumption, intoxication, and drinking while driving in addition to models in beer ads being at least 25 years of age and must “ reasonably appear” to be over 21 (Steiner & Steiner, 2012). Based on further research information declaring in America, at least, most restrictions on alcohol advertising are self- 7 imposed by the beverage industry and focus on encouraging responsible drinking. That's why most beer ads, for example, focus on taste rather than hard partying. Meaning that continuing to produce ideas while abiding commercial speech laws, following company rules and regulations will still create brand loyalty with responsible drinking. This recommendation will be a competitive advantage and definitely an added benefit of flexibility while abiding. Obvious disadvantages are that we are restricting our advertisements, however the perspective of being concise is really the goal in this recommendation thus making this the best and most probable recommendation for the company. Second recommendation is to conduct an extensive marketing study where a research team, our own or a third party, performs research about how exactly the company is marketing and what ways to improve based on knowing the methods used and what strategies might work better. Another study could be done on participants to discover if alcoholism or genetics is a factor on alcohol consumption. This information can help determine what advertisements will work within the guidelines and regulations. With such a huge benefit also is a disadvantage, research and development is expensive and if it cannot be affordable this recommendation could be eliminated. Additionally increasing the size keeps alcohol from looking ‘fun-sized’ but will inevitably lead to criticism of promoting excessive drinking, plus alcohol can be poured into countless sneak-able containers, which exemplifies why this recommendation is eliminated. Another recommendation was removing bright and colorful images like lifestyle advertising as a way to deter youth drinkers. This recommendation is very relatable to the argument in the case that the public is too stupid to decide responsibly. If a marketer positions a brand to satisfy emotional needs for a sophistication, popularity, who’s to say the consumer who finds gratification in the brand wrong (Steiner & Steiner, 2012). The example they used was criticizing a girl for feeling glamorous while wearing new perfume, it is the idea of an intangible gratification. Third recommendation is diversify by offering non-alcoholic beverages. Alcohol advertising has increased 400% since 1971 but there has been no appreciable increase in alcohol consumption (Richards). But the advertising has shown consumers there are more choices in what they can drink. Given this, why not persuade alcohol companies to diversify? Instead of offering more alcoholic choices, how about offering more non-alcoholic choices? Energy drinks seem to be popular; however, these have been known in the past to fail. How about healthier drinks like Vitamin Water or Gatorade? If there’s one thing customers always want, it’s more choices. The more good products customers associate with your company name, the more inclined they will be to buy their other products, including their alcoholic products. The advantages of this are a huge increase in revenue and brand recognition, but despite this gain, the initial startup of a whole new product line is enormous. Also be aware this could be another trap and chance to have allegations made by critics. This recommendation is feasible with funding and a very strong distinction between alcoholic and non-alcoholic beverages; however, this will not solve this industry’s competitive disadvantage of promotion while following the guidelines that make marketing alcohol ethical. Final recommendation is give more support to drinking and driving campaigns like the Alert Cab, which gives free taxi rides to restaurant and bar patrons who have been drinking. Promoting responsible drinking is not only ethical it is a good way to increase your lifetime revenue from a customer. Campaigns and programs could be train bartenders to serve drinks responsibly and owners to support binge drinking. However the major disadvantage of this is that responsibility as are only two percent of the alcohol ads 8 budget and youth sees 239 product ads for ever one message about safe driving (Steiner & Steiner, 2012). This statistic is startling and should be addressed. If this ratio is balanced through more advertisements about drinking responsibly, the company can associate their brand and gratification with safety of the consumer in mind along with responsibility and duty to preserve society’s safety thought of as well. This recommendation is not as expensive as an extensive study or new product line, but would certainly create the same impact. To summarize the recommendations the company should follow through on is to increase alcohol marketing laws and internal industry advertising regulations is a tool to be concise first and most importantly. Second most important recommendation the additional support to drinking and driving campaigns and responsibility advertisements as this recommendation is the least expensive comparatively. These recommendations will allow the company to use marketing effectively while maintaining an ethical statues, in addition to brand recognition through advertisements involving drinking responsibly. These recommendations are feasible under the premise that there is only minimal funding. With more investment, more recommendations can be implemented. 9 Bibliography Distilled Spirits Council of the United States. (n.d.). Economic Contributions of the Distilled Spirits Industry. Retrieved October 25, 2015, from Distilled Spirits Council of the United States: http://www.discus.org/economics/ Preidt, R. (n.d.). TV Alcohol Ads Tied to Problem Drinking for Teens, Study Finds. Retrieved October 20, 2015, from U.S. News & World Report Health: http://health.usnews.com/health-news/articles/2015/01/19/tv-alcohol-ads-tied-to-problem- drinking-for-teens-study-finds Richards, K. (n.d.). Alcohol Ads Increased 400% Over 40 Years, But Americans Aren't Drinking More. Retrieved October 20, 2015, from Adweek: http://www.adweek.com/news/advertising-branding/alcohol-ads-increased-400-over-40- years-americans-arent-drinking-more-163668 Steiner, J. F., & Steiner, G. A. (2012). Alcohol Advertising. In Business, Government, and Society: A Managerial Perspective, Text and Cases (13th Edition ed., pp. 538-548). New York, New York: McGraw-Hill Irwin. 10