Advertising and the Alcohol Beverage Industry
Speech to the Beer Institute

Wallace S. Snyder
President & CEO
American Advertising Federation
May 17, 2004

Good afternoon. I'm pleased to be at the Beer Institute Annual Membership meeting, speaking with the leaders of one of the largest advertising segments in the world. I want to wish you much success on all your programs here. I thank you for the honor of discussing with you today the opportunities presented to you through your commitment to advertising.

I'll begin today's discussion by talking about the value of advertising in building brand awareness. Then, I want to spend time on the challenges, and there are many, that you face as major advertisers of alcoholic beverages. Those come from society itself and the need for high standards, but also from government regulation at both national and state levels.

But before we get into those topics, let me tell you about the American Advertising Federation and the ways we are structured to help you. The AAF aims to keep its finger on the pulse of the industry and our diversity and uniqueness allows us to represent the industry in its entirety. The AAF, its academic chapters and our 200 ad clubs are leading the way regarding the business of advertising. We are the advertising industry's horizontal trade association that represents 130 corporate members, including advertisers, agencies and media, a national network of 200 ad clubs and 210 college chapters, which connect the industry with an academic base. Together, we protect and promote the well being of advertising. This grassroots system allows us to tackle local advertising issues will skill and knowledge, including proposed restrictions, taxes and regulations. When it comes to action that threatens the vitality of our industry, we tackle it aggressively and with skill.
The AAF is pleased to utilize its resources on behalf of advertising in the beer industry in a number of Supreme Court cases. Within the last several years, we have filed an amicus brief in Bentson v. Coors Brewing Company where the U.S. Supreme Court agreed with the beer industry, and with us, that it was improper for the U.S. government to prevent the industry from publishing on the product label the alcoholic percentage of the beer. Secondly, in 44 Liquormart, Inc. v. State of Rhode Island the U.S. Supreme Court again agreed with the industry and with the AAF that it was improper for the state to deny beer retailers the ability to advertise the price of the product.

I believe it is critically important that the AAF supports the beer industry's right to advertise – or the advertising rights of any industry – because what happens to one advertiser can very easily happen to others.

State of the Economy

And this is an industry that faces adversity on many fronts. Economically, we've had our challenges over the last few years. At its heart, advertising is a positive profession, and though we must be realists, it is important to run our businesses optimistically. Therefore, we are fortunate that there are currently better reports about the economic status of the ad industry.

According to the most recent report by TNS Media Intelligence/CMR, 2003 showed a strong, stead climb in the U.S. advertising market to $128.3 billion, an increase of 6.1 percent as compared to 2002. Overall, almost all of the measured media experienced double digit growth in 2003. The Internet showed an amazing increase of 15.7%. Even better, TNS is predicting a 7.8 percent rise in spending for 2004.

Others are predicting a bright future for the ad industry. ZenithOptimedia predicts 2004 U.S. ad spending to increase 5.5 percent, taking into account the upcoming Olympics and elections. These spending figures are strong statements about our improving economy.

The marketing of alcoholic beverages is a significant portion of advertising's spending pie. Recent advertising expenditures in the United States for beer, wine, and liquor combined totaled $1.6 billion, with TV ads totaling $811.2 million. In 2002, alcohol producers spent $596 million on sports advertising. These figures suggest that your industry understands and values the power of advertising, and invests in it accordingly.

Of course, we are in a time of great political and international uncertainty. And unfortunately, in such times clients tend to hold on to their money a bit longer and some choose to cut back. Fortunately, many advertisers increase their ad budgets. Realizing it pays to advertise and that such a strategy increases their marketshare and stockholder value, they follow the Ted Turner formula, who said “Early to bed, early to rise, work like hell and advertise!”

Great Brands

One of the AAF's missions is to urge corporate officials such as yourself to invest in advertising and adopt for yourself Turner's motto. Most of you follow this business model. Educating other, more skeptical executives of this fact is what the AAF Great Brands campaign is all about. The objective is to make C-level executives – CEOs, COOs, CFOs – understand and COMMIT to the importance of advertising.

The AAF initiated this campaign five years ago because we recognized that top-level executives, coming more and more from financial and legal backgrounds, didn't always value advertising as much as they should. They often fail to recognize the power of advertising to build brand equity and shareholder value.

Our AAF chairman at that time, Phil Guarascio, then-VP of General Motors and currently the new head of marketing for the NFL, thought it would be a good idea to advertise advertising, through what is now called the Great Brands campaign. And so the journey began to devise a way to communicate the vitality of the industry and its integral link to brand success to those who could make or break a boom year for the industry.

Our agency Carmichael Lynch in Minneapolis devised a plan, first centered on an eye-catching print campaign that used copywriter's wit and visual cleverness. The central selling point for the campaign is “Advertising. The way great brands get to be great brands.™ ”

We approached the parent companies of well-established “Great American” brands to see if they'd let us alter their prized logos for use in the campaign. But that request was met with initial resistance. We had some selling of our own to do.

Luckily, our pitch was well received by our first company Sunkist, and the world saw that company's commitment to advertising. The tagline read: “The average grocery store carries 16,875 brands. Why do you recognize this one?”

Public awareness began to soar when we secured one of the world's most beloved brands – Coca-Cola. Never in the history of the company has Coca-Cola allowed its brand to be altered in any way. The copy: “The secret formula, revealed.”

Not long after that execution, Energizer came on board with that irascible bunny beating the drum of advertising, stating “What makes one battery more powerful than another?”

From there on out, other world-class brands wanted to join:

We had shown that long-term advertising over decades had established these brands, but we also wanted to demonstrate the power of advertising with a relatively new company. Intel recognized that advertising would propel brand recognition and respect. Tagline: “It's what makes computers more powerful.”

And Altoids, a product that didn't advertise for hundreds of years, kick-started sales and built a brand that has a hip, cult following. Tagline: “Invented in 1780. Properly marketed 215 years later.”

Our exceptional ad agency, Carmichael-Lynch, continues to take the campaign to the next level with two new Great Brands ads, soon to break in media across the country:

First, this Great Brand was built on advertising over the past 25 years. The copy now reads, “Changing the way people think overnight.”

Next, this has been a leading Great Brand for over a hundred years – built and reinforced every year with this beloved character.

The copy reads, “Because it is a jungle out there.”

And your industry has also participated to spectacular success with the campaign. Budweiser is of course one of the world's top advertisers, with a continuing commitment to quality advertising. Tagline: “How to become the King of (insert your product here)”

Television commercials featuring Coca-Cola, Intel (and FedEx set to break next month) have run on CNN, CBS Sunday Morning and ESPN sports programming. We are reaching the CEO-level executives through the quality programming they are most likely to watch.

To date, $7 million in ad space has been donated by some of the nation's leading publications, including trade magazines such as Advertising Age, ADWEEK, and BRANDWEEK, leading national and international newspapers like The New York Times, The Wall Street Journal, USA TODAY, and Financial Times, business publications like Forbes, Fortune and Business Week and quality magazines like National Geographic and The New Yorker.

Mood of Country and Government

So you can see that we believe advertising is important and can't be cut back at any time in a company's development. Yet we must be careful to take into consideration the audience that we advertise to. And the current mood of the country makes this an especially challenging time to advertise.

Many see this decade as a freewheeling, morally ambiguous, jaded time where media is rampant with graphic images and the audience is accustomed to such display. But in reality, this is a very conservative era, when many take great umbrage at the state of the media and therefore, the state of advertising. The moral mood among commentators is a backlash against the “anything goes” culture that we've seen in the past few decades, and the action that is being taken is serious. In this time of increased clutter, we must move up to the line, but not cross it, when it comes to advertising imagery.

The Beer Institute has an excellent advertising and marketing code, which gives specific guidelines on how to market your products. Your standards demand that beer advertising be carried out in a responsible and ethical manner. The AAF too has a list of guidelines to help in the creation of responsible advertising with its Advertising Ethics and Principles. Advertisers, agencies and the media all have a stake in supporting effective self regulation so that consumers will believe that they can trust ad claims as the basis for their purchase decisions. Former chairman of the ad agency BBDO Bruce Barton put it this way, “Advertising is the very essence of democracy. An election goes on every minute of the business day across the counters of hundreds of thousands of stores and shops where the customers state their preferences and determine which manufacturer and which product shall be the leader today, and which shall lead tomorrow.”

Keeping advertising in check is the responsibility of all segments of the industry – the agency and media outlets as well as the advertiser. The majority of advertisers do so responsibly and with taste and decency.

Unfortunately, many do not agree with that statement, and there are some in government who are making it there business to target advertising and specifically, alcohol marketing. I know Jeff will discuss with you the Washington and legal scenes for the beer industry. I wish to take a few moments to provide you with maybe a broader industry perspective. I see the beer industry under a three-point attack. It seems during every Congress since prohibition, some member of Congress or regulator has worked to limit the sale and advertising of beer to legal audiences. From the late Senator Strom Thurmond, an otherwise friend of industry, all during the 1990's to Congressman Frank Wolf and Congresswoman Lucille Roybal-Allard, there is always a member ready to lead an anti alcohol charge. Parenthetically, even former Representative Joe Kennedy, whose family's fortune is built on alcohol and which made it possible for him to serve in the Congress, joined the anti-alcohol forces.

Many times, attacks on the beer industry are built around efforts to limit advertising content - limitations which even these anti's know would not pass constitutional muster.

Quite often the attacks would deny the tax deductibility of advertising of beer. I see efforts to limit deductibility to be the most dangerous. They come up in a number of non-beer settings as well. Some antis try to depict them as a less radical approach than directly banning speech. Rather, they describe this approach as one that will not come into play as long as the industry does the right thing.

Let me provide an example. Senator Chuck Grassley, the Republican Chairman of the Senate Finance Committee, and as he truthfully says, a long time supporter of advertising, has chosen to use this approach for prescription drugs. The Senator introduced a bill to allow the reimportation of pharmaceuticals into the United States. But the advertising tax deduction would be denied to any pharmaceutical company that attempted to block the reimportation of their products. Senator Grassley tells us not to worry, because only companies that evade reimportation would lose their deductibility.

The bill sets a dangerous precedent. In this case advertising is used to coerce company actions but you can easily see where deductibility can be used as a threat to coerce company messages.

Point two. Some argue the moral atmosphere in Washington has become as heavy as the air in our August summers. In ordinary times the applause for beer advertising practices coming out of last fall's Federal Trade Commission report would signal that events are going well. However, Janet Jackson's Super bowl antics, Howard Stern's language, the ongoing sanctity of political correctness and the continued suggestions that we solve the problems faced by American children and young people by limiting what they hear demonstrate these are no ordinary times. Any number of legal products and legitimate intellectual positions become caught up in this atmosphere. I fear that any beer advertising which does not appear in a tombstone format and which airs in hours other than midnight to four a.m. are potential targets of the morality police. Unfortunately, the current atmosphere might make such outrageous legislation appear legitimate.

Point three. Tom Osborne, one of the best college football coaches while at Nebraska, and now a Member of Congress, has an idea for the NCAA. He introduced a Sense of the Congress resolution that asks the NCAA not accept broadcast alcohol advertising on their sporting events. Congressman Osborne thinks alcohol advertising by the NCAA sends a bad message. Apparently, he believes that since many college students are under 21 it is therefore inappropriate to advertise during college events even though the audience is overwhelmingly over 21. An even greater danger is that this limitation could go from being a Sense of the Congress resolution to a mandate in a Higher Education Appropriations.

Just last fall, your industry adopted the FTC proposal that advertising be limited to programs where the audience is at least 70% adult. Through Nielsen research, we know that the audiences for NCAA events is approximately 87% adult (going back to representative Osborne's proposal). If the industry cannot advertise on programs where the audience is 87% adult, the obvious question is, realistically, where can you advertise? And, make no mistake, for the anti's that's the point. We cannot permit overregulation, done in the name of protecting young people but providing no real benefits, to deprive an overwhelmingly adult audience from receiving appropriate messages.

It is ironic that these attacks are launched on an industry that has done more in the name of public education and public service over the last fifty years than virtually any other industry. From designated driver to underage consumption prevention campaigns, the beer industry for fifty years has promoted legal and responsible consumption of its products.

Conclusion

So as you can see, we live in a turbulent time in this world of advertising. Thank you for your support of this industry that strives to help you reach your consumers with creativity and intelligence.

The American Advertising Federation is pleased to support the industry and the Beer Institute in efforts to educate Congress and regulators and to fight tooth and nail to guarantee that these types of restrictions never become law. Jeff and the Beer Institute are doing a great job in protecting your Washington interests and I am proud that we are there alongside them.

Thank you.