Essay/Term paper: What are the history, laws, profitability and social responab

Essay, term paper, research paper:  Business

WHAT ARE THE HISTORY, LAWS, PROFITABILITY, AND RESPONSIBILITES TO THE CONSUMER OF ADVERTISING HARD LIQUOR ON TV IN THE UNITED STATES?

INTRODUCTION

Purpose

The goal of this report is to inform the reader of the recent events that prompted hard liquor advertising on TV. In addition, the laws associated with advertising across this media, as well as recent legislative endeavors to control such advertising. Furthermore, the report also focuses on the potential profitability the distilled spirit's industry will gain from advertising across this media and the industries social responsibilities to the consumer.

Sources and Methods

Research for this report is gathered mainly from information found on the World Wide Web. Some information was gained through newspaper articles obtained by using the InfoTrac system in the Ruth Scarborough Library on the Shepherd College Campus. Refer to the bibliography for specific information references.

History

Research by the Distilled Spirits Council of the United States (DISCUS) found that 30 to 50 percent of Americans think that distilled spirits are being advertised on TV. Since Prohibition the hard liquor industry voluntarily agreed not to advertise their products, first on radio in 1936, and of TV in 1948. However, the industry is being faced with declining sales. Their competitors such as the beer and wine industries have grown. The sales of beer and wine have increased dramatically, leaving the hard liquor industry behind. The main reason for this occurrence is due to the fact that these industries have tapped into the resource of advertising on TV.

Consequently, this has prompted the hard liquor industry to reevaluate its current marketing situation. The first company to take the leap to TV is Seagram. The Seagram company began advertising 30-second Crown Royal whiskey commercials in Corpus Christi, Texas.



1
2
Definitions

The words "distilled spirit" is used throughout this report. Distilled spirits and hard liquor in this report have the same meaning. Distill means to let fall, exude, or precipitate in drops or in a wet mist according to Webster's Dictionary. Hard liquor is the end result of this process using the appropriate ingredients. Distilled spirit is any alcoholic beverage not defined as beer or wine.

Laws

Constitutional

The right to advertise is constitutionally protected commercial free speech under the First Amendment. This fact is being upheld in a recent commercial free speech decision by the Supreme Court. The case of 44 Liquormart, Inc. vs. Rhode Island upholds the industry's commercial free speech rights by insuring that beverage alcohol is allowed the same protection under the First Amendment as other legal products and services.

In addition, the Courts also ruled that truthful and non-misleading advertising is an essential part of the free enterprise system. Withholding this form of advertising deprives the consumers of knowledge that is needed to make conscious and informed decisions.

Federal Regulations

Advertising hard liquor on TV is a constitutionally protected right, however, the industry must follow strict Federal regulations. An advertisement of distilled spirits can not contain any false or misleading statement that tends to create a misleading impression of the product to the consumer. Furthermore, a statement in an advertisement cannot say anything bad about a competitor's product. Provisions are made also for a statement's design that cannot contain any material that is obscene or indecent.

Federal regulations do not permit claims of distilled spirits having curative or therapeutic qualities. This practice was very popular in the 1800's and early 1900's. Traveling salespersons would often stage a show in the middle of small towns claiming a miracle cure for various sicknesses. Most often, the cure would involve alcohol consumption causing the consumer to become intoxicated. This advertising was false and misleading.

Flags, seals, coats of arms, crests, and other insignias which can be capable of relating to the American flag or a branch of the armed forces is strictly prohibited. The advertisement can not mislead the consumer into thinking that the product is endorsed, made, used by, or produced for any of the government, organizations, or families these insignias are associated.


3

The use of deceptive advertising techniques such as subliminal techniques are also
prohibited under federal regulations. Subliminal techniques refer to any advertising technique that attempts to convey a message to a person by means of images or sounds that are very brief. These messages usually cannot be perceived at a normal level of awareness according to federal regulations.

The federal regulations above are only a select few. There are many constraints on advertising distilled spirits. In addition to advertising constraints there are many prohibited practices concerning bottling and labeling of hard liquor. Persons who are interested in finding out this information it can be found on the World Wide Web at http://143.231.208.199/.

104TH Congress Bills

Federal regulations for hard liquor advertising are very strict. However, some lawmakers believe that the regulations are not strict enough. United States Representative Joe Kennedy, Democrat from Massachusetts, is a major player in introducing legislation to further restrict or stop distilled spirits advertising.

Mr. Kennedy introduced several bills to the 104th Congress. The first bill he introduced is known as the "Children's Protection from Alcohol Advertising Act of 1996". The purpose of this bill is to establish advertising requirements for alcoholic beverages. Restrictions proposed by this bill are that no alcoholic beverage can be advertised on any audio tape, audio disc, videotape, video arcade game, computer game or in film. Furthermore, no outdoor advertising of alcoholic beverages can be located within one thousand feet of any school, playground, or other public facility where persons under 21 are expected to be present. Another major provision of this bill is to restrict any advertisement on TV between the hours of 7:00 A.M. and 10:00 P.M. to be limited to only a picture of the beverage with factual, objective audio information about the beverage.

A second bill introduced by Mr. Kennedy is the "Sensible Advertising and Family Education Act". The act requires Surgeon General's Warnings on all media advertisements on TV. Such warnings as "Alcohol is a drug and may be addictive" (WWW, Sensible Advertising and Family Education Act).

A third bill introduced is the "Alcohol Advertising Accountability Act of 1996". The bill proposed by Mr. Kennedy and others requires the Secretary of Health and Human Services to report annually to the Congress on alcohol advertising. The report consists of alcohol advertising profiles and its effects on consumers.

In addition, the above bill will require the Secretary of Health and Human Services to establish a panel to assist in gathering information. The information will consist of the
4

media used by alcohol advertising to reach children. Furthermore, the total expenses for alcoholic beverage advertising in each media such as TV, magazines, and radio. The report will also identify the types of themes, especially on TV ads, of advertising beverage alcohol.

The report content will also include a determination of the extent young people are exposed to alcohol advertising. The relationship between alcohol advertising practices and underage drinking will also be evaluated. Consequently, the evaluation of the above factors will include recommendations for legislation by the Secretary of Health and Human Services.

The most recent bill introduced by Mr. Kennedy is the "Just Say No Act". His undying efforts to ban alcohol advertising is enforced in this bill. Mr. Kennedy suggests that distilled spirits on any medium of electronic communication shall be unlawful.

PROFITABILITY

Target Market

The market for distilled spirits is shrinking as its loyal customers are aging. The need for a younger market has spawned the industries decision to advertise in order to increase profits. The graph below represents the percentage of people who say they drink, and their respective age. Furthermore, the graph compares the type of alcohol each age group is inclined to drink.




Corporate Profits

5

According to Impact, a publication for the alcoholic beverage industry, distilled spirits will show its first growth in 15 years. The total spirits category is expected to rise 0.3 percent. In addition, the top 25 premium brands are expected to be up 4.9 percent. Crain Communications Inc. suggests that "the turnaround comes as some liquor marketers are attempting to move into TV…"(WWW, Spirits Sales Drought Eases).

Media Profits

Corporations are not the only beneficiaries to increasing profits. The media has much more revenue to gain from this venture to TV. However, the major networks, do not want to air hard liquor advertisements. They fear they will lose money from beer and wine marketers.

This is not the case with locally owned affiliates and some cable networks. They will accept part of almost $228 million the industry spends annually on advertising.

SOCIAL RESPONSIBILITY

DISCUS Code of Good Practice

DISCUS is the trade association representing producers and marketers of distilled spirits sold in the United States. The association claims, " the industry holds itself to a higher standard than required by any laws or regulations that apply to the marketing or advertising of beverage alcohol "(WWW, DISCUS Code of Good Practice: An Enduring Example…).

The industry not only has to follow strict government regulations, as discussed in the law section of the report, but has its own voluntary Code of Good Practice for distilled spirits advertising.

According to DISCUS the code has two fundamental principles: " (1) to ensure responsible, tasteful, and dignified advertising and marketing of distilled spirits to adult consumers who choose to drink", and " (2) to avoid targeting advertising and marketing of distilled spirits to individuals below the purchase age" (WWW, DISCUSS Code of Good Practice: An Enduring Example…).

The Code of Good Practice contains provisions on responsible content and responsible placement of spirits advertising. A few provisions are firstly, distilled spirits should not be advertised or marketed in any manner directed or primarily intended to appeal to persons below the legal drinking age. Secondly, distilled spirits advertising should not depict a child or portray objects, images, or cartoon figures that are popular with children. Finally, distilled spirits advertising should portray distilled spirits and drinkers in a responsible manner.

6

Public Education

DISCUS members of the distilled spirits industry claim to pay a vital role in fighting alcohol abuse. DISCUS supports, develops or initiates social responsibility efforts to educate the public about beverage alcohol.

The Century Council is a non-profit organization mainly supported by DISCUS and its members. Their objective is to reduce alcohol abuse across the U.S. The Century Council investigates, funds, and implements innovative approaches to address the problems of underage drinking and drunk driving.

DISCUS and its members not only support the Century Council but various other organizations as well. A few of these organizations are the: White House Leadership Conference on Youth, Drug Use, and Violence, the National Commission Against Drunk Driving(NCADD), BACCHUS ( Boosting Alcohol Consciousness Concerning Health of University Students), and "Friends Don't Let Friends Drive Drunk". Everyone of these organizations deal with the curbing of underage drinking, alcohol abuse, and other various problems.

DISCUS involvement with the above organizations are not the only social obligations the establishment is concerned with. In 1994 they initiated legislation to Congress known as the "Drunk Driving Prevention Act". The act make provisions to include mandatory alcohol and drug education for drivers. In addition, the ban of open containers in vehicles and zero tolerance for drivers under age 21 who are caught drinking. The act also includes Administrative Licenses Revocation(ALR) whereby authorizing a police officer to confiscate the license of any driver who fails a chemical test or refuses to take one. Many of these laws are in use today, thereby being adopted by state legislature.

Parental Guidance

Roper Starch research organization conducted a national survey asking young people what influenced their decision to drink or not drink. The survey resulted in 60 percent citing their parents as their primary influence, 28 percent cite their peers, while only 4 percent site advertisements. The results of this research suggest that distilled spirits advertising is not the culprit for alcohol abuse. Improper parental guidance and lack of public education is the determining factors in alcohol abuse.

CONCLUSION

The conclusion reached through this report's findings are that:


7

. The distilled spirits industry should be allowed to advertise on TV along with beer and wine. The industry should get equal and fair treatment as the other alcohol industries afforded by the First Amendment.
. Government will always pose regulations on industry. The role of the government is to protect and serve the citizens of the U.S. The distilled spirits industry has and will continue to abide by these regulations. The industry claims to hold itself to higher standards than that of the regulations imposed by government.
. The answer to America's alcohol problems is not to ban advertisements. Free speech and the promise of a better tomorrow is what makes this country great. Public education, parental guidance and freedom of choice are the answer to the problems.































ii



BIBLIOGRAPHY

Code of Federal Regulations. CITE: 27 CFR Sec.5.63. EXPCITE Title 27. CHAPTER I. SUBCHAPTER A, PART 5, Subpart H. Online. Http://143.231.208.199/cgi-bin/fastweb..wAAA+distilled%26spirits%26advertising.

Code of Federal Regulations. CITE: 27 CFR Sed.5.65. EXPCITE Title 27. CHAPTER I. SUBCHAPTER A, PART 5, Subpart H. Online. Http://143.231.208.199/cgi-bin/fastweb...wAAA+distilled%26spirits%26advertising.

Crain Communications Inc. "Spirits Sales Drought Eases:." (Dec. 1996). Online. Http://adage.com/ns-search/news-an.../.

Dallas(AP). "Liquor Ads Start on Television After Decades-Long Voluntary Ban." The New York Times. (June 12,96). Online. Http://www.newstimes.com/archive/jun1296/ nab.htm.

Distilled Spirits Council of the U.S. "Beverage Alcohol Advertising: A Constitutionally Protected Right." Online. Http://www.discuss.health.org/adcode/const.htm.

Distilled Spirits Council of the U.S. "DISCUS Code of Good Practice: An Enduring Example of Social and Corporate Responsibility." Online. Http://www.discuss.health.org /adcode/code.htm.

Distilled Spirits Council of the U.S. "Distillers Change Advertising Code to Advance Equal Treatment." Online. Http://www.discus.health.org/adcode/prad.htm.

Distilled Spirits Council of the U.S. "Distillers Spirits Advertising in Perspective." Online. Http://www.discus.health.org/adcode/adpers.htm.

Distilled Spirits Council of the U.S. "Social Responsibility and Public Education: The Distilled Spirits Industry's Commitment to Curbing Alcohol Abuse." Online. Http://www.discuss.health.org/adcode/social.htm.

Jackson, Jerry T. "Dor Issues Policy Statement Regarding Liquor Advertising." (July, 1996). Online. Http://www.state.ga.us/Departments/DOR/pressrel/p071296a.htm.

McDowell, Bill., Teinowitz, Ira. "Cable Network To Take Liquor Ads." (Nov., 1996). Online. Http://adage.com/news_and_features/features/19961111/article5.html.


iii

U.S. House Of Representatives. "Alcohol Advertising Accountability Act of 1996(Introduced in the House). "Online. Http://rs9.loc.gov/cgi-bin/query12?c104: H.R.+3475:.

U.S. House Of Representatives. "Childrens Protection from Alcohol Advertising Act of 1996(Introduced in the House)." Online. Http://rs9.loc.gov/cgi-bi/query/2?c104: H.R.3473:.

U.S. House Of Representatives. "Just Say No Act(Introduced in the House)." Online. Http://rs9.loc.gov/cgi-bin/query/2104:H.R.+3644:.

U.S. House Of Representatives. "Sensible Advertising and Family Education Act." Online. Http://rs9.loc.gov/cgi-bin/query/1?c104:./temp/~c104H0mc!e817:.






























i

Part Page

I. INTRODUCTION .................................................................... 1

A. Purpose ................................................................................ 1

. Sources and Methods ............................................................1

. History ...................................................................................1

. Definitions ............................................................................2

. LAWS .......................................................................................2

. Constitutional .......................................................................2

. Federal Regulations .............................................................2

. 104th Congress Bills .............................................................3

. PROFITABILITY ..................................................................... 3

A. Target Market .......................................................................4

. Corporate Profits .................................................................5

C. Media Profits .......................................................................5


. SOCIAL RESPONSABILITY ...................................................5

. DISCUS Code of Good Practice ..........................................5

. Public Education ..................................................................6

. Parental Guidance .................................................................6

. CONCLUSION ............................................................................6

VI. BIBLIOGRAPHY ...................................................................... ii