All about surrogate ads, oops!, brand extensions

agencyfaqs! tries to answer a few questions on surrogate advertising after speaking to the stakeholders – broadcasters, advertisers, government officials and agencies – of which, some wanted to remain anonymous

Last month, the ministry of information and broadcasting (I&B) sent out a bombshell to broadcasters. Freed of legalese, the message was: Stop accepting non-liquor and non-tobacco advertisements from liquor and tobacco brands. The cut-off date? March 28, 2008.

Just days before that missive – or threat, depending on which side you are on – Union health minister Anbumani Ramadoss had asked the I&B ministry to take action against tobacco and liquor companies indulging in surrogate advertising in print, electronic and outdoor media as well.

While the I&B ministry directive quoted the Cable TV Networks (Regulation) Act, the health minister, according to PTI, stated that brands such as Bagpiper soda, McDowell’s, Johnny Walker soda and Kingfisher mineral water are using surrogate advertising, which need to be stopped. The same goes for products that have exactly the same brand name and logo, which had earlier been there in the liquor ads.

What happens now? Will advertisers accept the order unquestioningly? Where will those budgets go now? Are the broadcasters ready to give in to the revenue loss without a fight? These are some of the questions this article tries to answer after speaking to the stakeholders – broadcasters, advertisers, government officials and agencies – of which, some wanted to remain anonymous.

How is surrogate advertising defined?

The dictionary meaning of the word surrogate is substitute. But no one in the industry is clear about the definition of surrogate advertising.

According to some, surrogate advertising means advertising the namesake of the main brand. Others such as Pramod Krishna, president, Confederation of Indian Alcoholic Beverages Companies (CIABC), refused to accept the term surrogate advertising. He prefers to categorise them as advertising for brand extensions. Santosh Desai, chief operating officer of Future Brands, offers his take: “When you advertise one brand in the guise of the main brand, it is called surrogate advertising.”

According to Krishna, brand extensions are genuine products and have been an old business model. Maybe, but many advertisers resort to such advertising in order to keep the original brand alive in the minds of the consumers.

What is the background? And why has the government ordered a ban?

A senior official in the health ministry says that it is a question of public health. There is an act in place for tobacco (Tobacco Advertising Prohibition Act, 1992), but not for alcohol. And by surrogate advertising, people are constantly reminded of the mother brand.

To quote from the health minister’s letter, “Considering the ill effects of cigarettes, alcohol and other intoxicants, the government has banned advertisements of these products in the media. As a reaction, the liquor and tobacco majors have sought other ways of advertising their products. They have introduced various other products with the same brand name and are carrying out heavy advertising so that consumers do not forget their liquor brands.”

In 2000, the Indian Broadcasting Foundation (IBF) had sent a recommendation to the government about surrogate advertising. No one raised any questions for a while. In 2002, broadcasting industry sources revealed plans to put in place measures for self-regulation and monitoring, even before the I&B ministry took concrete steps in this regard. The broadcasters, who were members of the IBF, announced that they would come up with an advertising code specific to surrogate advertising.

Meanwhile, in 2005, the government banned – and then allowed – surrogate advertising. Jawahar Goel, president, IBF, says, “In 2006, notices were issued by the ministry all of a sudden and the channels were asked to run a scroll of apology just before Independence Day. Then we asked who is going to decide, what is brand extension and surrogate – there should be a body which should decide.”

Discussions went on with the I&B ministry. Agencies played merry-go-round. If channel A was notified, then agencies went to channel B and then to channel C. By the time, channel A had sorted out the issue and the agencies went to them again. It was then that the IBF and the ministry decided that the ads would go through the Central Board of Film Certification (CBFC) for all brand extension commercials. But as Goel and I Venkat of IBF put it, nobody from the government consulted the IBF or ASCI or CBFC before the current notification.

Does the consumer have to be reminded of liquor brands?

Consumers will not forget liquor brands easily. Some states allow liquor to be sold through retail outlets. Karnataka allows wine and beer on retail shelves, Delhi allows beer and Maharashtra only wine. West Bengal and Andhra Pradesh are expected to follow suit. Radico Khaitan is planning to tie up with the Future Group to distribute its liquor brands through the Big Bazaar outlets.

Which are the brands or categories which will be affected?

The biggest names in the fray are Kingfisher and Wills. The former advertises its mineral water and airlines, while Wills has lifestyle products and a personal care range.

Detractors of the ban argue that, today, Kingfisher Airlines is a much bigger brand than the beer. It is brands such as Seagram (which releases CDs), McDowells (soda), Bagpiper (soda, cassettes and CDs), Godfrey Phillips (bravery awards), and Bacardi (cassettes and CDs) that will probably be hauled up.

Gutkha companies indirectly advertise pan masalas, which have the name of the main brand (Goa, Pan Bahar or Pan Parag). And most recently, White Mischief sponsored a programme called License2flirt on MTV. Not to forget the ‘Oh la la la lule ho’ tune of Kingfisher (water or beer?).

The industry feels that smaller brands will get affected. A Wills or a Kingfisher might argue that advertising for airline and lifestyle brands can no longer be called ‘surrogate’ in the English meaning of the term and find a way out of the imbroglio. But smaller brands will end up being affected because they are selling cassettes and CDs or mineral water and soda under Big Brother’s name. Desai is quite emphatic: “Liquor companies have no business to be in the CDs and cassettes business.”

What happens to the money allocated for this?

According to industry estimates, approximately Rs 600-700 crore is spent by these brands on advertising. This includes TV, print and events. The ad spends of Kingfisher alone were about Rs 100 crore in 2006.

Says Desai of Future Brands: “They will probably build properties on events.” Players in the industry wouldn’t give a definite answer, but hint at more events around these brand names if the ban is not lifted.

What happens to sponsored events and sports events? The Indian Premier League for cricket has a team named Royal Challengers, whose main sponsor is the UB Group. Does this mean that the broadcaster, Sony, will not be able to telecast the matches sponsored by the company?

That is again something no one in the industry is clear about. Even though the health minister’s letter to the I&B ministry mentions print and outdoor also, no action from any front has taken place in those areas.

There are many unanswered questions. When Wills sponsors a fashion week for instance, will a channel be allowed to telecast the programme?

If the government is concerned about public health at large, should tobacco and alcohol companies be allowed to sponsor events? The UB Group has spent Rs 450 crore to buy the Bangalore IPL Team (Royal Challengers). Just because the group’s initial claim to fame was by selling liquor, it does not seem fair that it be penalised for the team holding a liquor brand name.

What is the punishment?

If the government goes ahead with the ban and the broadcasters and channels do not pay heed to the notification, then the I&B ministry holds the authority to either fine them or even ban the channel, as it did with FTV for apparently airing adult content.

Can the associations involved and the advertisers take legal recourse?

Most stakeholders feel that the notification is hypocritical. On the one hand, the government allows the products to be manufactured. On the other, it denies the manufacturers the right to propagate knowledge of their products in order to drive sales.

According to Goel, the IBF has sought a meeting with the I&B ministry to sort out the issues. “If that does not show any results, then we will go up to the Prime Minister. The court will be the last resort,” says Goel. The meeting, which was expected to have taken place in the first week of April, is yet to happen. “When we got in touch with the I&B ministry last week, they stood their ground about banning surrogate ads completely,” adds Goel.

A senior lawyer, practising in the Delhi high court, has this to say. “The law states that it is a breach of the Constitution – the right to business of any entity.” There is, in fact, no legislation controlling surrogate ads. It will also be an infringement on the trademark laws. Once a trademark is issued by the organisation, there can be no discrimination. And that is a way by which the bill/notification can be changed.

But government sources seemed unperturbed by that. It seems that the government has already spoken to the trademark organisation to look into its rules as brands are violating the Tobacco Act by using the original name with its brand extension and product offerings.

Normally, when a brand applies for a trademark, it keeps its options about the product to be manufactured quite wide. It would hardly seem likely that a liquor brand would have included CDs and cassettes in its trademark registration application. In such an eventuality, the company could be courting trouble.

What about Page 3 photos showing people drinking with the backdrop of liquor brand banners? Is that surrogate?

Wait and watch. Another interesting development is that Ramadoss, the health minister, has requested brand ambassadors (read celebrities) not to endorse junk food and surrogate brands.

Krishna of CIABC is very clear. “If the product is manufactured and marketed, then we are of the opinion that the products should be allowed to advertise during adult viewing hours (after 11pm at night).”

How will it end?

Sources at Kingfisher and other companies say that it will be highly speculative to talk about what they will do. They are waiting for any other directive by the ministries in question.

As the ban goes into effect, one thing is clear. If the broadcasters accept this ruling without question, it won’t be long before the ‘dragnet’ spreads.

The next target could be print followed by radio (which does see a lot of event announcements) and probably the Internet – not necessarily in that order.