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A critical review of the current marketing situation facing pg company

In the United States, marketing is a crucial part of the alcohol supply chain. According to the Federal Trade Commission FTC 1999alcohol producers spend two to three times their measured media expenditures in unmeasured promotions such as sponsorships, Internet advertising, point-of-sale materials, product placement, items with brand logos, and other means.

Growth in measured alcohol advertising has outstripped inflation by 20 percent since 1975 Impact Databank, 2002a ; Taylor Nelson Sofres, 2002 ; U. Department of Labor, 2002. One effect of this marketing is to create high barriers to entry Jain, 1994which in turn contributes to the concentration of market share in the hands of a small number of companies. These companies face a market that, until recently, essentially had been declining or flat for most of the past two decades.

To maintain their markets, alcohol companies must continue to invest heavily in advertising and promotion; to expand the market, they must encourage drinkers to switch brands or increase their consumption, or persuade nondrinkers to begin drinking. Young people are one audience for their efforts. Although the precise effects of this marketing on individuals are difficult to calibrate, it is increasingly ubiquitous, and benefits from technologies that are at the cutting edge of information societies.

The regulatory frameworks for alcohol marketing, in contrast, were developed in the first part of the previous century and have changed little in the interim. This chapter will begin with a brief summary of the shape of and trends in the alcohol market in the United States, with particular attention to youth consumption.

It will then describe the nature of and trends in alcohol marketing, particularly as these pertain to young people; the structure of the alcohol industry and key players in it; and the shape and effectiveness of regulatory and self-regulatory frameworks within which those players operate. The paper will conclude with a discussion of needs for further developments both in research and in public policies. Per capita alcohol consumption among Americans peaked in 1980. It is now 16 percent lower than it was in 1980 see Figure 12-1although it has begun to increase again in recent years.

Per capita consumption of alcohol has also fallen relative to other consumer beverages: World Health Organization, 2002. According to the National Household Survey, fewer than half of Americans age 12 or older are current drinkers had a drink in the past 30 daysand fewer than 5. Of United States drinkers, the heaviest drinking 5 percent those who average 4.

More than half of all alcoholic beverages in the United States and 76 percent of beer are consumed at high-risk levels, that is, when drinkers had five or more drinks on a single occasion Rogers and Greenfield, 1999.

Consumption among young people is even more concentrated in a small group of heavy users. Young people under age 21 account for an estimated 12 percent of the total market U. These binge drinkers consume the vast majority of the alcohol drunk by young people: Department of Justice, 2002.

The number of new teenage drinkers appears to be increasing. According to the National Household Survey on Drug Abuse NHSDAbetween 1995 and 1999 the latest year for which data are availablethe total number of people who began drinking alcohol increased significantly from 3. The majority of those initiates were teens: At the same time, the average age of initiation of alcohol use has generally decreased since 1965 National Institute on Drug Abuse, 2002.

Growing the Alcohol Market: Whereas in earlier eras, alcohol may have been marketed based on the quality, purity, and price of the product, now the identity of the brand is paramount Jernigan, 2001.

  • According to the Federal Trade Commission FTC 1999 , alcohol producers spend two to three times their measured media expenditures in unmeasured promotions such as sponsorships, Internet advertising, point-of-sale materials, product placement, items with brand logos, and other means;
  • For example any beer advertising should not in any way condone drunk driving, excessive drinking, or any other illegal activity.

Marketing is what creates brands and brand images. In the past 20 years, viewing alcohol marketing as confined to advertising has become more inaccurate. A total marketing strategy has five steps: Pricing the product so that it is affordable to the target consumer and making it available wherever those consumers may be are important parts of the marketing mix that are beyond the scope of this chapter. Following a brief discussion of market segmentation and targeting, this chapter will focus on the areas of new product development and advertising and promotion.

  • In contrast to a 50 percent threshold for underage audience composition in vehicles in which ads are placed, the Commission pointed out that some companies used a more stringent 25 percent threshold;
  • We also find that target international market competitive intensity is a direct driver of efficiency-related but not differentiation-related strategic intentions;
  • Upon repeal, states were offered two choices for alcohol control regimes:

Market segmentation and target marketing are standard business practices that assist in expanding the number of consumers in the population Kotler, 1992. Nonwhites and other lower consuming groups are thus particularly important to the growth of the market Scott et al. Notably, recent research suggests that alcohol availability and advertising, particularly billboard and point-of-purchase advertising, are becoming significantly more prevalent in African-American and Latino communities Altman et al.

Women are also a critical area for market growth because prevalence of alcohol use is lower among women for all groups except 12-to 17-year-olds, and heavy use is more common in all age groups among males. Finally, evidence shows that young people are also a target audience for the marketers.

This will be discussed in greater detail. Product Development New product development has been a particularly active area in recent years. Of particular interest to the prevention of youth alcohol problems have been several categories with apparent and some demonstrated appeal to youth.

Like the wine cooler craze of the 1980s, sales of malternatives at least initially took off rapidly: Wine coolers, alcopops, and malternatives share certain product attributes, resembling soft drinks in their fruity, sweet flavoring and their colorful single-serving sized packaging. According to Monitoring the Future, the federal government's annual survey of drinking and drug use in a sample of 50,000 students across the country, wine coolers are the only alcoholic beverage category more popular with girls than boys Flewelling et al.

Their bright colors, cartoon spokes-characters, and confusing labels have drawn criticism from others in the industry and from government regulators for having youth appeal and for being misleading to consumers Blackwell, 1996 ; Bureau of Alcohol Tobacco and Firearms, 2002.

  1. Beyond the shadow of Prohibition.
  2. Product Development New product development has been a particularly active area in recent years. The old paradigm had it that all marketing was selling a product.
  3. The first was the public health issue of underage drinking. Department of Health and Human Services DHHS issued a report reviewing federal and state laws and regulations regarding alcohol industry advertising and marketing standards and practices Office of Inspector General, 1991.

Their sweet flavorings may also be particularly suited to convincing nondrinkers to drink. Since the late 1980s, a substantial body of studies on rats has found that the use of sweeteners can affect rates of initiation of alcohol use. Sweeteners have been used in laboratory experiments to induce alcohol initiation in rat strains bred both to prefer and not to prefer alcohol see, e.

Epidemiological research on underage drinking in the United States has not, for the most part, broken out these drinks as a separate category. Monitoring the Future asks about wine cooler consumption, but only in a subsample of high school seniors.

PRIDE's findings show that both annual and monthly prevalence of cooler consumption fell slightly in 2001 relative to prior years. Annual prevalence figures range from 33. The only data available on alcopop consumption is anecdotal, from a national poll conducted in the United States in the spring of 2001. The poll found teens and adults in agreement that alcopops were more popular among teens than adults.

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Research from other western countries may shed some light on the impact of these products on youthful alcohol consumption.

Research done on a sample of 1,078 Canadian teens between the ages of 12 and 18 in 1989, during the heyday of wine coolers, found that wine coolers were the alcoholic beverage of choice in general a critical review of the current marketing situation facing pg company for initiation into alcohol use for all teens and more markedly so in the case of the younger teens Goldberg et al.

Alcopops were introduced into the United Kingdom in 1995. The Welsh Youth Survey, developed in collaboration with the World Health Organization-sponsored Health Behavior in School-aged Children study, was conducted every other year from 1988 to 1996. The Welsh survey added questions about alcopops consumption to its 1996 questionnaire. Results showed that 17 percent of 11- to 16-year-olds in Wales in 1996 drank alcopops at least weekly. Many of these appeared to be new drinkers.

Researchers found that alcopops consumption matched the entire increase in weekly drinking of alcohol between 1994 and 1996 among 11- and 12-year-olds, half the increase for 13- and 14-year-olds, and most of the increase for 15- and 16-year-old girls Roberts et al. Swedish surveys have found that alcopops and sweet ciders accounted for more than half the recorded increase in alcohol consumption among 15-and 16-year-old boys between 1996 and 1999, and two-thirds of the increase in consumption among girls, at a time when alcohol consumption among Swedish adults remained stable while youth consumption was increasing Romanus, 2000.

Alcopops and malternatives tend to have an alcohol content of approximately 5 percent, as opposed to 4. According to Scottish researchers, this increased alcohol content in sweet, colorful drinks targeted at young drinkers is attributable to a change in alcohol marketers' a critical review of the current marketing situation facing pg company of their market: This growth in the importance of nonmeasured marketing expenditures and activities is in keeping with a trend among consumer product producers in the United States in general.

Corporations as diverse as Nike, Kraft, and Intel have demonstrated to the business world the value of brands, as opposed to manufacturing facilities or processes or other hard assets. According to the 1998 United Nations Human Development Report, global advertising spending is now outpacing the growth of the world economy by a third Klein, 1999. By the latter year, only 25 percent of total spending went to direct advertising, while 75 percent went to other promotional activities, such as sponsorships, product tie-ins and placements, contests and sweepstakes, and special promotions.

The FTC 1999 estimate that the costs of non-measured alcohol marketing activities are two to three times the costs of measured expenses suggests that alcohol companies are not an exception to this trend. Alcohol marketers themselves speak in the language of intimacy and relationships when they describe what they are doing. Diageo's director of global commercial strategy, Ivan Menezes, described the company's approach to marketing Johnnie Walker whisky: We've got to own the emotional heartland of the category and connect with the consumer in a way that goes beyond the rational aspects of the brand … The emotional high ground we believe Johnnie Walker [whisky] can hold surrounds the area of inspiring personal progress.

That whole area carries a set of values that works extremely well across borders quoted in Fleming and Zwiebach, 1999: Thus it is not a whisky but a set of values that is being marketed. In Malaysia, this led to a Johnnie Walker-sponsored and branded campaign where consumers were asked to choose their favorite role model from among six major world figures. The list included Martin Luther King, Jr.

This example illustrates the new form that marketing is increasingly taking. As described by Canadian journalist Naomi Klein 1999: The old paradigm had it that all marketing was selling a product.

In the new model, however, the product always takes a back seat to the real product, the brand, and the selling of the brand acquires an extra component that can only be described as spiritual. Advertising is about hawking product.

The brand as experience, as lifestyle. As described, these marketing techniques seek to create a unique experience that consumers identify with the product. For many products, including beer, this experience is also quintessentially a youth experience.

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Across products, the ubiquity of the global mass media has contributed to the emergence of a global mass youth culture, or rather, a set of youth subcultures. The branding is done by combining a commercial trademark with one or another subcultural motif, a subculture the buyer belongs to or wants to join … The brand is the price of your admission to this subculture. The brand is neither quite marketing nor culture; it's like the catalyst, the filament of platinum that makes culture and marketing combine.

Successful youth brands not only attach themselves to the subculture, but as Seabrook indicates, position themselves to be among its defining features. Some of the newest alcohol products attach themselves to the all-night clubbing scene. Energy drinks, loaded with caffeine, help young people to stay awake through all-night activities such as clubbing.

Premixed energy drinks were a natural successor to the common practice of mixing nonalcoholic energy drinks such as Red Bull with vodka or other distilled spirits.

In 1998, a U. The company's total revenue grew 154-fold between 1998 and 2001 GBL International, 2002. Months later, the makers of the hypercaffeinated Jolt Cola in the United States introduced another new category, alcoholic spring water. Finally, the popularity of premixed cocktails such as the Kahlua drinks Mudslide and B-52 prompted Brown-Forman Beverages to introduce Jack Daniels Hard Cola in the summer of 2002, with a Web site that includes online games, music samples, and free downloads.

The marketing of these beverages provides a case study in embedding products in young people's lifestyles and daily practices.