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booze bRands ThaT snooze, lose

Giant liquor brands might be under more pressure to remain culturally relevant in the years to come. This is according to a global study identifying the world’s most cultural brands. measuring and understanding cultural relevance is vital for a brand’s success because only culture can tell whether the brand has got it or lost it.

As part of its ongoing brand campaign, Amstel Lager launches a new TV commercial, “The Chef”, a follow-up to Amstel’s hugely successful and awarded TV ad, “The Boxer”

Cultural Traction 2013, compiled by brand development and marketing insight consultancy, Added Value, highlights that Smirnoff, Absolut, Heineken, Budweiser, Johnnie Walker and Chivas Regal among others, have scored some of the lowest VIBE scores of the study. In fact, its top 10 list doesn’t feature a single alcohol brand – Google tops the list followed by Apple, Samsung, IKEA, Microsoft, Sony, BMW, Audi, Coca-Cola and eBay. The list ranks brands according to their cultural vibrancy. Added Value’s brand VIBE score is a composite of four factors, statistically culled from dozens of attributes that reflect cultural relevancy: • Visionary - Leading the way and getting our attention. • Inspiring - Have a point of view and stand for something I want to be a part of. • Bold - Have swagger with substance. • Exciting - Are disruptive and have momentum.

Commenting on the concept of Cultural Traction and the VIBE score, Added Value South Africa’s Dr Inka Crosswaite said that “Brand equity measures brand health today, an important metric for any brand. But Added Value’s VIBE provides a third dimension, a view on the strength of the brand’s momentum for tomorrow. “Culture is the currency of all of our conversations and it is in a constant state of flux. Great brands know this and invest in marketing to stay ahead of the conversation.” Crosswaite added that it’s one thing to be a culturally vibrant brand in one part of the world, but it’s another to radiate that vibrancy at high amplitude across the world. “This means the brand has not only tapped into global shifts in values and attitudes, but also expressed itself and engaged people in ways that resonate culturally on a local level.” She said that Cultural Traction 2013 shows that perceptions of the world’s biggest liquor brands as disruptive and having momentum are particularly low. Compare a lowly score of 72 for Smirnoff and Heineken with 103 against McDonald’s, BMW and Nike. Look at brands like Apple and Samsung and you’ll see scores virtually doubling the alcohol brands. “So what is going on? Why are the alcohol brands scoring so poorly overall, and particularly on this key measure of momentum, innovation and progression? “The first reason is undoubtedly what’s going on in its own category”, said Crosswaite. “In the last few years, we’ve seen that category trends are no longer being driven by the big players, but by targeted, niche brands. “Super-premium on the one hand and craft, on the other has witnessed phenomenal growth – in a global context, think The Kemel and Brooklyn Breweries, Chase Vodka and Sipsmith Gin. The mass brands have increasingly come to represent a ‘safe’ but uninteresting choice. “But the Cultural Traction study highlights an even broader challenge – the decline of alcohol’s role and relevance in the world of consumers. Looking at the highest-ranking brands, it is technology that dominates. “While there may be an element of category impact going on here, we think it goes further than that. These brands are doing something for people which is meaningful and engaging, and which gives them a relevant cultural presence. In fact, tech brands appear to have takenover the emotional space.” She acknowledged that there are some of the big alcohol brands that are acting in tune with culture and tapping into the cultural trends that seem to drive a brand’s VIBE. Crosswaite said Stella Artois’ Total Immersion campaign is one example; Absolut Vodka’s Accessible Creativity is another; there’s also the Johnnie Walker House in Shanghai and Smirnoff’s Nightlife Exchange project. But she said that to make a true impact on consumers, the ‘big booze boys’ need to start thinking much bigger by recognising the shifts that are going on around them, not only in their own categories but in our culture, more broadly. “They need to ask themselves the challenging question – do big brands in alcohol work and will they continue to work? They need to recapture the essence of what they can offer and express it in a relevant way. It’s time for a refresh,” said Crosswaite.

a ban on alcohol adveRTising could cRipple The economy

The South African liquor industry has developed into a major force in the local economy, providing employment and income to thousands of households and making a substantial contribution to export earnings and government tax revenue.

Government’s proposed decision to ban alcohol advertising would have a negative impact on the economy and lead to job loss in liquor and related industries.

Recently Econometrix released a comprehensive report into the economic impact of an advertising ban on alcoholic beverages. In 2011 it was estimated that the GDP could be reduced by 0.28%, or R7.4 billion. South Africa could also lose significant international sports events.

It has estimated that the total potential advertising expenditure loss by the alcoholic beverages and related industries because of a total ban would be R4.386 billion.

The potential ban would have an impact on the rest of the economy through the advertising broadcasting industry, sport sponsorships and advertising agencies.

Given this scenario, it is estimated that employment could be reduced by 11,954 people. This will affect people working in broadcasting, sport activities, advertising agencies, retail trading and wholesalers.

In the processes of manufacturing, packaging, marketing and delivering alcoholic beverages, the liquor industry stimulates economic activity throughout the entire beverage value chain. This encompasses a wide range of producers and suppliers in the upstream linkages and retailers, distributors and the hospitality industry in the downstream linkages.

These upstream and downstream activities in the alcoholic beverage value chain generate additional income and tax revenue, which in turn is spent in the economy, inducing further economic benefits. necessary production inputs, ranging from water, sugar, barley, hops and malt to tin cans, glass bottles, corks and bottle crowns, as well as fuel and power.

During 2009, the liquor industry purchased goods and services including capital equipment from its direct suppliers to the value of R115.5 billion. The value of production supported by the liquor industry throughout the South African economy is valued at R332.7 billion in 2009. Approximately 88% of the employees in the liquor industry and its direct suppliers are from previously disadvantaged backgrounds, and the agriculture, forestry and fishing sector derives the largest direct benefit in terms of employment opportunities from the liquor industry’s operations.

Looking at the skills composition of the economy wide impact of the liquor industry’s operations on employment,

The direct impact of the liquor industry amounts to R115.5 billion which accounts for just over a third of the liquor industry’s economy-wide impact on production, while the indirect impact contributes a further R56.7 billion and the induced impact constitutes the remaining R160.5 billion.

Productive capital assets including technologically advanced machinery and equipment, trucks and building structures, together with labour and entrepreneurship, form the basic productive factors needed in most manufacturing processes.

The liquor industry’s production processes sustain a significant amount of fixed investment in the economy. On an economy wide basis, the total capital stock needed to sustain the present level of liquor production totals R173.1 billion, or 3.5% of South Africa’s total capital stock.

Buildings and construction works account for 70% of the total capital requirement, while machinery and other equipment and transport equipment constitute 23% and 8% respectively.

Image courtesy of Heineken International

8.4% of the positions are filled by highly skilled employees. The majority of job opportunities sustained by the liquor industry’s value chain are low skilled positions (37.6%) or in the informal sector (22.3%).

The liquor industry’s noteworthy contribution to employment of low skilled workers should be viewed positively given the high unemployment rate among low skilled workers in South Africa. Furthermore, 72% of the 548,000 jobs sustained by the liquor industry’s operations are filled by black employees. The liquor industry and its first round suppliers contributed an estimated R9.9 billion towards labour remuneration during 2009. Financial proceeds arising from direct and indirect taxes on the production and sale of beverages, particularly alcoholic beverages, are an important source of government revenue in South Africa.

The liquor industry contributes to government tax revenue in various ways, including excise duties, value added tax (VAT), corporate tax and personal income tax.

The direct impact of the liquor industry and its first round suppliers on tax revenue is estimated at R19.5 billion in 2009.

per capita alcohol consumption and per capita advertising expenditure on alcoholic beverages. A review of global studies shows a lack of a demonstrable positive Minister of Health, Dr Aaron Motsoaledi relationship between advertising and said the alcohol industry was the consumption of alcoholic beverages contributing R19 billion to the South as the research and findings of the African economy, but dealing with the various studies are contradictory and fallout of alcohol abuse was costing therefore inconclusive. taxpayers R39 billion. Based on the lack of a positive However, the tax revenues arising relationship between per capita from the indirect and induced impacts alcohol consumption and advertising through the economy raised the expenditure, the effectiveness of a ban government’s take to an estimated on alcohol advertising is weakened. R41.8 billion in 2009, or 6.7% of total The reports also state that other policy government tax revenue. measures to inhibit the harmful use of In all, the results from the analysis show alcohol should be considered. that the liquor industry not only makes a substantial direct contribution to state coffers in terms of tax revenue, but abuse, illegal the liquor industry’s operations have alcohol pRoblems high spin-off effects on production, employment creation in the South African economy. The main problem in South Africa is not consumption of alcohol per se (South Africa’s adult per capita The econometric model shows that there consumption ratio is amongst the is no statistical relationship between SpotongFA.pdf 1 2013/05/14 03:37:52 PM lowest in the world), but the main problem areas that exist around alcohol abuse in South Africa are: • The small percentage of the population which drinks, does so excessively • High levels of youth drinking • Illegal alcohol sector - there are between 50,000-60,000 licensed/ legal outlets for alcohol sales and distribution; in contrast, there are an estimated 120,000 unlicensed liquor outlets. • It is generally accepted that the alcohol abuse problem lies within this unlicensed sector, which is not regulated at all by government. The amount of taxes lost through this illegal sector is significant. • The focus should be on abuse of legal and illegal products rather than decreased drinking of legal products.