JULY/AUGUST 1997 · VOLUME 18 · NUMBERS 7 & 8
E C O N O M I C S
JULY/AUGUST 1997 · VOLUME 18 · NUMBERS 7 & 8
E C O N O M I C S
THE WORLD'S LARGEST ALCOHOL COMPANIES are aggressively promoting their products
to the poorest people and heaviest drinkers in countries where Western-style
beer is a badge of honor even when purchased at the expense of food.
Predatory marketing practices are critical to the giant alcohol companies'
success. According to some alcohol industry executives, the global brands would
not exist without their huge advertising and promotional campaigns. Differences
between one vodka and another, or between one lager beer and another, are
slight. Beer is its brand image.
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Globally, the health effects of alcohol abuse are startling. A recent
study by the World Health Organization, the World Bank and the Harvard School
of Public Health holds alcohol responsible for 3.5 percent of all years lost
globally to disease and disability. This puts alcohol problems on a level with
measles, tuberculosis and malaria. In industrialized countries, where heart disease is the leading cause of death, public health focuses on the controversial issue of moderate drinking (two drinks a day or less) and cardiac health. But that topic is superfluous to a developing region such as sub-Saharan Africa, where heart disease is rare and alcohol's contribution to death and disability from injuries is more significant. In Zimbabwe, for example, the minister of health and child welfare blames alcohol for a majority of traffic crashes and half the country's divorces. The leading cancers for men and women are strongly related to alcohol use. In Estonia, more than 70 percent of adults apprehended in 1995 for homicides, serious assaults and rapes were drunk. -- D.J. |
"Beer is 6,000 years old roughly. A beer is a beer. Maybe it is less cloudy than 2,000 years ago," says Koh Poh Tiong, the chief executive officer of the Southeast Asian beer giant and Heineken joint venture Asia Pacific Breweries. "But there is nothing much you can do with beer, because it is 6,000 years old. So therefore it is all about brands. ... We are not selling beer, we are selling image."
Many of the multinational alcohol companies' promotions exploit sexual themes, tie brand-name products to western values and images -- sometimes in strange ways -- and circumvent national advertising restrictions, where they exist.
A small club of companies has now divided up the world to minimize competition and maximize profit. The combined sales of the top 10 global brewers and top 10 distilled spirits companies total nearly $200 billion. The top 10 brewers sell one out of every three beer worldwide. The top 10 distillers sell 57 percent of globally marketed spirits, Globallly marketed spirits constitute 46 percent of the world's total.
GLOBAL BREWMASTERS
A small number of companies wield great influence in presenting a global image of drinking, and exporting and implanting a global set of drinking customs. In addition to producing and selling alcohol, these companies are increasingly defining alcohol for the world, as well as lobbying for alcohol policies that give them maximum freedom to encourage people to drink and drink heavily. More than half of the world's industrially produced beer comes from 20 companies. Control of the global beer market is falling into fewer hands: in 1980, the 30 largest brewers produced less than half the beer.
U.S. brewer Anheuser-Busch is the largest producer by volume of beverage alcohol in the world. Like its U.S. competitors, Anheuser-Busch is a Johnny-come-lately internationally. But it is has now aggressively gone global. In recent years, it has established a joint venture to produce Budweiser in the newly opened Indian market, bought an 80 percent share in a Chinese brewer to introduce Budweiser in China, and purchased more than 40 percent of the Mexican brewer Grupo Modelo and 5 percent of China's largest brewer Tsingtao. It has also announced partnerships with the largest brewers in Costa Rica, El Salvador, Guatemala and Honduras and the number two brewer in Brazil.
Heineken of the Netherlands is the number two global brewer, having grown rapidly in the last decade with the help of overseas subsidiaries, joint ventures and licensees. Heineken makes the most widely available beer in the world, and has the greatest presence of any of the majors in the developing countries. As of 1992, Heineken was sold in 150 countries and brewed in 50. In 1995, one quarter of its sales came from the Asian Pacific and African regions, and these are the regions where it is growing most rapidly. It is moving aggressively into Eastern Europe, since 1993 adding to an investment in Hungary interests in breweries in Bulgaria, Poland and Slovakia.
Miller, owned by Philip Morris, is the number three brewer.
Number four is South African Breweries (SAB), a rarity as a global beer giant based in a developing country. SAB has turned its attention to sub-Saharan Africa. The company's future lies principally "in sub-Saharan Africa, which has 400 million people," says SAB Chief Executive Meyer Kahn. "Most are very poor, with incomes a third of blacks' here. So we reckon this 400 million has the purchasing power of 100 million low-income South Africans. That's an enormous export market for our beer and soft drinks. ... Talk about potential. In South Africa, with 40 million people, we sell 23 million barrels of beer annually. In Tanzania, with 30 million, the brewing capacity was a mere 500,000 barrels [prior to SAB's 1994 entry]. ... We know more about Africa's developing consumer markets than anybody. The guys at Budweiser in St. Louis probably don't even know where Tanzania is."
Rounding out the top five is Interbrew, the Belgian maker of Labatt's.
Among the distilled spirits makers, the last decade has witnessed a rash of mergers, acquisitions and joint ventures. Now the two largest producers, Grand Metropolitan (whose brands include Smirnoff, J&B, Baileys and Black Velvet) and Guinness (whose brands include Johnny Walker, Gordon's Gin, Dewar's and Tanqueray), both British, are proposing to merge. The other top companies are the British Allied Domecq, Seagram, Bacardi, American Brands, Pernod Ricard of France, the Japanese Suntory, India's UB Group, and the U.S. Brown-Forman.
SEX AND ADDICTION
The formula for marketing alcohol changes little from country to country: Use sexual imagery, rely heavily on sports, music and cultural sponsorships; build on brand prestige; capitalize on local customs as marketing opportunities; and target the poor, the young and the addicted, and encourage them to drink even more. In Malaysia, Carlsberg has won the loyalty of Chinese consumers through funding a local rock-and-roll band competition that culminates in a tour by the winning bands to the largely privately financed Chinese language schools. Carlsberg pays all costs for concerts, enabling the schools to keep all of the proceeds. When Carlsberg built its Malaysian brewery in the early 1970s, the brand had only a 5 percent share of the beer market. Since that time, its sales there have exploded to more than 60 percent of the market.
Carlsberg's advertising executive Raymond Choong credits "the long cool Dane" campaign, targeted primarily to rural drinkers and starring a model dressed in a white bathing suit, for the sales boom. Over time, the blonde has become more a part of the beer she advertises, with her hair blending into the golden bubbles of the brew. She plays opposite the "Carlsberg man," whom Choong describes as "pan-Asian" and, if unable to win the Caucasian woman, capable at least of purchasing the beer. Choong says this makes the brand "a person rather than a product, so it's like to him the brand is a friend he can rely on."
Lee Kee Hock, marketing director of Guinness Anchor Berhad in Malaysia, says that his company meets its goal of making personal contact with each of the estimated 200,000 heavy consumers of Guinness, Heineken, Tiger and Anchor beers in Malaysia. Both Guinness and Carlsberg hire young women to work in pubs and restaurants representing the brewer. Costumed as "women in green" or "women in red," they greet customers and offer the company's beer. In addition to the bar and restaurant women, the brewers sponsor tours of beauty queens and models through bars. On a poster for one such Guinness tour, the caption "beware their magic spells" arises from the model's cleavage.
The spirits trade in Malaysia offers its own version of personalized marketing in hostess clubs catering mostly to local businessmen. Virtually everyone working in the club has an interest in seeing the clientele drink heavily each night, according to Paul Chin, marketing director for Riche Monde, which handles the leading cognac. Management receives a bonus over and above profits from sales to push a particular brand. Spirits companies offer customers a variety of gifts -- perfume, watches, leather goods -- based on how much of a brand the businessman drinks. It is understood that drinkers pass the gifts on to the hostesses, who are hired by the club.
"Ladies sit with you -- they are your companion for the evening," says Chin. "The percentage [of evenings that end in sex] is as low as 20 percent. It is not necessary that you have to. It is only meant for sitting there, and if she likes you, fine -- you [the drinker] are influenced by her because if the company selling a particular brand is giving a gift that she wants, she will then say, `Could you please open this brand x tonight?' And you may feel obliged."
Although alcohol advertising is not permitted in Estonia, there is no law defining what alcohol is, so the Saku brewery advertises on television and even boasts in its annual report that it sponsors a TV program from its pub in Tallinn, bringing "a beer-drinking atmosphere to 200,000 viewers in their homes."
Since declaring its independence from the Soviet Union in 1991, Estonia has moved beyond vodka on its way to becoming a quintessential modern alcohol market. After independence, Scandinavian alcohol multinationals began to transform centuries-old drinking habits. Liviko, the state-run vodka maker, is producing sweet liqueurs that appeal to women, who are lower-volume drinkers than men. Thanks to marketing, beer -- once the drink of choice primarily for people who live on islands in Estonia -- is now a major focus for more urban drinkers, particularly women and youth. At the start of 1990, Saku and Tartu breweries had almost even shares of the bottled beer market. Between 1991 and 95, Saku grabbed a 57 percent market share after a holding company owned by the largest Norwegian, Swedish and Finnish brewers took majority control and redesigned the bottles, labels, and advertising campaigns. For younger drinkers, they created a stronger beer, Saku Rock.
Tartu, purchased by Estonians, is evening the marketing score. With a Finnish partner, it produces many of the sweet, higher alcohol content drinks with flavors like "rum-cola" and "vodkaexotic" that are sold next to soft drinks and cigarettes at nearly every kiosk. Tartu sponsors rock bands in bars, and sports such as basketball and cross-country skiing. Located in a university town, the brewer arranges for every student to receive a stamp on a card for each beer purchase. Completed cards may be entered in a lottery in which the prize is 40 cases of beer. "Enough to get drunk for a long time for the whole dormitory," according to Arho Antilla, Tartu's marketing director.
Modern packaging is also a sales success story for Chibuku Brewery, which is partially owned by SAB and makes about 90 percent of the traditional (opaque) beer in Zimbabwe. Dubbed "Scud" because of its resemblance to the missiles used in the Persian Gulf war, the two-liter plastic container solved the brewer's problem with packaging shortages. The Scuds are recyclable and can be sold "in four walls or a shack," says Ben Tafa, Chibuku's marketing director.
TARGETING THE ADDICTED
One particularly insidious element of the global companies' strategy is their campaign to keep heavy drinkers drinking heavily. "If you want to talk about success, a lot of the promotional campaigns directly relate to consumption," says Lee Kee Hock of Guinness Anchor Berhad in Malaysia. "If you look at people who actually drink, we probably have the highest consumption in the world. Have you seen the Chinese drink? Each one can finish one bottle of cognac. Out of the 18 million total population, our research tells us that less than one million people actually drink. Of that, 20 percent [account for] 80 percent of the consumption."
The story is similar in Zimbabwe. "A lot of it, at the very bottom end of the market, is image. Western culture sets the pace in terms of what people aspire to," says Richard Wylie, who creates advertising for three of the six brands of clear, European-style lager produced by National Breweries in Zimbabwe. "There is a marked tendency among that [lower-income] population to drink for effect. They drink to get drunk. And you'll find that the wage earner will have a big family, he'll have five to eight children, say. They'll struggle to make ends meet. He'll go and spend on alcohol for himself, clothing and footwear [while] they don't get decent food to eat."
Wylie's company forged a Carling Black Label campaign for "the denim jeans brigade" with the tag line, "It All Happens Quicker With Carling Black Label." The tag line was "a subtle way of telling them it's stronger," Wylie explains.
ADDRESSING THE WORLD PROBLEM
High levels of alcohol consumption and alcohol abuse cannot be solely attributed to the global alcohol companies. Much or most alcohol is domestically produced, often outside of the corporate economy. And drinking patterns vary significantly according to national culture and history.
But global corporations are at the cutting edge of alcohol promotion. Their marketing campaigns, far more visible and better funded than those for local products, significantly define the image of alcoholic beverages. And their manipulation of sexual imagery, introduction of slick marketing techniques in poor countries and focused appeal to heavy drinkers should be sources of special concern.
The world has an alcohol problem, much of it due to the multinational alcohol companies, and it needs to act. Drinkers must be reached with health education and treatment programs, but these steps alone will be insufficient.
The global alcohol companies' advertising and promotional activities should be significantly curtailed, with the companies forswearing electronic broadcasting advertisements, sponsorships and sweepstakes. Companies should not give incentives for heavy drinking, such as volume discounts or prizes; they should cease making health claims; and they should package their product in forms distinct from non-alcoholic beverages.
Governments should adopt comprehensive alcohol policies that impose and enforce meaningful restrictions on alcohol companies, support prevention, education and treatment, and limit where alcohol can be purchased.
Unfortunately, it does not appear that many developing or post-communist countries are on this track. The adoption of a national policy statement on drugs, including alcohol and tobacco, has been stalled at the Zimbabwe cabinet level for more than a year. The Estonian government has circulated a draft "Law on Alcohol" since 1995, but it has yet to be introduced in the country's parliament. In Malaysia, government officials dismiss alcohol as a problem of a minority and a topic too "culturally sensitive" to be included in educational curricula, while they mandate treatment for drug addicts.
The failure of these countries to address alcohol use and abuse is all the more serious because it can be taken as a matter of faith that the industry will not adopt public-health friendly policies of its own accord.