The liquor industry brought in a record breaking $26.2 Billion in sales in 2017, rising 4% from 2016. It was the eighth consecutive year that sales rose to break records. Governed by both state governments and the Distilled Spirits Council of the United States (DISCUS), marketers must navigate a myriad of regulations to compete in this highly saturated market. The balance between corporate social responsibility (CSR) and competitive advantage is tricky and sometimes harms a business’ strategy. In this industry, however, CSR is a critical component to maintaining a competitive advantage. In order to comply with the DISCUS code of Responsible Practices and still effectively reach a young target market, marketers need to be able to think critically and creatively.
When prohibition ended in 1933, the alcohol industry’s first priority was to reestablish in a way where they could prevent their products from once again being viewed as abuse products. While they abided by the rules and regulations of the various states which frequently spoke to how the industry could market alcohol, they came together through their trade associations to form their own code of conduct. In 1934, the DISCUS code was established representing a higher standard of advertising and a form of self-regulation. Over the years the code has been updated many times to reflect changing advertising mediums and American values. Today it encompasses rules and regulations on brand advertising, consumer communication, promotional events, packaging and labeling, distribution and sales, product placement, sponsorships, and merchandise for every type of print and digital media as well as any promotional activity. It has a huge scope with members in over 1,400 brands. Many non-members still follow the code, however, as noncompliance can immensely harm a company’s public image in our secular society.
The major challenge for marketers is the ability to reach young consumers that are over the legal drinking age while not encouraging irresponsible consumption patterns or underage drinking. It can be very hard to determine if the promotion being run is appealing to 21 and above or 15 and above. To mediate this, the DISCUS code recommends that marketers don’t target consumers under the age of 29, but that philosophy proves difficult, especially when targeting highly brand loyal minorities such as African-Americans and Hispanics. Additionally, we see trends where people are consuming spirits at an earlier age than before. There used to be a sort of “rite of passage” within the industry where it was understood that newly legal consumers would first drink beer before moving to cocktails and whiskeys as drinking habits matured. We also see consumers in their early twenties “discovering” new brands and then turning friends onto it. Because of this, a clear strategy would be to put a large emphasis on marketing to adults ages 21-30. Unfortunately, it’s hard to ethically target this demographic without excluding underage consumers and facing public backlash.
For around fifty years, liquor companies voluntarily refrained from any form of broadcast advertisement. With the rise of television and the decline of print media, however, the shift became unavoidable. The Distilled Spirits Council amended their code to include provisions accordingly, but the fight to block hard liquor advertisements from television has been going on for decades. In 1997, Reed Hundt, the chairman of the Federal Communications Commission (FCC), embarked on a battle to block liquor ads from television which the industry had previously refrained from doing. Former President Clinton also asked the FCC to evaluate whether or not the government should take action to block such advertisements. Hiram Walker, most notably known for their Canadian Club brand, was caught in the storm, as Hundt threatened to take networks’ licenses over an advertisement for Mudslide, a popular mixed drink. Hiram Walkers’ President of Marketing, Don Coe, pointed out that Mudslide had the same alcohol content as beer, which were allowed to advertise on television without a fight. He claimed Hundt’s actions were purely political and “No politician is ever going to lose a vote by claiming to protect children.” Today, most laws require over 60% of the audience to be over the legal drinking age, but industry self-regulation requires 71.6% of the audience to be over 21. Additionally, companies are required to conduct internal audits twice a year to evaluate past placements and take corrective action as needed. As recently as 2012, more networks have welcomed liquor advertisements for their late-night programs, giving brands some flexibility with their reach. For example, many late-night hosts invite celebrity guests of all ages to appear on the show. Celebrities with a younger following, such as rapper Cardi B or YouTube star Liza Koshy, attract an audience that aligns closer to a brand’s target market while still maintaining that 71.6% mark.
Situational influences play a huge role in consumer decision making, but they also influence how marketers choose to sell products. In the early 90s, marketers for Hiram Walker were trying to find a way to market the rather old and tired Beefeater Gin brand to a younger demographic. Hiram Walker’s resolution to this was to run a promotional campaign in San Francisco geared toward the LBGT community where “Beefy Boys” promoted Beefeater Gin in gay bars. If you purchased Beefeater Gin, you would receive a discount on the drink special but also a pack of condoms. Beefeater’s president in London, a devout Irish Catholic, was appalled and actually sent a cease and desist to Hiram Walker’s marketing department. The promotion was extremely popular and beneficial for the gay community, as this was during the height of the Aids epidemic. While some felt it was incredibly irresponsible, the company received a reward from the National Human Rights Organization for their initiative to support a social cause. While the United States is still considered a secular society, the initiative to combat a serious disease such as HIV was seen favorably by U.S. consumers, even with a population estimated to be around 25% devoutly religious. HIV’s presence in Eastern and Central Europe remained relatively low, so consumers in those markets wouldn’t have shared the same beliefs.
Many Americans view drinking as a social activity. Studies show that alcohol can play a significant role in social bonding, increasing the amount of time people spend talking to one another, and more than two-thirds of Americans say they drink on occasion. The ideas of lifestyle and self-concept play a huge role in consumer’s alcohol consumption habits. Consumers prefer brands that align with their self-concepts, a person’s thoughts and feelings as they relate to himself or herself as an object. Accordingly, marketers try to showcase products in settings that reflect social situations. In print advertisements, for example, we often see two glasses displayed as opposed to just one. The models used in advertisements are always aspirational- successful, happy people enjoying beverages. This insinuates that a customer is not drinking alone, but instead with a friend or significant other. According to the National Center on Addiction and Substance Abuse, alcohol advertisements have less than 1% of an influence on young people’s decision to drink while a person’s peer group accounts for around 64% of the influence. Still, many believe that the industry has an obligation to market alcoholic beverages responsibly. To avoid promoting unhealthy habits such as binge drinking, marketers often include food in liquor advertisements.
While the DISCUS code prohibits promotional activities at events with a large amount of underage people in attendance, the use of promotional agencies and local distributors make the process extremely fragmented and hard for brands to control. There is a Bacardi sponsored tailgate at every home game at the University of Alabama. While it is restricted to the public, there is no formal authority in attendance to check identification and make sure everyone consuming the beverages is over the legal drinking age. It is unclear if the Bacardi brand itself is even aware of the tailgate or if local distributors are in fact responsible. Because the marketing of spirits spans over so many different segments, promotional activities are not as well regulated. As a result, the Distilled Spirits Council has been putting in a lot of effort to combat abusive drinking on college campuses. In 2000, they implemented a program to collaborate with universities to educate and develop effective plans. They even awarded a total of $300,000 in grants to schools with “specific, action-oriented plans” to implement in their communities.
The view in the United States that liquor is a “sin product” has led more to alcohol abuse than anything the spirits industry has done on their own. The alcohol industry is aware that if it steps out of line, they will receive complaints and possibly consequences. Kahlua once did a promotion in conjunction with a milk company to advertise milk to adults. Surprisingly, the general public did not have a problem with Kahlua being shelved next to popular products for children, but an animal rights group stepped in and convinced the company to no longer continue with that particular promotion. We don’t see the same level of carefulness within advertising in other industries that can be harmful. For years, nobody went after the tobacco industry for marketing to young people. It is a large issue now, however, with the rise of electronic cigarettes which are extremely popular among today’s youth. Many health and beauty products are also marketed irresponsibly, but the spirits industry has always had to self-police to maintain public support. As a result, irresponsible marketing practices within the industry are few and far between.
The nature of marketing in the liquor industry is both unique and difficult. It requires marketers to have a deeper understanding of American consumer values. Corporate social responsibility has a hand in every decision made from broadcast advertisement all the way down to product placement in stores.
