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Diageo, the Smirnoff Brand, and the Transformation of the Youth Alcohol Market

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Diageo, the Smirnoff Brand, and the Transformation of the Youth Alcohol Market CONSEQUENCES OF INDUSTRY RELATIONSHIPS FOR PUBLIC HEALTH AND MEDICINE Joe Camel in a Bottle: Diageo, the Smirnoff Brand, and the Transformation of the Youth Alcohol Market I have documented the James F. Mosher, JD shift in youth alcoholic bev- erage preference from beer THE ALCOHOLIC BEVERAGE to distilled spirits between the same market share (based market at the expense of the dis- 2001 and 2009. market has experienced 2 dra- on absolute alcohol consump- tilled spirits industry. Philip Mor- I have assessed the role of matic shifts in the past 4 decades. tion), and the markets for both ris, the world’s largest tobacco distilled spirits industry mar- Between 1970 and 1997, beer products grew rapidly for the company at that time, bought keting strategies to promote became the dominant beverage of next several decades.1 Beginning Miller Beer and adapted its to- this shift using the Smirnoff choice, taking substantial market around 1970, however, an im- bacco marketing strategies to the brand marketing campaign share from distilled spirits. This portant shift occurred; beer sales beer industry, transforming the as a case example. trend was precipitated by young kept increasing whereas distilled beer market. Television advertis- I conclude with a discus- consumers, who began choosing spirits began a steady, steep ing expenditures soared, youth- sion of the similarities in beer and wine over distilled spirits decline.2 oriented advertisement copy be- corporate tactics across as they came of age. Distilled Distillers faced 3 major hurdles came common, and Miller and consumer products with adverse public health im- spirits became identified with in keeping pace with beer. At the Anheuser Busch, who came to pacts, the importance of older generations. end of Prohibition, distilled spirits dominate the beer market, be- 6,7 studying corporate mar- Market forecasters predicted the were considered the most hazard- came fierce competitors. During keting and public relations slow demise of the distilled spirits ous of the 3 types of beverages this same period, the population practices, and the implica- category, in part because of these because of their high alcohol con- was shifting rapidly to the suburbs, tions of those practices for shifting demographics. These pro- tent and their link to organized spurring the proliferation of con- public health. (AmJPublic jections proved to be premature. crime and moonshining. Beer and venience stores. Beer and tobacco Health. 2012:56–63. doi: Beginning in the late 1990s, young wine were seen as beverages of became key staples of these new 10.2105/AJPH.2011.300387) people’s beverage preferences be- moderation.3,4 To encourage con- retail outlets. Brewers also cen- gan shifting again, beer’s growth sumers to shift their alcoholic tralized the brewing process, flattened, and the distilled spirits beverage preferences, policy- establishing high-tech breweries market grew rapidly, with most makers established 3 key policies: that greatly reduced the per-unit growth concentrated in particular cost of production. Beer prices brands of ‘‘white goods’’––vodka, 1. Tax distilled spirits at much dropped steadily relative to infla- rum, and tequila. higher rates per unit of alcohol. tion.7 What accounts for this change 2. Make distilled spirits much less A June 1991 federal study in fortunes for the distilled spirits available by strictly limiting documented the new dominance industry? The short answer is the types of retail outlets where of beer in the youth market. Beer youth marketing innovation. I they can be sold. was by far the alcoholic beverage have described this market trans- 3. Allow beer and wine, but not of choice among junior high and formation, focusing on the mar- distilled spirits, to advertise on high school students who reported keting strategies associated with electronic media including tele- binge drinking; these individuals the Smirnoff Vodka brand as vision and radio. were averaging 13.3 servings of a case study. I conclude by ana- beer per week compared with only lyzing the public health implica- The electronic media ban was 1.2 servings of distilled spirits per tions of this transformation. a voluntary agreement between week.8 distillers and electronic media sta- Distillers could not compete THE DECLINE OF THE tions instituted as a response to 9 effectively for the youth market DISTILLED SPIRITS congressional hearings between in this policy climate. Unable to MARKET 1947 and 1958. The voluntary use the media most popular with ban helped convince Congress not young people, their products be- Distilled spirits were the alco- to pass a legislative ban.5 came increasingly identified with holic beverage of choice during The beer industry exploited older and aging consumers and Prohibition. After Repeal, beer and these regulatory advantages, in- were not considered youth friendly distilled spirits had approximately creasing its share of the alcohol because of their relatively harsh 56 | Consequences of Industry Relationships | Peer Reviewed | Mosher American Journal of Public Health | January 2012, Vol 102, No. 1 CONSEQUENCES OF INDUSTRY RELATIONSHIPS FOR PUBLIC HEALTH AND MEDICINE flavor. Convenience stores typically brands, which did not have the associated with the beer industry. number of television advertise- do not sell distilled spirits, so the harsh tastes associated with ‘‘brown’’ Public health groups, concerned ments placed on programs that gap between the number of beer distilled spirits (whiskeys and that the product was designed overexposed youths.16 and distilled spirits retailers grew. bourbons) and gin.2,11 The white for the youth market, used the Although beer remained the Distilled spirit prices were higher brands could be mixed with fruit term ‘‘alcopop’’ for Smirnoff Ice dominant type of alcohol adver- than were those of beer because of flavors and sugar to create a bev- and other sweet, malt-based prod- tised on television, Diageo avoided tax differentials. erage more akin to soft drinks. ucts because of their similarity to the voluntary ban on distilled Beer’s advantage among under- This was an important character- soda pop.12 spirits by advertising on electronic age drinkers had important finan- istic because during the previous Smirnoff Ice quickly became media and thereby competed with cial implications for distillers be- 2 decades, soft drinks had become the dominant beverage in the beer companies to reach youth cause of the critical role underage the most popular commercial alcopop category. It invested audiences with its Smirnoff brand. drinking generally plays in the beverage in the US market, cap- nearly $40 million in 2001 and Diageo spent approximately $45 alcohol market. The average age turing an increasing ‘‘stomach $50 million in 2002 for advertis- million on electronic media ad- of first use among youths younger share’’ from alcoholic beverages, ing in measured media (television, vertising to launch Smirnoff Ice in than 21 years is 15.8 years, and coffee, teas, milk, and tap water, radio, magazines, newspapers, 2002, for example; only the 4 those who begin drinking before particularly among young people.6 and outdoor platforms), mostly most popular beer brands (Bud age 15 years are significantly more Other types of commercial bever- television.2,13 Smirnoff Ice adver- Light, Miller Lite, Budweiser, and likely to become heavy consumers age producers viewed soft drinks tising shot up from 2% to 50% of Coors Light) had higher electronic and to experience a wide range as competitors and sought ways all alcopop advertising between media advertisement spending of alcohol problems than are those to imitate their tastes and market- 2000 and 2001. that year.17 who wait until age 21 years.9 Ac- ing strategies. Diageo placed its Smirnoff Ice Other alcopop producers fol- cording to a National Research Diageo developed a sophisti- advertising in media venues with lowed Diageo’s lead. Measured Council/Institute of Medicine re- cated marketing strategy to relatively large youth audiences. media advertising expenditure for port, underage drinkers consume reenergize its Smirnoff Vodka The Center for Alcohol Marketing all alcopop brands went from between 10% and 19% of the al- brand using 3 key components: and Youth (CAMY) conducted $27.5 million to $196.3 million cohol on the market (almost all of a series of studies documenting between 2000 and 2002, signifi- whichisconsumedinbingedrink- 1. Develop a beverage that tasted the extent to which alcohol ad- cantly increasing the total amount ing episodes), producing between like soft drinks. vertising was placed in television of youth exposure to alcohol ad- $10 and $20 billion in annual reve- 2. Use the Smirnoff Vodka brand programming with disproportion- vertising and contributing to nues.10 Underage drinkers’ increas- name but market the product as ately youthful audiences ( > 15% a rapid growth in consumption ing preference for beer, therefore, a malt beverage to compete of the audience being aged 12---20 from 105.1 million gallons in meant that distillers were losing effectively with beer in terms of years, despite this age group com- 2000 to nearly 180.0 million gal- revenues to beer in the short term price, availability, and advertis- prising only 15% of the total lons in 2002.2,14,18 Smirnoff Ice and facing a shrinking market in the ing in electronic media. viewing audience). For 2002, accounted for 68.0% of the in- long term as underage drinkers 3. Reorient Smirnoff Vodka itself CAMY reported that Smirnoff Ice crease, producing 52.0 million became adults. as a young person’s brand by placed more than 1500 alcohol gallons in 2002. Between 2000 adding new fruit flavors and advertisements on television pro- and 2002, Diageo increased its THE DISTILLERS using other marketing innova- gramming with disproportionately market share in the alcopop mar- RESPOND: THE SMIRNOFF tions. youthful audiences. A substantial ket from 0.6% to 29.0%.2 BRAND CASE STUDY number of the advertisements Young people, particularly girls, Smirnoff Ice: The Transition were on television shows with contributed substantially to alco- In 1997, Grand Metropolitan Beverage youth audiences of greater than pops’ surge in popularity.
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