Sobering reality: Three liquor firms served notices for surrogate ads

The Ministry of Consumer Affairs (MCA) has issued show cause notices to three major liquor companies - United Breweries (UB), Radico Khaitan, and Allied Blenders & Distillers (ABD) - for purported violation of rules that ban surrogate advertising, promoting a ‘forbidden’ item under the guise of advancing some other product.

To circumvent rules against the promotion of alcohol, liquor brands integrate other products from their brand portfolio in the narrative, leveraging surrogate advertising.

The notices have been issued, following the ministry’s public warning on August 31 wherein it had said “many alcoholic spirits and beverages are being advertised under the garb of music CDs, club soda, and packaged drinking water”.

In a Right To Information response dated November 4, the MCA told Business Standard that the above-stated three liquor companies have been issued show cause notices on the issue of surrogate advertising. 

“The matter is under investigation,” said the MCA.

UB, which is owned by Dutch brewing giant Heineken, did not respond to the newspaper’s queries regarding the show cause notice until the time of going to press. 

UB owns the Kingfisher brand - the largest-selling beer in India. The Bengaluru-based company’s market capitalisation (m-cap) stood at Rs 44,367 crore on Wednesday.

The Indian alcohol beverage sector’s size is estimated at Rs 2.6 trillion in 2021-22, making India the third-largest alcohol market in the world, after China and Russia, according to ABD, which owns major whisky brands such as Officer’s Choice and Sterling Reserve.

When asked about the MCA notice, ABD Company Secretary and Chief Legal Officer Ritesh Shah said the firm is not in a position “to either confirm or deny any such development or related details”. 

ABD is on course to list on the bourses and, on the advice of its counsels, refrained from stating anything in public domain to ensure compliance with applicable laws.

“If any disclosures are required, the same will be done in compliance with laws at a relevant stage,” added Shah.

In June this year, ABD filed papers with the Securities and Exchange Board of India (Sebi) to raise Rs 2,000 crore through an initial public offering.

Radico Khaitan, which had an m-cap of Rs 13,913 crore as on Wednesday, owns brands such as 8 PM Premium Black Whisky and Magic Moments Vodka. Its Chief Operating Officer Amar Sinha said the alcobev maker has already responded to the show cause notice and furnished all requisite information. 

“We have brand extensions that have a revenue model. Since these extensions are in their initial stage of launch, it will take some time for their volume to grow,” he said.

The company is “extremely hopeful” that these brand extensions will grow as successful standalone brands in times to come, said Sinha.

“Subsequent to our response, we have been asked to submit other information and are in the process of doing so,” he added.

In its August 31 warning, the MCA had also asked major industry associations like the Advertising Standards Council of India, Federation of Indian Chambers of Commerce & Industry, Confederation of Indian Industry, and the International Spirits and Wines Association of India to “ensure strict compliance” with the Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022, especially with regard to provisions that prohibit surrogate advertising.

These guidelines were issued by the MCA on June 9 this year.

In its warning, the MCA had said that “during recent sports events that were televised globally”, many instances of surrogate advertising had been noticed.

The MCA had said that many alcohol and tobacco brands are employing famous faces. By lending it legitimacy, it could have a negative influence on the impressionable youth. “Several instances of direct advertisement of alcoholic beverages on social media platforms were also observed by the department,” the MCA noted.

The concept of surrogate advertisements gained popularity in India after the advertising of sin goods — like tobacco and liquor products — was banned on mass media under the Cable Television Networks (Regulation) Act of 1995.

Advertising for liquor has been banned in the country since 1995, but companies often use brand names on unrelated products to help with recall.