 "brands, advertisements, asci")
The Advertising Standards Council of India (Asci) on Thursday updated its guidelines for "Qualification of Brand Extension-products and services" under the restricted category prohibited from advertising by law. The modifications are specially targeted towards restricted categories like liquor and tobacco.
Brand extension is when a company uses one of its established brand names on a new product or new product category. It is mainly used by a company to use its existing brand image to drive sales of the new product.
Asci's current guidelines state that brand extensions must cross certain thresholds of business, investment, or distribution criteria to be considered genuine extensions. Now, it has added specific criteria for advertising spending in relation to the turnover of the extension.
"These measures are essential to prevent the misuse of brand extensions as surrogates for advertising in restricted categories," said Manisha Kapoor, chief executive officer and secretary general at Asci.
Under the new features, spending on advertising by a company has to be in proportion to sales turnover of the extension. The proportion for ad budgets has been capped at 200 per cent of the turnover in the first two years of the launch of the extension. It will have to reduce to 100 per cent in the third year, 50 per cent in the fourth year, and 30 per cent after that.
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"Asci has mandated that the advertising budget for genuine brand extensions of restricted master brands has to be commensurate with the extension's sales turnover," the council said in its announcement.
Moreover, the advertising budget will now include media expenditure across all forms of media in the previous 12 months, payments to celebrities for brand endorsements on an annualised basis, and the annual average money spent on advertising production for the brand extension in the previous three years.
The guidelines further specify that any variants launched under the brand extension will not be considered as a fresh extension. "The original date of the first brand extension will apply," it said.
Moreover, all evidence supporting the brand extension's qualification for advertising must be certified by a "reputed and independent" chartered accountancy firm.
Asci further said that if a brand extension of a parent brand that is under one of the restricted categories doesn't meet the updated qualifications, it will not be considered a genuine extension, but a surrogate created to advertise a restricted category.
