[Intl-tobacco] Lebanon: TTCs support partial ad ban

[Robert Weissman]

Smoking out the competition
Zawya
 July 2004

 Top tobacco firms rally behind an advertising ban that would jeopardize
 emerging brands

 Lebanon's days as a liberal haven for tobacco advertising may be numbered,
 in light of a petition signed by 10 MPs that urges the parliamentary healt=
h
 committee to outlaw all forms - above- and below-the-line - of tobacco
 advertising. However, established industry giants - such as Philip Morris,
 British American Tobacco and Japan Tobacco International, widely
regarded as
 the 'big three' players in the global tobacco game - are fighting back as
 they seek to engineer a partial ban. They agree with outlawing tobacco
 advertising on television as part of their commitment to "responsible
 marketing" but stand accused of constructing a strategy that will harm
 emerging brands. If they get their way, the market leaders will be able to
 continue with almost all below-the-line activities and a handful of
 above-the-line ones (such as limited print and cinema advertising) to ensu=
re
 a continued presence in the local market, while effectively curbing the
 challenge of those companies that rely on TV for successful brand building=
.

 "If you are losing market share to new competitors, the best way to
 counterattack is to say: let's ban advertising so that you can use whateve=
r
 awareness you already have in the market to try to increase your market
 share while preventing the others from becoming known to the consumers,"
 said an tobacco industry executive, who spoke on condition of anonymity.
 "It's a sort of gentleman's agreement, disguised as a responsible marketin=
g
 campaign, which has been struck between key players in the industry to sto=
p
 advertising on television." He explained that the leading tobacco companie=
s
 have lost a significant market share in recent years. "In the tobacco
 business, when you lose a 0.2% market share, heads roll. Imagine losing 1%=
,
 or 10%, or even 20%." Five or six years ago, the 'big three' controlled
 about 90% of the market; now they make up less than 50%. They have lost
 about 20% to 22% market share to local cigarette brand Cedars, which
used to
 have a share of only 2% to 3%. French cigarettes Gauloises and Gitanes hav=
e
 gained around 10% and Davidoff about 3% to 4%. In addition, a host of
 lesser-known, cheap brands, such as German-produced Three Stars - which se=
ll
 at LL1,000 a pack - have made small but meaningful inroads. The solution?
 Cut off the supply of oxygen. "If you stop advertising, these people are
 going to reap the benefits," concurred Joe Ayache, associate managing
 director of ad agency Impact BBDO.

 However, even before there was talk of a tobacco advertising ban, industry
 leaders had begun to move into below-the-line activity to prop up their
 declining market shares. A few years ago, Philip Morris - which owns
 Marlboro - was spending less than 50% of its advertising budget
 below-the-line. That figure has since risen to more than 80%. Things
are no
 different at British American Tobacco (BAT), another leading tobacco compa=
ny
 with brands in the Lebanese market. "We are focusing our efforts on the
 point-of-purchase," acknowledged Zeid Nadhim, BAT regional manager. He sai=
d
 BAT's above-the-line ad expenditure had plummeted from about 75% a few yea=
rs
 ago to less than 5% today.

 "Tobacco advertisers have been affected by the economic situation and they
 don't care about the reputation of the brand. This is why media advertisin=
g
 has dropped so drastically," said Mounir Torbay, secretary-general of the
 World Federation of Advertisers' Lebanon chapter. "They need the 'push' an=
d
 not the 'pull.' They want people to buy more, to switch from one brand to
 another. This is very difficult to do through media advertising."

 Marketing executives of Lebanon's the 'big three' insist they favor
 regulation for moral reasons. "The shift towards below-the-line advertisin=
g
 and our voluntary abstention from television advertising is definitely not
 driven by business reasons," stated Elie Moukarzel, area manager for
 Kettaneh, which represents the marketing interests in Lebanon of leading
 cigarette manufacturers Philip Morris. "It is purely responsible marketing=
."
 Continued below-the-line as well as various kinds of above-the-line
 advertising are not at odds with the 'responsible marketing' mantra. "We
 support restrictions on tobacco advertising but we don't support a total
 ban. We believe below-the-line advertising should be preserved because thi=
s
 is where you can limit communication to adult smokers who have gone in to
 make their choice of brand," said Bechara Baroudi of Marlboro Lebanon.
 Nadhim, however, believes that tobacco advertising should be permitted in
 various publications without a significant young readership.

 But tobacco companies' efforts to ruthlessly milk media advertising before
 any demise, and their determination to block the prohibition of almost all
 below-the-line, and some above-the-line advertising lend fuel to the
 suggestion that the 'responsible marketing' slogan, in Lebanon at
least, is
 a fa=E7ade.

 "The people who are saying we should delay this, or never do it, are peopl=
e
 who are trying to protect industries and their interests," said Ghattas
 Khoury, a member of the parliamentary health committee seeking to implemen=
t
 a ban.

 Industry efforts to delay and condition a ban are apparent in a May 9 Phil=
ip
 Morris document obtained by EXECUTIVE, entitled COMMENTS ON THE LAW PROPOS=
AL
 SEEKING TO BAN TOBACCO ADVERTISING IN ALL MEDIA IN LEBANON. The document
 says any law prohibiting tobacco advertising should contain a number of
 exceptions, including: =B7 "Advertising in any publication that has at lea=
st
 75% of its readership over 18 years of age.

 =B7 Outdoor advertising that is not closer than 100 meters from any point =
of
 the perimeter of a school attended by minors or in close proximity to
 playgrounds or other facilities frequented particularly by minors.
 =B7 Advertising in cinemas, when at least 75% of the audience is over 18 y=
ears
 of age.
 =B7 Communications to consumers at points-of-sale tobacco products.
 =B7 Tobacco product sponsorship until December 1, 2006."

 If implemented, these suggestions would conveniently ensure that companies
 like Philip Morris retain the means to market their products, while
 depriving emerging competition of their most important brand-building
 platform: television.

 Khoury, who favors a total above- and below-the-line ban, is finding his
 position untenable. His foes include advertisers, advertising agencies, an=
d
 MPs from South Lebanon's tobacco farming heartland.

 Some tobacco giants, ad agencies and advertisers argue that a complete,
 immediate ban is unsustainable for economic reasons. "If you deprive our
 ailing advertising industry of tobacco advertising expenditure, it will
be a
 blow for an industry that is already struggling to survive," said Torbay.

 But Khoury said this was just a cynical business ploy. "They have
played a
 very intelligent game here," he said. "They are hammering us with the idea
 that we are kicking people out of jobs. But in fact they are motivated onl=
y
 by increasing sales," he said. A current tobacco advertising ban draft law
 appears to accommodate the interests and views of Khoury's foes. It
does not
 call for an immediate or total ban, although above-the-line advertising
 would be completely banned as of January 1, 2006, as would the distributio=
n
 of free promotional gifts. Below-the-line sponsorship of sports and cultur=
al
 events would be prohibited starting from January 1, 2008 (allowing Marlbor=
o
 to sponsor another three Lebanon rallies), while most other forms of
 below-the-line advertising would be tolerated.

 Asked if it was likely that all below-the-line advertising would be banned
 in the near future, Torbay chuckled: "I don't think that is a clear and
 present danger."

 ***
 While alcohol does not face a ban on above-the-line advertising,
 distributors are under a different type of pressure. Hit by the current
 recession, they have been forced to cut costs and are shifting ad spend
 below-the-line, despite the potential harm this does to long-term brand
 image. "There has been a real shift towards promotional advertising,"
 acknowledged Carlo Vincenti, of Bacardi Breezer and Johnnie Walker
 distributors G. Vincenti & Sons. "This reflects the economic climate. The
 consumer no longer wants just his favorite brand. He wants it with a speci=
al
 offer. And for us, it is less expensive than any main media campaign."
 Vincenti said his company's below-the-line spend had risen from less than
 15% a few years ago to 35%.

 As a product of the depressed advertising market, there has also been a mo=
ve
 within above-the-line alcohol and tobacco ad spending from television to
 outdoor, such as billboards - which are fashionable, easier to create and,
 most importantly, cheaper. The emergence over the last few years of
 competition-enhancing ready-to-drink (RTD) beverages, such as Bacardi
 Breezer and Smirnoff Ice, has increased overall alcohol ad spend in Lebano=
n
 but has also contributed to the rush to below-the-line spending. Smirnoff
 Ice and Bacardi Breezer control over 85% of the RTD market share.

 "The market is growing and consumption of whisky is down because of the
 economic crisis," said Hadi Kahhale, business manager at Fattal, which
 distributes Dewar's, Jack Daniel's, Absolut Vodka, Bombay Sapphire, and
 Kefraya (in which it has a share). "There is pressure on us to increase
 volume of sales, and one safe way to increase volume is through promotions=
."
 The lion's share of alcohol ad spend is now being funneled into in-store,
 point-of-sale activity, promotion and sponsorship by zealous marketing
 directors. Supermarket shelves are stacked with alcohol-related 'special
 offers.' "There has been a lot of sales pressure on the marketers, who
 cannot compromise on price. So they had to undertake promotions," said
 Ayache.

 The transferal of alcohol advertising spend to below the line has been
 hastened by intense inter-brand wars, particularly over whisky, which
 accounts for over 85% of spirits imports into Lebanon and 45% to 50% of
 spirits sales in the country. Over the last few years, above-the-line ad
 spend on whisky has decreased by more than 60%, from more than $10 million
 in 2001 to $4 million today. The battle is most passionate between
Dewar's -
 distributed by Fattal - and Johnny Walker - distributed by Diageo. Droppin=
g
 whisky consumption rates have raised the stakes in the fight for market
 share. Between them, Johnnie Walker, Dewar's, and William Lawson
 (distributed by Fattal) control over 80% of the whisky market share. Fatta=
l
 has just spent $500,000 re-launching Dewar's.

 The below-the-line alcohol brand war is being fought primarily at
 "off-trade" locations, such as supermarkets, groceries and mini-markets,
 which account for 95% of sales, and 70% of below-the-line spend at Vincent=
i
 & Sons. The rest goes to "on-trade" locations such as hotel bars,
 restaurants and nightclubs.

 Alcohol distributors say that although they know the practice is bad for
 long-term brand image they are compelled to follow a trend no one
admits to
 initiating, but all blame on the changing demands of consumers financially
 sensitized by the country's economic woes and the need to protect their
 revenues and market shares. "You have to observe what's being done and you
 have to be a part of it," said Vincenti. "It's a vicious circle. Everyone'=
s
 doing it, so you have to do it." He acknowledged that below-the-line spend
 should not exceed 20% over a year, although his company's currently stands
 at 35%. The trend towards below-the-line alcohol and tobacco ad
spending is
 mirrored in the advertising industry as a whole. In four years, total
 above-the-line advertising spend in Lebanon has dropped by almost 50%, fro=
m
 around $130 million. Alcohol- and tobacco-related advertising used to
 account for between 20% and 30% of total spend. It is now less than 10%
- of
 which two thirds can be attributed to alcohol, and one third to tobacco.