Role and effects of alcohol advertising in sport: meeting with stakeholders

Sports, Arts and Culture

29 October 2013
Chairperson: Mr M Mdakane (ANC)
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Meeting Summary

At the outset, the Chairperson noted that no bill had been presented to Parliament therefore it would be inappropriate for the Committee to discuss the banning of alcohol advertising and sponsorship in sports. Instead the Committee would have an open discussion with stakeholders about the role of advertising in sports and how it pertained to the development of sports in South Africa.


BMI Sports Information informed the Committee that the sport sponsorship market in South Africa had been consistently growing for decades, from being a R63 million industry in 1985 to a R4.596 billion industry in 2012. Since the 2010 FIFA World Cup growth in sport sponsorship had decreased. Sponsors in South Africa were becoming more cautious and moving towards signing short-term contracts and many sports were feeling pressure from this, including the big three of soccer, rugby and cricket. Whenever sponsors backed out the sporting industry then looked to the government for support and this could put a great strain on the already thin resources of the Department of Sports and Recreation.

BMI Sports Information stated that alcohol companies spent a great deal of funds on advertising on sports events. Television would be the greatest loser as a result of an alcohol ad ban as alcohol advertising was most prominent during live sporting events. Television advertising for alcoholic beverages accounted for 73.5% of spending for companies. When the tobacco ad banning was implemented the industry was a quarter of the size it was in 2012. Many comparisons had been made between the two areas, but this was unfair. The loss of tobacco advertising was not as big of a deal due to the emergence of IT companies and telecommunications companies. Those companies filled the gap that tobacco advertising left. If alcohol advertising was banned there was no new industry to take its place. Furthermore, telecommunications companies were reducing their spending on sports advertising and putting their funding focus elsewhere.

BMI noted that 26% of all alcohol sold in South Africa was done outside the formal channels and held the belief that it was from this area that alcohol abuse problems stemmed from. This area must be addressed in order for alcohol abuse numbers to decrease. Banning alcohol sponsorship and advertising would affect the GDP of the country as it would be reduced by R7.4 billion and would add to the unemployment problem of the country.

The Industry Association for Responsible Alcohol Use (ARA) highlighted that literature on the influence of advertising on alcohol consumption had proven to be lengthy and mostly contradictory. Alcohol was a mature product category in which consumers were already aware of the product and its basic characteristics. Advertisers did not aim to increase total consumption rather they aimed to encourage consumers to switch to their product and create brand loyalty. Many scientific studies concluded that parental education, poverty, unemployment and peer pressure were more influential in alcohol consumption. There was no statistical relationship between per capita alcohol consumption and per capita advertising expenditure on alcohol beverages. Both government and the industry agreed that alcohol abuse was at unacceptable levels in South Africa, but virtually all scientific evidence demonstrated that alcohol advertising bans had little to no impact on overall consumption. The ARA held the belief that a set of carefully targeted policies, restrictions,
and laws covering a range of measures far wider than advertising would be much more preferable.

According to the ARA, the problems in South Africa did not lay with alcohol consumption, rather with alcohol abuse and it was wrong to demonise all consumption. The ARA was open to discuss and make concessions when addressing abuse, as it agreed that the status quo could not remain. The World Health Organisation (WHO) recommended the regulation of alcohol advertising and not an outright ban. New regulations paired with targeted interventions were what the ARA believed to be the proper steps in addressing alcohol abuse. Including tailoring plans to individual, societal, and cultural differences, by doing this the factors leading to alcohol abuse would be better understood.


Members thanked the ARA and BMI for their presentations and despite the fact that they could not comment directly on the proposed bans, they still found the information to be very relevant and helpful. Members asked what kind of education was available to consumers as well as to sellers. Members also praised the common sense approach taken by the presenters but hoped that lessons had been learned from the tobacco advertising ban. Some Members emphasised that stronger regulations would help in the battle against alcohol abuse because banning was not a reasonable solution. The Director General of the Department of Recreation was present and made a brief statement revealing that the Cabinet had approved a draft bill on the matter of banning alcohol sponsorship and advertising and that it would appear in Parliament soon. He noted that the Department had supported the tobacco ban under the impression that it would receive funds through the sin-tax, but this did not happen. The Department would ensure that its interests were covered this time and would refuse to rely on an unwritten promise. The revenues generated by the alcohol industry were essential to the Department and their sponsorship of organisations and events was essential.
 

Meeting report

Opening Remarks
The Chairperson welcomed everyone and stated his desire to have a short but fruitful meeting. The purpose of the meeting was to meet with stakeholders to discuss the role of advertising in sports and how it pertained to the development in sports. There was no bill before Parliament in regards to banning alcohol advertising in sports thus it would be inappropriate for Members to discuss such matters. The main purpose of the meeting was to have a broad discussion on sports in the country and the roles that industries were playing.


Mr M Dikgacwi (ANC) reiterated the Chairperson’s point about there being no bill before Parliament pertaining to the banning of alcohol advertising. Members were only there to listen to the stakeholders and presentations and there would be no discussion of matters that were not before Parliament.

The Chairperson then asked the representative from BMI Sports Information to begin his presentation.

BMI Sports Information Presentation
Mr David Sidenberg, Head of Strategy, BMI Sport Information, stated that BMI was the first and only
independent research company that dealt with the sport and sponsorship industry. BMI Sports had field
workers who did face to face interviews and had compiled tonnes of information on demographics.

The sponsorship market for sport in South Africa had been growing steadily, in 1985 expenditure on
sports sponsorship was at R63 million and had grown to R4.596 billion in 2012. When leveraging was
accounted for in the final figure the total came to R6.953 billion. Despite the big increases in total
expenditure over the years, since 2010 the increases in expenditure had levelled off, this could be
considered a FIFA World Cup 2010 hangover. The leverage ratio in 2006 was at 0.84:1 and had fallen to 0.51:1 by 2012. Overall South Africa had a lot of toys, but no batteries.

Mr Sidenberg noted that South Africa had a case of the haves and the have-nots in the industry. There were people with resources and sponsorships and there were those whose development had been stifled by a lack of funding. There were gold medalists waiting for cheques in order to compete abroad. The high price of rights made it difficult for sponsors to commit to a sport as they sought to get returns for their investments. Whenever sponsors left, everyone looked to the government to make up for the funds sponsors once provided. Sponsors had become more cautious and preferred short term contracts which left a lot of uncertainty. Even the big three sports, namely cricket, rugby and soccer were feeling the pressure. Sports was one of the few things that was still viewed on live TV and sponsors were vital to sports broadcasters.

 

Mr Sidenberg stated that South Africa had one of the most advanced sports broadcasting systems in the world and sponsorship was a major part of this. Music, arts and culture provided a very small portion of the sponsorship market, accounting for 7% combined expenditure. In 2011 an estimated R394 million was spent on arts/culture sponsorships. This was up from the 2009, in which expenditures were R358 million. This represented a modest increase of 5%. R213 million of the total for 2011 was put into music and R181 million to all other arts/culture activities. This area was largely sponsored by the banking and alcohol industry with the telecom industry only recently joining the fray. If any of those sponsors left the effects would be profound, and the loss of alcohol sponsorship would be severe.

The top four sponsorship spenders were ABSA, MTN, Vodacom and Nedbank. Those sponsors were
vital in overall sponsorship. The top 30 sponsors in 2012 accounted for just under 50% of the total direct sponsorship spending in South Africa, while in 2010 during the World Cup the top 10 sponsors accounted for 45% of the total market. This was demonstrative of the stagnation of sponsorship in the country.

Mr Sidenberg moved onto sponsorship spending by the alcohol industry. Alcohol sponsorship had a huge impact on where events were held. South Africa was not as dependent on alcohol sponsorship as other countries but it was still vital to the health of sports in the country. Castle Lager had been a long and loyal sponsor that had stuck with the national Soccer, Cricket and Rugby teams through thick and thin and their contribution had been great over the years. The loss of even one of the major alcohol sponsors would not go unnoticed.

Alcohol companies spent a great deal of funds on advertising on sports events. Television would be the greatest loser as a result of an alcohol ad ban as alcohol advertising was most prominent during live
sporting events. Television advertising for alcoholic beverages accounted for 73.5% of spending for
companies. When the tobacco ad banning was implemented the industry was a quarter of the size it was in 2012. Many comparisons had been made between the two areas, but this was unfair. The loss of tobacco advertising was not as big of a deal due to the emergence of IT companies and telecommunications companies. Those companies filled the gap that tobacco advertising left. If alcohol advertising was banned there was no new industry to take its place. Furthermore, telecommunications companies were reducing their spending on sports advertising and putting their funding focus elsewhere.

Mr Sidenberg asked what would be targeted next if alcohol advertising and sponsorship was banned. Could fast food and soft drinks be banned for their negative effects on health? He feared that an alcohol ban could
cause a snowball effect and hurt participation in sport. He then pointed to the more recent “responsible drinking” message that companies were using, including ads featuring prominent sports stars such as Rafael Nadal. Those ads were positive and if all alcohol advertising was banned how would companies get a positive message across to the public. Companies needed to participate in self-regulation in advertising. Banning alcohol companies from advertising and sponsorship could be considered anti-competitive and anti-growth. Sponsorship had the power to rally youth around sport and create passion.

Mr Sidenberg then showed a Heineken advert that demonstrated that alcohol advertising does not have to be all about consumption. Instead, that company used its ad space to promote involvement in the UEFA Champions League.

Mr Sidenberg noted some statistics from the Department of Health, including that fact that 26% of all alcohol sold in South Africa was sold outside formal channels. It was generally accepted that alcohol abuse roblems rested within that 26%. He noted that the GDP of the country would be reduced by 0.28% or R7.4 billion if alcohol sponsorship and advertising was banned. The 26% sold through informal channels combined with a ban would equate to a net economic loss for the country and would add to the problem of unemployment.

The Chairperson thanked Mr Sidenberg for his presentation.

 

Industry Association for Responsible Alcohol Use (ARA) Presentation
Mr Michael Mabasa, Corporate Relations Director, Brandhouse, stated that ARA was a non-
profit organisation that was focused on the prevention of the negative consequences of alcohol abuse. It was comprised of many bodies including the South African Breweries, Brandhouse, KWV and many more. ARA appeared before the Committee in order to demonstrate its commitment in fighting alcohol abuse in South Africa. ARA would share its perspective on the impact of an alcohol advertising ban and to respectively propose alternative policy options.

 

Mr Mabasa stated that ARA wanted to be players in the dialogue. His presentation was based off public discussion but nothing would be assumed until a bill was set forth.

Mr Mabasa noted some of the liquor industry’s contribution to the South African economy. The
statistics presented were from 2009. The liquor industry added R94.2 billion (4.4%) to the GDP and supported more that 548 000 jobs throughout the economy. For every job offered directly by the liquor industry 6.3 additional jobs were supported in the rest of the economy, both formal and informal. Around 88% of employees in the industry and its direct suppliers were from previously disadvantaged backgrounds.

Mr Mabasa reiterated the previous speaker’s point that 26.3% of alcohol in South Africa came from
informal bodies. He noted the incorrect perception about consumption in South Africa. South Africa was a
medium consumption country in terms of per capita adult alcohol consumption. 65% of the population had never consumed alcohol and that was amongst the highest abstention rates. However findings from national surveys showed that those who consumed drank at binging levels. Of the 35% who did consume alcohol a large percentage drank from illegal establishments and home-brews.

South Africa had a problem with under licensing, for example; there were more licenses at the V&A
Waterfront then there were in the entire Cape Flats. There was a need to legalise and regulate but it
proved to be very difficult. There were 50 000-60 000 licensed outlets versus an estimated 120 000
unlicensed outlets.

Dr Vincent Maphai, Executive Director, South African Breweries Limited, then took over the presentation and stated that there was a direct link between sports development and advertising. Advertising in sports was used for companies to compete with one another and to increase brand awareness. TV dominated alcoholic beverage spending at 73.5% of total expenditure. Overall the liquor industry sponsorship spending was dominated by sports sponsorship at 79.57% followed by arts and culture at 10.35%, broadcast at 5.67%, naming rights at 2.5% and other at 1.84%.He then further broke down sponsorship in sports noting the programmes that the alcohol industry sponsored. In soccer the alcohol industry sponsored: Bafana Bafana, South African Football Association (SAFA), Domestic Premier Soccer League, Regional Soccer evelopment League and Stadiums, many of which were built for the 2010 World Cup. Without sponsorship many of the World Cup stadiums ran the risk of becoming “white elephants” as many were under financial distress. The alcohol industry also supported many bodies in Rugby, such as the Springboks, the Rugby Championships, the Currie Cup, and Super 15 as well as the Varsity Cup. Cricket sponsorship included the Proteas Test Cricket and the One day Cricket Team. The alcohol industry also contributed approximately R40 million to domestic sport development programmes. Furthermore the alcohol industry supported many peripheral sporting codes. Those small sponsorships were vital to the health of the sports as they did not have the financial backing of the major sports.

Mr Maphai noted that the potential loss of sports sponsorship could result in an increased reliance on the government and would create negative socio-economic ramifications. The Department of Sports and Recreation would feel a considerable strain with the loss of funding, especially if a replacement industry was not present when the alcohol industry left. The potential ban would have an unintended impact on the rest of the South African economy through the advertising broadcasting industry. The estimates provided by the ARA showed that household income would decrease by R5.4 billion and there would be almost 12 000 jobs lost as a direct result. Exports would decrease by R225 million and imports would decrease by R304 million.
Some strategies for more responsible alcohol advertising included monitoring the volume and frequency
of alcohol adverts, particularly on television. Alcohol advertising during family viewing hours be curbed. The use of celebrities and/or successful individuals in alcohol created an illusion that alcohol was directly related to success, these adverts resonated more with the poor and young people. Those types of adverts needed
to be monitored and limited.

Mr Maphai then asked whether alcohol advertising affected consumption. Literature on the influence of advertising on alcohol consumption had proven to be lengthy and mostly contradictory. Alcohol was a mature product category in which consumers were already aware of the product and its basic characteristics. Advertisers did not aim to increase total consumption rather they aimed to encourage consumers to switch to their product and create brand loyalty. Many scientific studies concluded that parental education, poverty, unemployment and peer pressure were more influential in alcohol consumption. There was no statistical relationship between per capita alcohol consumption and per capita advertising expenditure on alcohol beverages. Both government and the industry agreed that alcohol abuse was at unacceptable levels in South Africa, but virtually all scientific evidence demonstrated that alcohol advertising bans had little to no impact on overall consumption. The ARA held the belief that a set of carefully targeted policies, restrictions,
and laws covering a range of measures far wider than advertising would be much more preferable.

The problems in South Africa did not lay with alcohol consumption, rather with alcohol abuse and it was wrong to demonise all consumption. The ARA was open to discuss and make concessions when addressing abuse, as it agreed that the status quo could not remain. The World Health Organisation (WHO) recommended the regulation of alcohol advertising and not an outright ban. New regulations paired with targeted interventions were what the ARA believed to be the proper steps in addressing alcohol abuse. Including tailoring plans to individual, societal, and cultural differences, by doing this the factors leading to alcohol abuse would be better understood.

Mr Mabasa thanked the Committee for the opportunity to present and noted that nothing the ARA said should lead the Committee to think that it did not believe alcohol was an issue in South Africa. ARA
acknowledged that the industry could have done things differently in the past. They could not continue with the same mindset. They were open and ready to listen to suggestions.

Discussion
The Chairperson thanked both delegations for their presentation and noted that the information presented was very useful. The interest for the Committee was in development and sport.


Mr M Rabotapi (DA) noted that Members could not speak directly to advertising in their responses. Alcohol consumption was an important subject that affects all citizens of the country and some of the issues presented could be better dealt with by the Portfolio Committee on Health. Stronger regulations would help in the battle against alcohol abuse because banning was not a reasonable solution.

Mr Dikgacwi thanked the presenters and noted that the presentations helped in better understanding the issues. He asked how development was monitored and what kind of education was available to consumers and sellers?

Mr G MacKenzie (COPE) stated that there was a lot of common sense in the arguments made during the presentation and the country needed to take this common sense approach in seeking solutions. South Africa needed to learn from the tobacco advertising ban. He was not sure whether tobacco consumption had decreased significantly or at all since the ban. The Department of Sports and Recreation was promised some of the income from the sin-tax after the tobacco ban but this did not happen. He used HIV/AIDS awareness as an example of dealing with a difficult subject; he stated that you could not ban sex but having safe sex awareness and making people aware of the consequences greatly helped. In terms of economic outcomes Mr MacKenzie stated that the job loss was not the only issue, there were far more small areas that could be affected and he provided the example of a small print shop that printed flyers for a music festival that lost beer sponsorship losing business.

Mr Alec Moemi, Director-General, Department of Sport and Recreation, noted that the Cabinet had approved the draft bill proposing a ban on alcohol sponsorship and advertising and it would be introduced in Parliament soon. The Department had supported the tobacco ad ban based on the guarantee that it would receive income from the sin taxes. This never happened and the Department had to make cuts to programmes. He asked if a ban on alcohol advertising came to fruition where would the Department get the funds the alcohol industry provided. The Department would not accept a word of mouth agreement like it had done previously. The Department needed to ensure that its interests were covered. All industries were shrinking due to the struggles of the global economy and there would be no industry to replace the revenues generated from alcohol advertising. The funds obtained from alcohol advertising revenue were essential to the functioning of sport in the country.

Mr Sidenberg informed Members that there were more outcomes in regards to alcohol advertising than just
finances. He asked the Committee to consider the impact a ban would have on the programmes that the alcohol industry supported. He cited youth soccer sponsorship as an example. The under-17 and under-20
teams were developing nicely and had the resources to do so because of sponsorships. He then spoke about the alcohol industry swimming sponsorship programme which taught young people how to swim, not only was it promoting sports but it was helping save lives by teaching a vital skill.

Mr Mabasa then spoke about the strategies South Africa had taken to combat HIV/AIDS. The formula was simple; when there was a social issue that was that serious all of society’s resources must be mobilised. He felt as though this could be effective in addressing alcohol abuse.

Mr Mabasa noted that sponsorship from the alcohol industry helped in many areas, and did not exclusively benefit the players. Sponsorship enabled proper training for coaches, organisers, officials and youth programmes. There was a programme in place called the responsible trading programme, which taught people how to comply with the conditions of their license. It taught traders to not allow young people into their establishment and enforce ID regulations. Cutting off people when they had too much was emphasised alongside promoting an anti-drinking and driving message. The programme had trained over 17 000 traders and had received positive feedback.

Dr Maphai noted that the industry wanted to work with the government to be able to identify interventions and determine what was important in order for the advancement of sport development in the country to continue. Determining those objectives and the trajectory of sport in the country would help the industry better direct sponsorship. In many cases where the alcohol industry sponsored community programmes it used its corporate logos rather than brands such as Castle or Carling.

The Chairperson thanked the delegations for their input and noted that there were many challenges in developing sports in South Africa and he wished for a sporting facility in every community. It took time to develop sponsorship and it was an important aspect of sports in the country.

The meeting was adjourned.
 

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