Russia cans frothy beer ads
September 12, 2004

Russia's attempt to soften its hard drinking culture by encouraging beer-drinking, in place of the longstanding national tipple, vodka, has gone awry.

Unfortunately, although younger Russians are happy to swallow beer, the message of moderation has failed to go down so smoothly.

Widespread anxiety about drunken, rowdy youth has sparked a legal clampdown on beer adverts, generally agreed to be some of the wittiest and most watchable on television.

"Beer advertising is not advertising of the product. It's lifestyle advertising," objects Vladimir Medinsky, deputy chairman of the Duma's committee on the economy and a member of the pro-government United Russia party.

Healthy, wealthy and sexy

Mr Medinsky considers the glamour on offer in beer ads "very dangerous for youth, for minors, because they don't have any immunity to that".

Alcoholism among young people has doubled in recent years, he says. Teenagers hang out on street corners and "the tallest of them collects money from his friends and goes to buy beer for all of them".

The new law bans beer commercials from TV and radio between 7am and 10pm, and outlaws portrayals of people, animals or cartoon characters.

Nor can ads present beer drinking as likely to make anyone healthy, wealthy or sexy. A ban on posters near schools, gyms or cultural centres makes brewers' voluntary codes compulsory.

Unsurprisingly, brewers are lobbying for changes ahead of full implementation of the law on 1 January, and the advertising industry is holding its breath.

Sport fights back

Some of the loudest objections have come from sporting bodies which rely on brewers for sponsorship.

Russia's biggest brewer, Baltic Beverages Holding, sponsors the national football league, ice hockey, boxing and judo to promote its top-selling Baltika brand.

Sports groups argue the 10pm watershed could kill live matches, and want an exemption for logos on shirts and stadiums. Otherwise, the Russian Ice Hockey Federation has warned, foreign teams may pull out of matches.

Preventing logos been shown is "absurb, as we already have the contracts," RIHF president Alexander Steblin has said.

Brewers are optimistic that the law will eventually be "more liberal", says BBH vice-president for sales and marketing Vesa Isohanni. "We are negotiating, or trying to influence, on this sponsorship issue.

"The general public is very happy...[that broadcasters] are showing much more matches, games, after getting sponsorship from breweries."

Certainly, no politician wants to be seen to hurt sport, especially when, like United Russia, it supports the advertising restrictions on public health grounds.

Tradition dies hard

Part of the problem is that beer is officially a soft drink, sold cheaply at 24-hour street kiosks. One aim of the new law is reclassify it as alcoholic, says Mr Medinsky.

The evening TV watershed was applied to vodka in the 1990s, and later toughened into a total TV ban.

"Really we don't have any traditions of beer drinking...We hoped that the drinking of beer would be instead of vodka, but now they go together," says Mr Medinsky.

Cocktails mixing the two drinks are popular, and there is even a saying that "Vodka without beer is money spent for nothing".

"The majority of growth in the beer market is coming from younger drinkers, and a lot of the growth...is coming from high alcohol beer," says Tim McCutcheon, a senior analyst at Aton Capital in Moscow.

Despite the legal minimum drinking age, he says "the reality is that if you can get your hand over the counter, you're fine".

Brimming hopes

Russia's beer market is growing fast. Compared with Germans or Czechs, Russians do not drink much beer at all, but foreign brewers see huge potential in 145 million thirsty Russians. The market is the fifth biggest in the world and consumption is rising.

It's possible to have a TV break where every single ad is a beer commercial

Tim McCutcheon, Aton Capital

In 1996, Russians drank 14.6 litres of beer per head per year, but they now gulp down about 40 litres each, according to the Russian Beer Brewers Union, and Aton's data. In St Petersburg and Moscow, this rises to 75 litres.

The main rivals are BBH, a joint venture of Carlsberg and Scottish & Newcastle, and Sun Interbrew. They mix imported and local brands - Becks and Tuborg jostle with Baltika, Uralski, or Bag-Bier from Siberia.

But the restrictions are coming at a tough time, just as brewers are feeling the inevitable slowdown that follows explosive growth. "You're seeing [profit] margins compressed," says Mr McCutcheon.

Beer sales volumes grew 21% in 2001 and 19% in 2002, but only about 5% last year, according to Aton Capital's research.

Awash with ads

A deluge of TV advertising drove this expansion. Even Mr Isohanni admits the "huge number" of ads may have triggered the clamp-down. "It's been a bit overheated," he says.

"It's possible to have a TV break where every single ad is a beer commercial," says Mr McCutcheon.

Beer advertising is a sizeable chunk - about 10% - of the $150bn a year that advertisers spend on Russian TV slots. By offering the fastest route to creating a national brand, TV has pulled in 90% of the big brewers' marketing budget.

For the ad industry, it is not yet clear if the restrictions mean beer ads will dry to a trickle or unleash a flood of new commissions.

Advertising executives profess to be unperturbed as Russia's economy is enjoying its best years since the 1998 rouble crisis.

"Our advertising market is up, like the whole economy of course," says Yuri Pashin, chief executive of global ad firm Young & Rubicon's Moscow bureau.

Certainly, BBH has recut and adapted some ads. "We are prepared. Already we have done shorter versions without showing images of people," says Mr Isohanni.

But more restrictions are on the way, according to Mr Medinsky, who is charge of advertising law reform for United Russia.

The Duma is debating raising the minimum drinking age to 21, and he intends to propose curbs on public drinking.