Liquor Industry Gets Aggressive with Advertising

After years of losing market share to brewers, the liquor industry, led by Diageo, is coming on strong in marketing its products, the Wall Street Journal reported May 24.

Diageo, which acquired most of Seagram Co. three years ago, controls about 27 percent of the U.S. liquor market. As a result, it has the political clout and marketing strength to take on the big beer brewers, such as Anheuser-Busch Cos.

In the past, liquor companies were less aggressive with their advertising, fearful that it would cause a backlash. However, beer companies took the aggressive marketing route, flooding television, radio, and newspapers with ads and grooming powerful lobbyists in Congress and statehouses.

Diageo now wants to level the playing field. The company’s lobbying has resulted in nine new states allowing liquor sales on Sunday, bringing the total to 30. Diageo has placed lobbyists in every state capital and has boosted the industry’s lobbying group, the Distilled Spirits Council of the United States (Discus).

Although Diageo and Discus have been unsuccessful so far in breaking the unofficial ban on advertising distilled spirits on network television, the industry has been successful in getting ads placed on cable channels and local broadcast stations.

The marketing is paying off. According to a report from Impact Databank, which monitors the industry, liquor volume increased by 3.2 percent in 2003, while beer volume declined 0.2 percent. Liquor comprised 29 percent of the beverage alcohol sector last year, compared to 27.9 percent in 1998, while beer’s share declined to 57.4 percent from 59.6 percent.

“Someone had to take leadership and say, ‘This is wrong,'” said Edgar Bronfman Jr., former chief executive of Seagram. “There was this misperception that the alcohol in beer is somehow different from the alcohol in wine, which is somehow different than the alcohol in spirits. It’s not.”

Anheuser-Busch is now fighting back. Mike Owens, vice president for sales for Anheuser-Busch, had urged distributors who carried both Anheuser-Busch and Diageo brands to stop carrying the liquor maker’s products.

“Diageo is well financed and made up of young, aggressive, well-educated managers who are out to take our share,” Busch said during an internal sales conference in the spring of 2002. “Just that simple. We are not going to let them do it.”

Diageo Chief Executive Paul Walsh countered, “We’re not targeting Anheuser-Busch here. We’re targeting the consumer. And those lines between liquor and beer are going to get blurred whether Anheuser-Busch likes it or not, because that’s what the consumer wants.”