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Joe Camel in a Bottle:
Diageo, the Smirnoff Brand, and
the Transformation of the Youth
Alcohol Market
James F. Mosher
Alcohol Policy Consultations
National Electronic Seminar sponsored by the Underage Drinking
Enforcement Training Center,
April 19, 2012
Diageo:
The Innovator of the Distilled Spirits Industry


Formed in 1997 when Guinness and Grand
Metropolitan merged, becoming the largest
distilled spirits company in the world.
Determined to expand the U.S. market,
which has been dominated by beer.
U.S. Per Capita Consumption
By beverage type (14 years+)
1.6
1.4
1.2
1
Beer
0.8
Distilled
Spirits
Wine
0.6
0.4
0.2
0
1960 1965 1970 1975 1980 1985 1990 1995
Source: Impact
Databank
Consumption Trends:
Types of Distilled Spirits
1970-2000 (Millions of gallons)
300
250
Whiskeys &
Gin
Vodka, Rum, &
Tequila
Specialties
200
150
100
50
0
1970
1980
1990
1998
Source: Impact Databank
Underage Drinking: A Critical
Component of the Alcohol Market


Those who begin drinking before age 15 are
four times more likely to become heavy
consumers than those who wait until age 21.
Underage drinkers consume 10%-19% of the
alcohol market (almost all of which is
consumed in binge drinking episodes),
producing $10-$20 billion annually.
CAMY, 2010; Foster, 2003
Beverage Choice for
12th Grade Binge* Drinkers
45%
40%
35%
30%
Boys: Beer
Boys: Liquor
Girls: Beer
Girls: Liquor
25%
20%
15%
10%
5%
*5+ drinks in one setting
97
19
95
19
93
19
19
91
0%
Source: Monitoring the Future
Alcohol Industry “unwanted”
consumption and sales, 1999
Foster, 2003
Diageo: Competing with Beer
Beer has significant marketing advantages over
distilled spirits particularly for young
drinkers:
Advertising on network television;
 Lower tax rates;
(In Maryland: $.09/gallon for beer; $1.50/gallon for distilled
spirits)
 More retail outlets
(In Montgomery Co. MD, 298 beer outlets compared to 25
spirits outlets).

The Answer
Create a malt-based, low-alcohol
beverage with distilled spirits
branding that is appealing to
young drinkers, particularly
young women, and regulated as
beer.
Developing Brand Loyalty
at an Early Age
“Diageo rolled out Smirnoff Ice in
the US market...it suddenly put the
once-stodgy Smirnoff name on the
tips of millions of echo boomers’
tongues” – (Impact, May 15, 2003)
Echo Boomers:
 Americans born from 1980-1995
 8 – 23 years old in 2003
“The beauty of
this category is
that it brings in
new drinkers,
people who really
don’t like the taste
of beer.”
Marlene Coulis
Director of New Products
Anheuser-Busch Co.
Advertising Age
April 22, 2002
Who are “New Drinkers”?
Average Age of First Use of Alcoholic Beverages among
those under 21: 15.9 years old.
Every day, 2,500 young people under 15 years old started
drinking.
SAMHSA 2010
Smirnoff Vodka and Smirnoff Ice
Advertising Expenditures
(U.S., millions of dollars)
$70
$60
Smirnoff
Brands TOTAL
Smirnoff Ice
$50
$40
$30
Smirnoff Vodka
$20
$10
$0
2000
2002
2004
2006
Source: Impact Databank
Smirnoff Ice Advertising 2002


1,533 television ads placed in media
programming that overexposed youth, 26.3%
of all Smirnoff Ice TV ads
These ads cost $6.9 million, the sixth most
spent on overexposing ads for any brand
(behind only the most popular beer brands)
Source: CAMY
Smirnoff Ice Laundry
Smirnoff TV Ads Violating Industry
Voluntary 30% Underage Audience
Composition, 2005



Smirnoff Ice: 1,318 ads, $1.1 million, 46.4
million youth impressions
Smirnoff Vodkas: 337 ads, $463,000, 43.2
million youth impressions
The brand with the second most violating ads
(behind Corona beer)
Source: CAMY
Television Advertising Placement:
Youth Audience Overexposure
35%
30%
25%
Alcopop ads
Distilled spirits
Beer
Industry average
20%
15%
10%
5%
0%
2006
Source: Center on Alcohol Marketing and Youth
Smirnoff Vodka
TV Commercials, 2007

Rated the worst
vodka brand for
placement in
youth-oriented
television
programming
Center on Alcohol Marketing to Youth
Smirnoff Marketing:
Going Viral
Smirnoff Ice Drinking Game
Smirnoff Vodka
I Phone App
Alcopop Brand Preferences:
Underage Drinkers vs. Overall Market
5 State Survey, 4075 Respondents, 2004
Youth Market Share
Overall Market Share
Smirnoff Ice
14%
11%
54%
Mike's Hard
Lemonade
Bacardi Silver
Other
38%
38%
9% 15%
Wolfson M. et al. “Flavored Malt Beverage Use in a Multi-state Sample of Adolescents”, Wake
Forest University, December 2005; Impact Databank
Seven Leading Youth Alcohol Brands:
Any use and binge drinking, past 30 days
Pilot study, 2011, N=108
Siegal et al. 2011
Beverage Preference, 9th-12th Grade Girls
(30 day prevalence, 2005)
40
35
30
25
Distilled Spirits
Beer
Alcopops
20
15
10
5
0
Ark
Neb
NM
Centers for Disease Control, MMWR, July 27, 2007
WY
U.S. Per Capita Consumption
By beverage type (14 years+); Gallons of Ethanol
1.6
1.4
1.2
1
Beer
0.8
Distilled
Spirits
Wine
0.6
0.4
0.2
0
1960 1965 1970 1975 1980 1985 1990 1995
Source: NIAAA
U.S. Per Capita Consumption
By beverage type (14 years+); Gallons of Ethanol
Gallons of Ethanol
1.4
1.2
1
0.8
0.6
Beer
Wine
Distilled Spirits
0.4
0.2
0
Source: NIAAA
45
40
35
30
25
20
15
10
5
0
Boys: Liquor
Boys: Beer
*5+ drinks in one setting
07
20
05
20
03
20
01
Girls: Liquor
Girls: Beer
20
19
99
% binge drinkers
Beverage Choice for 12th Grade
Binge* Drinkers
Source: Monitoring the Future
Consumption Trends:
Types of Distilled Spirits
1970-2000 (Millions of gallons)
300
250
Whiskeys &
Gin
Vodka, Rum, &
Tequila
Specialties
200
150
100
50
0
1970
1980
1990
1998
Source: Impact Databank
Consumption Trends:
Types of Distilled Spirits
1999-2009 (Millions of gallons)
Smirnoff Vodka Sales
1990 - 2006
(U.S., thousands of nine-liter cases)
10000
9500
9000
8500
8000
7500
7000
6500
6000
5500
5000
20
09
20
07
20
05
20
03
20
01
19
99
19
96
19
90
Smirnoff
Vodka sales
Introduction of Smirnoff Ice
Source: Impact Databank
Alcopops aka
Flavored “Malt” Beverages
“Flavored malt beverages exhibit little or no traditional
beer or malt beverage character. … Brewers … remove
the color, bitterness, and taste that are generally associated
with beer. … This leaves a base product to which brewers
add various flavors, which typically contain distilled
spirits, to achieve the desired taste profile.”
Federal Alcohol and Tobacco Tax and Trade Bureau (TTB)
Description of “Flavored Malt Beverages” (Alcopops)
Why Distilled Spirits Are Added to
Alcopops
According to the Flavored Malt Beverage Coalition:
“Flavoring ingredients that are added to a malt beverage
base to produce an FMB need to be stronger …
because of the pronounced organoleptic [sensory]
qualities of the base itself.”
Fact Sheet, February 2003
Alcohol Derived from Added Distilled
Alcohol Flavorings
Alcohol Percentage Derived
From Added Distilled
Alcohol Flavors
Number of Flavored
“Malt” Beverages
0-25%
4
26-50%
0
51-75%
5
76-100%
105
Maximum Alcohol Derived
From Added Alcohol Flavors:
99.98%
Total: 114
Volume of Beer Base Present in
Flavored Malt Beverages
Volume of Flavored “Malt”
Beverage Derived From
Fermented Beer Base
Number of Flavored “Malt”
Beverages
0-25%
95
26-50%
4
51-75%
1
76-100%
14
Production Schemes to Gain
Regulatory Advantage

Smirnoff Ice has a different formulation in the
United States than in other countries where it
is identified as a spirits-based beverage.
Alcopop Classification:
State Attorneys’ General Opinions
ME
CT
NE
MD
CA
Alaska
Hawaii
State Attorney General Opinion for
Reclassification
State Attorney General Opinion Opposed to
Reclassification
Alcopop Classification: Nebraska
2003: Nebraska Liquor Control Commission rules
alcopops are distilled spirits, but suspends ruling
pending federal rule making.
2005: NLCC reverses 2003 ruling, adopts federal rule.
2006: Nebraska Attorney General issues opinion
supporting NLCC ruling.
March 2, 2012:
Nebraska Supreme Court rules alcopops are distilled
spirits under Nebraska law
April 2, 2012:
Nebraska Legislature overrules Supreme Court and
adopts federal rule.
Guy Smith
“Reputation & Crisis Management” Expert



2000-2008: VP for
Marketing Public
Relations, Diageo
1998-1999: Special
Advisor to President
Clinton
1975-1992: VP-Corporate
Affairs, Philip Morris
Company
.
“In our marketing
activities, we never
target people under the
legal purchase age.”
Diageo Corporate Citizenship Report, 2003
Supersized Alcopops:
“Binge in a Can”
Diageo’s CEO Paul Walsh
“Diageo chief executive sees salary package
hit £3.5m [$5.45 million] as 900 lose jobs”
2009 news headline
Salary the following year: $9.4 million
The Creators of Colt 45 Blast
Evan and Daren Metropoulos
“We want to win. We want to blow these
brands out, explode them, and make
everyone lots of money.”
Evan Metropolous
Possible Unfair Business Practice
Allegations



Tax fraud
Youth market targeting that encourages illegal
behavior
Unfair competition
May 19, 2011
Maryland Raises Alcohol Tax
Voter support for dime-a-drink,
Maryland 2010
Contact Information
[email protected]
www.alcoholpolicyconsultations.com
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