Beer And Wine Ads Do Not Boost Consumption

6-23-97
University Park, Pa. -- Television and radio advertising for beer and wine reinforces brand loyalty but does not significantly increase either consumption or demand, a Penn State study shows.

"Thus, government policy makers would be ill-advised to issue laws and regulations affecting alcohol advertising in the hope that these will automatically drive down consumption," says Dr. Jon P. Nelson, professor of economics. "My published studies have already shown that state bans of price advertising and restrictions on billboard advertising on alcohol beverages do not lead to a reduction in drinking."

Nelson is author of the paper, "Economic and Demographic Factors in U.S. Alcohol Demand: A Growth-Accounting Analysis," which appeared recently in the journal Empirical Economics. He used quarterly data for 1974-90 to weigh the significance of economic and demographic factors on patterns of alcohol consumption.

He published two earlier articles on the effects of alcohol advertising on consumption in the Journal Of Regulatory Economics and Applied Economics.

"Last year's decision by liquor producers to advertise on cable TV broke the industry's 60-year ban on broadcast advertising and sparked a policy debate over the role of alcohol advertising in society," Nelson notes. "Participants in the debate included President Clinton, several elected representatives, the chairman of the Federal Communications Commission and spokespeople for the liquor and beer industries."

However, relatively few people seem to realize that total alcohol consumption in the United States has not increased since the mid-1980s and is now at about the same level as in the mid-1960s, Nelson says. Measured on a per capita basis, liquor consumption has been declining since 1975, beer since 1980 and wine since 1985.

Furthermore, an analysis of advertising and consumption trends fails to reveal a consistent relationship between advertising and consumption. Beer advertising, for instance, increased by 41 percent between 1980 and 1985, but per capita consumption dropped 3 percent. Liquor advertising jumped 24 percent between 1975 and 1980, but per capita consumption decreased 4 percent.

Total consumption of wine coolers fell from a peak of 121 million gallons in 1987 to only 19 million in 1995, despite substantial advertising efforts, according to Nelson.

"Three possible explanations may account for this," Nelson says. "First, advertising in slow-growth industries does not create demand. Rather, product sales determine the level of advertising, rather than the reverse."

Second, increases and decreases in advertising around some base level are often associated with the introduction of new products. A prime example would be the growth and decline of consumption and advertising of wine coolers. Third, advertising in slow-growth industries affects how much of the market the individual brand has captured, with little or no effect on overall demand for that product.

"Although producers in all industries engage in some types of cooperative activities, there are only a few examples (milk, orange juice) of producers advertising on a cooperative basis," Nelson says. "Most advertising is directed at stimulating brand recall and brand loyalty."

**pab**

EDITORS:Dr. Nelson can be contacted at (814) 865-8871(o) or at jpn@psu.edu by email.

Contacts:
Paul Blaum (814) 865-9481 (office) (814) 867-1126 (home) pab15@psu.edu
Vicki Fong (814) 865-9481 (office) (814) 238-1221 (home) vyf1@psu.edu