The Effect of Alcohol Advertising on Alcohol Consumption

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The Effect of Alcohol Advertising on Alcohol
Consumption

• Henry Saffer
• National Bureau of Economic Research, New York,
  NY
• Kean University, Union NJemail
  hsaffer_at_gc.cuny.edu

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What is advertising?

• Advertising is a specific type of promotion that
  utilizes media to create positive product imagery
  or positive product associations or to connect
  the product with desirable personal traits,
  activities, or outcomes.
• Promotion refers to all activities that are
  designed to increase sales.

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Why is advertising so important to alcohol
producers?

• At the manufacturing level the alcohol industry
  has few firms
• Each firm is reluctant to cut price since they
  their rivals may follow them.
• If all firms cut price, they all lose revenue and
  no company will increase market share.
• Alcohol companies compete with advertising --
  not price
• Share of Voice Share of Market
• alcohol industry Advertising /Sales 9
• other industries Advertising /Sales 3

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How does alcohol advertising work?

• Only branded alcohol products are advertised.
• Advertising is used to create a targeted and
  positive personality for a branded product.
• This personality can provide the consumer with
  satisfaction
• The product personality resonates with the
  consumers values and aspirations.
• Use of the product connects the consumer to the
  personality attributes created in the
  advertising imagery and brings a sense of being
  true to their values and increases the
  satisfaction derived from use of the product.

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Evidence from Prior Studies

• Most prior studies find that advertising does not
  increase alcohol consumption.
• The key to understanding these results is
• a) the advertising response function
• b) the type of data that are used to measure
  advertising

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Advertising Response Function
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Market Level
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Counteradvertising
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Alcohol Advertising Bans

• Saffer 1991
• Uses a pooled time series from 17 countries for
  the period 1970 to 1983.
• Bans on spirits advertising lowers consumption by
  16 percent relative to no bans
• Bans on beer and wine advertising lowers
  consumption by about 11 percent relative to
  countries with bans only on spirits advertising.

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Saffer and Dave 2002 Treats both alcohol
consumption and alcohol advertising bans as
endogenous. updated the data set with data
from 20 countries over 26 years. one ban can
reduce alcohol consumption by five to eight
percent.
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• Saffer- Alcohol Advertising Expenditures on
  Highway Fatalities 1997
• A ban on beer and wine broadcast advertising
  would reduces highway fatalities by about 2000
  per year in the US.

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Saffer and Dave 2002 cross section adolescent
drinking A ban on all local alcohol advertising
would reduce adolescent monthly alcohol
participation from about 25 percent to about 21
percent. For binge participation the reduction
might be from about 12 percent to about seven
percent.
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Conclusions

• Bans on alcohol advertising can reduce overall
  alcohol consumption by about 5 percent
• Bans on alcohol advertising can reduce adolescent
  alcohol consumption by about 10 percent.