Originally published October 2005
Recent press reports suggest that the Canadian beer industry is in trouble. A shrinking consumer base1, depressed prices2, smoking by-laws and industry consolidation are just some of the long-term threats faced by brewers. Short-term factors such as the NHL lockout and unseasonably cold temperatures have also contributed to disappointing recent quarterly results.
Brewers must also contend with the perception that beer is a carb-rich and waist-expanding beverage in comparison to wine, a substitute alcoholic product that is associated with good health and longevity. Indeed, much like the mature Western European market, statistics indicate that Canadians are drinking slightly less beer3 and significantly more wine4.
Hard liquor manufacturers have also captured a portion of the traditional beer-drinking target market. The success of the hard liquor manufacturers can be attributed to a proliferation of new product lines (e.g., flavoured vodka), catchy advertisements and aggressive promotional campaigns at points-of-sale.
One response adopted by brewers to address these challenges is to increase advertising and promotional activities. Many brewers reverted to a standard beer-advertising theme of featuring nubile young women to captivate the 19-35 year old male audience. Comparative advertising has also remained a staple in the beer advertiser’s toolbox. Last summer, several brewers duelled over who produced the coldest beer. One major manufacturer introduced a draught tower that stores beer at sub-zero temperatures. Another product was branded as the "ice cold" beer, much to the chagrin of some critics who questioned the plausibility of such a statement. Indeed, the major breweries have been criticized for their ‘congenital arrogance’, ‘money-is-no-object’ ineptitude and lack of innovation.5
Only time will tell how the breweries will respond to these criticisms.Whatever the future holds, it is important to remember that marketing beer in Canada requires compliance with a web of rules that includes federal legislation, provincial legislation, common law principles, provincial advertising guidelines and federal codes of conduct. Therefore, marketing plans and/or specific marketing tactics should be reviewed by legal counsel in each province or territory to ensure compliance with the various regulatory regimes. The following overview highlights some of the important legal issues to consider before developing a new beer marketing campaign.
Some breweries have run contests that offered prizes such as Las Vegas vacations and golfing getaways. Promotional contests must be conducted within the limits set out by the Criminal Code, the Competition Act and provincial alcohol advertising regulations. Here are a few rules to remember in structuring a contest:
- Only contests involving skill or a mix of skill and chance are permitted. Contests involving chance alone are prohibited by the Criminal Code.
- Games of mixed chance/skill are prohibited if participants are required to pay money or give valuable consideration in order to participate.
- The Competition Act requires adequate and fair disclosure of such matters as the number and value of the prizes, the geographical scope to which they relate, and any fact within the knowledge of the advertiser that materially affects the chances of winning.6
Breweries may use celebrities to endorse their products. However, provincial liquor advertising guidelines restrict the use of celebrity endorsements, especially if there is a chance that children would consider the celebrity to be a role model. The celebrity endorsement must also comply with the Canadian Radio-television and Telecommunications Commission’s Code for Broadcast Advertising of Alcoholic Beverages ("CRTC Code") and must not violate anyone’s trademark, copyright, or personality rights. Breweries considering the use of a celebrity endorsement must therefore ensure that legal counsel has conducted due diligence and, if necessary, drafted consents and licenses to use the celebrity in the advertisement.7
Product giveaways represent a potentially lucrative marketing tool for brewers. For example, breweries have recently included products ranging from sleeves of golf balls to coupons for two steaks as gifts upon the purchase of a case of beer. Before embarking on a product giveaway promotion, care must be taken to ensure compliance with several advertising guidelines:
- Product Acceptability – Not all items are acceptable as giveaways and several provincial liquor authorities have reserved the right to deny their use. Some provinces require the giveaways to meet tests of appropriateness and good taste.
- Approval by Liquor Authorities – Some provinces require beer manufacturers to submit applications or product examples to the relevant liquor authority. In some cases the application must be filed at least 90 days prior to the anticipated start of the campaign.
- Value Restrictions of Promotional Items – Product giveaways are restricted in many provinces (including Ontario) to a maximum dollar amount or maximum percentage of the purchase price of the beer. Providing consumers with a chance to win the item is one method that can sometimes be used to tackle the maximum value restrictions, subject to compliance with contest laws.
- No Purchase Necessary Option – The CRTC Code requires a "no purchase necessary" option for promotions, contests and premium offers. This option should permit participation without purchase of the product and without cost to the participants. The purpose of the "no purchase necessary" option is to avoid the allegation that the promotion is attempting to influence non-drinkers to purchase beer. It also may have other effects with respect to the retail value of value-added products.
- Language – Both French and English are official languages in Canada but some provinces have rules respecting the language labelling requirements for products sold within their boundaries.
ALCOHOL-SPECIFIC MARKETING REGULATIONS
The CRTC Code specifically applies to all alcohol advertisements in Canada and is enforced by Advertising Standards Canada ("ASC") who, in turn, publishes periodic Ad Complaints Reports. The 2004 Ad Complaints Reports revealed that a majority of the complaints lodged with the ASC last year were related to beer ads.8 Additionally, there are statutes, policies, and alcohol advertising guidelines that apply in the various provinces and are enforced by the provincial alcohol commissions.
The CRTC Code and provincial regulations cover a wide spectrum of advertising tactics including, among other things, attempts to influence non-drinkers to consume alcohol, advertisements directed at minors, associating the product with an activity that involves danger or risk, the time of day that the ads are displayed and as mentioned above, the use of celebrity endorsements.
REGULAR PRICE CLAIMS
Brewers may offer sales promotions to differentiate their products on price factors. However, brewers (especially of so-called "discount beers") should be aware that the Competition Act requires that a significant volume of the product must be sold for a significant length of time at the regular price of the product in order for a company to claim that a product is being sold at a "sale price". The Competition Bureau has shown an increased focus on "regular price" advertising over the past few years, with several Canadian companies receiving widespread negative publicity and substantial monetary penalties for violating this law.
In order to avoid liability under ‘ordinary price laws’, don’t refer to a regular price in an ad unless a substantial volume of the product has been sold at its regular price and the product has been offered for sale at the regular price for a substantial period of time. Don’t artificially inflate the regular price of the product in order to make the sales price appear to be more attractive. Finally, don’t run a sale for extended periods of time, or repeat a sale week after week (in which case the Competition Bureau might consider the sale price to be the regular price).9
GLIMMERS OF HOPE
Provincial craft brewers in Ontario have recently organized and combined resources in an attempt to reduce the advertising power advantage held by the larger breweries. Governments have supported craft brewers in various ways including tax incentives offered to some smaller operators, which helps them to compete against some of the larger manufacturers. Craft breweries are able to offer differentiated brands that appeal to their market, in part aided by strong word-of-mouth advertising and sometimes by fostering a "root for the little guy" sentiment from loyal customers10. For example, Steam Whistle BrewingTM has developed a strong grass-roots appeal through catchy online ads, brewery tours, community events, event sponsorship and a feel-good company history.
Other encouraging signs exist for the future of the beer industry. Dozens of twists on traditional beer products have proliferated including imports, speciality beers, microbrews, discount beers, low-carb beers, draft in a can and caffeine additives that might expand the size of the beer drinking market to new demographics. There’s even talk of flavoured-GuinessTM hitting the market soon. Some beer advertisements such as the Bud Light InstituteTM have won acclaim for their hilarious and catchy television commercials.
The last quarter of 2005 and the first quarter of 2006 will hopefully be more promising to the beer industry thanks in part to the return of the NHL. However, breweries should not rest their hopes on hockey alone, as wine, hard liquor and negative consumer trends remain viable threats to the overall health of the industry. In combating these threats, breweries must ensure that they comply with both alcohol-specific and general marketing laws. In order to prevent a hefty fine or the negative publicity associated with a sanction, legal counsel should review your marketing plan or specific marketing tactics for compliance with the laws in each province and territory where the campaign will be executed.
1. There are 325,000 fewer Canadian males between the ages of 20-34 then there were 15 years ago. (ROB Magazine, September 2005).
2. Discount beers account for 30% of the market. (ROB Magazine, September 2005).
3. Twelve years ago, the average Canadian adult consumed 10.7 cases of beer. Today, the average Canadian drinks 10.3
cases of beer: a subtle but significant change. (ROB Magazine, September 2005).
4. Wine sales have increased 32% in Canada in the last 12 years. (ROB Magazine, September 2005).
5. Source: http://www.marketingmag.ca/magazine/current/ the_work/article.jsp%3Fcontent=20050523_68806_68806.
6. For more information on how to run a promotion that complies with Canadian contest laws, please see: "Making Your Contest a Winner"
7. For more information on celebrity endorsements, please see: "Cult of Personality: Using Celebrity Images in Advertising" by Jeff Scanlon.http://www.mondaq.com/editorial/article.asp?aid=29767.
8. One sexually-themed television commercial for a beer product resulted in 113 complaints to the ASC. The beer manufacturer issued an apology for airing the commercial too early in the evening , during a program that included many children among the viewing audience.
9. For more information, please see the article "Ordinary Price Claims: Misleading Discounts Will Cost You!", available online at: http://www.mbmlex.com/Upload/Publication/OrdinaryPriceClaimsT2.pdf
10. The Ontario Craft Brewers are also generating interest by attempting to set a standard of approval in the same vein as the wineries in Ontario with the VQA label.
The foregoingprovides only an overview. Readers are against making any decisions based on this material alone. Rather, a qualified lawyer should be consulted.
© Copyright 2005 McMillan Binch Mendelsohn LLP