PRESENTATION TO THE SPORTS & RECREATION PORTFOLIO COMMITTEE

PRESENTATION TO THE SPORTS & RECREATION PORTFOLIO COMMITTEE Room M 315, Marks Building, Parliament, CAPE TOWNTuesday, October 29, 2013

Opening remarks • Thank you for the invitation to share our views on the proposed alcohol advertising ban. We acknowledge that this is not official consultation of the liquor industry on the proposed Bill; • We wish to demonstrate our commitment in fighting against alcohol abuse in South Africa; • We will share our perspective of the impact of an alcohol advertising ban; • We will also respectfully propose alternative policy options that can be considered to address alcohol abuse in South Africa given our country’s very specific issues; • We also wish to solicit insight from the Portfolio Committee on its expectations from industry over and beyond current initiatives on curbing harm

About ARA

About ARA • Associate Members: • In addition, a number of distributors and some retail chains such as Tops, Makro and Diamond Liquors have now joined the ARA as associate members. There are currently more than 120 associate members and the ARA continues to receive enquiries from other interested parties. OUR PURPOSE: To promote a culture of responsible alcohol use in South Africa

Alcohol and advertising • No single player can solve this alcohol abuse. Only partnerships will work. There are the lessons learnt from other social issues such as HIV/AIDS and crime; • No scientific research has discovered a silver bullet in addressing alcohol abuse; • Majority (65%) of South Africans do not consume alcohol and of those who consume only 8% abuse the product. This 8% who abuse alcohol, causes damage to themselves and to society. Targeted interventions are therefore required to address this community of irresponsible alcohol users; • Hard drugs in SA are pervasive, but these are not advertised anywhere. Consequently, we need to ask whether an alcohol advertising ban will address alcohol abuse in South Africa; • Benefits of an advertising ban are at best dubious – and the social costs are unmistakable

Impact on competition, transformation and SMEE development • Competition • The liquor industry has barriers to entry to the market which are quite high. To promote a highly competitive environment, one should be able to grow your brand through ad-spend • Transformation • With high barriers to entry, a ban on alcohol advertising will inhibit transformation in the liquor industry further, as it would hamper small BEE players to advertise their products and break into the market through marketing and advertising. • SMME development • Smaller companies would be forced to continue operating in a compressed profit margin environment, with little or no prospect to generate volume growth. New entrants and emerging brands would find it almost impossible to compete or try to enter the industry, increasing the barriers to entry even more. This would effectively strangle smaller companies with limited brand recognition

Liquor industry’s contribution to the SA economy including multiplier effects (in 2009), the liquor industry: • sustained production of R333bn throughout the economy; • added R94.2bn (or 4.4%) to GDP; • supported more than 548 000 jobs throughout the economy; • for every R1.00 in sales generated, R2.08 is added to the country’s GDP The liquor industry has particularly high spin-off effects on employment • for each job offered by the liquor industry and its direct suppliers, 6.3 additional jobs are supported in the rest of the economy (formal and informal); • majority of positions are for unskilled workers; • around 88% of employees in the industry and its direct suppliers are from previously disadvantaged backgrounds. Source: Econometrix Economic Impact of an Advertising Ban on Alcoholic Beverages Study - June 2013

Liquor industry’s contribution to the SA economy Source: Econometrix Economic Impact of an Advertising Ban on Alcoholic Beverages Study - June 2013

Alcohol demand or consumption patterns in SA • SA adult per capita alcohol consumption (APC) in 2005 = 9.5 litres of pure alcohol. • 26.3% was homemade and illegally produced alcohol; • APC in South Africa is above world average of 6.13; • regional average for Africa of 6.2; • below the European regions’ APC of 12.2; • SA’s recorded per capita consumption showed an increasing trend until the mid-1990s, but… over last decade per capita demand for liquor has been shrinking; • SA is considered to be a medium consumption country in terms of per capita adult alcohol consumption. • However, findings from national surveys show that those who do drink appear to do so at “binging” levels. Source: Econometrix Economic Impact of an Advertising Ban on Alcoholic Beverages Study - June 2013

Alcohol demand or consumption patterns in SA • 65% of population has never consumed alcohol • This is among the highest abstention rates in the world; • 7.7% have not consumed alcohol during the past year; • Almost ¾ of the population have abstained from drinking alcohol in past 12 months. • Of the 35% of the population that do consume alcohol, only small percentage consume branded products; largest percentage consume home-brews/ illegal alcohol. • There are 50,000 - 60,000 licenced/legal outlets for alcohol sales and distribution and an estimated 120,000 unlicensed outlets; • Generally accepted that alcohol abuse problem lies within this unlicensed sector, which is not regulated at all by Government; • Amount of taxes lost through illegal sector is estimated to be in region of R16bn Source: Econometrix Economic Impact of an Advertising Ban on Alcoholic Beverages Study - June 2013

small population that drinks, does so excessively – i.e. heavy episode drinking illegal alcohol sector high levels of youth drinking Alcohol demand or consumption patterns in SA Main problem areas that exist around alcohol consumption in South Africa are: Source: Econometrix Economic Impact of an Advertising Ban on Alcoholic Beverages Study - June 2013

Alcohol harm in SA - our issues are specific • Prevalence of FAS among Grade 1 students • Motor Vehicle Accidents % PAFs # per 1,000 students -80% South Africa World W. Cape (Wellington) Gauteng N. Cape (De Aar) N. Cape (Upington) Worldwide Both Males Females Percent of reported incidents where victim or offender are under the influence of alcohol Percentage of Youth who Have Tried Alcohol % of youth Males Rape Females Murder India Ghana Mexico Brazil SA Ireland Victims Offenders Sources: ‘A review of policy-relevant strategies and interventions to address the burden of alcohol on individuals and society in South Africa’, Charles Parry, 2005; ‘More action needed on alcohol abuse’, Charles Parry, 2006; ‘Alcohol Use in South Africa FactSheet’, Medical Research Council; “A Strategy for a Safe SA, “April 2008; ‘Creating a sober South Africa’, Charles Parry, 2005; WHO Global Status Report on Alcohol 2004; National Drug Master Plan 2006–2011; “Estimating the Burden of Disease Attributable to Alcohol Use in South Africa in 2000,” M. Schneider et al.

Addressing Drunken Driving

Addressing Binge Drinking

Addressing Under Age Drinking

Addressing Foetal Alcohol Syndrome

Advertising expenditure patterns • Purpose of advertising is primarily to increase brand awareness of companies and encourage consumers to buy their product. • Reinforce and confirm the correctness of choice amongst existing users so that they make a repeat purchase; • draw attention to product and any new products. • ATL advertising expenditure on alcoholic beverages has increased over the past five years to R1.8bn in 2012 • Alcohol ADspendhas remained virtually at the 5.5% level as a share of total media advertising expenditure since 2010. • Beer manufacturers have been spending the majority on advertising, followed by spirits, ciders, AFBs and RTDs and wine manufacturers.

Potential impact on the media • TV dominates overall alcoholic beverages ADSpend (73.5% of total, 2012), followed by radio (8.7%) and cinema (6.3%); • SABC TV has by far the largest share in ATL alcoholic ADSpend (28.4%): • Total ban will result in the SABC losing advertising income of R500m+ p.a; • If one adds the potential loss of R26.5m from radio ADSpend income, then loss to SABC increases to R541.7m; • DSTV will have 2nd largest loss in ADSpend income of ± R440m (2012), followed by eTV (R300m); • Cinema stands to lose potentially R114.5m and OOH companies stand to lose R76.3m in billboard income; • Commercial regional radio stations will loose R55.2m, and metropolitan commercial radio stations R44.6m; • Media owners SABC, Multichoice Africa, eTV, Times Media Ltd, Media 24 and Radmark were biggest recipients of ATL advertising income from alcoholic beverages in 2012  will be mostly affected.

Total direct corporate sponsorship spend in SA has grown from R63 million in 1985 to over R4.3 billion in 2011. Leverage spend has been estimated to total a further R2.5 billion, which implies a total sponsorship industry capitalisation of approximately R7 billion.

Sporting codes supported by the industry The following list highlights some of the national sporting codes and programmes that would be directly affected by a potential loss of sponsorship funding from the alcohol industry: 1. Soccer: a) Bafana Bafana; b) South African Football Association (SAFA); c) Domestic Premier Soccer League; d) Regional Soccer Development League; e) Stadiums, especially those built for the 2010 Soccer World Cup, which may be at risk of turning into “white elephants”. Already these are under significant financial distress, the potential loss of sponsorship funds from the liquor industry would exacerbate this. 2. Rugby: a) Springboks b) Tri-nations rugby tournament c) Currie Cup and Super 15 d) Varsity Cup 3. Cricket a) Proteas Test Cricket b) On-day Cricket team

Sporting codes supported by the industry • 4. Sports Development Programmes • Domestic sports development benefits from sponsorship deals from the alcohol industry. The liquor industry’s sponsorships contribute approximately R40 million per annum to major sporting codes’ development programmes. A certain portion of the money is also allocated to development and filters through to the grassroots sports level. • 5. Department of Sport • The potential loss of sports sponsorship could result in increased reliance on governmental funding given the negative socio-economic ramifications of weakened developmental structures in the major sporting codes. This will induce strain on the Department of Sport if the financial loss from a potential loss of funding from the liquor industry is not replaced by another industry. • 6. Other small/peripheral sporting codes • The primary risk from a potential alcohol sponsorship ban on domestic sports development is likely to be concentrated on peripheral sporting codes benefiting from liquor industry funding support. While these may not carry the financial clout of the major sporting codes, given the relatively lower inherent return on sponsorship investment, there is a risk of total collapse in the structures within these peripheral sporting codes – an examples is: • the Dusi and Fish River canoe marathons • J&B Met (Horse racing)

Economic impact of a ban • The potential ban will have an (unintended) impact on the rest of the economy through the advertising broadcasting industry (especially television and commercials), sport sponsorships and advertising agencies; • It is estimated that the GDP could be reduced by 0.28%, or R7.4 billion (in 2011 prices). Employment could be reduced by 11 954.

Some of the stakeholder concerns about advertising • Volume and frequency of alcohol adverts: the actual quantity of adverts placed in various media, particularly television is of serious concern. The prevailing view is that the high volume of alcohol adverts on TV during family viewing times (between 18h00 - 21h00) should be curbed; • Content of alcohol adverts: the link and use of celebrities and/or successful individuals when advertising alcoholic products has unintended consequences as it creates an illusion for success. These adverts resonate more with the poor and the youth as they regard drinking alcohol as cool and that it could lead to business and/or social success or acceptance;

Does advertising of alcoholic beverages influence consumption? • Literature on influence of advertising on alcohol consumption is lengthy & mostly contradicting. • Balance of global evidence is contradictory & inconclusive; • Does not support a direct causal relationship between overall alcohol marketing and aggregate consumption or harmful drinking patterns (whether chronic or episodic) • Alcohol is a "mature" product category in that consumers are already aware of the product and its basic characteristics • Overall consumption is not affected significantly by advertising specific brands; • Instead of increasing total consumption, the objective of advertisers in this mature market is to encourage consumers to switch to their brand and create brand loyalty; • Effective advertisers gain market share at the expense of others, who lose market share. They do not focus on increasing the total market for the product • Majority of alcohol consumed worldwide is not advertised • Insufficient evidence to support an association between advertising and levels or patterns of drinking; • Determinants of individual behaviour are difficult to establish. Factors are numerous and their interrelation complex; • Many scientific studies conclude that parental education, poverty, unemployment and peer pressure are much more influential. • There is no statistical relationship between per capita alcohol consumption and per capita advertising expenditure on alcoholic beverages.

Does advertising of alcoholic beverages influence consumption? Source: Econometrix Economic Impact of an Advertising Ban on Alcoholic Beverages Study - June 2013

Will an ad ban be effective to reduce consumption/harmful use? • Virtually all scientific evidence demonstrates that alcohol bans have NO or little impact on overall alcohol consumption; • Restrictive bans on alcohol advertising in many countries have not rendered the desired result, i.e. lowering adult per capita consumption; • There is more than sufficient inconsistency, as well as a strong body of research denying the strength of any link, that it would be an incorrect policy decision to introduce a comprehensive ban on alcohol advertising in SA, • Total ban likely to have limited impact on total real consumption and probably no impact on per capita consumption; • Other policy measures that could be more effective (according to international research) are: • Health sector response; • deter drinking and driving; • reduce the availability of alcohol by restricting and/or regulating the sale of alcohol to the public; and • reduce the affordability of alcohol through taxation and price.

Concluding remarks • Both government and industry agree that alcohol abuse is at unacceptable levels; • Virtually all scientific evidence demonstrates that alcohol bans have NO/little impact on overall alcohol consumption; • Restrictive bans on alcohol advertising in many countries have not rendered the desired result, i.e. lowering adult per capita consumption. • There is more than sufficient inconsistency, as well as a strong body of research denying strength of any link, that it would be an incorrect policy decision to introduce a comprehensive ban on alcohol advertising in SA • Total ban is likely to have limited impact on total real consumption and probably no impact on per capita consumption. • Set of carefully targeted policies, restrictions, and laws covering a range of measures far wider than advertising would be preferable, should be introduced and carefully regulated & monitored; • Status quo cannot remain, we will be remiss to ignore the strong voices from different constituencies • We are open to discuss and make concessions on addressing abuse • This is what we have done and there’s scope to do more – we won’t run ahead of government • Over and above the alcohol reduction harm programmes, we have implemented some initiatives such as the removal of billboard in highly impoverished areas but we cannot unilaterally implement these without engagement with Government

Concluding remarks • WHO • With regard to the advertising of alcoholic beverages, it should be noted that the WHO recommends the regulation (not necessarily banning) of advertising in their “Global Strategy to Reduce the Harmful Use of Alcohol”; • Developing effective partnerships • Governments, public health organisations, and the alcohol beverage industry agree that there is much more to do in the fight against the irresponsible consumption of alcohol beverages. There is much common ground among these various stakeholders that can form the basis of an effective partnership. • Targeted interventions • There is a need identify the particular individuals, populations, and settings in society where harmful drinking patterns exist and focus exclusively on them, rather than on society at large. These interventions can be tailored to individual, societal and cultural differences. By targeting those with problematic drinking patterns, and understanding the factors leading to their inappropriate alcohol consumption, alcohol abuse and its consequences can be significantly reduced.

Thank You Last updated: 2 January 2020

PRESENTATION TO THE SPORTS & RECREATION PORTFOLIO COMMITTEE