The Advertising Standards Council of India (ASCI) last week announced updated guidelines for ‘Qualification of Brand Extension – Products and Services’ under the restricted category prohibited from advertising by law.
ASCI’s existing guidelines mandated brand extensions to cross certain thresholds of business, investment or distribution for them to be considered genuine. Specific criteria for advertising spends in relation to turnover of the extension have now been added.
As per the new code for brand extensions, advertising budget for genuine brand extensions of restricted master brands has to be commensurate with the extension’s sales turnover. The proportions for the ad budgets are capped at 200 percent (ie. not more than 200 percent) of the turnover in the first two years of launch of the extension, followed by 100 percent (ie. not more than 100 percent) of revenue in the third year, 50 percent in the fourth year and 30 percent thereafter. The advertising budget includes media expenditure across all forms of media in the previous 12 months, payments to celebrities for brand endorsements on an annualised basis, and the annual average money spent on advertising production for the brand extension in the previous three years.
If a brand extension of a parent brand that is under one of the restricted categories don’t meet the updated qualifications, ASCI will not consider it to be a genuine extension, but a surrogate created to advertise a restricted category. ASCI’s updates will contribute to maintaining the integrity of advertising in India, upholding ethical standards, and protecting consumers from misleading practices.
BrandSutra View:
ASCI’s efforts over years as a self-regulatory body has been largely appreciated by industry watchers. Yet on the issue of surrogate ads, one felt that it needed to do more. Its recent guidelines that mandated brand extensions to cross certain thresholds of business to qualify as genuine and not be deemed surrogates was noteworthy and a step in the right direction. That said, it allowed for workarounds by alcohol brand extensions and we saw several of them advertising on high impact properties like cricket matches even as the guidelines were announced. The updated guidelines linking ad spends to sales turnover is a welcome move that deserves to be lauded. This will mean that to advertise at scale, brands will need to create an extension at scale. The linkage of ad spend to turnover, if implemented with rigour, will ensure that we will see very little of alcohol brand extensions in the near term. Theoretically, scaling a packaged water (or some other) brand extension is not impossible for an alcobev major. But, that will mean creating a real line of business from that extension. Given that alcohol brands cannot otherwise advertise, we might see such extensions become real businesses for brands in the longer term. Alcohol brands need to get creative. Perhaps we will see more IPL teams renamed to help recall of alcohol brands.
