In a move that will hit the advertising agencies and tobacco industry alike, the Cabinet today approved the introduction of the Tobacco Products (Prohibition of Advertisement and Regulation) Bill 2000, which seeks to put a ban on advertising and sponsoring of sports and cultural events by tobacco companies. Media companies too are proposed to be banned from advertising tobacco products.
Tobacco companies–cigarette, chewing tobacco and gutka–are known to spend close to Rs 250 crore on advertising in the mass media (print, television and radio) as well as on outdoor promotion, including sponsorship of sports and cultural events.
The three advertising agencies that are likely to take the biggest hit are HTA, Bates India and Lowe Lintas & Partners which handle the account of ITC, the country’s largest tobacco company. Out of the three, the Act is likely to hit Lintas the most which does the entire media buying, estimated at Rs 40 crore, for ITC. Also likely to be affected is the sponsorship to various sports events by ITC.
According to industry sources, the company spends Rs 17-20 crore on the deal with the Indian cricket team whereby the players sport its logo (the contract is for another two years), Rs 5 crore on sponsoring golf and another Rs 3.5 crore on tennis.
GPI spends Rs 2 crore on promoting the Four Square Rafting Tournament. Privately, cigarette companies admit that the Act will help large players with established brands.
It will make it very difficult for a company to launch rivals for strong brands. It will also act as an effective entry barrier for new entrants including overseas tobacco companies. In fact, one tobacco company disclosed that it was contemplating legal action against the government initiative.