The National Football League is abandoning a long-held advertising ban on distilled spirits in a test that will run during the 2017 season, though the change is likely to be permanent.
For the first time, television networks will be allowed to air commercials for hard liquor, in a move to expand beyond the historical choices of beer brewers and automakers, according to The Wall Street Journal (subscription required). The ban had been the result of concerns regarding linking football players and teams with hard liquor and its potential effects on young fans.
This change does come with conditions, however. The NFL will only allow four 30-second distilled-spirits ads in each game, with no more than two in a given quarter or during halftime. Pregame and postgame shows will also be limited to two spots each. Players will be prohibited from appearing in liquor ads, and the ads can't contain any references to football. Each spot must include a "prominent social-responsibility message," and there can be no content directed at minors.
The NFL has been expanding its revenue base, even in the face of declining viewership. Pro football ratings fell by an estimated 9% for regular-season games and 6% for the postseason, but advertising revenue grew to a record $3.5 billion for the season, up 3% over the prior year. The headline-grabbing Super Bowl ads have the highest rates, at an average of $4.6 million for each 30-second spot.
The league is probably seeking to capitalize on changing demographics and societal trends, and that could spell trouble for brewers. Beer has gradually been losing market share to wine and spirits, though beer remains the preferred alcoholic beverage in the United States. According to a Gallup Poll from last August, 43% of Americans surveyed cited beer as their preferred alcoholic drink, followed by 32% for wine and 20% for liquor. But beer's prominence has eroded in recent years, down from 47% in 1992.
The trend to ditch beer is particularly prevalent among millennials. Beer was the preferred alcoholic beverage among 70% of 18- to 29-year-olds in 1992, but that figure had fallen to 40% by 2013, while wine and liquor have risen to 23% and 30%, respectively, according to research from Barclays.
The NFL's move in the midst of stalled sales of suds has probably blindsided brewers such as Anheuser-Busch InBev (NYSE:BUD) and Molson Coors Brewing Company (NYSE:TAP.A), which have become football staples with their game-day ads. The Budweiser Clydesdales have appeared in Super Bowl ads since 1986, and Bud Light is the official beer of the NFL until 2022, thanks to a six-year deal valued at $1.4 billion that includes 28 of the league's 32 teams.
Raise your glass
Diageo is one of the world's largest distillers and is best known for its vast selection of premium spirits that include Captain Morgan rum, Smirnoff vodka, Lagavulin scotch, and Tanqueray gin. Diageo has already been reaping the benefits of the trend toward premium beverages and the growing popularity of whiskey. Revenue for the previous six months grew 14.5% over the prior-year period, while operating profit increased 20% year over year.
Brown-Forman, distiller of Finlandia vodka, Canadian Mist whiskey, Herradura tequila, and the Jack Daniel's family of whiskeys, has been using innovation and creative flavors to drive gains. The company reported net sales that increased 4% in its fiscal second half, excluding the impact of exchange-rate differences. The recent introduction of Jack Daniel's Tennessee Honey and Tennessee Fire and other whiskey brands helped drive double-digit growth in its U.S. market.
NFL ratings will probably continue to feel pressure as the options for consumers' time increase in an era of video games, social media, and binge-watching. The league will seek new ways to boost revenue, even as its fan base continues to erode. The combination of the limited number of spots and increased demand could help keep rates flat or even higher in the face of decreasing viewership, so this is a good strategy by the NFL.
It could also spell more good news for distilled spirits, as beer gets sent to the showers.