Tag Archives: ban

Nepal bans import of liquor, among other items, to rein in economic crisis

India’s neighbours – Sri Lanka and Nepal – are in deep economic crisis. The crisis is a bit similar as both countries largely depend on revenues from tourism and that was severely affected due to the pandemic. Unlike Sri Lanka, Nepal is not that debt-ridden. Nevertheless, the Himalayan country is witnessing unprecedented inflation and its economy is just rolling down the mountains with no immediate relief in sight.

Hence, the Nepal Government headed by Sher Bahadur Deuba has initiated certain measures, including ban on imported cars, liquor, playing cards and nearly a dozen other “non-essential” goods to address the widening trade deficit and declining foreign currency reserves. Nepal’s central bank has said reserves are only sufficient to cover just over six months of imports, down from 10 months in mid-2021. The Finance Minister Janardhan Sharma has stated that the situation is nothing like Sri Lanka’s and that Nepal is in a “slightly better position” than Colombo in terms of production and revenue. He admitted, that although the forex reserves are stressful due to escalated imports of luxury items, Nepal is not burdened with foreign debts like Sri Lanka. Nepal’s trade deficit rose by nearly 34.5% on-year to $9.35 billion in mid-March, while forex reserves have fallen below $10 billion. Hence, the ban on some imported goods, including liquor.

Shri Sher Bahadur Deuba

“This is a short-term measure taken to prevent the economic condition of the country from going bad,” said ministry joint secretary Narayan Prasad Regmi. “The government has decided to curb imports of certain luxurious and non-essential goods as the recent surge in imports has put pressure on our economy.” The central bank had already verbally directed private lenders not to issue letters of credit for luxury goods earlier in April.

India major exporter to Nepal

In 2020, Nepal imported $5.58M in hard liquor, becoming the 142nd largest importer of hard liquor in the world. In the same year, hard liquor was the 228th most imported product in Nepal and the imports are primarily from India ($2.64M), Singapore ($1.76M), United Arab Emirates ($786k), United Kingdom ($169k), and Malaysia ($140k).

While emergency restrictions on imports of high-end vehicles might temporarily bolster Nepal’s balance of payments, the fact that imported wines and spirits represent less than 0.2% of the country’s total import value suggests that the ban will have negligible economic impact, state some experts. The heavy taxes on imported wine and spirits generate almost $55 million in the form of excise and customs,

The fear is that ban on imported liquor may lead to ‘bootlegging’. Nepal has a significant informal alcohol market. According to research by the World Health Organisation and the Nepal Health Research Council, at least 66% of all alcohol consumed in Nepal was either illegal or home-produced, making for an illicit market that is more than twice the size of the legal market.

Experts said that prohibiting the import of international spirits and wines will only compound this problem, increasing the share of illicit alternatives through smuggling across borders into Nepal and counterfeiting of popular, premium international brands.

Local brews

Locally, Nepal is known for some brews that mostly are made in homes. Rakshi is the Nepali term for a traditional distilled alcoholic beverage. Its alcohol content is around 45%. That is to say as a whiskey. Nepalese drink this homemade drink during the festivals.

Production and consumption of alcohol is controlled by the Madira Aain 2031. License is required to sell alcohol. However, it permits brewing and consumption for household purposes without a license. Gongo is made from scraps of ugali and maize, fermented over several days, and then distilled through a jerry-can of cold water into a soda bottle. This has hints of ethanol, but surprisingly palatable.

Tongba is the drink of the Limbu people of Eastern Nepal and also referred as Tibetan Hot Beer. And then there is Chaang which is made from a selection of cereals.

In 2020, Nepal exported $385k in hard liquor, making it the 123rd largest exporter of hard liquor in the world. During the same year, hard liquor was the 106th most exported product in Nepal. The main destination of hard liquor exports are to Japan ($231k), South Korea ($64.1k), Hong Kong ($53.6k), Macau ($20.4k), and Belgium ($13.5k).

The fastest growing export markets for hard liquor of Nepal between 2019 and 2020 were Macau ($20.4k), South Korea ($18.4k), and Japan ($8.41k).

ASCI bans surrogate advertising in IPL

The Advertising Standards Council of India (ASCI) banned surrogate advertising of liquor during India’s showstopper event – Indian Premier League 2021 which however, got truncated, due to some players and franchise staff testing positive. Talks are on to hold the unfinished spectacle in the United Arab Emirates, like it did in 2020 without crowd attendance, to be viewed on a broadcast platform.

It was during 2020 IPL that surrogate advertising was active on television and digital medium, particularly OTT (over the top), the latter in the absence of clear guidelines. “The IPL broadcaster for TV has confirmed to the ASCI that all advertisements are checked for CBFC clearance so that they are not in violation of the Cable Television Networks (Regulation) Act, 1995 (CTNR). Keeping that in mind, the ASCI processed complaints on advertisements appearing in OTT, digital and print media,” ASCI said. The association suo motu took up 14 complaints and some of the advertisers withdrew the ads.

Brand extensions have some leeway

The CTNR rules prohibited the direct or indirect advertising of cigarettes, tobacco products, wine, alcohol, liquor or other intoxicants in 2009. The Information & Broadcasting Ministry, however, allowed advertisements of products even if they shared a brand name with a liquor or tobacco product so long as it wasn’t a manifestation of the prohibited product. Advertisement of brand extensions of liquor and tobacco products is permitted under CTNR, provided the product sold under the brand extension does not make direct or indirect references to the prohibited product, it is distributed in reasonable quantity and is available in a substantial number of outlets, and the proposed expenditure on the advertisement of the brand extension product is not disproportionate to the actual sales turnover of that product.

ASCI guidelines for brand extensions

The Advertising Standards Council has ‘Guidelines for qualification of brand extension product or service’ wherein for an advertisement to qualify as a genuine brand extension advertisement (by implication, not surrogate), the in-store availability of the product sold must be at least 10% of the leading brand in the product category or sales turnover of the product must exceed `5 crores annually or `1 crore in the state where the product is distributed.

Age-old question, whether to allow liquor advertising or not?

However, the question that keeps raking up is an age-old issue – whether to allow liquor advertising / surrogate advertising or not? And the topic is universal leading to unending debates. Across continents, there are countries where liquor advertising is allowed and then there are as many countries that have banned / restricted advertising of alcoholic beverages. In the United States, spirits advertising has self-regulatory bodies that create standards for the ethical advertising of alcohol. In the UK, advertising for alcoholic drinks follows a code enforced by the Advertising Standards Authority, while the packaging and branding of the products is subject to self-regulation. In Thailand, alcohol advertisements are allowed but with a warning message. In South Korea, public advertising is allowed only after 10 p.m. In the Philippines, alcohol advertising comes with a disclaimer ‘Drink Responsibly’. In India, liquor advertising was banned after the Ministry of Health found that cigarettes and liquor had adverse effects on a person’s health. However, advertisements for liquor brand extensions can run on television only if they have a certificate from the Central Board of Film Certification. That led to the companies (manufacturers and also advertising agencies) becoming innovative with ‘surrogate advertising’ wherein unrelated products with the same brand name is manufactured / advertised and sold, only to ensure that the liquor brand name stays right on top of consumers’ minds. Unrelated products include mineral water, music CDs, soda, sports accessories and anything that can be advertised.

Active on digital media

The question here is when liquor companies are active on social media which is a major influencer, an indisputable force and not to mention its enormous reach, the whole idea of banning on OTT and television smacks of hypocrisy. It is indeed paradoxical that excise which is one of the top revenue earners for most states, going up to 15 % of the overall revenues, is not allowed to be promoted. There is a school of thought that believes if a product is allowed to be manufactured and sold, it should be allowed to be advertised, but that is over simplification as it will certainly be like opening up the Pandora’s Box.Gokul Krishnamoorthy who worked with an agency that handled United Breweries in an opinionated article in the Financial Express says “While ASCI banning surrogate ads by liquor brands during the curtailed IPL 2021 was a welcome move, it prompted a question in many minds. What explains the existence of a team called ‘Royal Challengers Bangalore’? One can’t help but remember that the current captain of the team Virat Kohli is idolised by a young boy in a health beverage commercial, among many others. Royal Challenge is a brand of whisky owned by United Spirits, which also owns the Royal Challengers Bangalore cricket team. If scale of presence, volume of advertising, market share and the likes are the key metrics by which one decides whether or not an alcohol brand can advertise its extension, then Royal Challengers Bangalore has no problem at all.” He goes on to add “The only seeming solution then, albeit rather simplistic and overarching, is that if a brand is present in a category where promotion is banned, it should not be allowed to promote itself in any context. It should be denied the right to promotion, whether for its shared corporate brand, for its extension, for its event, for its cricket team or whatever else.” Since such conundrums exist, there are those who feel that we need to shed this hypocrisy and accept that people do drink and reaching them is a legitimate part of a company’s business plans. The companies should be allowed to promote safe, moderate and responsible drinking. In states where there is prohibition this issue does not crop up at all. With digital media coming into play, some players have been advertising brand extensions as the CTNR does not apply to advertisements over the internet. This is changing as we have seen the government bringing social media under control. The digital medium is pretty nascent and governments are grappling with policies to rein in the medium. Indian liquor companies have been using social media to promote their brands. The UB Group recently tied up with a digital content company which produced a web series titled ‘Pitchers’, a five-part series on four friends trying to launch a start-up. With over 10 million viewers, the show got a rating of 9.7 out of 10 on internet movie database website, making the new concept of advertising, going beyond surrogate advertising. As rules become stricter, liquor brands will look at different channels – events, experiential, branded content and in-film, like ‘Pitchers’. As manufacturers need to advertise, one way or the other as to get their products sold, they have been innovative in how to get the message across.