ASCI Strengthens Brand Extension Criteria To Curb Surrogate Advertising

The Advertising Standards Council of India further strengthened its brand extension guidelines, especially for restricted products like liquor and tobacco, keeping in view celebrity campaigns during high-profile sporting events in India.

ASCI has now added criteria linking advertising spends to the turnover of the new business, according to its statement on Thursday. This is in addition to existing guidelines that set thresholds of business, investment or distribution criteria for brands to be considered as genuine extensions.

Brand extension is when a company takes an existing brand name and uses it for a completely new product or category. The goal is to leverage the reputation and recognition of the master brand to boost sales of the new offering. At times, this is used as a way advertise restricted products, like alcohol, by advertising packaged water or club soda.

Here are the key takeaways of the new guidelines:

The money spent on advertising a new product under an existing restricted brand should be proportionate to the sales it generates. Such restricted brands cover liquor and tobacco companies that use surrogate advertising.

For such brand extensions, advertising budgets are capped at 200% of the turnover in the first two years of launch of the extension, followed by 100% in the third year, 50% in the fourth year, and 30% thereafter, according to the new guidelines.

The advertising budget includes expenditure across all forms of media in the previous 12 months, payments to celebrities 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 introduces different versions or flavours, they won't be treated as entirely new extensions. Instead, they will be considered part of the original brand extension.

For example, if a popular shampoo brand introduces a new fragrance or variant of the product, it won't be treated as a separate extension.

To ensure compliance with the guidelines, all evidence supporting a brand extension's qualifications for advertising must be certified by a reputable and independent chartered accountant firm.

If a brand extension doesn't meet the specified qualifications, the apex body for advertising in India will not consider it a genuine extension but a way to advertise a restricted category indirectly.

These measures are essential to prevent the misuse of brand extensions as surrogates for advertising in restricted categories, according to Manisha Kapoor, chief executive officer and secretary general of ASCI.