The Advertising Standards Council of India (ASCI) has updated its 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 spends have to be in proportion to sales turnover of extension: ASCI has mandated that the 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.
This measure will ensure a balanced approach to advertising investment in alignment with the extension’s sales performance over time.
- Treatment of Variants Under Brand Extension: For clarity, any variants launched under the brand extension will not be considered as a fresh extension. The original date of the first brand extension will apply.
- Certification by Reputed CA Firms: To ensure genuine compliance, all evidence supporting the brand extension’s qualifications for advertising must be certified by a reputed and independent CA firm.
- 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.
These modifications specifically target brand extensions associated with restricted categories such as liquor and tobacco, informed an official statement.
Manisha Kapoor, CEO and Secretary General, ASCI, said, “As part of our ongoing commitment to consumer protection and ethical advertising, ASCI has introduced these new additions to the Brand Extension Guidelines. These measures are essential to prevent the misuse of brand extensions as surrogates for advertising in restricted categories. We believe that these guidelines will strengthen the integrity of advertising in the industry.”
ASCI had in place specific guidelines for brand extension, which were modified a few months back. It was felt necessary to further strengthen these in view of mega-budget celebrity campaigns during high-profile sporting events in India. The recently concluded World Cup saw a slew of such advertisements.
