The World: Russia takes a hard line on drink and tobacco

But tighter regulations will force advertisers to be more innovative when trying to reach consumers, Lucy Aitken writes.

It's hard to believe that Russia's ad industry is only a teenager.

Since the fall of the Soviet Union in 1991, it has ballooned to become Europe's sixth-largest ad market, worth nearly $5 billion.

Growth was up by 28 per cent in 2005, but figures for 2006 may well be affected by recent challenges introduced by the government. The Russian State Duma's revised Law On Advertising has toughened up ad regulations, and will force many clients to reconsider their communications strategies.

The law, passed on its third reading at the end of February, is most stringent on TV advertising, which accounts for nearly half of all adspend in Russia. From 1 July, TV ads must not exceed 15 per cent of daily broadcast time and 20 per cent in every hour, and ad breaks must not last longer than four minutes. From 2008, TV advertising will be cut by a further 5 per cent per hour.

Outdoor also comes under the cosh, with tighter controls on the placement of posters, and a complete ban on outdoor tobacco ads, effective from 1 July 2007. Ads promoting alcohol, pharmaceutical and gambling brands are also restricted.

What's more, "umbrella advertising" is no longer allowed. This is where, for instance, a vodka brand might make a small quantity of mineral water under the same marque as the vodka. A TV ad would then wax lyrical about the virtues of the "water" - for example, its purity and cleanliness.

Sergey Koptev, the chairman of the Leo Burnett Group in Russia, recognises that umbrella advertising was misleading for consumers, and that ads promoting alcohol and tobacco brands needed to be more tightly regulated in a country where the life expectancy for men is just 61 years.

Yet Koptev is fuming about how the new law was passed, not to mention the severity of the restrictions: "It turned out to be much tougher than what we were predicting and we are pissed off with the way it's happened. The most shocking thing was that we were not consulted."

Koptev predicts that small- and medium-sized advertisers will effectively be priced out of advertising on TV due to media inflation. Russia's booming economy has seen inflation levels of between 20 and 40 per cent, and Koptev thinks they may even nudge 50 per cent in the second half of 2006. "This is leading clients to reconsider all their media planning," he says.

Yet across the industry, there's a general consensus that there will be very little shift in media spending patterns because demand for TV advertising already tends to outstrip supply. In a vast country that spans 11 timezones and has a population of 141.5 million, TV is still the cheapest and most efficient medium for most brands.

"TV inventory will decrease, but one single commercial will have a higher impact, and that will appeal to big advertisers," Dmitry Dmitriev, the chief executive of OMD Group Russia, speculates.

Dmitriev believes that the Duma has clamped down on the ad industry in the interests of the Russian population. Russia assumed the G8 presidency for the first time in January 2006, and it will host the G8 summit in St Petersburg this July. He is convinced Russia is making more of a concerted effort to bring itself into line with its European neighbours in the G8, particularly on issues such as restricting alcohol and tobacco commercials, and advertising to children. Dmitriev sums it up: "It is a political decision, not a business one."

He recommends that agencies' time is best spent working out new ways to engage consumers, rather than railing against the law. Most agencies accept that the ad industry carries little sway with the powers that be anyway, particularly when compared with Russia's Titans in the energy industry. Dmitriev reveals: "We are meeting with clients to show them that we can promote brands in a more creative, entrepreneurial way." OMD has planned event-led marketing for Schwarzkopf's new hair-styling range, got2b, and a word-of-mouth "green" campaign for the mobile network MegaFon. The latter was shortlisted for a Cannes Media Lion category for purpose-built media last year.

If the new law can encourage advertisers to innovate, then perhaps it can be a positive force. Alexander Romanov, the chief executive of JWT/RAVI, believes some aspects of the new law should be welcomed. "There was too much clutter before," he says. "There was no regulation that the ads should be evenly spread, so some channels would put a lot of advertising in primetime. People were bored by long ad breaks that could last up to ten minutes."

Viewers were also fatigued by the tidal wave of beer commercials that appeared after 10pm. The Beer Limitation Law of 2004 prevented beer brands from advertising on TV from 7am to 10pm, so as soon as the clock struck ten, the floodgates opened. "Ad breaks became very ugly," Romanov reflects.

He remains sanguine. "There are regulations in every country. I can see a lot of extra work and unpleasant negotiations ahead, but inflation grows here every year, so we must plan our adspend much more carefully. Besides, if a rule is made, you have to follow it, especially if it's in the interests of the public."

Here in Russia, it seems that old habits die hard.

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