Tuesday, February 22, 2005
Trading Cigarettes for Alcohol
There is some evidence that cigarettes and alcohol are complements, so that some change that raises the consumption of one also will raise the consumption of the other. (For instance, Guinness complained that its sales fell when Ireland's public smoking ban went into effect; the econometric evidence is slightly ambiguous, however.) But when it comes to promoting the McLaren Formula 1 car racing team, there seems to be some substitutability. McLaren has been sponsored by tobacco for decades, most recently, by West cigarettes. But as EU tobacco promotion curbs come into effect, that sponsorship will no longer be tenable. Into the breach steps Diageo Plc, a major manufacturer of high-quality spirits. Come the Turkish Grand Prix in August, McLaren will be sporting liquor logos.
The EU's directive banning tobacco sponsorship is to be implemented in July, 2005, although there seems to be some ambiguity on that point, too. Tobacco companies were the first Formula 1 sponsors, and four of the ten racing teams still have tobacco sponsorship. While other liquor manufacturers have sponsored Formula 1 teams in the past, Diageo recently became the first alcohol purveyor to sponsor a NASCAR car.