The World Cup business opportunity

By Stephanie Jacob

Along with the battles on the field, many companies and brands will also be competing off it to get as much exposure from the upcoming Fifa World Cup as possible – in the hope that it will boost both sales and brand recognition. The tournament is as much a sporting event, as it is a business opportunity with millions in revenue up for grabs.

____________________________________________________________________

The nature of the Fifa World Cup has changed significantly since the inaugural tournament kicked off in Uruguay in 1930.

Then there were only 13 participating teams, four from the European continent, seven from South America, Mexico and the United States. Out of the four teams from Europe, three made the ocean voyage in the same boat. En route to Uruguay, the boat called at Rio de Janeiro to pick up the Brazilian team.

Although being an invitational tournament rather than one based on qualification, even getting these many teams (especially from Europe) had been a task in itself. At that time many players were not full-time footballers and could not afford to leave their jobs for such a lengthy period of time.

All those years ago, the sport of football was a very different prospect. Much has changed in the 84 years since then and now. When the Fifa World Cup kicks off in just under 10 days, there will be 32 teams playing – each one coming off a lengthy qualification rounds and all wanting very much to be there.

Teams will consist of the best footballers in the game, most if not all will have no job other than being a football player and many will be multi-millionaires. Quite a number of the teams will also probably fly in on their own chartered planes.

Some things though might not be so different; in 1930 a beverage company called Coca-Cola provided its products as refreshments for fans in Uruguay. Come June 12, 2014, they will be among the sponsors again – though it is probably safe to say that several zeros has been added to Coke’s marketing budget since then.

This year’s World Cup will be the 20th time the tournament is played and it has grown from just being a sporting event.  Although centred around a sport that is unfussy enough to be played on the streets or in the local playground, its premier tournament is now also a business opportunity worth millions (if not billions) of dollars.

It is so widely followed and recognised, that there is barely a brand or company in the world that has not jumped on the advertising and sponsorship bandwagon (officially or unofficially) to benefit from the exposure to the world’s most watched and followed sporting spectacle.

Why sponsor the World Cup?

German sports brand Adidas has been an official Fifa sponsor since 1970, and recently extended its partnership with the association till 2030 – which will see them sponsor four more World Cups.

Along with providing the official uniforms for the tournament’s volunteer workers, Adidas’ contract with Fifa also allows it to provide and brand a key component of any football match – the ball.

Come Brazil 2014, Adidas’ brazuca football will be at the feet of the world’s best footballers such as Cristiano Ronaldo and Lionel Messi. It is a privilege that is believed to cost the company US$100 million (RM322.95 million) per every four year World Cup cycle (the exact value of the sponsorship deal has not been disclosed by either Adidas or Fifa).

But the return on that might be much more, because equally as important will be the fact that the brazuca ball will also be at the feet of footballers across the globe as fans try to get a feel of football’s premier competition.

Adidas is expecting to hit two billion euros (RM8.8 billion) in sales in 2014, up from the 1.5 billion euros seen in last year boosted by sales related to the World Cup. Adidas will be also be marketing replica football kits, as the brand sponsors several big name stars and nine of the national teams participating in Brazil. It will be hoping that those on its roster will put in exciting displays, and this will lead to fans purchasing their favourite team or footballer’s jerseys.

Increased sales and intangible benefits

While Adidas is the official Fifa sporting brand sponsor, it is not the only sports company that will go all out to showcase its products this summer.

Puma another German-based sports brand will also have a significant presence in Brazil through its sponsorship of eight participating teams — Italy, Switzerland, Algeria, Cameroon, Ghana, Ivory Coast, Chile and Uruguay.

In commenting on its investment commitment to the World Cup, Tim Stedman from Puma’s Global PR division said “our investment is sizeable, comprised of sports marketing contracts with federations (national football associations) and endorsements with players.”

Puma will be looking to derive returns “through the global sales of replica shirts and licensed products that have considerable value in the lead up to and during major tournaments such as the Fifa World Cup,” he added.

In addition to sales coming as a direct effect of advertising and marketing efforts, Stedman said that Puma’s sponsorship will also have what it commonly known as the ‘halo-effect’ on the company as a whole.

According to Investopedia, the ‘halo effect’ is marketing lingo used to “explain the bias shown by customers towards a certain product, based on a favourable experience with other products made by the same manufacturer.”

A basic example is a person might buy a Puma made Italian replica jersey during the World Cup period after seeing it being worn by his favourite football player. Following this purchase, the same individual might also buy a pair of Puma running shoes because he is impressed with his earlier purchase.

But it is not just sports companies that are trying to get a piece of the global appeal that comes with being associated with the World Cup. Also among Fifa’s top tier sponsors are Sony International, Emirates, Kia and Hyundai Motors and Visa. All have contracts that at least take them up to the 22nd edition of the World Cup in 2022.

Although all produce goods and services not essential to the game of football, the companies believe that having a visual presence at the World Cup will bring them invaluable brand recognition.

These companies believe that by sponsoring a sport with such extensive appeal across the world, they can develop a connection with customers (both current and prospective) by portraying or creating a bond of shared passion for the sport.

Commenting on the value of sponsoring the World Cup, Naza Kia Malaysia’s chief operating officer of Syed Abdull Hafiz Syed Abu Bakar noted that the “returns were great but mostly intangible.”

Explaining the benefits of Kia’s sponsorship, Syed Abdull said “as the global automotive partner, we are able to create extraordinary opportunities which we pass on to our customers and potential customers. By making this emotional connection we become part of an aspired lifestyle. This in turn gives us an added advantage in a person’s brand choice to fit their identity and lifestyles.”

“Another is elevating our brand recognition. This association with the world’s biggest sporting event has enabled us to tap into the public consciousness in a way that has been immensely effective,” he added.

Aligning itself with the World Cup also allows the brand to reach a much wider audience, some of whom may not have been familiar with it before. It is for this reason Kia goes beyond the ambit of the automobile industry and into sports, which has such a broad appeal.

By leveraging upon its partnership with Fifa, Kia is also able to offer unique experiences in its marketing campaigns, which it believes in turn will help it increase the effectiveness of its marketing efforts.

One of the programmes being run in Malaysia is the Fuleco Friend Search, which offers a Malaysian child the unique opportunity to walk out with the World Cup mascot at the start of one of the semi-final matches. Kia is also running the Champs to Rio futsal tournament, where the winning team will be sent to Brazil to compete in a global futsal tournament and get to watch the World Cup live.

Fifa also wins big from these deals

Fifa itself is also benefits substantially from its partnerships with these global brands. It is estimated that the association made about US$1 billion in revenue from partnerships with these global brands in the 2010 World Cup in South Africa.

It is fiercely protective over the brand recognition it and its competitions have, saying “key brand assets such as the Fifa World Cup trophy and the official emblem are universally known and the great value they represent is the cornerstone of Fifa’s commercial programme.

“Therefore, investing time and resources to protect the brand is of paramount importance to Fifa in order to secure the revenue streams which fund Fifa’s football and social development initiatives as well as its men’s, women’s and youth competitions,” it added.

The association has a tiered system of sponsors, each tier comes with certain rights and benefits. There are three tiers, Fifa partners, Fifa World Cup sponsors and national supporters. In the first tier are global companies such as Adidas, Coca-cola, Hyundai and Kia, Emirates, Sony and Visa – these companies are allowed to put their branding on all Fifa tournaments and activities.

The second tier is specific to the tournament, these usually include a mix of global companies and local companies. Among those sponsoring the Fifa World Cup in Brazil are beer company Budweiser, lubricant company Castrol and Brazilian telco company Oi. The third tier meanwhile is made up of local companies and Fifa affiliates.

In Brazil, the association is expected to rake in US$1.3 billion in revenue from these marketing and sponsorship deals. This coupled with substantial income from TV broadcasting rights, is expected to generate close to US$4 billion in revenue for Fifa alone from the World Cup

Tomorrow: Corruption rocks the World Cup

Yesterday: Should Malaysia bid for the World Cup