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Coke's Going for the Gold

Posted by: Nanette Byrnes on September 03, 2008

There are many ways to measure the return on an Olympic sponsorship: incremental sales, increased brand awareness, perhaps new retail relationships. But when Coca-Cola announced its planned purchase of giant China Huiyuan Juice Group Limited for $2.4 billion just 10 days after the Beijing closing ceremonies, it’s reasonable to wonder whether the cola makers high profile backing of the games may have given it a business edge.

China is famously relationship-driven, and Coke’s early support of the games certainly has helped the company’s image. Coke’s estimated to have paid approximately $70 million for its spot as one of the International Olympic Committee’s top-tier sponsors of Beijing and the preceding winter Olympics in Turin. Most sponsors invest 3-4 times the cost of sponsorship in marketing that asset, says Greg Paull, principal of R3, a marketing consulting firm based in Asia which has done work for Coke. “Coke did very well – they started early, stayed focused and leveraged the right assets,” according to Paull. His firm’s research found that shortly before the games started 50% of Chinese surveyed could spontaneously name Coke as a sponsor of the games. 86% could do so when prompted.

But in the case of the Beijing Games, marketers also tapped into the great deal of nationalist pride they brought to China.

The benefits of that may be going far beyond the consumer market. “The goodwill Coke got itself not only permeates the consumer level but the government relation levels as well, and you’ve got to have that to do business in China,” says Terrence Burns, president of Helios Partners, a sports marketing firm, that does extensive business with host cities and sponsors.” You know they were selling more cans of coke, but from a brand play it was such a tsunami in every sense of the word, national pride and everything came together. The international partners benefit from that if they were out there and early.” To Burns, who set up this year’s Olympic sponsorship for mining giant BHP Billington, the Chinese games were as much about impressing the Chinese government as the man on the street. Mining isn’t exactly a standard category for the Olympics, but for BHP, which sells iron ore to every major steel plant in China, its $20 million investment was well returned in governmental good will.

Coke should hope for the same. To get the Huiyuan deal done, it still has to jump through several governmental hoops, including passing a new anti-monopoly law. For China, this would be the fifth largest foreign investment in its history according to Thompson Reuters. The four ahead of it were all commercial bank deals, so this would break some new ground. (By comparison, the largest Chinese investment in the US was the $5 billion piece of Morgan Stanley China Investment Corp. lat December. The largest US deal ever was back in 1999 when the UK’s Vodafone bought AirTouch for $65.8 billion, according to Thompson Reuters.)

A spokesman for Coke, which has been in China since 1979, says the consumer was the primary focus of the company’s Beijing sponsorship. But if it got them some governmental goodwill, that couldn’t be bad.

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How can you manage smarter? BusinessWeek writers Nanette Byrnes, Patricia O’Connell, Emily Thornton, Matthew Boyle, Michelle Conlin and Diane Brady synthesize insights from the brightest business thinkers, critique the latest management trends, and comment on leaders in the news.

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