With Germany and the world gearing up for the soccer championships, makers of everything from TVs to soft drinks are racing to cash in
Just weeks before the June 9 kickoff in Germany, World Cup mania already is spurring sales of a variety of products from TVs to cell phones to beverages, not to mention soccer jerseys and other sports-related items. Japanese electronics makers Matsushita, Sharp, and Toshiba (TOSBF) all have reported spikes in their most recent earnings -- thanks in large part to rising demand for flat-panel TVs from soccer fans. Sharp may even push up the opening of a new LCD TV factory, originally scheduled for October, so as not to miss out on the summertime sales bonanza.
It's all part of the build-up to the largest soccer World Cup ever. Soccer is the universal sport. It’s played in nearly every country on the globe. A cumulative 28 billion fans watched the 2002 World Cup 2002 in Korea and Japan, and FIFA officials expect 32 billion cumulative viewers to tune in to the upcoming month-long tournament. Vying for their eyeballs -- and their wallets -- are companies from Coca-Cola (KO) to Nike (NKE) to Samsung. Companies are expected to spend more than $1 billion on advertising -- not including sponsorship fees, and marketing and hospitality -- during the 2006 World Cup. "There is no real sporting event like this in the world in regard to massive global exposure," says Salvatore Galatioto, president of Galatioto Sports Partners, a New York investment firm. "It's going to spur sales of all kinds."
For the likes of Adidas and Nike, the World Cup is a bonanza. The two sporting-goods giants are waging their own competition off the pitch, launching their broadest and most comprehensive marketing campaigns ever. Germany's Adidas-Salomon (ADDYY) is shelling out close to $200 million, while Oregon-based Nike (NKE) is spending more than $100 million on various campaigns to peddle sneakers, soccer boots, jerseys, soccer balls, and T-shirts.
Although Adidas remains the global leader in soccer footwear with 38% of the market, according to NPD Sports Tracking Europe, Nike now controls 31% and is intent on supplanting the German company in the only athletic sneaker category where it is No. 2. That’s why Nike has spent billions since 1994 to grow what then was a miniscule $40 million soccer business to one approaching $1.5 billion in sales today. Part of Nike’s strategy has been to sign some of the world’s most celebrated soccer players, such as Brazilian star Ronaldhino, voted the world’s best player, to help spread the Nike message to soccer-obsessed young people around the globe.
Nike also has teamed up with Google (GOOG) to create the world's first social network for soccer fans, Joga.com. The site, which launched on Mar. 15, will roll out to 140 countries in 14 languages (see BW Online, 4/3/06, "Adidas' World Cup Shutout").
The marketing push is already paying off. Sources at Nike say sales of soccer gear are booming. Adidas, meanwhile, expects to ring up $1.5 billion in soccer sales this year, up from a previous estimate of $1.27 billion. The German giant is leaving nothing to chance: it continues to be one of the event’s official sponsors, which means its name will be plastered on perimeter boards on the soccer pitches at every stadium. It also will supply the match ball in all 64 matches. Adidas has bought up all of the billboards to blunt typical Nike guerrilla marketing efforts and it has livened up its advertising. Adidas officials say sales of the new World Cup soccer ball, called TeamGeist, have reached 10 million since December, and estimate they will sell another five million by the end of the year. "This is the biggest campaign we have ever done," says Adidas Chief Executive Herbert Hainer. "Our strategy is to dominate the World Cup."
For U.S. companies, the World Cup is a golden opportunity to build brand awareness abroad. Although the sport continues to gain popularity stateside, the U.S. fan base remains comparatively small. The 2002 World Cup final between Germany and Brazil attracted 1.1 billion viewers worldwide, but only about 3.9 million Americans tuned in, according to Nielsen Media Research estimates.
That huge international audience is the reason Anheuser-Busch (BUD) is spending more on World Cup advertising and marketing than it did for this year's Turin Olympics or the Super Bowl. "The power of the World Cup we feel helped grow the image and awareness of Budweiser globally," says Tony Ponturo, vice-president of global media and sports marketing for Anheuser Busch.
The brewer of Budweiser beer is just one of a list of U.S. giants that has shelled out between $40 million and $60 million for the privilege of becoming an official 2006 World Cup sponsor. Others are MasterCard, Gillette (PG), Yahoo! (YHOO), McDonald's (MCD), and Coca-Cola (KO). Being a World Cup sponsor can be lucrative if managed properly, marketing experts say.
Take MasterCard. As an official sponsor, MasterCard will be the only credit card accepted at any of the World Cup-sponsored stadiums and venues, says Jeffrey Bliss, president of Javelin Group, who was chief marketing officer for the 1994 World Cup in the U.S. MasterCard is guaranteed transactions at the 12 stadiums.
The same holds true for Coke, which will be the only cola sold at the matches. "It's a really good deal," says Bliss. So much so, that Fédération Internationale de Football Assn. (FIFA), the governing body of the World Cup, has upped the price of sponsorship to as high $200 million per company over eight years, say people familiar with the matter.
It isn't just sponsors that could score big from the tournament, though. Makers of mobile phone and service operators are rolling out new gadgets and tailored services for World Cup-mad customers. T-Mobile (DT), the "official mobile sponsor," is offering to beam World Cup video highlights directly to your mobile phone about one hour after each match.
Also, T-Mobile customers in Germany for the tournament will be able to gain access to essential travel, ticket, accommodation, police, and other practical information through their handsets. Samsung, the Korean phone maker, has created a limited-edition mobile phone, the E370, which is the British national team's official phone. It comes preloaded with the distinctive three-lions wallpaper, and video clips of soccer star David Beckham's free kicks and other glorious moments in English soccer history.
European, Latin American, and Asian broadcasters also are betting big on the World Cup. The matches will be televised in 189 countries, and U.S. sponsors will be directing their marketing dollars mostly to the key markets in Europe and Latin America. In contrast, the U.S. TV market is small but growing. ABC (DIS) and ESPN paid a combined $40 million for the U.S. English-language rights and will air all 64 matches.
The two broadcasters expect the tournament to draw a bigger audience in the U.S. this year. The reason: better viewing times from the German time zone (the previous tournament was co-hosted by Korea and Japan) and high expectations for the U.S. national team. The Americans reached the quarterfinals in 2002 and they are fielding an even stronger team this time. ABC and ESPN have reupped for eight more years, agreeing to shell out $100 million for the U.S. broadcast rights in 2010 and 2014.
The stakes are also high for Spanish-language broadcaster Univisión (UVN), which holds the Spanish-language World Cup rights in the U.S. The network paid $150 million for rights to the 2002 and 2006 World Cups and has sold about $130 million in ads for this year's tournament. Officials expect ad revenues to climb to $180 million and total viewership to reach 50 million, up from 35 million four years ago.
It's no wonder then that Univisión is shelling out $325 million for the 2010 and 2014 tournaments. Seems that for companies, the price of admission is getting richer every day.