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By Oren Laurent
President, Banc De Binary
Football fans will tell you that only one team can win the World Cup. That may be true – on the pitch. But in a world of corporate sponsorships and celebrity endorsements, the world of business and finance to which readers will be partial, this sporting event is driving up the stocks and profits of a wide number of enterprises.
As official clothing and ball sponsor, and creator of the Brazuca ball designed especially for the weather in Brazil, Adidas is the obvious name to mention here. It is the only company allowed to use the words “World Cup” in its ads and to have its logo across stadium signs. Yet it is certainly not the only winner. While Adidas championed the Argentinian player Lionel Messi, rival sportswear firm Nike placed their signature tick on the Jerseys and feet of international stars. Nike has included eight players in its animated advert and marketing efforts, including two Brazilians, significant because the host country will play a strong role in the company’s anticipated global growth.
Nike spent $876 mln on marketing in the fourth quarter of 2013. Don Blair, Nike’s CFO, explained that “demand creation investments behind the World Cup” accounted for the high spending. In other words, Nike is confident that the millions it has spent on marketing in connection with the tournament will have a long-term pay off as viewers and fans will purchase its goods. Spending in the current quarter is expected to be 30% higher than last year. On Friday, shares surged 3.23% and the trend may well continue if sales figures remain high. This type of growth is impressive for a company already as large and dominant in the market as Nike.
Other multi-national corporations are also cashing in. Coca-Cola, McDonalds and Visa, despite their product not being sports related, also made the strategic decision to become official sponsors of the tournament. They will be hoping that the marketing value and brand awareness deriving from sponsorship will give a short-term boost to sales and longer-term benefits to shareholders.
Indeed, the sports-marketing research firm, Repucom, showed that over $4 bln was generated globally for sponsors during the last World Cup in South Africa in 2010. Just this week, Visa confirmed the spend-trend. The Visa Europe UK Expenditure Index revealed that British consumer card spending in June was up 0.6% from June 2013, as soccer fans spent more in supermarkets and pubs during the Cup.
We’ll know on Sunday which team takes home the trophy, but for business sponsors, the results are already clear. There is no doubt that such a globally popular tournament has several commercial winners. We’ll see in the coming months to what precise extent the firms’ sales, branding, and shares will be boosted.
