The Loss of Alcohol Sponsorship won’t be the end of Formula 1

There are rumblings that the Loi Evin, a ban on alcohol sponsorship in France, could be expanded across Europe. Talk about expanding the law has been going on for years, with the French – naturally -  leading the calls for the Europe-wide ban.

F1 Confidential Johnnie Walker Monaco

Many news stories have been printed about how bad a ban on alcohol sponsorship will be for Formula 1. I should point out that contrary to some people’s beliefs, this is not a problem of the same scale as the ban on tobacco. Alcohol sponsorship in Formula 1 doesn’t contribute anything like what tobacco did. In fact if we’d had this discussion a couple of months ago, before Martini & Smirnoff entered the sport, it would pale into near insignificance.

Current alcohol sponsors in F1: Johnnie Walker (McLaren & FOM), Martini (Williams), Smirnoff and UB Brands (Force India), Jose Cuervo (Sauber), Veuve Clicquot (Ferrari) and G.H.Mumm (FOM). The total spend across all teams and FOM comes to around $60m, with Johnnie Walker contributing the most at around a third – but most of that goes to FOM for circuit signage.

Compare that with tobacco sponsorship at the time, that was in the region of $250m. Of course this was at a time when F1 team budgets were much lower – so in percentage terms tobacco sponsorship was a great deal more important to teams than alcohol sponsorship is for teams in 2014.

The main teams to be affected by a ban would currently be Williams, Force India and McLaren. Of course all the teams receive a share of FOM’s revenue, however given the size of the FOM agreements we’re talking about, the monetary loss is likely to be in the mid-six figure range per team. So in the scheme of things, not a great loss.

One point that should be made is that any ban on sponsorship, will likely not be a ‘sponsorship’ ban, but more likely a ‘brand’ sponsorship ban. That’s to say that sponsors will not be allowed to benefit from on-car, on-driver or circuit branding (anything visible on television), but can benefit from other rights and benefits such as hospitality experiences and promotional rights. Team’s can still generate significant revenues from brands for rights such as access to drivers.

To provide an example, Johnnie Walker’s sponsorship would likely still be successful without their on-car and on-driver branding as the majority of sponsorship activity is off track / off broadcast – parties, VIP experiences, on-pack promotions, on & off-trade point of sale activity, and new/social media communications. The branding helps them generate greater brand association.

F1 Confidential Johnnie Walker

In the case of Johnnie Walker they have been involved in F1 for a long time, so will benefit from legacy brand association for years to come, even if the brand isn’t present. E.g. many people still believe Marlboro is still on the engine cover of the Ferrari years after it was removed.

The difference comes when a new alcohol brand wants to enter the sport for the first time. They will naturally have to work harder to create that brand association. That said there is plenty they can do that doesn’t include in-broadcast branding to create this association.

Summary

Yes Formula 1 will suffer if an alcohol ban is imposed, but it is not of the scale or importance of the tobacco ban. Sports such as football will face a much greater problem in trying to replace those lost dollars.

Something everyone should be aware of though, is the habit for people to move onto the next thing. Tobacco sponsorship is banned, alcohol may be banned in the future, but what is next in the cross-hairs? Fast food? Sweets and confectionary? F1 has adapted well to change in the past, and it will continue to do so in the future. Ultimately it (and the teams) have to in order to survive.

7 thoughts on “The Loss of Alcohol Sponsorship won’t be the end of Formula 1

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  6. Sauber are still sponsored by Cuervo Tequila!
    I’m curious whether there is a way to measure the impact of the legacy effect of sponsorship? Some sponsors I’ve spoken to say that there isn’t a definite way to measure the impact of the sponsorship (esp. with sales of a product) after the brand sponsorship has ended. So would it just be the brand image that stays associated with F1 like Marlboro’s association with Ferrari?

    • Amended, thanks Deepali! Serves me right for trying to remember them all off the top of my head – I’ve even got a list of sponsors on the blog (although it needs updating!). Very busy few months.

      There are ways to track this (within reason), however in order to draw strong enough conclusions the brand would have to have been measuring their sales during the partnership – to relative accuracy. No matter what brands say, I’d be surprised if the number of brands tracking actual sales hit double figures (actually I’d be surprised to hear if more than 4-5 were!) It’s something all consumer brands say they track, but when asked to display the data, they don’t actually have the numbers.

      Tracking results is something I advocate strongly – as, how do you prove the worth of something otherwise?!

      In the case of Marlboro (as it’s been a few years since ‘official’ involvement) it may be possible to conduct consumer perception surveys that highlight an influence in sales. More commonly brands will compare sales during promotional periods – e.g. standard promotion Vs free gift Vs F1 promotion etc.

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