Hollis Sponsorship Bulletin

A week after Toyota announced that it was pulling out of Formula One, the post-mortem has begun into what exactly went wrong – and what the implications are for the circuit.

A lot of attention has focused on the strategic mistakes that the Japanese team made during its eight years in the sport. But the reality is that F1 is an expensive luxury when your parent company is battling to survive a global recession. With Toyota’s investment in F1 put at around £200 million a season, it was an obvious cutback at a time when the parent company was reporting its first-ever financial loss.

Toyota – whose primary sponsor was Panasonic – isn’t the only Japanese company to pull back from motorsports in the last year. At the end of last season, Honda also withdrew from F1 – despite grand ambitions to promote its green credentials. Subsequently, we have seen Kawasaki pull out of MotoGP and Subaru quit rallying. Just ahead of Toyota’s pull-out, tyre manufacturer Bridgestone also announced that it would no longer participate in the circuit.

Those high-profile departures speak volumes about the weakness of the Japanese economy. But it’s not just Japanese car companies which are reining in their spend. General Motors has pulled back in Nascar while BMW has also quit F1. All eyes are now on Renault – which is also poised to make a decision on its future involvement in F1.

Despite such setbacks, it would be wrong to write off F1 – which has a habit of defying expectations. While Japan has backed away from the circuit, there is plenty of support from China, Southeast Asia, India, Russia and, most importantly, the oil rich Gulf States. This is evident both in terms of new sponsors (eg MegaFon, The National Bank of Abu Dhabi and Lenovo) – but also in terms of the news teams and stadia which have been (or are being) developed. 

Similarly, there continues to be support from the likes of Mercedes and Ferrari – which show no desire to quit F1. In the case of the latter, a high-profile deal with Santander Bank suggests that sponsors are still attracted to the huge audience and corporate hospitality on offer by the circuit.

Next season will be particularly interesting for the domestic audience – with Jenson Button and Lewis Hamilton both expected to compete for the title. That prospect alone might be enough to lure a few Brit sponsors in the F1 fold.

Formula One is this week facing up to the fallout from the Renault race-fixing scandal. Following the World Motor Sport Council’s ruling that the Renault F1 team conspired to cause a deliberate crash in last year’s Singapore Grand Prix, its lead sponsor ING has pulled out with immediate effect.

The ING deal was worth an estimated £40 million a year to Renault – which has also seen Spanish insurance firm Mutua Madrilena withdraw. In a statement, the Dutch bank said: “ING is deeply disappointed at this turn of events, especially in light of an otherwise successful sponsorship.”

In reality, the decision to terminate early is not a major blow to ING – which was due to end its relationship with Renault at the end of the current season anyway. In light of the severity of the accusations against Renault, it would have been strange if ING had stayed involved with the team for the sake of a few extra races. Far more important was to distance the brand from the any association with cheating.

Still on the subject of cheating, sponsorship trade body ESA waded into the debate about ethics in sport this week. In light of recent controversies surrounding sports such as football, rugby union, athletics and F1, ESA issued “a stark warning” to sports governing bodies and rights holders of the threat to future potential sponsorship funding if acts of cheating are seen to persist within sport. “Sponsors quite rightly are highly sensitive about their brands and their ability to protect them,” says ESA chairman Karen Earl. “Like the fans watching live at events and on television, sponsors will start to feel cheated and will certainly not want to have their brand linked with a sport, a team or individuals who have deliberately cheated in order to win.”

ESA says it will be advising members to include extra clauses within their sponsorship contracts to provide them with extra protection. Commenting on the issue, ESA legal advisor Nick Johnson said there were reasons to be positive, “Drug abuse and match fixing scandals have cast shadows over sport. However, improved technology and more detailed examination is beginning to lead to quicker and more conclusive exposure of cheats. This will strengthen the rights of sponsors enabling them to react appropriately and making the rights holders much more accountable”.

More fun and frolics in September with the news that LG Electronics will be the title sponsor of a new global music event created by Universal Music and motor racing circuit Formula One.

Dubbed F1 Rocks, the idea is that music stars will headline live music events from F1 Grand Prix locations. The first event will be in Singapore during the weekend of September 24-26 and will involve high-profile acts such as Beyoncé, the Black Eyed Peas and ZZ Top.

The sponsorship deal extends LG’s association with the sport. The company is already a global partner in a 5-year deal running since Jan 2009.

Commenting on the its new activation strategy, LG chief marketing officer Dermot Boden said: “F1 Rocks with LG will allow us to further broaden global awareness to build a deeper understanding for our style and technology positioning with an even wider audience that embraces music and entertainment as a passion.”

As part of the programme, LG will host a Golden Ticket competition on its website. Winners will get the opportunity to visit Singapore to watch a night-time floodlit Grand Prix in VIP style.

Integrated agency Adam & Eve’s run of good form continued this week with the news it has secured a marcoms brief from the Williams F1 team. Under the terms of the deal, it will help William establish its brand positioning then develop a creative approach which can woo sponsors.

Williams GP Engineering director of marketing Dominic Reilly said: “Adam & Eve’s approach is what we were looking for to help us realise the potential of Williams as a sponsorship opportunity for domestic and global brands.”

Adam & Eve has had a purple patch in the sponsorship space. Earlier this year, it was appointed by Lloyds TSB to work on its sponsorship of the London 2012 Olympics.

After Brawn GP and Jensen Button’s stunning start to the new Formula One season, there are reports that Virgin chief Richard Branson may up his commitment to the team.

Virgin started sponsoring the team just prior to the start of the new season and has already achieved great marketing capital from its partnership. But with Jensen Button now leading the Driver’s Championship table, there’s a feeling that the Brawn brand can become even more impactful – either for Virgin or for another sponsoring company. Brawn, for its part, is hoping to lock in a long-term deal at a time when there is so much buzz around its brand.

Branson has said that Virgin’s negotiations with Brawn are ongoing – but that they could go in one of two directions. Either Virgin could secure itself a long-term title sponsorship of the team – or another company could step in with a financial offer which Brawn finds difficult to resist. If that happened, Virgin would remain as a sponsor for this F1 season but then “bow out gracefully” before 2010.

In a separate development, Philips is backing a second series of its ad-funded show The Factory on Pan-European sports channel Eurosport. The show, which is designed to support Philips’ sponsorship of the AT&T Williams F1 team, looks at the team’s day-to-day preparations during the season. As part of the deal, viewers can enter a competition which gives them a chance to drive a Williams F1 car.  

In one of the week’s less surprising developments, debt-ridden Dutch bank ING announced that it will end its high-profile sponsorship of Renault’s Formula 1 team at the end of this year. The decision was taken as part of the €1bn cost-cutting drive which was announced in recent weeks.

ING has worked the sponsorship hard – adding driver endorsements and Grand Prix title sponsorship deals to its core Renault relationship. However the economic downturn has made the F1 association look something of a luxury.

ING’s departure follows the recent news that beleaguered motoring giant Honda plans to pull out of F1 as well. It is currently looking for a buyer for its team – with Richard Branson’s Virgin Group mentioned as one possible bidder.

Honda – which spent in excess of £100 million on the team last season – needs to find a buyer before the start of the new F1 season in March, otherwise it will shut the team down. Aside from Branson, there have been reports of at least another ten interested parties. However Honda claims that none of them have crystallised into serious offers as yet. Speaking at the weekend, Honda CEO Takeo Fukui said: “There are various offers but we have not seen any serious buyer yet. We find the sale process difficult.”