LONDON—The Olympics may be the ultimate sporting event for millions of athletes around the world, but for corporate sponsors even the success of the recent Games in London pales in comparison to the continuing dominance of soccer.
Adidas AG, ADS.XE +1.91% the world’s No. 2 sports apparel maker after U.S. giantNike Inc., NKE -2.58% was the sole sportswear partner of the London Olympic Games in a deal worth £100 million ($162.2 million), dressing officials and 80,000 volunteers and kitting out 3,000 athletes. The tie-up saw Adidas’s U.K. Olympic merchandise sales more than triple compared with the 2008 Games in Beijing, helping boost first-half sales in the U.K. by 24%.
But the German company admits the financial returns from its commercial association with the Olympics aren’t nearly as high as from soccer. It plows money into the sport’s two biggest international tournaments, the FIFA (Fédération Internationale de Football Association) World Cup and UEFA (Union of European Football Associations) European Championship. Consumer powerhouses like McDonald’s Corp., MCD +0.14% CanonInc. 7751.TO +3.57% and Continental AG CON.XE +3.70% joined Adidas in paying large sums for sponsorship of this summer’s European Championship, which broadcast their logos to billions of viewers across the globe as well as stadium fans.
"A soccer event has clearly a positive effect on sales because you can sell millions of the match ball. Fans also buy the jersey of the team," said Adidas’s chief corporate communication officer, Jan Runau, also noting the company sold seven million "Tango 12" balls and one million Germany replica shirts before and during Euro 2012. Adidas forecasts record global sales of more than €1.6 billion ($2.1 billion) from soccer in 2012, 23% higher than in 2008, when the last European Championship was held.
"[For] the Olympics, the immediate sales impact is not so huge because most of the sports are not so commercially driven. Nobody honestly buys a jersey of a marathon runner just because he has won a gold medal."
The International Olympic Committee generated an average of $85 million to $90 million of revenue per corporate partner in the 2009-2012 cycle, before additional sponsorship money raised by London organizers to stage the event, according to data from Deloitte’s Sports Business Group. That compares with $351 million for a single deal signed between FIFA and Adidas in 2005 to cover the period to the 2014 World Cup in Brazil. The contract for Adidas, which along with Coca-Cola Co. KO -0.60% andSony Corp. 6758.TO +3.47% is one of FIFA’s six main partners, includes supplying match balls and referee kits for every FIFA event.
In addition to the top tier sponsorship, each World Cup attracts further funding, including from eight global sponsors, taking Deloitte’s projected marketing revenue for FIFA between 2010 and 2014 to more than $1.2 billion. Alongside club soccer sponsorship, revenues could grow further.
There are clear differences in the breadth and value of sponsorship across the Olympics versus soccer. While a roster of more than 50 sponsors were linked to the Games, which affords no perimeter advertising, FIFA’s funding relies on a much narrower selection of around 20 companies.
"The top properties, clubs, events and tournaments [have commercial] values [that] are really holding up and increasing at a greater rate," said Deloitte analyst Austin Houlihan.
Companies hope increased exposure will help deepen brand recognition and improve shopper loyalty, thereby boosting profits in the long term. But the impact on the sports apparel sector in the wake of the credit crisis, hit by pinched spending in debt-laden Western markets and amid new concerns over the pace of economic growth in key emerging countries like China, has cemented the importance of sponsorship deals.
"As belts tighten in austerity-hit Western Europe, there is evidence that the middle ground of consumer goods is getting squeezed, by economy branding on the one side and affordable luxury on the other. A big chunk of the [sportswear makers’] portfolios sit within this middle ground," said Rob Walker of Euromonitor International.
A successfully branded international sports event can create a spike in sales and make all the difference to results. For the two most visible sports brands, Nike and Adidas, the commercial stakes are high as they look for spurts to offset potentially lackluster European sales, said Mr. Walker.
But strategies differ. While Adidas sponsors events, Nike concentrates on team contracts and individual endorsements with soccer players like Portuguese star Cristiano Ronaldo. “If we get the product right for [athletes], the visibility and sales uplift will come,” said Charlie Brooks, Nike’s senior communications director.
The UEFA Champions League—club soccer’s top competition—is central to Dutch brewer Heineken NV's HEIA.AE -1.86% marketing ambitions. The company has sponsored the event since 1994, starting by promoting local brand Amstel, which was succeeded in 2005 by its flagship lager. Heineken says the competition, which prioritizes television advertising slots from commercial broadcasters for only six main corporate sponsors, gives unique levels of penetration.
"If you ask people around the world who is the sponsor of the Champions League, 52% of beer drinkers say it is Heineken," said Hans Erik Tuijt, head of sponsorship and marketing at Heineken, citing a company study. The competition’s nine-month duration, as opposed to one month every two years for international soccer tournaments, or two weeks every four years for the Olympics, gives sponsors prolonged advertising exposure to consumers globally, Mr. Tuijt said.
But as it expands across the fast-growing markets of Asia, Latin America, Africa and the Middle East, soccer is no longer just the preserve of the familiar corporate giants. In July, Russian energy giant Gazprom OAO OGZPY +4.19% signed up to be a sponsor of the Champions League until 2015, a deal which Alexey Miller, chairman of the group’s management committee, said exposes the brand to a “fundamentally new level on the global scale.”
Competition for these event sponsorships is intensifying as exposure increases world-wide and companies are now falling over themselves to enjoy a “halo effect” from affiliation to sport, said Stuart Whitwell of brand consultancy Intangible Business.
"People can relate to [sport] so easily and it is very emotionally powerful. They like the prestige of it."