F1 chasing telecoms and vodka sponsors

10/12/2012

It is only a matter of days since Formula One signed one of its most high profile sponsorship deals all year. This came when high-end Swiss watchmaker Rolex became F1's timekeeper last week in a five year agreement which also sees it taking over from Hublot as the official timekeeper of the sport.

However, always on the lookout for ways to make his next buck, F1's boss Bernie Ecclestone isn't stopping there. Four years ago Pitpass revealed that he planned to expand F1's portfolio of official partners and an article by our business editor Christian Sylt in today's Telegraph reveals the fruits of this.

Ecclestone told Sylt "we are chasing one or two people that want to be involved. We are looking at phones and drinks. People like Vodka and things like that, they are out there. They are interested because it gets the brand across."

According to a senior F1 sponsorship agent, luxury goods giant LVMH, which owns fashion icon Louis Vuitton, is in pole position to land the vodka deal. Its Belvedere vodka brand has a reputation for being high-class and although it is distributed internationally it does not enjoy as wide recognition as its rivals such as Smirnoff and Absolut. F1 would be an ideal platform to boost its brand recognition but Belvedere president Charles Gibb says "there are no discussions taking place."

It is unclear which telecoms company F1 is in talks with. The leading brand in the sport is Vodafone which had advertising hoardings at five races last year and spends an estimated £46.8m ($75m) annually as title sponsor of McLaren. Earlier this year it was reported that Vodafone was reviewing its McLaren deal. In 2010 it renewed the agreement until the end of 2013 but the economic climate has worsened since then. As a result of this it is believed to have carried out an evaluation but has yet to reach a conclusion about pulling out.

Advertising and sponsorship generated 14.7% of F1's £950m ($1.5bn) revenue in 2011 and it has ten official partners in its portfolio including investment bank UBS and parcel delivery service DHL.

The cost of becoming an official F1 partner tends to be several times less than that charged for title sponsorship of a top team. Partners get trackside signage rights and use of the F1 brand in advertising for an annual cost of around £9.4m ($15m).

The only drinks brand which partners with F1 at the moment is Mumm champagne. F1 has a branded soft drink made by Red Bull but this is not an official partnership. Ecclestone says "Red Bull has done a drink but they don't seem to be very active with it. We have a deal that if they start making it work we get a cut."

More sponsor signings may be on the way. In line with Pitpass' prediction in 2008, the prospectus for the stalled flotation of F1 on the Singapore stock exchange states that the sport "can significantly grow the global partner programme because we have not yet developed it to a level similar to comparable programmes used by other global sports entertainment businesses."

It adds "we may also consider segmenting the global partner and official supplier programmes such that we have a global partner or official supplier in a particular product category for specified regions or events. We will also explore opportunities to increase advertisers and sponsors in underexploited product categories such as apparel and accessories, energy and automotive."

Ecclestone says that overall, "this year and next year the revenues are going up by a few percent because of our contracts. The same with profit." Many of F1's key contracts contain escalator clauses which increase the amount paid by up to 10% annually. This helps to insulate F1 from downturns and has kept its corporate hospitality business buoyant despite marketing spending plummeting during the recent recession.

In 2011 corporate hospitality revenues increased 20.2% to £49.1m ($78.7m) as F1's VIP Paddock Club area served 69,000 guests across 19 races. It may sound like a tremendous achievement to get that many people to put their money down for tickets which average at £710 each. However, Ecclestone says "corporate hospitality is still not as strong as it was but it is getting a lot better." As ever, he is still on the lookout for an even bigger pay-day.

Treble vodkas all round?