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Sponsorship marketplace in F1 looking "pretty good" says F1 business expert

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Sponsorship marketplace in F1 looking "pretty good" says F1 business expert
Jun 13, 2013, 5:56 AM

The sponsorship marketplace in Formula 1 is looking “pretty good” at the moment with several new brands coming into the sport, according to For...

The sponsorship marketplace in Formula 1 is looking “pretty good” at the moment with several new brands coming into the sport, according to Formula 1 business expert Zak Brown, however he adds that there remains a big pressure on teams to continue to find ways to raise money.

Teams are facing soaring costs heading into next year, with the new 1.6-litre V6 engines set to be introduced to the sport. As a result, the price of the powerplants will rise from around £6-10 million per year to around £18 million. That sizeable increase will put pressure on the midfield and back marker teams.

Brown, who is the founder and CEO of Just Marketing, told the June edition of the JA on F1 podcast: “The sponsor marketplace is pretty good, globally as sport, there were some significant announcements in off-season such as UPS, Rolex, Coca Cola (through their Burn brand) – so there’s still a lot in-flow.

“But the sport has big appetite for sponsorship and in history of sport, there has never been enough money coming in to make everyone fat and happy. So there is constant pressure on teams to raise money which is still very difficult despite a few coming in in the off season.”

The biggest change to the sport in terms of sponsorship is the type of brands which are aligning themselves with teams. The recent trend has seen the arrival of more consumer packaged goods companies entering the sport.

“A few years back, we though the whole consumer packaged goods category would be next in line to enter the sport and sure enough, Unilever, GSK and Coca Cola have all entered the sport in the last 12 to 24 months,” added Brown.

“I think what’s is great is that they are some of the largest activators to consumers in the world. One of the things that made Nascar so successful was the advertising campaign created for the sport by hundreds of thousands of sponsors involved who are all very consumer driven.

“When you get into banks, logistics or narrow consumer groups, they don’t tend to be mass market as much. I think the new trend is a win-win. It will be good cash for racing teams but also help extend the reach of the sport – which is only good for everybody.

“I think this trend demonstrates that on a global basis [in terms of sports sponsorship], F1 is the leader. If you have a global product, there are very few means in which you can do an arrangement that reaches 200+ countries.

“To be able to replicate that through the traditional advertising channels would be a very expensive proposition. When you break down the value and the reach brands get with F1, it’s actually not nearly as expensive as it sounds.”

There has been speculation that following Vodafone’s departure as McLaren’s title sponsor, Mexican businessman Carlos Slim – who backs the team’s driver Sergio Perez, might use one of his companies, such as the European telecommunications company Claro which has appeared in the Woking-based team’s car this season, to take over the sponsorship, but Brown says history suggests that won’t be the case.

“I’m not surprised to see some of Carlos Slim companies align with McLaren,” said Brown. “He has always supported drivers no matter what team or category - they’ve done GP2 and Grand-AM in American and F1 – but I have never seen them become title partner.

“I think you might see a bit more of the Slim family involved through their backing of Perez but I don’t anticipate seeing them as a title sponsor. They haven’t historically shown they put that level of investment behind a driver.”

With regards the lack of a Concorde Agreement in the sport, Brown doesn’t think it’s a big problem at the moment because “everyone seems to be operating pretty well” without one. However, he adds that it will need to be done before the sport floats on the Stock Exchange.

“It [the Concorde Agreement] will be important when they eventually do go public because it’s something the investor community would want to see,” said Brown. “It will eventually get done but there is probably not a massive sense of urgency.”

Recently, Donald Mackenzie, the co-founder and co-chairman of private equity firm CVC Capital whose stake in F1 is just under 35%, said the proposed flotation may again be put on hold until next year.

“Donald would obviously know better than anyone what plans are,” said Brown. “Maybe he wants to cool the noise a little bit. That could be one strategy as to why he’s throwing out a soft comment.

“Maybe something is going on and he wants to manage expectations because everyone, myself included, thought it was a done deal to go public this year. Maybe he wants to pull back on expectations a little bit because he knows something that we don’t.”

To listen to the full interview with Zak Brown, plus more from Christian Horner, Mark Gillan and Derek Warwick make sure you listen to the June edition of the JA on F1 podcast available to download via the iTunes store or directly here.
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