By Jinjoo Lee
The Paris Olympic Games are almost here, and top brands like Nike and Adidas are ready for airtime. So are the underdogs.
Marketing and sponsorships, especially for well-known brands, are partly about playing defense. Leaving a top athlete or team without your logo opens up room for competitors to take that space. But betting on the right athlete can also mean striking gold.
One of the most successful examples is Nike's contract with Michael Jordan, whose namesake brand now generates nearly $7 billion of annual revenue and is growing faster than the rest of the company. It is little wonder brands often duke it out for top teams. Earlier this year, Nike nabbed Adidas's role as the official kit supplier for the German national soccer team after reportedly offering more than 100 million euros a year, equivalent to $108.4 million -- more than double what its competitor was paying -- according to a local German newspaper.
The Paris Olympics is a huge opportunity to get exposure. More than three billion viewers tuned in for each of the last two Olympics. A similar number in 2024 would mean about 37% of the world's population is watching. Sports- and entertainment-intelligence platform SponsorUnited counts 368 sportswear brands that are buying sponsorships or media with Olympics entities.
Nike, which spent $4.3 billion on marketing and sponsorships last fiscal year, said it expects operating costs to rise by a mid-single-digit percentage in the three-month period starting in June as it ramps up advertising for the Euro Cup and the Paris Olympics. In an interview with Reuters earlier this year, a Nike marketing executive said that the Paris Olympics would be the company's "largest media spend" and the "biggest moment for Nike in years."
Adidas, which spent about EUR2.5 billion on marketing last year, also flagged higher advertising expenses this year, citing major sporting events. Running footwear brand On said it would focus its marketing budget on the summer Olympic months.
Unsurprisingly, the number of top athlete sponsorships corresponds almost directly with the size of sportswear brands' marketing budgets. Nike, which by far has the most to spend, also has the largest volume of top athlete or team sponsorships, according to analysis from Citi Research, which looked at the top leagues of sports with the most viewership. Adidas and Puma take second and third place, respectively, on both of those metrics.
Compared with sports such as basketball and soccer, where viewership and participation are both high, marketing at the Olympics has less tangible benefits. Adidas Chief Executive Officer Bjørn Gulden said on the company's earnings call in March that the Olympics aren't a very "commercial event" because people generally don't buy replicas of Olympics sports uniforms. Rather, Gulden said the Olympics is a platform to launch technologies and to showcase the brand in smaller sports. For Nike, whose own CEO acknowledged earlier this year that it lost its "sharp edge" in sports, the event will be a much-needed opportunity to reconnect its brand with its athletic roots.
Yet big brands still splurge during Olympic years. Nike clearly stepped up marketing spending during the quarters corresponding to the 2012 London and 2016 Rio Olympics, though it didn't for the 2020 Tokyo event, which took place during the heart of the pandemic. Sales did spike during the Olympics quarters in 2012 and 2016 for Nike, but the effect was small and temporary. Similarly, Adidas hasn't seen notable revenue spikes during Olympics quarters.
The bigger opportunity during the Olympics might be for less-known brands whose logos many viewers will be seeing for the first time. Footwear brand On has a brand awareness of about 12% in the U.S., while Hoka has 25% awareness, according to Bernstein's survey of sportswear shoppers. Lululemon said in its June earnings call that its unaided brand awareness in the U.S. is "in the low 30s." On is the official sponsor for Team Switzerland, Lululemon for Team Canada and, while Hoka doesn't have a country-level sponsorship, it sponsors some track and field athletes who will be participating. Gap-owned Athleta has a roster of American athletes -- including gymnast Simone Biles and swimmer Katie Ledecky -- as its brand ambassadors.
Smaller brands have a better shot at shining in sports with low viewership but high participation, such as running.
"It's unsurprising that brands like On and Hoka have gained momentum from focusing on running," said Monique Pollard, equity analyst at Citi. "You don't need to spend a lot [on running sponsorships], whereas basketball can become really quite expensive," she said.
Big brands still win on volume. About 64 track and field athletes who will be participating in the Olympics promoted Nike in social-media posts, while 51 promoted Puma and 39 highlighted Adidas, according to SponsorUnited. On, Brooks and Hoka collectively have 13.
Underdog brands can get an instant boost when they pick the right athletes, though keeping the momentum going is difficult without a compelling product. Under Armour signed Stephen Curry in 2013 after his deal with Nike lapsed -- a prescient pick. Though Curry's signature shoe flew off the shelves in the earlier years, a later version was mocked for being too bland, and ultimately Under Armour hasn't gained significant market share in basketball. Skechers saw double-digit percentage sales growth in its running footwear line after Meb Keflezighi won the Boston Marathon in 2014 wearing the brand's shoes, but the effect was ultimately short-lived.
Spending on the Olympics could end up being a low-return investment for most brands, but the cost of failing to medal is too high.
Write to Jinjoo Lee at jinjoo.lee@wsj.com
(END) Dow Jones Newswires
July 24, 2024 08:00 ET (12:00 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
Comments