What Olympic Sponsorship Means For Stocks

By Geoffrey Michael | July 18, 2012 AAA
What Olympic Sponsorship Means For Stocks

There's no bigger world stage than the Olympic Games and no bigger international marketing platform. When the opening ceremonies kick off on July 27, 2012, in London, over 200 countries are expected to be represented by about 10,500 athletes. The Games of the XXX Olympiad will feature competitions in over 300 events covering 26 sports.

In addition to a worldwide television audience, attendance at the games will number a half million spectators. Nine million tickets have been sold for the individual events, including $3,000 tickets for the best seats at the opening ceremonies. Over 4,000 medals are on the line during the 16 days of competition.

SEE: The Most Costly Olympic Games

The Olympic Partner (TOP) Program
Corporate sponsorship provides more than 40% of the financing needed to stage the Olympics. Partners also provide product support and technical services that are vital to staging the events and supporting the athletes.

The official sponsors are divided into four categories based on funding level. The participation level determines the specific rights that each company is entitled to use for its marketing programs. This includes exclusive marketing rights in certain geographic regions, as well as the designated use of Olympic marks and images.

  • Worldwide Partners (includes Acer, Atos Origin, Coca-Cola, Dow, General Electric, McDonald's, Omega, Panasonic, Proctor & Gamble, Samsung, Visa)
  • Partners (includes Adidas, BMW, BP, British Airways, BT, EDF, Lloyds TSB)
  • Supporters (includes Adecco, Arcelor Mittal, Cadbury, Cisco Systems, Deloitte, Thomas Cook, UPS)
  • Suppliers and Providers (includes Airwave, Atkins, Boston Consulting Group, CBS Outdoor, Crystal CG, Eurostar, Freshfields Bruckhaus Deringer LLP, Holiday Inn, John Lewis, McCann Worldgroup, Mondo, Nielsen Company, Next, Populous, Technogym, Ticketmaster, Trident)

Only official sponsors may associate themselves with the Olympics brand in their advertising or any other business-related purpose.

SEE: Olympic Economics: Boom Or Doom?

Competing Brands
One of the most competitive markets is athletic wear, and it's not limited to companies that are official sponsors. One such company that expects to benefit is Under Armour, an innovative apparel maker of synthetic microfiber clothing. While it hasn't officially sponsored these Games, it did sponsor specific athletes during the Vancouver Winter Olympics. Because of the clothing's ability to regulate body temperature by wicking away perspiration, many athletes are expected to sport the UA logo in London, even if they're not sponsored by the company.

That kind of advertising goes a long way with the billions of potential consumers who'll be watching. S&P projects that Under Armour will increase 2012 revenues by 20% and expects 2013 earnings to grow 28% year over year.

The apparel maker with the biggest stake in the Games is Adidas. It's an official sponsor of both the Olympics and the Union of European Football Associations championship tournament. Adidas provides apparel to many of the national teams and requires that it be worn on the medal podiums. However, the athletes wear whatever they want during the actual events.

Adidas is also supplying clothing and shoes that must be worn by the Olympic support personnel. While it still ranks second to Nike in market value, Adidas expects the Olympics to increase sales by about $157 million and push it into first place in the United Kingdom within three years. Its shares have averaged an annual return of 36% for the past three years and Deutsche Bank is forecasting earnings growth of 19% in 2013.

The elephant in the room is Nike, which has already seen future orders rise 13% in anticipation of the Games. To capitalize further, it will launch several new products including the Superfly R4 shoe and Turbo Speed Suit specifically designed for sprinters. It has signed exclusive contracts with many of the athletes who are medal favorites.

Nike's shares have averaged an annual return of about 40% over the past three years. Revenues rose 18% in its most recent quarter and analysts expect earnings to grow by 18% next year.

SEE: The Pros And Cons Of Sports Investing

Global Marketing
The Olympics provide an opportunity to build brand awareness around the world in just a matter of days. Proctor & Gamble became a sponsor this year to promote its corporate identity beyond its portfolio of popular consumer products. It's using famous athletes from multiple countries to help market its products and is predicting additional sales of $500 million as a result of its Olympic affiliation.

Cisco Systems is looking to enhance its global recognition and reputation as a first-time sponsor of a major sports event. It opened a showpiece building called Cisco House across from the Olympic Park. It's designed to showcase its work in the technical and digital sectors as a catalyst for future growth in the U.K. and beyond.

McDonald's connection with the Olympics goes back almost 40 years. In addition to being a top-tier Worldwide Partner, it's also the Official Restaurant of the Olympics. The company boasts 64 million customers around the world, and it will serve the coaches, athletes, spectators and media right on the Olympic site. The famous golden arches will be visible to all who attend the events and to billions watching on television.

The Bottom Line
All of the companies associated with the Olympics will benefit in some way. While it takes significant news to move the stocks of huge multinational companies like General Electric, the most immediate benefactors will likely be the smaller companies creating a significant presence on the world stage for the first time. A past example is Roots, an apparel maker that sponsored several Canadian Winter Olympic teams and built its brand almost overnight.

The strategic placement of a logo that attracts billions of eyes to an iconic photo can be a real game changer for any company. It's no accident that almost everyone recognizes the Nike swoosh and Adidas three-stripe logos.

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