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SOUTH AFRICAN SPORT & SPONSORSHIP LANDSCAPE. THE SOUTH AFRICAN SPONSORSHIP MARKET. Since 1985 the expenditure on sport sponsorships increased from R63M to R4,596M
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THE SOUTH AFRICAN SPONSORSHIP MARKET • Since 1985 the expenditure on sport sponsorships increased from R63M to R4,596M • 2012 began much the way 2011 ended, with the market remaining relatively flat in anticipation of the outcome of a number of major soccer sponsorship property renewals still outstanding. • In the end direct sponsorship spend in the SA market grew a respectatble 6,8% YOY.
LEVERAGE SPEND RATIO CONTINUES TO FALL IN SA MARKET • Since 2006 the leverage ratio has fallen by over 30%; • Although this has steadied somewhat in 2011, it declined again to just over 50% as big as direct spend in 2012, and there is no doubt that leverage spend remains under considerable pressure. • Again, those rights holders who have adopted our “Batteries included” recommendation will be in a far stronger position to renew in the current climate.
SPONSORSHIP LANDSCAPE • “Marketplace volatility has made 2012 & 2013 a very interesting two years for sponsorship—one often filled with contradictions.” • Commercially speaking, it has been a period of consolidation rather than success stories for the South African sponsorship industry. • The elephant in the room" is the high costs associated with acquiring sponsorship rights to key properties, which escalated up to and post 2010 WC and which are now under the microscope for real marketing return. • The approach has become far more cautious and strategic, and unless a sponsorship is core to a company’s strategy, a shorter-term view utilising more traditional TV and Radio advertising bursts have seemingly been easier to justify of late. • Even the “Big Three”; Soccer, Rugby & Cricket are under pressure for the first time. • Corporate are however still finding resources to align with sports, entertainment, nonprofit and other opportunities that help them achieve bottom-line objectives. • “Although economic conditions are a contributing factor, individual properties will live or die based on their ability to deliver the marketing and business solutions sponsors need.”
ESTIMATE OF ARTS/CULTURE SPONSORSHIP MARKET • In 2011 an estimated R394 million was spent on Arts/Culture sponsorships. • This is up on the R358 million of 2009 representing modest growth of about 5% per year. • This will consist of R213 million into music and R181 million on all other Arts/Culture activities. • A further about R94 million could be spent on leveraging these sponsorships. • Arts/Culture sponsorship spend is about 10% as big as sport sponsorship spend, and this has not really improved over the past. • There is however a noticeable increase in music sponsorship interests with major brands such as the Mobile industry and Alcohol companies are looking at this market as a way of connecting to and creating experiences with their customers. • Despite some new players (Telecoms), the Banks and Alcohol companies have largely carried this industry for a number of years – the loss of Alcohol sponsorship would therefore be severely felt!
RANKING OF TOP SPONSOR BY SPEND [2012] • The top 30 sponsors accounted for just under 50% of the Total direct sponsorship spend in South Africa in 2012. • By comparison in 2010, as a result of the World Cup spend, the Top 10 sponsors alone accounted for 45% of the total market. (.i.e.: FNB, Telkom & MTN with FIFA , and Castle & ABSA with SAFA )
SPONSORSHIP SPEND BY ALCOHOL INDUSTRY • The alcohol industry has traditionally been one of the strongest users of sponsorship to market its products and brands globally. • While the South African market is not as dependent as some other markets (like Australia for example), depending on the year our Alcohol brands can account for as much as 10% of the total direct spend in sponsorship. • They also account for an above average leverage spend ratio. • Currently they account for between 5-10% overall on average. [R400m – R750m per year]. • Isolating Castle, it is also a major Sponsor to our National Soccer, Cricket, & Rugby, teams and is the only Sponsor who has stuck by our boys through thick and thin. • It must also be remembered that despite the breadth of the South African Sponsorship market, the top 10 sponsors generally account for as much as 50% of total sponsorship spend in the country. • To lose even just one of these major sponsors from this list (Castle) will clearly not go unnoticed.
TOP ALCOHOL ADVERTISERS BY SPEND [5 YEAR TRENDS] • According to ACNielsen’s Adex, ATL advertising expenditure on alcoholic beverages has climbed sharply over the past five years, from R834.6 million in 2007 to R1.73 billion in 2011 and R1.8 billion in 2012. • Do to the obvious target market fit, it goes without saying that a significant portion of the Alcohol industry’s marketing budgets are channeled to traditional advertising during Live sporting events. • While not all of this spend in concentrated only around live sports, a large percentage is do to the natural target market fit [i.e.: High adult male bias].
MEDIA OWNERS BY ALCOHOL ADVERTISING INCOME [5 YEAR TRENDS] Source: ACNielsen’s Adex • TV dominates overall alcoholic beverages adspend, accounting for R1.3 billion (or 73.5%) of the total in 2012. • This was followed by radio with R157 million (8.7% of the total) and by cinema with R115 million (6.3% of the total).
IMPACT OF MARKETING BAN ON BROADCAST INDUSTRY • Without these revenues, not only will many of our sporting codes be in trouble, sports broadcasting & Media as a whole will be placed under even more pressure than it already is. • According to the then acting CEO Robin Nicholson in April 2011: “The SABC reportedly stands to lose up to R400m (per year) if a total ban on alcohol advertising is imposed by the government”. ……"An outright ban on alcohol advertising on television and radio is one of the biggest risks to SABC’s revenue," said Mr. Nicholson. "It’s a significant part of our advertising revenue." • The SABC has warned the parliamentary portfolio committee on communications that such a ban could cost the SABC about 8,5% of its annual advertising revenue.
A LOOK BACK WHEN TOBACCO LEGISLATION WAS INTRODUCED • When the Tobacco ban came into effect in 2000/2001, the South African market was a fraction (less than 25%) of the size it is today. • As a result, Alcohol companies spend in 2013 would account for more than 40% of the total sponsorship market in 2000.
COMPARISONS TO TOBACCO BAN • Proponents of the proposed advertising ban have argued that advertising agencies, newspapers and radio companies were not affected by the similar loss from tobacco. • When Tobacco was banned in 2000, the sponsorship market was still very much in its infancy. • More importantly, the loss in revenue was quickly replaced by new emerging categories, first with the IT/ Internet boom, and then even greater through the massive growth from the Cellular industry. • Vodacom sponsorship of Soccer for example only began in 1999 with the Chiefs, Pirates & Vodacom Challenge properties. • Today – no such new categories or replacement markets exist. • Additionally, as industries such as the Telecoms continue to mature, traditional advertising and sponsorship investment is beginning to be replaced with content ownership strategies. • A further concern is that if successful with banning Alcohol, it will only be a matter of time before Fast Foods and Soft Drinks industry are targeted next (i.e.: Obesity)…. Then the Cellular Industry (i.e.: Radiation /etc..) and so on…
TOBACCO, ALCOHOL …..WHAT”S NEXT • A further concern is that if successful with banning Alcohol, it will only be a matter of time before Fast Foods and Soft Drinks industry are targeted next (i.e.: Obesity)…. Then the Cellular Industry (i.e.: Radiation /etc..) and so on… • As a society if we were to focus on a range of different products and services, some sort of negative case could be made against a lot of them. • Alcohol would probably be at the top of the list but there are plenty of others – gambling, fast food, fizzy drinks, mobile phones, dating agencies and following on from the recent financial crisis, banks and other financial institutions. • Participation in Sport will also be directly impacted without the associated marketing and sponsorship of sport and our sporting heroes. As participation rates fall, the potential increase in health costs to the nation could be huge.
DEPARTMENT OF HEALTH MOTIVATION TO BAN ADVERTSISING • Minister of Health acknowledged that the liquor industry contributed R19 billion to the economy each year, but said the adverse effects of alcohol were more costly. • “Nobody is saying anything about what alcohol is taking from this country,” he said. “The country spends R39bn trying to reverse the adverse effects of alcohol. • Show me any person who buys oranges for R39 and sells them for R19 and I will call a psychiatrist. • He dismissed arguments that banning alcohol advertising would hurt sport, because sport sponsorship would also be affected. • In fact, he said, associating healthy and successful sportsmen with alcohol was “fraudulent”.
CHAMPIONS DRINK RESPONSIBLY The "Champions Drink Responsibly" campaign has reached out to millions of consumers worldwide to educate them about responsible behaviors when drinking alcohol, including: ‘Have a plan,’ ‘Pace yourself,’ ‘Stay together,’ and ‘Drinking and driving don’t mix.’
RESPONSIBLE DRINKING MESSAGING WOULD BE LOST • Often overlooked is that a significant percentage of this spend that is actually allocated to “Responsible Drinking”, messaging which as a consequence of this proposed ban would now be lost as well.
BRANDHOUSE CAMPAIGN • A survey conducted over the course of 2011 by Synovate on behalf of, alcohol beverage company, brandhouse, showed an increase in the number of South Africans who said they would not drive if they had had too many alcoholic drinks. The survey indicated a shift of 4% over the course of 2011. • The new above-the-line campaign dramatises the possible consequence of landing up in a police van, and most worryingly, who you could end up sharing the back of the van with, as well as being driven home by a number of other unsavoury characters, each more terrifying than the next. • This campaign is premised on the fear factor and belief that this is a powerful deterrent to drunk driving. • The campaign follows on the success of brandhouse’s previous campaign, where 136 916 people viewed the advert on YouTube, ‘Love to meet you’, which became known as ‘Papa wag virjou’.
MILLER BRANDS SUPPORTS CAMPAIGN FOR SMARTER DRINKING • Miller Brands is proud to support an industry led £100 million social marketing campaign aimed at encouraging more responsible drinking among young adults and reducing the social acceptability of drunkenness. • Developed by over 45 companies as the ‘Campaign for Smarter Drinking’, the 5 year initiative is being implemented in partnership with the independent charity The Drinkaware Trust as well as the Government. • Miller Brands is a contributing supporter of the Drinkaware Trust, an independent, UK-wide, public-facing body with the objective of positively changing public behaviour and the national drinking culture and helping reduce alcohol misuse and minimising alcohol-related harm. • With support from the drinks industry, the campaign uses digital advertising, outdoor advertising, packaging and point of sale displays to deliver its message under the strap line “why let good times go bad?”
ECONOMETRICS STUDY • Department of Health statistics indicate the cost of alcohol to the nation is R40bn • 26% of all alcohol consumed in South Africa is however unrecorded (produced, distributed and sold outside formal channels) and, therefore, beyond the confines of any controls or intervention policies, such as increased taxes or advertising. • It is generally accepted that the root cause to the problem of alcohol abuse lies within that 26%. • Econometrics study has estimated that the total potential advertising expenditure loss by the alcoholic beverages and related industries will be R4.386 billion • Adding the impacts on the rest of the economy through the advertising broadcasting industry (especially television and commercials), sport sponsorships and advertising agencies, it is estimated that the GDP could be reduced by 0.28%, or R7.4bn • Any assumptions that government will save billions of Rands in alcohol related costs as a result of banning advertising within the industry remain nothing more than pure speculation at this time. [Max 10% worldwide]. • R40bn less 26% informal market x 10% maximum success = R3bn potential saving • This equates to a Net economic loss to the country – and worse further adds to the problem of unemployment and despair.
SPONSORSHIPS ROLE • The success of sponsorship in recent years and its increasing status as a marketing discipline have indeed made it a perfect target but as with every other marketing discipline, it is important to be objective and realistic about its role. • Major alcohol producers have always claimed that sponsorship is used to drive market share rather than market growth and the findings generally support this claim. • Marketing disciplines do not in themselves tell people to start smoking, drinking or gambling • If a market is mature, advertising will have little impact on the total market size - the purpose of marketing is more to differentiate among individual branded products. • reinforce and confirm the correctness of choice amongst existing users so that they will come back and make a repeat purchase. • draw attention to their product and any new products on the market. In summary, businesses in a mature market advertise to increase their market share and in the process enhance their brand and/or company name. • An interesting consequence of this legislation is that it would further serve to Lock-in current market share (anti-competitive, anti-entrepreneurial)
SPONSORSHIP IMPACT RESEARCH • Excess use of any products such as alcohol, gambling, fast foods and fizzy drinks is however a problem and this is where our attention needs to focus. • Sponsorship can and should help with this. By attacking the problem, sponsorship could reposition itself and head off many of its detractors. • Of course many of the drinks companies are already using their sponsorships to promote drink responsible messages but much more could be done and other potentially vulnerable products need to be thinking about this and planning ahead. • If sponsorship could be seen to be taking the lead in this area and actively work with those groups whose goal is very simple and straightforward – a ban on marketing and sponsorship by certain product sectors - there is a much greater chance that we can provide a much better solution to the problem. • This in turn will ensure that those products and brands who have identified sponsorship and employed it so effectively as a marketing tool over recent years will be able to continue using and developing it as a key component of their marketing plans. • Perhaps the greatest loss for sponsorship will be the campaigns themselves.
