It’s done it with Kanye West, now Adidas is pinning its hopes on a gang of soccer galacticos from Lionel Messi to Gareth Bale. Call it the Kardashian effect in sport if you like. Brands want more of a bang for their marketing buck by sponsoring individual sporting celebrities – grandly titled as ambassadors – as some cut back on their team partnerships. West has re-energized the Adidas fashion brand with his Yeezy range. Such associations work for sportswear, too.
Adidas said on Thursday that it’s ending a sponsorship deal with Chelsea Football Club six years early, and would receive a 50 million euro ($57 million) payout. While the “mutual decision” was determined in part by the London club’s desire for an even more generous benefactor, it comes as Adidas is slashing the number of sports teams it sponsors.
The German company is forking out ever-huger amounts on so-called “marketing investments” (which include sponsorship deals) — reflecting the hyper-inflation in the sports rights market. At the same time, it’s under pressure to boost an operating margin that’s well below those of rivals Nike and Under Armour. So it needs to be selective about who it wants representing the brand.
While some big-name teams are out, big-name individuals are in. Ending the Chelsea deal, which John Guy, an analyst at Mainfirst, estimates would have cost Adidas 390 million euros over 10 years, gives it more firepower to invest in superstars like Messi, Bale, Luis Suarez and Paul Pogba.
Nike, another big presence in soccer has long been associated with individuals too. Upstart Under Armour is going down the same route, with Jordan Speith, Andy Murray and Stephen Curry.
That’s not to say all teams are off-bounds for the sportswear giants. Adidas still has Real Madrid, Bayern Munich, Juventus and Manchester United on its books. There’s a chance that Nike (Barcelona’s kit supplier) or Under Armour might snap up Chelsea.
But with sponsorship costs ballooning (see chart below), it makes sense for companies to allocate spending to a few big clubs and names rather than more thinly across the board. There were $50 billion of sports sponsorship deals last year, according to Nicolas Sultan at Capgemini Consulting.
It’s not just sportswear companies re-allocating spending in a fevered market. Carlsberg has ended its partnership with the English Premier League, although it still has a partnership with Liverpool Football Club. On a conference call this week, it said sponsoring this summer’s European football championships should boost market share — but at considerable cost. The brewer is planning further reviews.
Yet despite the Adidas shift, football clubs needn’t worry that their industry’s gold rush is coming to an end any time soon. Capgemini estimates that a bit more than a third of the revenues at football clubs and international tournaments comes from sponsorship.
The Adidas portfolio pruning does suggest even more money will go to an already entrenched elite of clubs and players. Yet with the high-spending Chinese increasingly bedazzled by the football circus, there’s sure to be plenty more bread to go around.
To contact the author of this story: Andrea Felsted in London at firstname.lastname@example.org