Challenges confront brands chasing World Cup glory

Soccer spectacle kicks up sponsorship dilemmas

With much of the globe now caught in the excitement of the World Cup, most consumers could be forgiven for not noticing the branding war that is now being waged all around them.

Standing before their local supermarket shelves, shoppers might get the impression that PepsiCo, which is now selling cans and bottles of its various drinks emblazed with images of Argentine superstar Lionel Andrés Messi, is an official sponsor of the World Cup in Brazil. This, however, is not the case. In actuality, Pepsi's biggest rival, Coca Cola, is a partner of FIFA, the international federation which governs professional soccer and organizes the World Cup. Despite this, Coca Cola's products do not currently feature the World Cup logo; although its own advertisements will be displayed in Brazilian stadiums during all 64 of this year's matches.

Many of the world's largest multinational companies have long relied on the popularity of mega sporting events to advertise their products and services globally. A successful example here comes from South Korea's Hyundai Motors. The automaker spent 1.5 billion euros ($2.03 billion) to become a sponsor of the World Cup in 2002, a year when its US auto sales surged by some 40 percent, according to media reports.

But for sponsors who have suffered from declining profitability and losses over past years, throwing tens of millions of dollars into World Cup sponsorship is a risky play.

German sportswear company Adidas AG, another FIFA partner, posted a 34 percent year-on-year decline in the net profits during the first quarter of 2014. Still, the company says that its sponsorship deal is expected to translate into record sales of its soccer equipment and apparel. Meanwhile, things are looking shaky as well for fellow FIFA partner Sony Corp, which lost $1.26 billion during its 2013 financial year and expects another loss of $487 million this year.

World Cup sponsors must also contend with ambush marketing and counterfeit products. According to most definitions, ambush marketers take advantage of the profile of an event to create a commercial association or seek promotional exposure without the authorization of the event's organizers.

FIFA has vowed to crack down on ambush marketing during the World Cup as a way to protect sponsors and its own interests. Marketing rights sales generated by this year's World Cup totalled $404 million in 2013, making this the second largest source of income for the event after the sale of television rights. But crafty advertisers have historically found ways to ride public interest tides without shelling out a dime for rights.

For example, during the London 2012 Olympic Games, Nike launched an advertising campaign featuring amateur athletes competing in various places around the world named London (for example: Little London, Jamaica; East London, South Africa). Ultimately, the legal team working with London Olympic organizers did not take action against Nike after ruling that its boundary-pushing campaign had not broken rules designed to protect the sponsors' rights.

This year, Nike returned to the same playbook with the release of an advertisement showing Portugal's Cristiano Ronaldo, Brazil's Neymar and England's Wayne Rooney preparing for the World Cup. The US sportswear maker also sponsors 10 national teams including Brazil, England and Portugal. Adidas, meanwhile, sponsors nine teams such as Germany, Spain and Argentina. Whichever company winds up sponsoring the event's eventual champion will surely see an increase in brand exposure. In the end, Nike may be able to outshine Adidas not just through numerical sponsorship superiority, but through its association with the Brazilian national team, which many see as the favorite.

Last but not least, intellectual property right infringements may also hurt the interests of official sponsors.

On this front, customs authorities in China have been clamping down on violators since April. Under such efforts, customs authorities in Shenzhen have seized a reported 520,000 unauthorized World Cup-related products worth an estimated 1.7 million yuan ($272,000). Authorities in other cities have also confiscated unauthorized products due for export to South American, African and Southeast Asian markets.

Speaking of China, Yingli Solar is now the only Chinese company to sponsor the current World Cup games. We should look at this deal in a rational light. Will the World Cup push Yingli into a deeper loss or save it from a deficit?