Is Coca-Cola About To Enter Formula 1?

Coca-Cola is currently deciding whether or not to become involved in Formula One motor racing according to the latest rumors. The American company has been conspicuous by its absence from the pinnacle of the Motor Sport, having come close to becoming the title sponsor of the championship back in 2005.

This was an intention which was ultimately derailed by F1 supremo Bernie Ecclestone, who was concerned that it would upset other companies involved in the sport if he was to grant such a deal to the soft drinks manufacturer. It therefore means that if Coca-Cola does enter the sport it will have be affiliated with one of the existing teams; but what form will this take?

Conventional model

The conventional model of Formula One sponsorship is for a company to place its brand logos on the side of a team’s car and also the driver’s overalls. Larger backers would also likely be included in the official title of the team.

This is a strategy which has been employed by Vodafone in recent years, who has been the official backer of the ‘Vodafone McLaren Mercedes’ team.

However, it is also a strategy which is thought of as antiquated by many marketing academics due to the lack of involvement required by the sponsor in the operations of the sporting entity. While it does increase brand awareness for lesser known brands, it is no longer thought of as being the pinnacle of sports sponsorship.

Indeed, Vodafone is rumored to be considering ending its contract with McLaren in the near future, despite attempts to incorporate the team more heavily in other forms of marketing communications in recent years. Perhaps it no longer feels that it is getting value for its alleged £23 million per year investment.

Coca-Cola was immediately linked to McLaren as a potential replacement if Vodafone is to pull the plug on their arrangement. McLaren would be the only top team without a primary commercial backer, and therefore make them the obvious choice if Coca-Cola was to adopt this model. It is certainly not out of the question, and is not too dissimilar from the American company’s original intention to ensure brand placement through its title sponsorship of the championship.

The new age

Modern marketing is all about integration, and the best way of controlling the messages coming out of a sporting entity is to actually own them. This is a strategy which has been employed by Red Bull, who purchased the former Jaguar team back in 2005 and re-branded them as Red Bull Racing. Since then it has become one of the biggest spenders in the sport, snapping up some of the best technical minds in the business and hence establishing themselves as the team to beat.

Red Bull also purchased the former Minardi team in 2006, using it as a breeding ground for young driving and technical talent which could ultimately be promoted to the Red Bull senior team in the future. In total it is believed that the Austrian company ploughs $240 million per year into the operation of both teams.

The company’s logos are emblazed across the cars of both teams, and the fact that the senior outfit are now normally fighting at the front of the field has helped them secure a significant share of the total television broadcast time.

In 2010, Formula Money estimated that the total brand exposure achieved by Red Bull via television broadcast time in the sport would have cost $358.5 million under normal conditions (i.e. TV advertisements during commercial breaks). F1 involvement can therefore be seen to be saving the company close to $120 million per annum and allowing them to be involved in a far more emotive and memorable activity than would ordinarily be the case.

Vodafone would have access to the same returns, but any McLaren victory will not be thought of as Vodafone victory. They would also have to share any TV exposure McLaren has with several other notable brands such as Mercedes Benz and Mobil.

What will Coca-Cola do?

It is a good time for Coca-Cola to get involved in Formula One. The sport is growing thanks to the commercial leadership of Bernie Ecclestone and the much improved on-track entertainment, and the plan for two races to be held in the USA (one in New York starting in 2013) will surely appeal to the American brand.

However, not all F1 sponsorship necessarily works. Vodafone for instance has been actively sponsoring top teams for ten years; sponsoring Ferrari between the years of 2002 and 2006 before moving onto McLaren.

But does anyone who isn’t a fanatic of the sport necessarily remember the involvement of Vodafone in Ferrari’s domination? Vodafone did very little other than placing their brand logos on the side of the Ferrari cars, and it is a tactic which is not likely to inspire to public.

Red Bull also fell foul of this in the early years too; being one of the primary backers of the Sauber team between 1995 and 2004 with very little success. It was only when they started up their own team moulded in their brand image of excitement and adventure that their association with the sport became cemented.

Coca-Cola’s past marketing endeavors suggest that if they decide to become involved in Formula One they will likely go down the conventional route of sports sponsorship; replacing Vodafone as the title sponsor of McLaren. However, it is unlikely that this would be as effective as the Red Bull method of Formula One sponsorship.

 

Written by Mark Martin who works in the Marketing department at MoneySupermarket.com