Formula 1- The Sponsorship Nexus



Decoding the sponsorship nexus at Formula1 - The phenomenon that has triggered the evolution of modern concept of sports marketing

The sporting discipline that triggered the evolution of modern concept of Sports Marketing

Our in-house F1 expert Dushyant Sharma decodes the sponsorship nexus of Formula 1

Formula 1 has been the front runner when it comes to throwing up numbers and statistics that have not only been nail-biting but larger than life as well. While on one hand, we have numbers that have been shrinking such as lap times,  yet , on the other hand figures have been swelling too for categories such as team budgets, partners and sponsors getting associated with the sport. Corporate sponsorships pretty much are what keeps the sport running year-on-year, given the fact that F1 is an expensive sport that requires huge financial support on developing the cars, technological innovations, logistics, maintenance, travel, etc. 

It was in 1968 when Team Lotus broke the ice of roping in corporates for sponsorships. At the Monaco Grand Prix, Lotus sported the Imperial Tobacco’s Gold Leaf branding on its cars. Since then, corporate money started pouring in on the sport quite generously. Formula 1 has always been viewed as a sport that is sophisticated, dynamic and very high on technology, incorporating all the apt reasons for companies to associate their brands with F1. For instance, Red Bull, the Austrian energy drinks giant has positioned its image as a brand that exudes active, progressive and passionate lifestyles. By associating itself with the sport, it seamlessly blends the dynamic image of F1 with the aspirations of its consumers. Another dimension is performance. Formula 1 cars screaming at peak speeds of over 300 kmph doing over in excess of 60 laps which are typically around 5 kms on an average per lap. All of this performance comes in, one, with the driver’s prowess and, two, the team and technicians involved real time. The association of the Malaysian Oil giant, Petronas with Mercedes F1 can be quoted here wherein both have jointly worked on developing the perfect lubricant for their engines, and the result, well is quite apparent with Mercedes dominating F1 right since 2014. BT and Williams F1 is another example in this context with the former being the official technology partner for the latter. Accordingly, corporates have aligned themselves to project one or the other aspect that stands unified between F1 and their brand image that they want consumers to perceive. The result is cars and team overalls decorated heavily with company logos and taglines.

Dwelling further into it and we notice that sponsorship is much more than sporting the logo on the car. Modern sponsorship deals are curated to be a win-win proposition for both the parties, the F1 team and the sponsoring company. The activities outlined in these contracts go well beyond the race days and encompassing event, promotions, press conferences and activations pre as well as a post-race weekend. From, products commercials and endorsements by drivers, usage of F1 team’s imagery in company’s promotions to logos rubbing faces quite blatantly, the package deal strikes the most optimum balance in leveraging the benefits of every penny spent. For a sponsor, it is not only about projecting its image to its existing customers but also reach out to potential audiences aka fans who are hooked onto the sport, other brands and the new regions that the sport is garnering popularity in.

Taking about popularity, Formula 1, as a sport, has been followed in very limited countries and regions with Europe leading the pack. But lately, there have been new regions that have contributed to increased viewership numbers, regions like India, China, USA, etc. Parallelly, we have witnessed a steep rise in the number of companies getting associated not only with the sport but also with various teams as sponsors. Some are in for long-term, while some look for a year or even one or two grand prix events. Collectively, as on date, F1 commands a mammoth list of sponsors for the 2020 season, even though this season was facing a huge threat of being scrapped due to COVID. Despite lesser races this year, the sponsors didn’t step back or shorten their contracts. Currently there are over 225 companies putting their monies into the sport, that’s the kind of brand value F1 has been able to build over the years. The sectors that have been common faces amongst the sponsors are the oil & lubricant companies, tobacco, auto components, etc. while telecom, banking, food & beverages, IT companies, logistics, luxury brands amongst others have also been active in sponsoring in the recent decade.

A recent research shows that Formula 1 has received over $30 billion from sponsors over the past 15 years. In 2018, team sponsorship accounted for 44.7% of F1’s total haul with the heftiest payments generated from title sponsors. The second-largest source of sponsorship in F1 is the team owners which represented 38.9% of F1’s sponsorship in 2018 followed by 12.6% from series partners. The average price of a team sponsorship deal came to an eye-watering $3.3 million in 2018. The latest entrant to the global partner list of brands in F1 is the Saudi Arabian Oil Company, known as Saudi Aramco, the petroleum and gas producer is one of the world’s largest companies. With this long-term sponsorship deal, Aramco joins DHL, Emirates, Heineken, Pirelli and Rolex as one of F1’s six global partners. Beer brand Heineken and luxury watch maker Rolex pay an estimated annual fee of $50 million and $45 million respectively.

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