In any tournament, sponsors are very important as well as supporting the programs financially and it helps to promote the brand as well.
With the FIFA World Cup entering the semi-finals, this is when viewership increases even more.
Where the tournament is as prestigious as the World Cup with more than 200 million viewers for each match across various media platforms such as TV, streaming and of course live attendance, many companies are trying to be one of the sponsors which makes the FIFA World Cup is one of the most effective international marketing platforms.
Alvin also shared his thoughts here:
Who are the sponsors for FIFA World Cup 2022?
In this year’s FIFA World Cup, well known brand names such as Adidas and Coca-Cola, Hyundai-Kia, Qatar Airways, Visa, the Wanda Group, Anheuser-Busch InBev (AB InBev), Hisense, McDonalds, Mengniu Dairy and Vivo are all still on board from the last edition. There are also additional names such as BYJU’s, Qatar Energy, Crypto.com in this latest edition.
When we look at these 14 names, we find that there among these sponsors, many are consumer staples companies with a few consumer discretionary and services. All of them tend to have individuals as the end customer rather than institutions which is probably the reason why they have chosen to sponsor and advertise on the FIFA World Cup.
So, do Sponsors of the FIFA World Cup make good investments?
As the 2018 edition of the World Cup was held in June 2018, we looked at data from January 2018 to see if a company was able to capitalize on its World Cup sponsorship and outperform in the last few years.
Here’s how their stock prices performed:
Consumer staples
There are 8 consumer staples that are sponsoring this edition of the World Cup, all except Vivo are listed companies:
- Adidas,
- Coca-Cola,
- Visa,
- AB InBev,
- McDonalds,
- Mengniu,
- Hisense and
- Vivo
Many of these 8 names are well known globally and some of them has been associated with FIFA for a long time, such as Coca-Cola since 1974 and Visa since 2007.
We compare the performance of these 7 companies to the S&P500 ETF in the last 5 years.
Not all of them have performed well.
When we compare their performance to the S&P500 ETF, only 4 of them have outperformed the S&P500 ETF’s 63% increase:
- Visa with a 100% return,
- Coca-Cola at 59%,
- McDonalds at 78% and
- Mengniu at 63%.
Visa, Coca-Cola and McDonalds are well known staples that are closely tied to the performance of the economy and the performance of the stock market. It is not unexpected that these 3 companies have performed better than the index.
Adidas and AB InBev have not done as well with Adidas and AB InBev recording a -35% and -48% decline respectively while Hisense managed a lukewarm 11% performance.
Adidas recently severed ties with Kanye West, ending production of the Yeezy brand. The company has had a poor year with an inventory glut and now has to fill a revenue hole with the loss of the Yeezy brand.
If there was a company that wished it did not sponsored the World Cup, AB InBev is probably that company as Qatar made a last minute turn to ban beer sales at World Cup Stadiums. The company also had to sell its stake in its Russian joint venture due to the Russia Ukraine Conflict and has also not done well since its merger with SABMiller due to its debt load.
Of the 4 companies that have outperformed the S&P500 ETF, 3 of them, Visa, Coca-Cola and McDonalds are global brands with an American heritage. As the S&P500 index is based in America, it was expected that these companies would have at least performed in line with the broader index.
Mengniu, Hisense and Vivo are the companies on the list with a Chinese Heritage, Mengniu and Hisense are listed on the Hong Kong stock exchange while Vivo is not listed.
When comparing these two companies to the iShares MSCI China ETF, both companies have significantly outperformed, with Mengniu recording gains of 63% over 5 years, Hisense recording a smaller 11% gain while the ETF recorded a -30% decline.
Vivo, the only Chinese company that isn’t listed and the company is the number one smart phone manufacturer in China in terms of number of smartphones sold. The company has about 9% global market share, an increase from just 5% to 6% 5 years ago, selling more than 120 million smartphones annually.
Consumer discretionary companies
- Hyundai-Kia,
- Qatar Airways,
- Qatar Energy
Of these 3 sets of names in the consumer discretionary, only the Hyundai-KIA sponsorship which comprise of the 2 companies are listed.
Comparing to the S&P500 ETF’s performance of 63%, Hyundai has underperformed, with a -18% decline while KIA has outperformed, recording an 82% gain.
Both are Korean companies, with Hyundai being the larger, better known and well regarded brand. What is not well known is that Kia is actually a subsidiary of Hyundai and Kia in turn has minority stake in various Hyundai subsidiaries which make the two brands very interconnected. However, in recent years, while Hyundai suffered from tough competition in various markets and business segments, KIA has improved its reputation, gained market share and was able to increase its prices which explains the stark difference in share price performance between the two.
Qatar Airways, like any other airline, suffered tremendously during the pandemic. Qatar airways is the state owned airline. As Qatar is the host of the World Cup, one would be inclined to believe that this sponsorship is a contribution to Qatar and as travelers may be inclined to travel on Qatar Airways in future, this would help the airline grow.
QatarEnergy is the state owned petroleum company of Qatar which operates all oil and gas activities in Qatar, including exploration, production, refining, transport, and storage. Hence, this sponsorship could also be as a contribution to Qatar and also for the company to gain international exposure. While QatarEnergy has not yet capitalised on this sponsorship exposure on the international scale, the company has carried out multiple acquisitions and consolidations in recent years and one would be inclined to believe that this is all part of a potential overseas expansion plan.
Services companies
- The Wanda Group,
- BYJU’s,
- Crypto.com
In 2016, The Wanda Group signed a deal with FIFA to provide sponsorship at the next four World Cup competitions, up until 2030. This deal made Wanda the first Chinese First-Tier FIFA Sponsor. The Wanda Group has wide ranging business interests such as property development, movie production, cinema operator, shopping malls, theme parks, hotels and sports events
Wang Jianlin, the founder of The Wanda Group used to be the richest person in Asia, but following a government crackdown on credit-fuelled expansion, the company had to cut debt and sell foreign assets to turn around the business. Wang Jianlin’s networth has since dropped 80% to $8 billion over the years which indicates that this would not have been a good investment.
BYJU’s is an Indian edtech giant which is looking to carry out an initial public offering of its physical tutor chain unit Aakash, which it acquired at $1 billion in 2021. It is now looking to raise $800 million to $1 billion in the initial public offering of Aakash at a valuation of over $3.5 billion.
At the same time, BYJU’s is likely to raise over US$ 500 million at a valuation of around US$23 billion. The company is planning to use the funding for acquisitions in the US.
In March 2022, FIFA has announced that Crypto.com will be an Official Sponsor of the FIFA World Cup Qatar 2022™. This is just right after Crypto.com bought the naming rights to Lakers’ Staples Center in a 20-year contract $700 million deal in November 2021.
Despite the woes surrounding the cryptocurrency industry now, Crypto.com expects to benefit from significant branding exposure both within and outside the tournament’s stadiums.
Are the World Cup sponsors good investments?
A World Cup sponsor tends to be a company with significant global presence and clout. However, the company’s ability to leverage on its marketing expenses is what drives its share price performance. Up and coming companies also tend to jump at the opportunity to sponsor this massive event as it could signify that they are in the big leagues and receive additional investments.
Although many of the World Cup Sponsors have performed well over the years, being a World Cup sponsor does not necessarily mean the company is a good investment as some of these companies have underperformed the market or faced debt issues.
Perhaps the better option is to invest in companies who will benefit from various infrastructure spending required for the host to be prepared to host the world cup. With the 2026 World Cup being the first to include 48 teams, expanded from 32 teams today and jointly hosted by three North American countries, namely, Canada, Mexico, and the United States across 16 cities, there would be many companies who would benefit substantially from this over the next 4 years.