What Does Jack Daniel's and Jim Beam Exit Say About Nascar?
NEW YORK (AdAge.com) -- After spending what seemed like decades trying to crack Nascar's ban on sponsorships by hard-liquor brands, spirits companies received the go-ahead from the auto-racing league in 2004. But after only five years, two of the three biggest sponsors in the category are dropping out, begging the question of whether the league is still a strong value proposition for marketers.
Brown-Forman Corp.'s Jack Daniel's and Fortune Brands' Jim Beam announced within days of each other that they will no longer sponsor cars next season in the Sprint Cup Series, Nascar's top tier.
Jack Daniel's is the primary sponsor of a full 38-race season for the No. 07 car driven by Casey Mears, an approximate $18 million yearly commitment that puts the sponsor's logo on the most prominent spot on the car, the hood.
Jim Beam is the sponsor for driver Robby Gordon's No. 7 car for about 15 races a year, or roughly an $8 million commitment.
A change in Brown-Forman's spending priorities led to the decision to end the sponsorship that began in 2005.
"While it is difficult for us to end our formal relationship with [team owner Richard Childress Racing], the current economic environment has compelled us to revaluate our spending and we've concluded that other areas in the marketing mix require additional investment," Tim Rutledge, VP-brand director for Jack Daniel's, said in a statement.
Bill Newlands, president of Beam Global Spirits &Wine U.S., echoed those sentiments.
"It was a difficult decision to transition away from being a Nascar Sprint Cup Series team sponsor," Mr. Newland said in a statement. "We always take a hard look at our marketing resources and how we can best interact with legal purchase age consumers. After an extensive review of our marketing strategy, we have come up with new alternatives to fuel growth for Jim Beam in 2010."
Both brands have cut back on marketing, in general. Brown-Forman spent $22.2 million in measured media in 2008 according to TNS Media Intelligence; it has spent $5.6 million through the first six months of the year, for a projected total of $11.2 million, or half of what it spent last year.
Fortune Brands spent $27.4 million last year, and is on pace for $22.4 million this year.
"Primary sponsorships are very expensive for Nascar teams. One could speculate that there was a premium for a right of entry for the distilled spirits," said Tony Ponturo, the former VP-global media, sports and entertainment marketing for Anheuser-Busch and now the CEO of New York-based Ponturo Management Group. "But, generally, when any sponsor backs out of a sponsorship, they have made the decision that the investment doesn't warrant the return or they can do a smaller investment and get the exposure they need."
Part of the problem might be the issue that has been plaguing Nascar for the last two years -- falling television ratings and dwindling attendance at the track. The 16 races on Fox drew a cumulative 5.1 rating and 11 share, down 11% from 2008's 5.7/12, while the six-race season on cable's TNT were down 9% compared to last year.
But since the racing coverage shifted to ESPN and ABC on July 26, Nascar has enjoyed an uptick, with four consecutive races from mid-August to mid-September enjoying higher TV ratings than the year before. In large part the lift has been due to ESPN's legendary multiplatform promotional tools, as well as compelling storylines on the racing circuit as the Sprint Cup's "regular season" wound down and the top 12 drivers eligible for the "Sprint to the Cup" races were determined.
"I think that every new brand that invests in a sport for the first time always has a period of adjustment, and I don't think the hard liquor evolution should be any indictment of the Nascar brand or business," says Rick Horrow, the sports business analyst for CNN and the CEO of Florida-based sports consultancy Horrow Sports Ventures. "I would be reticent to paint a picture of doom just because two sponsors dropped out."
"Overall sponsorship is strong in Nascar," said Andrew Giangola, Nascar's director of business communications. "Even amid this difficult economic downturn, the sport still has the most Fortune 500 involvement in professional sports. ... Sponsors come and go in our sport -- it's been that way for years. While you never want to see a sponsor drop out, it's important to note new brands like 'Guitar Hero' and Ask.com have entered the sport this year, and others, like Aflac, Office Depot, are increasing their involvement."
Mr. Giangola also pointed out that the third major spirits sponsor, Crown Royal, is increasing its commitment in 2010. The liquor brand currently is a partial sponsor of the No. 26 car driven by Jamie McMurray. Next year, it will be a half-season sponsor of former Cup champion Matt Kenseth. Crown Royal also has a deal with Nascar at the league level, and a popular race sponsorship in Richmond, Va., every year."I don't think this is as much a reflection on Nascar as it is on the possibilities that have opened in the spirits categories across the board," said sports-marketing consultant Joe Favorito, author of the popular sports public relations blog joefavorito.com. "There are just more opportunities for those brands to look at now than there were five years ago, and with limited funds they have to figure out how to best access not just existing consumers, but new consumers."