Formula 1 has seen a number of business sectors come and go since the championship began more than 60 years ago. An analyst for UBS, a global partner of Formula 1, has looked into those changes and come up with a number of interesting conclusions.
There are two main reasons why companies decide to engage in sponsorships: the specific nature of the product and its relevance to sport. Therefore companies such as oil, tyres and automotive are more inclined to spend money sponsoring an F1 team.
Those companies will be more resilient to downturns in the business cycle, and therefore a team could expect longevity with the sponsorship. In contrast, telecoms or utilities companies are more likely to pull sponsorship when market conditions go against them. An example would be Vodafone withdrawing their title sponsorship of McLaren at the end of the 2013 season.
For companies with a direct relevance to the sport, sponsorship is something which interests them because they want to create a close connection between their product and the values of the sport. Red Bull would be a good example. The energy drinks company wants a brand that promotes energy, speed and risk – much like Formula 1.
Tobacco companies were huge spenders in Formula 1 for close to three decades. Because of their budgets, they could afford to become a title sponsor – something that is rare in Formula 1 nowadays with just four of the 11 teams having a title sponsor.
From the 1970s, John Player Special, Marlboro and Benson and Hedges are just some of the iconic brands which created some pretty special liveries.
A ban on tobacco in the European Union saw companies leave the sport, however, Philip Morris continues to partner Ferrari even though their Marlboro brand is no longer present on the Ferrari. Instead, the company uses the partnership as an entertaining platform for Business to Business – something other teams are increasingly doing nowadays to increase their budget.
When it comes to energy and oil, it’s the product which encourages them to join the sport. Fuel and lubricant companies like Shell, Mobil 1 and Total are likely to be resilient to market conditions because they are such a fundamental part of the making Formula 1 happen.
Banks and financial services were quite prominent in the 1990s and 2000s, and their involvement has remained despite the banking crisis. They tend to sponsor the sport to target clientele – as the sport attracts middle to high-end followers – and obtain global reach – with the sporting expanding into emerging markets like Asia, Middle East and South America.
Telecoms and technology companies have gone through rises and falls in the sport as they look to align themselves with technology and innovation.
Companies like Telefonica, Orange and Vodafone have all spent a large amount of money in F1, but most of them have pulled out. However, Blackberry is working with Mercedes to improve communications bwteen team and driver during a race, Tata Communications are a technology partner to F1 and provide the sport with high speed connectivity via its fibre optic ring around the world.
While telecoms companies’ presence decreases, we have seen an increase in Fast Moving Consumer Goods (FMCG) companies – which are focused on shampoos, shaving creams and hair products – enter the sport. An example would be Unilever’s sponsorship of Lotus via its Clear and Rexona brands.
It seems sponsorship has become far more sophisticated than a simple sticker on the car for advertising purposes.
To read more on the subject, visit the Formula 1 pages of UBS.