Anheuser Busch (BUD) has introduced an incentive laden sponsorship model, for both teams and leagues, that rewards performance on and off the field (think: playoff appearances, rising attendance, growing TV ratings and increased social awareness). The template for A-B’s new deals include base compensation and a series of metrics (team/league specific) that if met, would trigger a larger investment from the company. VP of Consumer Connections Joao Chueiri said, as “leaders in the industry” it was the company’s responsibility to revamp “legacy (sponsorship) models that were created on consumer behavior that is no longer there.” It is believed that Anheuser Busch is the first “major sponsor” within the sports world to implement a performance based model.
Howie Long-Short: AB Inbev announced on March 1st its best FY earnings report in 3 years, reporting profitability growth within its 2 biggest markets (+1.9% in U.S. and +1.7% Brazil), FY17 revenue grew +9.8% YoY and EPS increased 42.8% YoY to $4.04. Should the board approve a proposed dividend on April 25th, the total dividend for FY17 would be $4.44. It should be noted that for the 5 year period beginning in ’12, BUD’s revenue CAGR of 4.6% exceeds that of all PMCG peers. For reference purposes, BUD closed at $107.79 on 4/2.
Fan Marino: BUD has league sponsorship deals in place with the NFL, NBA and MLB, and maintains dozens of individual team partnerships but, the New Orleans Saints, Los Angeles Dodgers, Minnesota Timberwolves and NASCAR, are the first 4 sports rights holders to work with A-B under the new performance-based model. Expect the off-field portion of these deals to cause problems at some point. If Papa John’s had this type of clause in their contract with the NFL during the 2017 season, one must believe they would have invoked their right to withhold financial “rewards”; a decision that would have pressured the league to restrict players’ rights to protest. Had that occurred, it’s not unreasonable to think that some players would have refused to take the field.
Fun Fact: BUD spent $350 million on sports sponsorships in 2016. Only PepsiCo (PEP) spent more ($360 million).
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