Formula One returns to Circuit of the Americas on Sunday for the 2021 Aramco United States Grand Prix. Fans stateside may be surprised to see Phillip Morris International (PMI) and British American Tobacco (BAT) advertising during the race (look for Mission Winnow branding on Ferrari driver Carlos Sainz’ car). But a new report from industry watchdog STOP indicates tobacco industry spending in F1 is at its highest level since 2006—the year the FIA’s (Fédération Internationale de l’Automobile) recommendation to ban tobacco-related ads went into effect. Formula Money estimates PMI ($75 million) and BAT ($30 million) collectively spent around $105 million on sponsorships with Ferrari and McLaren, respectively, in each of the last two years. Phil Chamberlain (managing editor, Tobacco Tactics, and a partner in STOP) explained that with no one trying to stop them, the tobacco companies—which have plenty of cash to spend and new alternative products to promote—have been emboldened to increase their presence in F1 over the last few years. And the two teams have been willing to take their money. McLaren said in a statement that “our partnership with BAT is rooted in technology and innovation and offers a global platform to drive awareness of BAT’s new category products such as Vuse and Velo, which can play a vital role in global tobacco harm reduction. McLaren and BAT’s race branding and marketing activity will always be in line with legal and regulatory environments.” Ferrari did not respond to our request for comment.
JWS’ Take: Tobacco companies have largely been exiled from the sports sponsorship ecosystem over the last 20 years, at least within the developed world. “You’ve got some examples where [ties] might [still] be quite strong with cigarette companies [and teams or leagues] in Southeast Asia. But it’s really kept to a national level. [As it relates to] these kinds of international sports brands, the FIA is out on a limb here,” Chamberlain said.
Back in 2001, the FIA, F1’s governing body, announced plans to eliminate tobacco-related sponsorships from the sport by the end of the 2005 season. But by the time 2006 came around, the organization had walked back its decision and instead simply “recommended” a ban. In an email to JohnWallStreet the FIA (via F1) explained that while it remains “firmly opposed to tobacco advertising,” it is “not in a position to interfere with the private commercial arrangements of teams and their sponsors.”
While the FIA only ended up recommending a ban, several of the tobacco companies that had been invested in the sport made alternative advertising plans after the 2001 announcement. As a result, tobacco company spending fell off a cliff in the mid-2000s. PMI was the only company still sponsoring a team following the 2006 season.
Tobacco company spending dropped to a two-decade low in the early 2010s after Marlboro was dropped from the official Ferrari team name. But sparked by a growing market for alternative tobacco products (which were not covered in the recommended ban), PMI began advertising on Ferrari cars again in 2018, and BAT rejoined the sport the following year. The amount of money pouring in from big tobacco has been on an upward trajectory since. The addition of new races (and thus, more ad inventory and more spend) to the F1 schedule is another factor contributing to the recent uptick.
Chamberlain suggests the lack of resistance faced since re-emerging in 2018 and 2019 has led to a 15-year high spend. “They are sort of being welcomed in by the regulators [and the teams] themselves,” Chamberlain said. “And mostly because they put an eye-watering amount of money into [the sport].”
While Ferrari and McLaren could try to replace the tobacco companies as sponsors, Stephen Curnow (EVP, General Sports Worldwide) says it would be a challenge, “regardless of the marketing power of F1 and both teams.” To do so, a new “super sector” likely needs to emerge. He suggested the crypto category could fill the bill. Crypto “companies are investing significant money across both soccer and F1 to create brand standout, and sponsorship is seen as one platform to legitimize a sector, which many consumers are still unsure of,” he said.
That doesn’t mean the two teams aren’t trying to replace their tobacco partners. While PMI continues to be Ferrari’s “title sponsor,” Curnow said, “it’s no secret the team is in the market to find a replacement, a significant challenge given the sponsorship spend they will need to take the place of.”
While Chamberlain argues tobacco company money is still “absolutely vital” for Ferrari and McLaren today, it must be noted that other teams have managed to not only survive but win races without it. So, it’s hard to argue those two teams couldn’t find a way to do the same.
One would think Formula One owner Liberty Media could also bar tobacco-related advertisements within the sport. But the publicly traded conglomerate has punted on taking action. In a statement (via F1), Liberty said, “The rules for this are governed by the FIA as the governing body and not the rights holder.” As you can see, there is “a really good game of pass the buck [going on] here,” Chamberlain noted.
Formula One’s trajectory would seem to help explain why PMI and BAT are investing so heavily in the sport, again. They see F1 “getting a younger demographic [and re-]branding itself in terms of being an innovator of technology that is exciting science,” Chamberlain said. Being associated with something young (32% of F1 fans are between the ages of 18-24) and cutting-edge is attractive to advertisers seeking to appeal to the next generation of fans.
F1 sponsorship also gives them opportunities to “meet and socialize with [a host of powerful] political, media and sports players at Grand Prix events around the world,” Chamberlain noted. The chance to host corporate hospitality outings and off-track events are particularly valuable to companies in an industry that has largely had access to social situations cut off over the last two decades.
There is a quantifiable return on the capital the two companies are spending, too. “Our report estimates that [BAT] received $54.2 million in [on-screen exposure for their brands] on a spend of $30 million,” Chamberlain said.
But just because PMI and BAT are sponsors of Ferrari and McLaren does not mean you should expect to see Marlboro or Lucky Strike branding on a car or driver’s fire suit Sunday. As Chamberlain explained, “Where they know the regulations are enforced really strongly, they back off a bit…. They flex their approach depending on how much pushback they will get [from regulators in the country].”
Instead, look for softer types of branding (think: corporate slogans like BAT’s “A Better Tomorrow”) and ads for e-cigarette products. Remember, just last week the FDA approved the sale of an e-cigarette product for the first time. That product, from Vuse Solo, is made by R.J. Reynolds Vapor Company, a subsidiary of the tobacco company Reynolds American Inc. Reynolds American is owned by BAT. It is worth noting that Vuse is also a sponsor of the Arrows McLaren IndyCar team.