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DATE News (chronologically)
04/05/10
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Sponsor still values NASCAR despite recent declines
Despite recent declines in attendance and TV ratings, the soft-drink company remains bullish on the stock-car set. Earlier this month, Coke signed a new deal with track operator Speedway Motorsports Incorporated (SMI) through 2015. Terms call for a consolidated contract – rather than the previous arrangement of signing individual deals with various SMI tracks – encompassing six speedways: Atlanta; New Hampshire; Infineon (Sonoma, Calif.); Las Vegas; Charlotte and Texas. Coke also retains naming rights to the Memorial Day weekend race in Charlotte.

Neither SMI nor Coke disclosed financial terms. Industry analyst Tim Conder of Wells Fargo Securities wrote in a recent report that sponsorship renewals are seeing less than 5 percent increases of late due to the economy and smaller TV audiences. Before the recession, sponsorships at SMI and elsewhere in NASCAR were valuable enough to warrant 10 percent annual gains, known as escalators.

Even if the Coke extension provides a smaller financial gain, it’s still a sign of optimism, Conder and the companies believe. “The pullback in corporate spending seen in 2009 appears due to corporate budget constraints, not declining interest in NASCAR,” Conder notes.

Ben Reiling, Coke’s director of motorsports, confirms that view.

Of the new deal, he says, “It strengthens our position in the sport of NASCAR and with the fans. The spirit of the relationship is as important as anything else and this will have us working better at the corporate level with (SMI).”

Renewing the SMI agreement maintains Coke’s widespread interest in NASCAR. The soft-drink company is the official drink of NASCAR through its arrangement with the sanctioning body, runs an expansive advertising and promotional campaign through its Coca-Cola Racing Family and has exclusive concession rights and other advertising tie-ins with eight tracks owned by SMI rival International Speedway Corporation (ISC).

The latter deal includes corporate naming rights for ISC-owned Daytona International Speedway’s summer Sprint Cup race through 2017. In addition, two more ISC tracks, Talladega and Watkins Glen, will begin relationships with Coke next season. Those various deals lend credibility to recent statements by Reiling and others at Coke that the company remain confident in NASCAR’s future.

Still, Coke and other sponsors, as well as the track operators, hope to see a turnaround in attendance soon. Companies want bigger audiences to hear their advertising – and, in Coke’s case, they also hope to sell more of their products at the track with more fans on-hand. For SMI and ISC, the need is obvious: more tickets sold means more revenue, plus higher prices for corporate sponsorships.

Those rosy prospects are likely on hold for at least another year or so. In the Wells Fargo Securities analysis issued this month, most of the figures related to attendance and ticket sales were discouraging.

For all of 2009, the most recent figures available, attendance and event-related revenue fell by 13.3 percent and 15.5 percent compared with the previous year. And it’s worth remembering that 2008 was hardly a banner year itself, as the country was already feeling pinched by a recession.

SMI executives anticipate another decline in ticket revenue this year, with ticket prices lowered, on average, by 4 percent to 5 percent to spur sales.

In recent years, SMI has worked with Coke and other sponsors to create special concessions and ticket offers to entice fans to come to the races. Coke has also made targeted appeals to NASCAR fans by offering unique memorabilia through its My Coke Rewards program. More recently, using social media, the company has encouraged fans to come walk the track at various speedways on race morning free of charge. In Atlanta, 3,500 fans took a morning stroll around the track, Reiling says.

“It’s another way we can help them enjoy the sport,” he says. “You get a real appreciation for the banking and the curves.”

Coke is banking on that appreciation from NASCAR fans for many years to come.

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