It doesn’t take much to send stock markets spiralling, but volatility isn’t just influenced by economic data.
Sporting events such as world cups, the Olympics or the Superbowl have become global brands, with sponsors keen to jump onto their success and reach millions of viewers from around the world. Sponsors can build brand loyalty and awareness by setting up exclusive contracts, which should in turn help their bottom line. For example you can only drink Heineken beer in the Rugby World Cup stadiums.
The outcome of an event can also affect Forex and share market performance. A study by Goldman Sachs ahead of the 2014 World Cup in Brazil showed the footballing nation that wins can usually expect a temporary boost in their stock market. When Andy Murray became the first Brit to win Wimbledon for 75 years in 2013 the FTSE 100 rose 5.1 per cent, while sales in drinks maker AG Barr, producer of Scottish favourite Irn-Bru, increased 5.8 per cent.
Chris Weston, analyst for IG, says the impact could provide a boost of more than £2 billion to the UK economy. He explains: ‘Ernst and Young estimates some 466,000 international visitors will make their way to the UK to watch the games. The total number of spectators should easily eclipse any prior rugby tournament and should be just shy of the 2002 FIFA World Cup in Japan.’
With the Rugby World Cup in full swing in England, which companies could score highly and who could fail to make a conversion?
Heineken
Dutch brewer Heineken has stumped up £20 million to sponsor the Rugby World Cup. For that sort of money it doesn’t want others drinking its profits and other brands have been banned from inside the 13 stadiums. This should help boost its profits and build brand loyalty.
Societe Generale
Corporate entertainment is a big part of sport and fans will jump at the chance to go to a Rugby World Cup game. Societe Generale can use its weight as a main sponsor to impress current and attract new clients. Mr Weston explains: ‘Societe Generale have the right demographic for the World Cup and should benefit from increased brand awareness.’
MasterCard
Described as the preferred payment partner of the event, MasterCard could see a long term boost from increased sign ups and, ultimately, more people using their payment services. It has launched a ’50 days of crazy’ social media and marketing campaign to attract new and existing users by getting them to share their experiences of the tournament. You can also use MasterCard contactless payments at venues and cardholders can access a number of benefits and special offers.
Losers
Guinness
Guinness has long been synonymous with the Rugby World Cup. When England won the tournament in 2003, parent company Diageo saw its shares soar 9.8 per cent. But this year Heineken is the main sponsor, meaning no other beer brands can be sold within 500 metres of stadiums, although that doesn’t stop pubs or supermarkets being able to sell rival brands. But fewer people will be purchasing Guinness and seeing the name around the grounds and during matches.
Pepsi
Coca-Cola and Pepsi are fierce competitors both in the drinks cabinet and in sponsorship. Coca-Cola is one of the main sponsors of the Rugby World Cup and will be able to generate brand awareness and increased sales from advertising and events. This could harm Pepsi’s position unless it can come up with innovative ways to stay in the game. For example, during the 2014 FIFA World Cup, despite not being a sponsor, it used a number of players on its bottles and cans.
Sky PLC
Sky has been reeling since 2010, when ITV pipped the broadcaster and the BBC to exclusive rights to show Rugby World Cup games. This gives ITV access to millions of viewers, which will help boost their advertising revenues and take audiences and potential advertisers away from Sky.
Only time will tell who will come out on top on the pitch and in the stock market but, by starting in the right position, your team and shares could have a better chance of success.
