World Cup 2002: a shot at goal
1 Jun 2002
It's not just football fans who are hoping for a strong performance from England in the FIFA World Cup. British businesses are pinning their hopes on the hugely popular international tournament as a way of boosting their fortunes at a time when many are still in the economic doldrums. How much money they will make depends partly on the success of the team. The longer England remains in the tournament - the final is on 30 June - the longer the nation will stay hooked, and the more people will spend.
Experts point to the feel-good factor associated with football, particularly significant victories. According to Mike Johnston, international chairman of the Chartered Institute of Marketing: 'Major world events tend to have a halo effect, which acts as a psychological trigger to consumer spending. Many suppliers of fast-moving consumer goods have used football as a vehicle for growing consumer interest in their brands, and football has proved to have a significant impact on the sales of alcohol. Last September, during the England versus Germany World Cup qualifying match, sales increased by more than 25% in multiple grocers.' This was the crucial game in which England famously defeated Germany by 5-1.
The advertising world is also hoping for a much-needed boost, and Johnston has high hopes: 'Last year advertising spend plummeted, but recent reports show an upturn, with total advertising revenue set to rise in May for the first time in 16 months. The World Cup will help accelerate this turnaround.'Limbering up
Early signs, however, are not particularly encouraging. ITV, which had hoped to attract bids of around £3.5m from advertisers for sponsorship to accompany its coverage of the tournament, has been forced to reduce its prices significantly. Potential advertisers were discouraged by the fact that England's star player, David Beckham, injured his foot. Without him, they feared, the England team's chances of making it beyond the first round were diminished, and therefore so was the effectiveness of any advertising campaign.
But Johnston argues that the World Cup is a good bet for any major brand. 'If you measure the success of sports sponsorship by such metrics as the number of people reached, brand awareness and impact on sales, then, inevitably, the World Cup is a huge attraction. Yahoo has secured online rights to it, resulting in a great deal of column inches and brand recognition in a short space of time.'
Other companies attempting to build their brand by associating themselves with the tournament include bank Capital One, which has launched a new World Cup credit card. Aside from zero interest for six months, it offers three different designs, including a photograph of the 5-1 scoreboard at England's victory over Germany in the qualifiers. Rob Habgood, vice president of Capital One Europe, explains: 'Last season there were around 30m admissions to football matches played in England, and 28m tuned in to watch England matches during Euro 2000. The World Cup is bound to be even more popular.'
But there are problems for those hoping to cash in on the event. Due to the time differences between the UK and host countries Japan and Korea, most matches will be screened in the UK in the morning. Advertisers fear those fans who are less than fully committed may not bother watching, especially as most will have to arrange to take time off work.Mixed fortunes
This unsocial timing is also something of a disaster for pubs. They did get a boost in April when the High Court ruled that World Cup matches amounted to a 'special occasion' - necessary for pubs to obtain an extension to normal licensing hours, although football fans' capacity to drink heavily at 7.30am is open to question. Despite this, brewing industry representatives remain resolutely upbeat. The Spirit Group, which owns 1,046 pubs and clubs across the UK, is providing managers of its outlets with promotional material and special offers. Even before the High Court ruling, many of its pubs had been planning to open up in the morning and offer World Cup breakfasts.
Some retailers, however, are breathing a sigh of relief over the timings of the matches. More people watching TV means fewer people out shopping. Sales of men's clothes in particular suffered a significant dip during June 2000 when the Euro 2000 tournament was taking place, according to the British Retail Consortium (see Panel 1). Peter Williams, finance director of Selfridges, says: 'The games are all fairly early in the morning. It would have been more of a problem if they had been during the day, so in this instance we are fairly relaxed about it.' He predicts that the retailer's television department will sell more in the lead up to the World Cup, because people use it as an 'excuse or opportunity' to upgrade. He also thinks that a good performance by England will make people spend more. 'If England win it will put consumers in a good frame of mind and we will benefit from that,' he says.
Electrical retail giant Curry's says it detected an increase in widescreen television sales as far back as March. Marketing director Ian Ditcham thinks football fans are driving this. Sportswear retailers also have high hopes for the World Cup. As he announced JJB Sports' annual results in April, the company's chairman David Whelan spoke of 'the sales opportunities to be created as a result of events such as the World Cup'. The launch of its England away kit, he said, had already boosted sales.
One finance director, however, sounds a note of caution about going full pelt into World Cup promotions without thinking it through first. Lesley Jackson is UK finance director of Bulmers, whose brands include Strongbow cider. She comments that companies in the alcoholic drinks market compete heavily to be associated with the World Cup, and that they risk losing out by cutting prices and paying heavy promotion costs. 'We put a lot of effort into the World Cup, but we have to compete so heavily with the big players that we don't make much out of it,' she says.
'We'll trade at a sensible level and make a sensible return.'Taking their best shot
More optimistic is Tim Howkins, finance director at IG Index, the UK's largest spread betting company. He hopes the tournament will be worth at least half a million pounds of extra income, and that it will bring in new clients who will continue to use IG's services after it's all over. Promotions such as doubling the pay out on certain sorts of bets are planned.
In the 1998 World Cup, the company increased its sports client base by around 15%. 'Normally football is about 50% of our sports business,' Howkins says. 'During the last World Cup it was over 70% - despite this period also including Ascot and Wimbledon.' IG now has double the number of sports clients it had in 1988, and 40% more than Euro 2000. This World Cup, says Howkins, will be IG's biggest football tournament so far. But he wishes that the tournament started a couple of weeks earlier - IG's year end is 31 May, the date of the first match.
Optimism about the World Cup is also shared by others in the betting sector. A Ladbrokes spokesman predicts that the industry as a whole will make more than £100m in turnover from the tournament - compared with around £65m in the 1998 World Cup. Since then, he comments, betting tax has been abolished, gambling on the internet has taken off and betting has become more socially acceptable.
But whether the UK economy will win overall is another question. Economists point to the problem of absenteeism (see Panel 2), the fact that the travel industry could be hit by people taking holidays to watch football rather than actually go anywhere, and the awkward timing of the match screenings in the UK. John Butler, HSBC's UK economist, expects the overall effect to be neutral for the UK economy, while Andrew Smith, chief economist at KPMG, expects it to be negative because funds will leave the country, for example as payment for TV rights and spending by fans travelling to the Far East. Football fans will be hoping the England team fares rather better than these two predict that the economy will.
1: Euro 2000 bad for business
Growth in retail sales values slowed to 2.8% in the month of Euro 2000, from 3.2% the month before. Economists blamed people watching the tournament instead of going shopping, and the start of the summer sales.
Beer sales Children's trainer sales Television sales
Men's clothing sales DIY/gardening goods
Source: British Retail Consortium - KPMG June 2000 Retail Sales Monitor
2: The price of 'sickies'
Perhaps the greatest cost to the UK economy resulting from the World Cup will be people not turning up for work because they want to watch the England matches. Barclaycard estimates that £1.2bn will be lost during the first round of three matches, and that if England makes it to the final round, playing eight games, the figure will rise to £3.2bn. The loss of roughly £400m per England match is based on the assumption, indicated in its own survey, that 40% of the 15.2m football fans in the UK will take a day off. With an average daily earning of £66, the total loss to the economy comes out at £399m.
You may not agree with Barclaycard's assumptions, especially as the sums appear to have ignored the fact that England's first match is on a Sunday. But most economists agree that absenteeism will be a significant problem over the tournament. Some employers are making arrangements for staff to watch the matches at work. Andrew Smith, chief economist at KPMG, comments that the problem of absenteeism will be most marked in industries where there is a high turnover of staff, for example postal and travel services. Even conscientious football fans, he suggests, might therefore be rather late for work on England match days.
3: 'Officially' cashing in
FIFA's 'official' World Cup sponsors, listed below, are thought to have paid around £10m each to become 'partners' for the 2002 tournament. In addition, FIFA is giving out some 250 merchandising licences, including one to Marks & Spencer. Global retail sales of official World Cup merchandise reached $1.2bn in the 1998 tournament. Sales of $1.3bn are hoped for this year. In April, FIFA launched an attack on 'ambush marketing' by companies using the World Cup as a sales tool without paying it money.
The official FIFA partners for the 2002 World Cup in Japan and Korea are: Adidas, Budweiser, Fuji Xerox, Gillette, JVC, MasterCard, Philips, Toshiba, Coca-Cola, Fujifilm, Hyundai, Korea Telecom, McDonald's, Yahoo.