World Cup advertisers get that France and Argentina feeling

By Leo Lewis
Monday 02 December 2013 02:48
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There's a sure way to make a small fortune on the World Cup: start with a large fortune and invest it in the tournament's biggest sponsors.

Selling every square inch of available space is nothing new in sport, and this World Cup presents its global audiences with the usual colourful array of world-recognised brands. At the top of the food chain are Fifa's 15 official sponsors – big blue-chip spenders whose millions of dollars have bought them the right to place their billboards around the pitches.

But behind those brands is a collection of companies whose recent fortunes have been decidedly shaky. Most have seen their shares tumble hard since the start of the year, and the added exposure during the tournament has yet to make any positive impact.

One of the more humiliating collapses has been at Avaya, a US communications company that has managed to get its name attached to many of the technical aspects of showing the games, including the match timekeeping. Avaya itself has been something of a market horror story. It was spun out from Lucent, the sprawling telecoms equipment company whose dismal crash was Wall Street's equivalent of the Marconi debacle. The plan was that Avaya would surge as a competitor to Cisco, but its 22 months of market history have produced only profits warnings and stock declines. Since the World Cup opened, Avaya's shares have tumbled nearly 28 per cent.

Yahoo! is another struggling sponsor. As the lone representative of the once-vibrant market for dot-com advertising, the internet portal company has a lot to prove. Unfortunately, shares in the core business are 20 per cent lower than they were in January, and have not picked up at all over the past two weeks. Yahoo! Japan has had an even rockier run, falling hard despite the early victories of the country's national team and despite its claims that internet traffic has surged since the tournament began.

But it has been the host-nation sponsors that have taken the biggest beatings. The glamour of the World Cup may seem encouraging for the economy; the Japanese research institute Dentsu has predicted that the tournament could generate more than double the 1.42 trillion yen spent staging it. But Tokyo investors are under few illusions: "It may lead to more T-shirt sales, but that's about as far as it will probably go," says Hiroshi Kato, a Tokyo fund manager. "Investors don't like the way the economy is looking."

Those worries have knocked the overall Japanese market, but the official sponsors are enduring particularly heavy weather. Since the tournament began, global technology worries have hurt the chip maker Toshiba, the electronics maker JVC, and NTT, Japan's national – and the world's biggest – telephone company.

Across the Sea of Japan in Korea, the sponsors have had an equally torrid time. Despite its team's glorious progression to the second round, the Korean market last week sent Korea Telecom Hitel to an all-time low and Hyundai to a 17-month low. In both cases, traders have been keeping a weather eye on Wall Street, and are not liking what they see.

The tech fallout has delivered a major blow to Philips, the only European in the line-up. Its huge weighting on the Amsterdam exchange means that its massive falls since the tournament opened have brought the entire index down.

The only stocks currently holding up the sponsors' portfolio are US corporate stalwarts Gillette, Anheuser-Busch and Coca-Cola. Their performance has been merely flat, while far more damage has been done by McDonald's, whose exposure to mad cow fears and rising pork prices has battered the shares by more than 30 per cent over the past two years.

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