End of an era as McDonald's ends IOC deal, but new sponsor awaits
By Simon Ward
McDonald’s has ended its long-running worldwide sponsorship of the International Olympic Committee three years before its deal was due to expire, citing “different business priorities," although a new technology partner looks set to come on board.
The international fast food chain has had an involvement with the Olympics, including as a sponsor of the US Olympic Committee, since 1976, and has been a TOP partner of the IOC since 1996.
At the start of 2012, McDonald’s extended the sponsorship until 2020, when Tokyo will host the Olympic Games, in a deal reported to be worth between $180 million and $200 million, but is now walking away from top-level involvement.
While the IOC said it had been “mutually agreed” to part ways, it is evident that the USA-based company no longer sees the games as a necessary platform to promote its products.
Nonetheless, McDonald’s will remain a sponsor of the 2018 winter Olympics in PyeongChang, with rights in South Korea only, operating restaurants in the Olympic Park and the Olympic Village.
The IOC said the financial terms of the separation, agreed by all parties, are confidential.
It added: “The IOC has no immediate plans to appoint a direct replacement in the retail food operations sponsorship category, and will review the category in the broader context of existing Olympic marketing programmes.”
The withdrawal of McDonald’s reduces the number of TOP sponsors to 12 although the IOC will not be significantly out of pocket as all are signed up until at least 2020, in deals now worth around $200 million over a four-year Olympic cycle, with the newest partner being Alibaba, the Chinese e-commerce giant, which has committed until 2028.
Moreover, the vacancy in the programme could soon be filled as Intel, the USA-based computer chip manufacturer, is close to finalising a worldwide deal.
Speaking about the departure of one of its most loyal Olympic sponsors, Timo Lumme, the managing director of IOC Television and Marketing Services, said: “The IOC’s sponsorship strategy is aimed at delivering long-term partnerships that help the Olympic Movement achieve the objectives set out in Olympic Agenda 2020, our strategic roadmap for the future.
“This strategy is exemplified by the recent announcement of long-term, ground-breaking agreements with new and existing global Partners. In today’s rapidly evolving business landscape, we understand that McDonald’s is looking to focus on different business priorities.
“For these reasons, we have mutually agreed with McDonald’s to part ways. I would like to thank our friends at McDonald’s on behalf of the IOC for the commitment the company has shown to the Olympic Movement over many decades.”
Silvia Lagnado, global chief marketing officer at McDonald’s, added: “As part of our global growth plan, we are reconsidering all aspects of our business and have made this decision in cooperation with the IOC to focus on different priorities.
“We have been proud to support the Olympic Movement, and we thank our customers and staff, the spectators, athletes and officials, as well as the IOC and local Olympics Games organising committees, for all of their support over the years.”
The decision does not mean that McDonald’s is abandoning international sport as it remains a second-tier ‘official sponsor’ of the Fifa World Cup, in a deal that runs to 2022, and will have a presence at the Confederations Cup in Russia, which kicks off tomorrow.
External factors Although not cited by either organisation today, the IOC and McDonald’s have come under regular pressure from health campaigners to end their association, given the apparent clash between elite sport and fast food and allegations that it encourages unhealthy eating.
However, McDonald’s has used the partnership with the Olympics to promote its salads and other healthy products and Jacques Rogge, the former IOC president, claimed before the London 2012 Olympics that his administration had challenged the company and Coca-Cola to help address the global obesity crisis before they renewed their contracts.
Coca-Cola, another long-time Olympics sponsor, remains signed up until the 2020 games.
Michael Payne, the influential former marketing director of the IOC, who negotiated the initial deal with McDonald's, told Sportcal: "It's not unusual for a sponsor to stop. It is unusual to stop mid-term, but if both parties agree on it, then it can be done."
He added: "I'm not surprised it's not renewing. It's been a 20-year run, and that's a long time. Few sports keep their sponsors for that long."
Payne claimed the IOC and McDonald's also faced a challenge as the company broadened its range of food and the local organising committees sought their own sponsors in the category, saying: "Even though McDonald's did some of the best Olympics advertising going, it was becoming more and more difficult to manage."
He added: "I think it really was mutual [to end the deal]. The slightest indication that McDonald's wanted out and the IOC would have been open to that."
While the activation of McDonald’s around the Rio 2016 Olympics was regarded as relatively low-key compared to the past, the timing of its withdrawal is somewhat unexpected given that Los Angeles, in its home market of USA, is in the running to host the 2024 or 2028 games.
Tim Crow, the chief executive of Synergy, the sports and entertainment marketing agency, said: “I’m a little bit surprised as I thought the prospect of an LA Olympics would mean they would be tempted to re-sign.
“Their relationship with the Olympics really started with America, with providing burgers to athletes, and I think the only place the relationship between McDonald’s and the IOC has really worked is USA. However, given how little they did around Rio in the States it is not [a surprise].”
The IOC executive board recently decided that the 2024 and 2028 Olympics will be awarded simultaneously in Lima in September, with Los Angeles up against Paris, albeit no decision has yet been made about the process to decide which city should host which edition.
Although it appears certain that the summer games will be returning to USA in the short- to mid-term future, for the first time since the Atlanta Olympics of 1996, McDonald’s has seemingly passed up the opportunity to be part of it.
Crow said: “I think the IOC will be relieved by this. But who will be most relieved will be the McDonald’s ad agencies, which have been floundering with it for years. They haven’t found an idea that has connected McDonald’s with the games.”
There is uncertainty over what sponsorship category Intel will fill, and this has been a major issue in negotiations with the IOC over the past year, according to Sports Business Journal.
The deal is set to be confirmed in a press conference in New York next Wednesday.
Intel has stepped up its involvement in sport in the last two years and it is claimed that chief executive Brian Krzanich has been a driver of the Olympics deal, and is keen for it to start in 2018, with the PyeongChang winter games, as Korea is a major hub for technology and there are plans to showcase 5G technology around the events.
Intel recently signed a three-year deal with Major League Baseball, which includes live streaming of one game per week in virtual reality on its True VR app, and, as it is based in California, is likely to enticed by the prospect of a Los Angeles Olympics.
Payne is not surprised at the new agreement, saying: "I think there's a trend of innovative companies using the platform for technology and to deliver business results."
The IOC generated a record $1.02 billion in revenue from its TOP sponsorship programme between 2013 and 2016 and claims to be "on course" to surpass that in the current cycle to 2020.
Following the withdrawal of McDonald’s, there are now seven TOP sponsors signed up until 2020 (Atos, Coca-Cola, Dow, General Electric, Procter & Gamble, Samsung and Visa), three to 2024 (Toyota, Panasonic and Bridgestone) one to 2028 (Alibaba) and one to 2032 (Omega).
However, there is now arguably a lack of mainstream consumer-focused brands, which would help the IOC in its stated goal to connect with younger audiences.
Crow said: “I think another conclusion you can draw with this [the withdrawal of McDonald’s] and Olympic sponsorship in the last couple of years is the sector that is adopting the games as a marketing platform is B2B.
“The Olympics is a great joint venture and most of the deals in recent years have been big B2B deals. It [the IOC] has always been good selling to broadcasters and B2B brands and what it needs to have is a new generation of consumer brands to come forward and market itself to a new generation of consumers.”
However, Payne believes the IOC should have faith in its existing partners to reach young people, saying: "It's a balancing act. Ultimately you want a portfolio of partners to tick all the boxes. If you want to connect with the youth in China, Alibaba will do more than McDonald's would, before breakfast."
He also pointed to the part Procter & Gamble plays in engaging with families and the role of youth-oriented sportswear brands such as Adidas and Nike, which sponsor many of the teams and athletes and activate heavily around the Olympics.