Going for the Gold: Is There a Boost from the Olympics?
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It's that time again. In the same year that the U.S. elects a president, the International Olympic Committee (IOC) organizes and holds the Summer Olympics. The modern version of the games began in 1896 in Athens, Greece and except for 1916, 1940 and 1944 (due to war) they have been held every four years since. In 1980, many Western countries, including the U.S., boycotted the Moscow Games due to the Soviet Union’s invasion of Afghanistan. In 1984, the Warsaw Pact countries, led by the U.S.S.R., boycotted the Los Angeles games. This year the games of the XXX Olympiad are being held in London, England.
While watching the opening ceremonies this year (the skit of the Queen parachuting out of the helicopter was great by the way) a question popped up. Do the companies that sponsor or advertise during the Olympics see an increase in sales or stock price?
Over one billion people tuned in to the opening ceremonies on July 27 and the expectation is that over half of the world’s population will watch at least a portion of the sporting events on TV. It is estimated that 500,000 people will attend the Games. All of this points to the fact that there should be a fairly wide exposure for companies advertising or supplying products.
Several companies including Coca Cola (NYSE: KO), McDonalds (NYSE: MCD), Proctor and Gamble (NYSE: PG) and General Electric (NYSE: GE) are part of the top level of The Olympic Partners (TOP) program, called the Worldwide Partners. This allows them to have exclusive marketing rights and designated use of various Olympic images.
Coca Cola paid $100M for the rights to be the sole provider of non-alcoholic beverages at the Games and expects to sell more than 23 million drinks in the two month period preceding, during and after the games. Two weeks before the opening ceremonies the stock price was $77.28. It has increased about 3.5% since, adding over $6B to the market cap. In the previous two week period it lost about 1.0% in value. If the sponsorship contributed to the increase it was probably worth it.
Proctor and Gamble is trying to promote its corporate identity through its sponsorship and advertising and expects a $500M increase in sales as a result. Because of the current rough patch it is going though the sponsorship may be worthwhile.
Another member of the Dow Industrials, GE, expects to generate $100M in sales based upon their sponsorship. It reported $1B in sales attributed to their sponsorship at previous Olympic Games, including $500M from the 2008 Beijing Games alone. For a mega cap corporation like GE the numbers aren’t huge but it is a positive nevertheless.
McDonalds is the official restaurant of the London Games. The stock price is down about 10% over the last six months, although it has stabilized a bit recently, and earnings expectations are down so maybe the sponsorship will give it a little boost.
Advertisements for Apple (NASDAQ: AAPL) were prominent during the opening ceremonies and during the early competition this year. Maybe the company is trying to duplicate the Superbowl advertisement in 1984 that introduced the Macintosh computer. That received many awards including TV Guide’s “number one all-time commercial” and the Macintosh was one of their best products. Maybe the company is concerned about the recent earnings miss and recognized it needed to be more aggressive to increase sales.
It doesn’t look like the companies mentioned above will get a gold, silver or bronze medal from their sponsorships and advertising this year but at least they are competing. Part of the Olympic experience is just being there. Let the Games begin.
Mark Morelli owns shares of Apple, The Procter & Gamble Company, McDonald's, and The Coca-Cola Company. The Motley Fool owns shares of Apple, The Coca-Cola Company, and McDonald's. Motley Fool newsletter services recommend Apple, McDonald's, The Coca-Cola Company, and The Procter & Gamble Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
