Tecate’s Knockout Sponsorship: Is It the Right Move?

After years of disputes and negotiations, the most anticipated fight in recent history is set to occur on May 2nd. Floyd Mayweather and Manny Pacquiao will meet in the ring for the “Fight of the Century.” But, are they the only ones strategizing on how to win?

Another contest has been brewing behind the scenes between Constellation Brands’ Corona (47% of U.S. imports from Mexico, according to Euromonitor) and Heineken’s Tecate (7% of U.S. imports from Mexico) – the two companies entered an aggressive bidding war for sponsorship rights to the fight. In the end, Heineken emerged the “victor” with a $5.6 million payout compared to Constellation Brands’ $5.2 million final bid.

Although this price tag is considered a premium for sport sponsorships, it is driven by the 4 million pay-per-view buys or 33 million viewer reach that the fight is expected to generate, making it the second most watched domestic sporting event after the Super Bowl. However, reach is only one variable in the marketing ROI evaluation for sponsorships, and the question is whether this sponsorship is the right choice for Heineken’s Tecate brand in the long term.

For a niche or newer brand, building awareness is the first step in the consumer purchase journey. From this perspective, the benefits of this sponsorship are apparent. The viewership is high, the brand’s “Born Bold” image is compatible with the sport of boxing, and Tecate’s target demographic, the bi-cultural Hispanic population, is a significant portion of boxing’s fan base.

Sometimes sponsorship rights are won but never completely pay out because of limited brand activation.  To the credit of Tecate, the brand appears focused on fully initiating its sponsorship by investing heavily in efforts such as a social media campaign featuring the iconic “Rocky” actor Sylvester Stallone, sponsored viewing parties, and integrated retail programs. Tecate has also secured prominent presence in the boxing arena.

Even so, this sponsorship represents a certain risk for Tecate. Boxing is widely considered an anemic to dying sport depending on the source, but since 2007 and despite this trend, much of Tecate’s marketing investment has been in boxing sponsorships. In line with the declining popularity of boxing, overall U.S. retail sales of Tecate have dipped at 5.5% a year between 2008 and 2013 despite intermittent spikes when it sponsors big fights. Given this downward trend, Tecate likely sees this “super fight” as a chance to revitalize the brand. However, these trends call into question the viability of this boxing-focused campaign as a strategy for raising long-term awareness and consideration for the brand since Tecate’s sales growth has not been sustained with its past investment in boxing sponsorships.

Tecate is clearly purchasing the brand attribute “associations” of boxing: masculinity, strength, toughness, grit, and power. Tecate’s aluminum can packaging (as opposed to a more “premium” glass bottle) aligns well with this gritty brand image.  Furthermore, Tecate’s “Are You Hombre Enough?” advertising campaign from the past few years highlights the brand’s focus on a more “macho” brand equity.

I would argue that Tecate can gain an analogous brand image by associating with a different sport – and one that is growing in viewership, not declining.  Mixed martial arts (MMA) is a booming sport that is rife with virility and aggression where the sport’s largest promoter, Ultimate Fighting Championship (UFC), has grown from 140,000 pay-per-view buys in 2001 to 3.2 million last year.  Also, according to Connecticut Latino News, a whopping 50% of viewers consists of Hispanics, while almost 40% of Hispanic males ages 18-34 consider themselves enthusiastic UFC fans.

With a compatible brand image and significant viewership by Tecate’s target population, MMA deserves consideration. It also may be more cost effective than boxing as a sponsorship platform, enabling Tecate to more fully develop and broaden its involvement with the sport.

It will be interesting to see whether the “Fight of the Century” helps revive Tecate’s sales, or if it settles in as another blip in the decline of the Tecate brand. If the fight does not provide the longer-term, sustained elevation the brand needs, perhaps MMA could.



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