SBJ/20081117/This Week's News

J&J won’t renew TOP deal with IOC

Less than three years after announcing that it would become a worldwide Olympic partner, Johnson & Johnson has decided not to extend its sponsorship through 2012.

“We are not renewing that sponsorship to enable us to focus on other business priorities,” J&J spokeswoman Lorie Gawreluk wrote in an e-mail. “We are proud to have been a sponsor of the [International Olympic Committee] and the Beijing Olympics, which was a success for the company.”

Despite its decision not to return as an IOC partner, J&J may remain affiliated with the Olympics by sponsoring the U.S. Olympic Committee, other national organizing committees and possibly the 2010 Vancouver Games, sources familiar with the company said.

The decision to discontinue the top-level sponsorship was made over the last three weeks in part because of the economy and the expiration of key patents that J&J faces in the coming years. It leaves the IOC without a sponsor that would have delivered approximately $100 million in its renewal over four years and helped the organization achieve its goal of $1 billion for The Olympic Partnership program running from 2009-12.

J&J left Beijing pleased with its experience as a TOP partner but undecided about its future in the program. The IOC granted J&J special permission to wait and make a decision after the company had analyzed its marketing performance following the Olympics. Both J&J sponsorship and IOC officials were optimistic that the company would renew but understood that it wasn’t guaranteed.

Speaking in Beijing during the Games in August, Owen Rankin, J&J vice president of corporate equity and Olympic sponsorship, said, “When we get back we’ll look at the rest of the data points and say, ‘Does this make sense as a place for us to be?’”

J&J’s multimillion-dollar exhibit
in Beijing included ancient
Terra Cotta Warriors (top).

The answer was not as simple as “no.”

Sources familiar with the company’s decision said Johnson & Johnson paid for its 2006-08 TOP and 2008 Beijing Olympic sponsorships out of its corporate budget, with the estimated outlay pegged at more than $73 million, because China was such a crucial market for the company. But this time the company wanted its brands to contribute to the cost of the sponsorship from their individual marketing budgets. The sponsorship division was able to pull that funding together but failed to get corporate approval because of economic pressure facing the pharmaceutical industry, which is expected to see revenue drop by as much as $10 billion next year.

While J&J officials spoke highly of their experience in Beijing, the company was one of the sponsors frustrated by the lack of foot traffic on the Olympic Green, where it spent millions of dollars building a showcase to expose its brands to Chinese consumers. The Beijing Olympic Organizing Committee (BOCOG) and IOC had told J&J and others to expect upward of 10,000 visitors a day, but the first weekend only 3,000 to 5,000 visited each day because of security restrictions. BOCOG corrected the problem later in the week by relaxing some of their security measures, but J&J and other sponsors were still frustrated.

J&J activated heavily during the Beijing Games. In China, it provided informational J&J branded books about the Olympics to children across the country, and in the U.S., it backed a special area on called the “Family Room” that featured webisodes of eight U.S. athletes preparing for the Games. J&J is the fourth partner to discontinue its IOC TOP partnership since last year. The others from the 2005-08 quadrennial are Kodak, ManuLife and Lenovo. The IOC was able to replace Lenovo with Acer, but it returned ManuLife’s insurance category rights back to the 200 national organizing committees and added Kodak’s digital camera category rights to Panasonic’s sponsorship. As the official health care products partner, J&J will be difficult, if not impossible, to replace.

An IOC spokesman said: “The TOP program receives a lot of interest from a number of corporations from around the world looking to partner with the Olympic Games and the Olympic Movement … (and) further announcements are expected to be made regarding new members” in 2009.

The IOC has nine partners for 2009-12 and already has raised more than the $886 million it received from 2005-08, but it hasn’t topped its goal of $1 billion for the quadrennial. It is exploring sponsorships in additional categories, including automotive, personal care products and others.

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