SBJ/October 22-28, 2012/Marketing and Sponsorship

Pepsi opens door for new Dale Jr. sponsor

PepsiCo is finalizing a new, three-year agreement with Hendrick Motorsports that will reduce its spend in NASCAR by as much as $20 million and open the door for a new sponsor to land a multi-race deal with the sport’s most popular driver, Dale Earnhardt Jr.

The move opens the door for another brand to associate with Dale Earnhardt Jr.
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The company is working on a deal that would make it the primary sponsor for eight races across three Hendrick Motorsports cars — the No. 88, No. 24 and No. 5 — between 2013 and 2015. That is a reduction from the 22 races it sponsored across two cars — 20 on Earnhardt’s No. 88 and two on Jeff Gordon’s No. 24 — over the last five years.

Current plans call for PepsiCo’s Diet Mountain Dew and Amp brands to top the No. 88 car driven by Earnhardt in five races, its Pepsi brands to cover the No. 24 car driven by Gordon in two races, and one of its Pepsi brands to be a single-race primary sponsor on the No. 5 car driven by Kasey Kahne, a driver the company believes could succeed Gordon, 41, as the face of its Pepsi brands in the future.

Industry sources valued Pepsi’s new deal at $10 million a year, a significant decrease from the $25 million to $30 million a year it spent on the No. 88 car alone between 2007 and 2012. The reduction is consistent with moves made by other large companies such as Anheuser-Busch and UPS, which cut back on the number of primary races they sponsored in recent years.

“The main takeaway for us is that we’re continuing the relationship and partnership because we really value it,” said Heidi Sandreuter, PepsiCo senior director, sports marketing, who declined to confirm how many races Pepsi would sponsor. “Moving forward, it’s still about driving Diet Dew for Dale (Earnhardt). Dale anchored Diet Dew this year for us and that is huge. Sports and racing is what the brand is leveraging to increase awareness and trial.”

Pepsi’s decision to reduce its support of the No. 88 car opens up an opportunity for a new brand to associate with NASCAR’s most popular driver. Sources said Hendrick is shopping 13 primary races on Earnhardt’s No. 88 car and four races on Kahne’s No. 5 car.

Pat Perkins, Hendrick Motorsports’ vice president of marketing, declined to comment on the number of races available on the No. 88 car but said the team is looking for a single company or brand that would align well with Pepsi and the National Guard, which will sponsor 20 primary races on the No. 88 next year. He added that they are looking at categories such as consumer packaged goods, personal care, speciality retailers and technology.

Earnhardt has been voted NASCAR’s most popular driver nine consecutive years. His licensed-merchandise sales represent approximately 30 percent of the sport’s entire merchandise sales.

“One thing that can’t be denied about Dale is his ability to move a market and his fan base’s loyalty,” Perkins said. “He is a product mover, and whether it’s a consumer packaged goods brand or an organization like the National Guard, he has an ability to make a positive difference for a business.”

Earnhardt showed the type of effect he can have on a brand’s bottom line when PepsiCo signed on to sponsor him in 2007. The company agreed to a five-year deal valued at $25 million to $30 million and used its affiliation with Earnhardt to promote its energy drink brand, Amp. At the time, Amp was the fifth-largest player in a fast-growing category, which then had more than $6 billion in annual sales. Its sponsorship of Earnhardt helped it increase its market share 68 percent, according to Beverage Digest.

But as sales in the energy drink category flattened in recent years, Amp and its parent company found it tougher to justify the cost of its No. 88 sponsorship. PepsiCo this year made Diet Mountain Dew the primary sponsor of the No. 88 for 16 races and reduced Amp to being a primary sponsor for only four races. It developed a full advertisement featuring Earnhardt using the tag line “Yeah, it tastes that good.”

“We still have awareness gaps and trial gaps for (Diet Mountain Dew),” Sandreuter said. “Our awareness among our core target, Gen X and leading millennial males, increased 40 percent. I imagine even the association with Dale would be greater.”

The company’s new deal with Hendrick is the latest in a series of reductions in NASCAR sponsorship. It ended a 49-year sponsorship at Daytona International Speedway in 2008 when Coca-Cola supplanted it as the title sponsor of the track’s summer race. It later eliminated sponsorships at Darlington, Watkins Glen, Talladega and Phoenix. Pepsi’s only remaining track deals are with Martinsville, an International Speedway Corp. track, and Bristol, a Speedway Motorsports Inc. facility. Pepsi-owned Gatorade sponsors victory lane at ISC’s 12 racetracks.

Pepsi increasingly has concentrated its sports marketing efforts on the NFL. It cut a deal this year to sponsor the next four Super Bowl halftime shows and has concentrated its marketing on bringing music and sports together, as seen in its current ad featuring New Orleans Saints quarterback Drew Brees and British boy band One Direction. It continues to use action sports as a platform for Mountain Dew, and it renewed its sponsorship of the Dew Tour earlier this year.

“The NFL is a huge part of our investment, but our deal with Hendrick is more significant than anything after the NFL,” Sandreuter said. “(NASCAR) is a huge priority for us. We’re still bringing a lot to the table with Hendrick and we’re always trying to put our money where it has the greatest effect. We don’t doubt that by tying into racing and the best team in the business we’re reaching our consumers in a relevant way and driving passion for our brands.”

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