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Volume 21 No. 2
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McDonald's close to TOP extension

McDonald’s is close to finalizing an eight-year extension of its worldwide Olympic sponsorship, ensuring that the restaurant chain will continue serving Olympic athletes for four more Games.

The deal, which sources familiar with the negotiations said would be announced in the coming weeks, is valued at $180 million to $200 million total. It extends McDonald’s membership of the International Olympic Committee’s The Olympic Partnership (TOP) program and gives the company worldwide marketing rights to more than 200 national Olympic teams as well as the Sochi 2014 Winter Olympics, the Rio 2016 Summer Games, and both the 2018 and 2020 Olympics, whose host cities have yet to be selected.

An IOC spokesperson declined to comment. A McDonald’s spokeswoman said the company is focused on the upcoming Games in London and didn’t consider it “appropriate to speculate about sponsorship of future Olympic Games.”

Though McDonald’s has been a TOP sponsor of the IOC since 1996, an extension wasn’t guaranteed. The company’s marketers were frustrated in 2010 by a Subway advertisement on NBC during the Vancouver Games that featured Michael Phelps swimming over land to where “the action” was that winter. McDonald’s considered the ad ambush marketing and complained to the IOC and U.S. Olympic Committee about it, injecting tension into the partnership between the company and the Olympic organizations.

The IOC also faced pressure to discontinue its relationship with McDonald’s. As the organization moved to promote healthy lifestyles, its connection with a restaurant chain that built its empire on Big Macs and french fries drew increased scrutiny from the press and criticism from athletes. Most recently, former British Olympic boxer Amir Khan said that the IOC’s relationship with McDonald’s sent young people the wrong message about healthy eating.

But both parties put those issues aside and reached a long-term extension in part because the IOC and USOC pledged to monitor ambush marketing aggressively, and the IOC’s loyalty to long-term sponsors trumped any concerns about McDonald’s food offerings, sources said.

Longtime IOC partner McDonald’s uses the Games to launch products and motivate employees.
“It is a very smart, economical decision for McDonald’s, being that the average global TOP sponsorship is probably the same price as what the category would go for in Rio by itself,” said Rob Prazmark, the founder of 21 Marketing and a longtime Olympic sponsorship salesman. “The IOC is extremely loyal to their existing sponsorship base, especially those companies who invested in the TOP program during the IOC’s time of need in the 1990s.”

McDonald’s joins General Electric as the second TOP sponsor to renew this year through 2020, leaving the IOC with only one more partner, Acer, up for renewal at the end of 2012. The other eight global sponsors — Coca-Cola, Atos Origin, Dow, Omega, Panasonic, Procter & Gamble, Samsung and Visa — are all locked up in long-term agreements.

Atos Origin, Panasonic and Samsung are committed through 2016. Coca-Cola, Dow, Omega, Procter & Gamble and Visa are signed through 2020.

The IOC has pushed sponsors to sign on through 2020 in recent years because it has agreed to change its current revenue-sharing agreement with the USOC after that year. The current revenue-sharing terms give the USOC a 16 percent share of TOP sponsorship revenue, and Gerhard Heiberg, the head of the IOC marketing commission, earlier this year said the organization plans to revise the TOP program after 2020.

The current TOP program, which covers the 2010 and 2012 Olympics, is on track to deliver around $960 million for the organization.

The Olympics have been an important marketing tool for McDonald’s since 1968, when it airlifted hamburgers to athletes during the Winter Games in Grenoble, France. The company, a longtime USOC partner, has made memorable Olympic-themed commercials for decades, featuring athletes ranging from Carl Lewis to Michael Jordan and Bonnie Blair to Tyson Gay.

Over the years, it’s used the Olympics as a platform to launch new products like the Southern Style Chicken Sandwich, which it promoted during the Beijing Games, and fruit smoothies, which it revealed during the Vancouver Games. It also used it as a way to motivate employees by offering them a chance to travel to the Olympics and serve athletes and ticket holders at restaurants in the athletes village and Olympic park.

For the 2012 London Games, McDonald’s is putting balanced eating and exercise at the center of its marketing efforts. It signed U.S. gold medal-winning swimmer Dara Torres as its global ambassador for a new program called “Champions of Play” that will give 200 selected kids worldwide a chance to attend the Olympics, tour the athletes village and play with athletes on their respective fields of play. For example, they will have a chance to swim with Torres in London.

In announcing the program, McDonald’s Global Marketing Officer Dean Barrett said, “A lot has changed in the 35 years since McDonald’s began supporting the Olympic movement, but what has not changed is how fundamental this partnership is to McDonald’s and the Olympic movement.”