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Volume 21 No. 1
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Nike scores in Brazil with '16 Olympic deal

Nike has signed a sponsorship agreement with Rio 2016 and the Brazilian national team, scoring a major corporate victory in the race for market share in fast-growing Brazil.

The deal gives Nike its first official Olympic organizing committee sponsorship since the 2000 Sydney Games. It represents a tremendous opportunity to strengthen Nike’s brand positioning in Brazil and generate strong licensed merchandise sales on the back of Brazil’s emerging middle class.

Under terms of the four-year deal, Nike will receive marketing and licensing rights to the Rio Games. It also will outfit all Brazilian national teams (except volleyball, which is sponsored by Olympikus) for the 2012 London and 2016 Rio Games. Unlike most Olympic apparel partners, Nike won’t outfit volunteers working at the Rio Games, and it is still being determined if it will provide opening and closing ceremony apparel for the Brazilian team, sources familiar with the deal said.

Financial terms weren’t available, but sources valued the deal in the $25 million to $40 million range. The total is significantly less than Rio organizers could have gotten for the deal.

Rio organizers opted to take Nike’s tier-three sponsorship offer over a tier-one sponsorship proposal from the Brazilian sportswear brand Olympikus, which is owned by Vulcabras Azaleia. In doing so, it is expected to become the first organizing committee to split team and volunteer outfitting into separate categories. They are expected to begin searching for a volunteer outfitting sponsor later this year, but it’s unclear where the organizing committee will turn to find an outfitter for that workforce.

Adidas paid $127 million for a tier-one sponsorship agreement for the 2012 London Games. But Brazil needed an outfitter for its national teams for the upcoming London Games, and sources said it chose Nike because of its reputation for product innovation.

Adidas, the official sportswear partner of the Athens, Beijing and London Games, did not compete for the Rio 2016 sponsorship. As an official FIFA partner, the company will have a dominant position in Brazil during the 2014 World Cup.

Rio 2016 already has signed five tier-one sponsorships and surpassed its goal of raising $570 million in sponsorship revenue. The organizer’s last tier-one deal with Nissan reportedly was worth $250 million. Its other tier-one partners are Bradesco, Bradesco Seguros, Claro and Embratel. It has a tier-two sponsorship with Ernst & Young.

The 2016 Olympics sponsorship is a departure for Nike. The company historically sponsors Olympic teams, not organizing committees. It last sponsored an organizing committee in 2000 when it replaced Reebok as the official sportswear partner less than a year before the Sydney opening ceremony. Reebok had withdrawn from its sponsorship after alleging that Sydney organizers breached their contract. Within days, Nike reached an agreement with the International Olympic Committee and Sydney organizers to replace Reebok.

Though the deal for the 2000 Olympics was cut hastily, Nike benefited from strong licensed product sales during the Games. Sources close to the deal with Rio 2016 said the company expects licensed product sales during those Olympics to be huge because of the growth of the Brazilian middle class and worldwide interest in Rio. Organizers of the 2016 Olympics projected more than $50 million in licensed merchandise sales in their IOC bid in 2008.

The deal included two other appealing components for Nike. First, it will be the dominant brand worn by Brazilian athletes in every sport from sailing and tae kwon do to track and field and soccer, which it already outfitted. Second, it doesn’t require the company, as is customary, to outfit the 50,000-plus volunteers who work an Olympics. That gives Nike the assurance, which the company prefers, that its brand will only be featured on athletes.