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Coca-Cola & China Firm to Sponsor Olympics: Trade War at Bay?

In a dramatic turn of events, the International Olympic Committee (“IOC”) recently announced that The Coca-Cola Company KO has inked a joint venture with China Mengniu Dairy Company Ltd to sponsor the Olympics till 2032. The blockbuster promotional campaign between a U.S. beverage behemoth and a Chinese firm appears to bring the corporate objective at the forefront and put the trade war issues on the backburner.

Fine Prints of the Deal

The joint advertising deal will cover sponsorship for four Summer Olympics, two Winter Olympics, the Paralympic Games and the Youth Olympics. Combining the non-alcoholic beverage and the dairy categories into a new joint category, the partnership involves significant investments in traditional and digital media to promote the spirit of the Olympics globally. Also, it represents a solemn pledge by both the companies to uphold the ideals and values of the Olympic Movement, and help create memorable experience for spectators and fans through financial and moral support for the IOC, participating nations and athletes. Although the company spokespersons and IOC representatives declined to comment on the deal value, various unconfirmed reports have pegged the transaction at about $3 billion.  

The TOP Program

With the deal, Mengniu has become the first Chinese fast-moving consumer goods company to become a member of The Olympic Partners (TOP) program – the highest level of Olympic sponsorship that grants category-exclusive marketing rights to a select group of global partners. Since its inception in 1985, the TOP program has attracted some of the best-known blue-chip multinational firms across the globe, which have actively offered funds to provide the foundation for staging of the Olympic Games.

Other corporate sponsors of this mega sporting extravaganza at present include Intel Corporation INTC, Visa Inc. V, Samsung Electronics, Toyota Motor Corporation TM, Panasonic Corporation and Alibaba Group Holding Limited BABA. Notably Coca-Cola has been associated with the Olympic Games since 1928, and the joint venture agreement with Mengniu extends this association to a historic 104-year-long relationship.

The Payoffs

Mengniu aims to leverage the entry into the elite list of TOP program to expand its international business and improve its brand image that got tarnished by a 2008 scandal over contaminated baby formula. With 40 plants across China, New Zealand and Indonesia, this firm is capable of producing more than 9 million tons dairy goods a year. The advertising deal with Coca-Cola will enable the company to gain a solid footprint in international markets with more exposure as it aims to become one of the world’s top dairy producers by 2025.

The inclusion of Mengniu as a sponsor for Olympic Games also corroborates the ‘Look East’ policy of IOC and represents a marked shift in its sponsorship program that was once dominated by Western companies. Moreover, the strategic choice of a Chinese firm for a unique tie-up with a U.S. company for the sponsorship seems to portray a well-devised plan to go beyond the bilateral trade spat for large-scale promotional activities that hinge on the unifying power of the Olympic spirit.

IOC President Thomas Bach perfectly summed up, “This long-term agreement is another demonstration of the relevance and stability of the Olympic Games in these times of uncertainty. Having our longest-standing partner, Coca-Cola, an iconic American brand, together with a young Chinese company, Mengniu, joining hands under the roof of our Worldwide TOP Programme is a great example of the unifying power of the Olympic spirit. This partnership will give another dimension to the promotion of the Olympic values around the world.”

Will the respective governments display the same bonhomie in resolving the prolonged trade war? Let us wait and see what the future holds.

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