Pepsi moving out of IPL: An opportunity for many

Pepsi is still mulling about withdrawing from its title sponsorship for Indian Premium League (IPL). A joint statement by BCCI and PepsiCo simply stated that they were looking to arrive at a solution and ‘both parties will share it when ready’.

As is known, Pepsi had paid Rs 396 crore in 2012 for the five-year IPL title sponsorship. This amount is nearly a 100% increase on what DLF had paid for the previous five-year period. IPL’s troubles are also well known, and sponsors’ concern in context of spot-fixing controversy and suspension of two teams is legitimate.

Interestingly, another layer was added to the controversy when a section of media reported that the beverage major ‘might’ be withdrawing due to its own financial concerns, and also that it was trying to get more value out of the money it has paid as the title sponsor. However, both the parties vehemently denied this angle.

What lies beneath?

If Pepsi does decide to walk out, would it be a wise decision? Jagdeep Kapoor, MD, Samsika Marketing consultants believes that to be the case and gives three reasons for it:

1st external: Main reason could be the controversies with IPL. 

2nd Internal: This will be a matter of economics like the value of spending. Pepsi almost spent double the amount than DHL. 

3rd: Pepsi is quick with their decision and they always do this. To not get their brand into any controversies they smartly moved out. For example, they favour more young celebrities in their advertisements than the old ones.

Harish Bijoor, Brand expert & Founder, Harish Bijoor Consults Inc, adds two more to it:
One is the possibility that IPL is a White Elephant for Pepsi at this point of time in its marketing journey.

Two is the possibility that IPL is a positive property with negative energies. Whatever the reason, IPL takes a beating in terms of all the past misdeeds the brand is tainted with, coming into public view once again. At the time, Pepsi had picked the title sponsorship at an astounding price, many a jaw had dropped open.

Santosh Desai, MD & CEO at Futurebrands, is of the belief that every brand makes such decisions basis brand and communication objectives. He expresses, “Giving the environment in which Pepsi got the deal, the market sentiment/feeling was they have paid more than the market would have determined at that point. Obviously Pepsi felt differently.”

Now, if two teams are dropped and there being chances of many big players not being seen in the coming season of IPL, the rates that appeared value for money at that point in time might suddenly appear not so value for money.

As for IPL’s maligned reputation being the reason, joint statement by the two entities IPL and Pepsi falls flat – BCCI can’t possibly promise that it would build IPL’s lost glory back before the next season, and Pepsi in turn buy that logic!

Negative impact on the brand IPL?

On to the second pertinent question. Would the title sponsor’s departure have a negative impact on IPL? Santosh Desai thinks it would. He expresses, “The reason behind pulling out will certainly not be good for the brand IPL. It certainly means that if they go out as the sponsor, it will affect the prices that IPL will get. IPL has shown a remarkable resilience so far, it has obviously taken more knocks than virtually any other brand and it is standing.” He adds, “The problem of IPL is that the economics of it are not making sense. The big challenge for them today is how to make the economics work as well as to fix some of the governance issues. If they don’t fix it then at some point in time it is going to have a problem. I don’t think it has come as far right now. Bad things have happened to it but there is still strength in the brand and the format.”

Sundeep Nagpal, Managing Director at Stratagem Media Pvt Ltd , meanwhile, expresses, “Pepsi is a prestigious brand and its decision to move out might have an impact on IPL as Pepsi holds a strong image in the market.”

Would IPL get its lost glory back?

Down but not out is the verdict as far as IPL is concerned. The experts believe that impact would be seen only for a short term. IPL got the league culture in India and it is now being followed up with Kabbadi league, tennis league etc. It has also succeeded in taking India on the world map in terms of sports. And, hence is a brand of great stature in itself. Jagdeep Kapoor says, “IPL will not only get back their glory but it will also exceed their past glory by building up in a much stronger way. It is just a phase which will pass. They will come back with a greater brand equity.”

Harish Bijoor agrees whole heartedly, “Public memory is really very short. Brands such as IPL will shrug off the taint in no time. In fact, since this is really a brand of cricketainment, as opposed to Cricket, which is played in whites, and has attitudes that are whiter than white, it thrives on controversy. More the better!”

Are other brands already expressing intent of interest?

While Pepsi is still pondering on ‘to stay or not to stay’ question, there are talks of other brands’ interest in the title sponsorship. If market buzz is to be believed, many are in the process of figuring out the changes in their marketing budgets to be able to accommodate IPL. Santosh Desai comments, “In sheer monetary terms, a Pepsi will always be replaced with a possible deeper player in this day and age of irrational investments being made by VC funded outfits out to get the eyeballs.”

Jagdeep Kapoor confirms our belief that brands are already checking out permutations and combinations. He expresses, “People are waiting. Along with Pepsi there were many other brands that bid a lot for the sponsorship. It is all about value in the eyes of the beholder and completely differs from perspective to perspective. There will be some negotiations but there are brands in the line.” He adds, “IPL has a lethal combination of glamour i.e. Bollywood and Cricket and this attracts more brands. They also have inclusion of international participants which is another plus point.”

Nagpal, meanwhile, is more cautious, “Other brands could sure be interested as IPL is a large property. On IPL side, the brands should be cautious with their work and do a lot of homework to bag the title.”

Are ecommerce majors biggest contenders?

So, IPL would continue to be hot property. This brings us to the product categories that have upped the ante this year and have gone aggressive in their ad spending. As per Group M’s ‘This Year, Next Year’ Report released in February, advertising by e-commerce companies will grow the fastest this year. In 2014, ad spending rose 12.5% to reach Rs.43, 490 crore.

As per the industry estimates ad spends by ecommerce sector between January and mid-May this year are to the tune of Rs 1,052 crore — that’s nearly three-fourths of the Rs 1,483 crore spent by them in the entire year 2014. If their blitzkrieg on various media is anything to go by, they would far exceed the 10-15% growth estimates by most media forecasters. Besides, the Indian consumer is showing cautious interest in e-tail and IPL would offer an opportunity for high engagement with the viewer. Is it then safe to assume that they would be keen to ride IPL bandwagon? Harish Bijoor states, “Most certainly yes. Expect fair degree of interest from ecommerce giants, payment gateways of every kind and more. They can be big gainers for sure. IPL is an eyeballs play, as is ecommerce.”

Santosh Desai agrees too, “I think e-commerce will find this as an opportunity. They are the big spenders at this point of time and will see this as an opportunity. It would always be difficult as anyone new who will come in, will have to start from scratch. If you spend that kind of money on sponsorship, you better utilize it properly. Sometime brands tend to spend all money on sponsorship and do not have the resources to leverage its benefits. Money is not a problem for e-commerce players, how they make the most of it is another question altogether.”

Would it be a win-win for all?

Now the last question – whose loss would it be anyways? We believe that it would be win-win for all – incumbent & new sponsors as well for the league itself. Our reasons:

1. Pepsi, if it stays on, it would do so on much better terms. If it goes, it might look at better marketing opportunities. For example marketing an android mobile and its accessories under its own brand name as it is doing in China. Monies it saves by withdrawing from IPL can hence be put to good use.
2. The new title sponsor – it might be able to get a better deal than Pepsi, and even if it does not, it would walk in with a set objective and know exactly what it is getting into
3. Finally IPL. Ultimately it is about sponsorship monies – whether it is Pepsi or Paytm (just for example) would not matter much. If the title sponsorship goes at a lower price, it just might have to look for other brand opportunities it can offer though.