New IOC Sponsorship Raises Questions in China

(ATR) The new IOC deal that pairs Coca-Cola and Chinese dairy company Mengniu breaks the mold for Olympic sponsorships.

Chinese media company Titan Sports has researched the circumstances of the sponsorship to produce this article for Around the Rings, written by Bi Yuan in Beijing.

On June 24, the International Olympic Committee (IOC), Cola-Cola and China’s Mengniu Dairy company announced a joint worldwide Olympic Partnership from 2020 to 2032. It marked the first-ever Joint TOP Partnership Agreement in IOC history.

The IOC’s announcement talked of the new partnership combining the non-alcoholic beverage and the dairy categories into a new joint category, and brings the second-biggest Chinese dairy company Mengniu into the family of worldwide TOP Partners.

However, it sparked controversy in China. Four days before the announcement, China’s leading dairy company Yili, which had learned of the agreement between Mengniu and the IOC, issued an open letter.

Yili may not be an official IOC sponsor but in June 2017 agreed a deal with the Beijing Organizing Committee to become the official dairy product sponsor of the 2022 Winter Olympic Games.

"It is known to all that Mengniu is a dairy company, and beverage products account for just a small portion of its total business," Yili said in an open letter posted on social media. "Its real purpose is to mislead Chinese consumers, and make them believe that Mengniu is an Olympic sponsor of dairy products."

The TOP program, launched in 1985, is the highest level of Olympic Sponsorship, granting category-exclusive marketing rights at all Olympic events. Mengniu and Coca-Cola’s international investment was reportedly around $1.5 billion, a figure widely believed to dwarf Yili’s domestic sponsorship deal.

An initiative of IOC: A new category

The exclusivity of Olympic Sponsorship is based upon product category and region.

"Theoretically it is improbable to have two or more brands of similar product structure in the same category or region," said Giovanni Izzi, a partner in the Italy-based law firm of Izzi, Toniatti, Perron Cabus and Martini & Partners.

At the 2008 Beijing Games, IOC partnered with more than one brand of the same product category, when they signed sponsorship deals with Beijing Yanjing Brewery, Tsingtao Brewery and Budweiser. However, that joint partnership was based upon the consensus of all parties involved after discussions.

While Yili is not an IOC sponsor, the fact that the IOC did not, back in 2017, have a dairy sponsor in the Top Program was a factor in the partnership with Beijing 2022 according to Izzi.

"Beijing Organizing Committee signed Yili as their dairy product sponsor in 2017 because IOC had no dairy product brand in their TOP Program, nor had they any plan to sign any dairy product brand in the TOP programme before the 2022 Beijing Winter Olympic Games," said Izzi.

"However, in IOC’s announcement, the partnership deal is based on a new joint category, neither non-alcoholic beverage, nor dairy product," he added.

In Paragraph 12 of the IOC’s official announcement of their Olympic Partnership with Coca-Cola and Mengniu, it is stated "Olympic marketing programs are based on the fundamental principle of exclusivity within a specific product category and territory. The current Beijing 2022 domestic partner’s exclusive rights in its designated category in the Chinese market will not be affected".

On the same day when the IOC announced the joint partnership deal, Beijing Organizing Committee for the 2022 Olympic Games claimed they will protect the rights of all sponsors and reinstate Yili’s status as exclusive dairy product sponsor through their official weibo account.

It is worth noting that Mengniu, having completed the joint TOP partnership deal with IOC, retweeted the weibo post.

A Dangerous precedent

In an interview with Titan Sports, Nicholas Watanabe, a lecturer of sports management at the University of South Carolina, said "It does set a dangerous precedent for the Olympics and the overall sponsorship market if this happens.

"That is, by having potential overlap between sponsorship categories for the local and global sponsorship deals, it creates the ability for corporations such as Mengniu to find ways to circumvent existing deals, and position themselves as a sponsor even though their competitor has already locked up exclusivity in a certain category.

"Allowing this to happen will clearly anger companies that have spent large sums of money to become official sponsors, and could result in them canceling their sponsorship as Yili has threatened to do. Furthermore, by creating an environment where exclusivity is not guaranteed, the Olympics essentially are lowering the value of their sponsorships, and thus they will likely develop rules or policies to prevent future occurrences. For now, the Olympics will have to deal with the difficult balancing act of keeping their official sponsor (Yili) and the state-owned Mengniu corporation happy", Dr. Watanabe commented.

Other observers such as Alain Lunzenfichter, formerly of L’Equipe noted that "The interests of Yili have been harmed by the partnership deal, through which Mengniu, their main competitor in Chinese market, gained more opportunities to make their marketing campaign" while Mark Dreyer, the founder of China Sports Insider blog, commented, "IOC simply doesn’t care because Mengniu is paying them a lot more money".

A solution

Wei Jizhong, the FIVB Honorary Life President and former Secretary General of the Chinese Olympic Committee, told Titan Sports that: "though IOC claimed this partnership is unique from another perspective, it is a poor idea, which hinders the host’s ability to achieve their marketing goals. IOC takes advantage of loopholes and gains interests through the deal, at the cost of the Beijing Organizing Committee and Yili. The impact of the unique partnership from IOC remains to be seen.

"Essentially, IOC’s partnership with Mengniu does not quite meet the ethical standards in business and it leaves Beijing Organizing Committee in a dilemma, dealing with the situation [of] one Chinese corporation’s [best] interests [come] at the cost of the interests of another Chinese company.

Wei suggests a compromise that would allow Yili to continue their partnership with IOC as an official dairy products partner while being granted a reduction in the sponsorship fee as a result of the IOC’s deal with Mengniu.

Wei says Mengniu could continue their partnership with Coca-Cola under the condition that they grant more dividends to IOC. Mengniu’s use of the five-ring symbol shall be restricted in business activities.

More solutions may need to be presented if the feud is to be ended.

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