2016 Rio Olympics aim for record sponsorship haul

This is a Thursday, June 27, 2013 file photo of Brazilian Indians shake maracas and shout slogan against the government as they protest in Rio de Janeiro, Brazil. It’s the latest in a series of massive, nationwide protests that have hit Brazil since mid-June. Demonstrators are angered about corruption and poor public services despite a heavy tax burden.

RIO DE JANEIRO — With public money for the 2016 Olympics getting tougher to find, Brazilian organizers are scrambling to raise record amounts of local sponsorship revenue to cover any budget shortfall and avoid a government handout.

In an exclusive interview with The Associated Press, the chief commercial officer for the Rio de Janeiro Games, Renato Ciuchini, said his new goal is to generate between $1.3 billion and $1.5 billion in domestic sponsorship income. This would double what’s been sold to date — $650 million — and easily surpass the $1.1 billion raised for the 2012 London Olympics.

“I may have this calm face but there is a lot of pressure here,” Ciuchini said. “There is no question about it. Our target is very high. … We are increasing the team. We are bringing in a lot of senior guys to the team.”

Just a few months ago, a top Rio official said $700 million in government aid would be needed to make up for a shortfall in balancing the local operating budget. That’s no longer politically tenable.

On-going violent street protests, which began five months ago during the Confederations Cup, the warm-up for next year’s World Cup, have focused on Brazil’s poor schools, shabby hospitals and soaring costs. Protesters have questioned why the country is spending $15 billion on the World Cup and a similar amount on the Olympics.

The protests, at their peak, brought 1 million people to the streets across Brazil on a single day. They have grown smaller, but more violent, and show no sign of going away.

Neither do charges of political corruption, which President Dilma Rousseff is sensitive to as she faces re-election just after the World Cup.

Ciuchini said $1.5 billion was the level at which government aid might not be needed to meet the Olympic budget. With “luck,” he might raise even more, he said.

“Even at this level ($1.5 billion) we cannot guarantee,” he said. “We are working with all the variables of the budget to make sure that we have no need for public money.”

Ciuchini was upbeat, saying Brazil’s sluggish economy — and distractions such as the World Cup and the threat of violence — did not harm potential sales. He pointed to Brazil’s large population of 200 million and described the famous Olympic brand as one that allows “you to ring anybody in the world and they will take the call.”

The countdown to the Rio Olympics reaches 1,000 days on Saturday, a big reminder the clock is ticking.

“We love to have this very high target,” Ciuchini said. “This is adrenaline for a sales organization.”

Income from local sponsorships should make up 20 percent of the Rio budget, which has yet to be announced. The operating budget was $2.8 billion in the original bid in 2009, but is expected to rise to at least $4 billion. Some think it could be much higher. Other major income sources are ticket sales, licensing, merchandising and a large contribution from the IOC.

The operating budget is to run the games themselves, not to build supporting infrastructure. Olympic host cities are bound by contract to pay for any cost overruns and deficits.

Rio organizers met an early sponsorship target of $500 million — including deals with Nissan, Banco Bradesco and Claro, a telecommunication company operated by Mexican billionaire Carlos Slim. Since then, things have slowed, which is worrying the top marketing official of the Switzerland-based International Olympic Committee.

“It started out very well, but they unfortunately had some economic challenges in Rio and the situation is not as it used to be,” Gerhard Heiberg, head of the IOC marketing commission and an IOC member from Norway, said in an interview with the AP. “It is challenging. We still think we will get sponsors in Rio. It hasn’t come up as quickly as we had hoped.”

Heiberg said protests were apparently making some local sponsors skittish.
At least six deaths were connected to June’s Confederations Cup protests. Jerome Valcke, the top FIFA official in charge of the World Cup, said recently the soccer tournament would have “the highest level of security you can imagine” to contain any violence.

“I know that some sponsors are waiting to see how things are going to be at the World Cup.” Heiberg said. “Will it be a success? Will it be chaotic? If people feel things are going to be very good for the games, it’s easier to get the sponsors. If people feel things are not going to be 100 percent, they will hold back on the Olympics. First they want to see what’s going to happen with the World Cup.”

FIFA announced six months ago in Rio that sponsorships for the World Cup had sold out, with total revenues of about $1.6 billion. FIFA said the last sponsor to sign up was Brazilian sporting goods chain Centauro.

Ciuchini said new Olympic sponsorships could be announced before the end of the year, bringing the total to about $900 million. He said negotiations had begun in the categories of airlines and steel, and said an oil and gas category would be opened soon.

“This is a very hot market for oil-gas,” Ciuchini said. “There is a lot of interest from global companies, not only from the domestic companies.”

Simon Chadwick, a professor at Coventry University in England who researches sports marketing trends, said any delay in cutting sponsorship deals could be costly.

“If the organizers get into a situation where there are financial shortfalls and they need that sponsorship revenue to plug a gap, obviously sponsors then can smell blood,” he said. “They can sense desperation if the organizers are starting to panic. I don’t think it’s a particular concern right now, but it’s an issue.”

Sidney Levy, the chief executive officer of the Rio 2016 organizing committee, has been negotiating the operating budget with government officials, and a new budget has been promised for months.

Levy declined to be interviewed for this article.

“We’ll have no further comment on the budget until we get it formally released,” organizers said in an email to the AP.

“You have the double-whammy of two events,” Chadwick said. “I think it’s a massive ask of corporate Brazil to commit to such huge financial resources to two sets of sponsorship deals. My sense of Brazil right now is that they have overextended themselves. The cost implications of staging two mega events is just too much.”

Sponsors strive for image and brand awareness, and Chadwick said they are cautious about how their brands might be portrayed.

“If people are concerned about civil unrest and the way the mega events are being run, and they don’t like what governments are doing — they note this and listen to their consumers. And if their consumers don’t like it, they will take action in response to that,” Chadwick said.

Tarpaulins covered Coca-Cola advertising displayed near Rio’s Maracana Stadium during the Confederations Cup, a safeguard against the logo being caught in photos of soldiers and police battling angry protesters; or worse — defaced or ripped down.

Former IOC marketing director Michael Payne said Brazil’s World Cup spending had hurt the Olympics. He said Brazil’s plan to use 12 stadiums for the World Cup — four of which are seen as white elephants — had “contaminated” some spending on the Olympics. FIFA required only eight stadiums, but Brazilian states lobbied hard for pet projects and Brazil’s soccer federation went along.

One of the stadiums is being built in Manaus in the Brazilian state of Amazonas. A judge there has suggested, since it has no use after the World Cup, the stadium could be converted to a prisoner processing center.

“You’ve got to ask yourself: Why did they need those four extra stadiums?” Payne said.

“As a result it makes all forms of sporting capital investment somewhat radioactive, even if the investments in Rio were legitimate. Those four stadiums have become the poster child for badly focused capital investment.”