Blue Chip Stocks Betting on the Olympic Games
The Rio Olympics are certainly a spectacle. But will they bring spectacular results to the companies whose ads are baked into the televised coverage of the Olympics? We will have to wait months to answer that. However, it is likely that top-tier Blue Chips investing in advertising and sponsorship will ultimately be rewarded.
So, who are the leading advertisers we have seen when we weren’t watching Michael Phelps or the U.S. Women’s Gymnastics Team rack up gold medals?
Coca-Cola (KO), for one. You cannot watch the Olympics for long periods of time without seeing healthy athletes in peak shape taking a swig of Coke. Being an Olympic sponsor, a global brand, can only do Coke a lot of good: the company actually lost 4% in revenue last year, and over half of its earnings come from outside the near-saturated North American market.
If the whole world really is watching, international sales of its beverages may spike. Even though sales volume was up 1% worldwide last year, currency fluctuations ate up those gains. Only huge gains in beverage sales volume and careful control of pricing can offset that kind of resistance. After all, unlike arch rival Pepsi (PEP), Coke does not have snacks to promote at the same time.
McDonald’s (MCD), another sponsor for the Olympics, depends even less on U.S. revenues: only one-third of its income derives from its home country. If you are a global brand, there is no better way to showcase your brand than be an Olympic sponsor. A quote appearing in U.S. News & World Report (http://money.usnews.com/investing/articles/2016-08-03/olympic-stocks-5-companies-betting-big-on-rio) captures the heart of the matter, “Nothing says global quite like the Olympics,” asserts Bob Johnson, president and CEO of The American College of Financial Services. Exploiting its global brand is key for McDonald’s success because in 2015, they closed more U.S. restaurants than it opened.
Fine. But where does General Electric (GE) fit into this? The brand is not as instantly recognizable to consumers as, say, Coke’s iconic red-and-white logo or McDonald’s golden arches. However, GE’s presence in the global market is supremely important: it wants to be the go-to brand for infrastructure needs in developing nations. Similar to McDonald’s, over half (55%) of GE’s revenue come from overseas. To be successful, the GE brand must impress their products, everything ranging from light bulbs to jet engines, into the minds of a global audience.
There is one other brand having a field in Rio: Visa (V). In its never-ending fight with Mastercard (MA), American Express (AXP), and upstarts like PayPal (PYPL) for payment systems dominance, Visa needs to shine. Bear in mind that it is currently the largest electronics payment network on earth ($4.76 trillion in 2014). Visa plans to stay that way, and Rio helps.
Perhaps the sexiest product rollout at Rio is Visa’s “wearable” devices line-up. If paying with a card is passé and paying with a phone is firmly entrenched, what’s next? Visa is testing new methods such as a payment ring that slides onto your finger. As Morgan Freeman’s voice has reminded us at several different Olympics over the years, Visa is still the only payment accepted at the Olympics. It is, after all, “everywhere you want to be.”
The company is also doing visible good via its support of the Refugee Olympic Team swimmer, Yusra Mardini. Her Syrian home was destroyed in 2015. It is hard to image a more astute, or classier, corporate sponsorship than that.
Written by Ali Bakir
Co-Founder and Director of Business Development at Peeptrade