Why Anheuser-Busch Is Reducing The Number of Partnership Deals But Not Overall Spend
BY ADAM GROSSMAN
Anheuser-Busch InBev (ABI) confirmed this week that it is reducing the company’s partnership portfolio by about 25%. ABI’s announcement in the current environment has caused alarm in the sports industry given that it is expected that ABI will reduce its property deals from 400 to between 280 and 300.
However, ABI also confirmed that it is reducing the number of properties it partners with rather than its overall spend. This is critical because ABI, in its role as one of the industry’s top spenders, is showing that it will continue to spend money on partnerships even with an economic downturn. However, it will only spend money on partnerships that generate results for its specific revenue and brand goals.
This is not the first time ABI has launched a substantial change to its partnership strategy. The company announced in 2018 that it was moving to “include incentive-laden performance clauses in all of its sponsorships” that focused directly on how partnerships were generating revenue for ABI.
This move to incentivize performance was likely made in part because there is clear evidence that sports partnership drives sales for ABI. We highlighted the results of a recent journal article, "Super Bowl Ads" in Marketing Science, that supported how the NFL’s biggest game had a big impact on Budweiser’s business. This included that:
Budweiser saw a statistically significant increase in sales in the week prior to the Super Bowl.
Budweiser saw a statistically significant increase in sales in the 8-weeks following the Super Bowl but only when it was the sole or primary advertiser.
Budweiser saw a statistically significant increase in sales around the NCAA Tournament but only when it was the sole or primary advertiser during the Super Bowl.
Budweiser generated $45 million in direct revenue from its Super Bowl advertising.
This example shows the benefits of exclusivity in ABI’s partnerships. However, ABI is evaluating exclusivity in its deals on a case-by-case basis. As ABI vice president of partnerships, beer culture and community Nick Kelly stated, “Our commitment is that we’re not going to pull money out of sponsorship, but you may see us shift where exclusivity is vital and where it’s not. There are some places where we have every single sports property, and the reality is: We don’t need every property in every single market. But there’s no property we feel like we can’t lose any more.”
Kelly’s last point is potentially the most critical when he states ABI feels that there is no property partnerships it “can’t lose” any more. This appears to mean data is driving decisions on properties and those that perform well, regardless of market or size, will secure ABI’s dollars.
This is important because there are properties that will be winners and losers over the 18 months Kelly stated it will take ABI to implement the property reductions. If ABI is reducing its overall number of partners but maintaining its spend then some properties will increase the size of their current deals with the company.
The idea of companies potentially spending more with properties even with COVID-19 is not exclusive to ABI. Excel Chief Business Officer Emilio Collins stated, “Spending is up across our sponsorship-related businesses, year-to-year, because brands are looking to find new ways to break through a consumer landscape that has really changed.”
Block Six Analytics (B6A) products are specifically designed to help both companies and partners thrive in the current environment. In particular, our Corporate Asset Valuation (CAV) model was designed specifically to enable our clients to create company-specific partnership valuations using a systematic approach.
More specifically, partnership assets refer to in-venue, media, digital, event, hospitality, and intellectual property (IP) activations. The CAV examines how likely each activation is to help a company increase incremental revenue or brand growth. Brand growth typically refers to increases in a company’s sentiment, engagement, consideration and / or awareness.
This is exactly what ABI and Excel have highlighted as the approach critical to their businesses determining how to allocate their portfolio investments. The companies that understand what properties drive value can identify new opportunities and revise current agreements to maximize return on investment (ROI). The properties that can identify which companies would most likely generate positive ROI can target their outreach to maximize partnership revenues.
ABI’s announcement has sent shock waves through the partnership industry. The reverberations felt by industry leaders, however, should not necessarily be a cause for concern. Instead, it should primarily serve to increase focus on how data will drive decision-making for buyers and sellers of sports partnership.