Sponsoring the Olympics should be a no-brainer. Global audience, nontraditional sports viewers, and a compressed time frame make it an excellent advertising opportunity … usually. And that's why major companies like Procter & Gamble (NYSE:PG), McDonald's (NYSE:MCD), and Coca-Cola (NYSE:KO) sign up: they want to reach people like me.
See, I don't watch many commercials. I own Netflix and a DVR, and I seldom watch live sports on TV, let alone winter sports. But in 2010, I sat glued to the TV as Shaun "The Flying Tomato" White obliterated his snowboarding competition in Vancouver. And I'll probably do the same this year.
However, Russia's recent anti-gay legislation could be a real problem for Olympic sponsors. Despite Russian President Vladmir Putin's assurances (as recently as last Monday) that Russia would make Olympic athletes and guests feel comfortable "regardless of nationality, race, or sexual orientation," many gay rights supporters are trying to make Olympic participation a liability rather than an asset.
"Sochi potentially is the 'danger games,'" marketing executive Peter Walshe told the Chicago Tribune.
It's already started
Some investors are beginning to get nervous. At P&G's recent annual shareholder meeting in Cincinnati, a shareholder confronted CEO A.G. Lafley with this question:
"P&G is also sponsoring the 2014 Winter Olympics, which are to be held in Russia.... This sponsorship amounts to advertising for P&G. There is an intrinsic dollar figure associated with the sponsorship, however there is also a petition that has been circulated concerning anti-gay/lesbian/bisexual/transgender laws in Russia that have been enacted. Some pundits compare those laws to human rights abuses. There is an intrinsic negative advertising with regards to the petition and media coverage....
"How does the company determine the dollar figure on advertising in a situation like this? How does the company know that they are making the correct decision?"
Benefits vs. drawbacks
First of all, don't expect any of these companies to back out of their sponsorship. Like I said, the Olympics is simply too unique a marketing opportunity to pass up.
Lafley himself admitted, "It has been a very good business builder for us, OK? And we translate very specific Olympic support and the very specific retail activity in stores around the world and that builds our business and that generates sales and profits for us." I'm sure the CEOs of McDonald's and Coca-Cola would agree.
This is hardly the first time a sponsor has been asked to back out of the Olympics. At the 2012 Summer Olympics in London, both Coke and McDonald's were accused of promoting unhealthy junk food, "conflicting with the Olympic ideal of health and wellness," and asked to step down as sponsors. The London Assembly even tried to ban their sponsorship.
But they didn't back down then and it's almost certain they won't now. Lafley said, "It is our expectation that the International Olympic Company [sic] will do the right thing and come to the right decision regarding the issue you raised on the games." Way to go, Lafley! Pass that buck!
The nightmare scenario
But what if it no longer becomes possible to just ignore the issue, like Coke and McDonald's in 2012, or to pass the buck onto the IOC, like P&G? What if something happens to bring the issue to a head?
Kenneth Roth, president of Human Rights Watch, thinks it's likely. "It's easy to imagine a confrontation taking place on global television. It's almost certain that athletes will flaunt their homosexuality or support for gay rights," he told BuzzFeed.
If something very public and very newsworthy were to happen, how should the sponsors respond?
Obviously, the companies would issue all the usual appropriate statements: that's a given. But would they go further and actually walk the walk instead of talking the talk?
Would they, for example, release ads showing their support for gay rights? Picture it: an Olympian wins the gold medal, kisses his boyfriend, then they each crack open a Coke. Or a soccer mom drives the kids home, dumps their uniforms into the washer with some Tide Pods, and goes upstairs for dinner with the kids...and their other mom (and maybe other mom brought home some McDonald's).
It would be risky. If people can line up for hours outside a Chick-Fil-A to support "traditional marriage," they can certainly switch to Pepsi or Burger King or Wisk over the same issue.
But how organized or sustained would such an effort be? Hard to say. You can be sure, though, that the Olympic sponsors are giving the whole issue a lot of thought.
John Bromels owns shares of Coca-Cola, McDonald's, and Procter & Gamble. The Motley Fool recommends Coca-Cola, McDonald's, and Procter & Gamble. The Motley Fool owns shares of Coca-Cola and McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.