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Chipotle, Soccer, and the Value of Corporate Sponsorship

By Andrew Marder – Mar 8, 2014 at 11:48AM

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Chipotle's sponsorship of Major League Soccer may pay off, but the accounting behind sponsorship success isn't straightforward.

Sponsorship is a mixed bag. For instance, businesses that want to be Official Olympic Sponsors spend an estimated $100 million just to get the title, before they spend a dime on actual advertising. Some of the biggest brands spend another $1 billion after acquiring the rights to the Official label on actually using it. The return on that investment can be difficult to calculate and the investment varies from brand to brand.

Even with such daunting figures and return on investment challenges, big companies continue to tie their names to events. One of the more recent agreements came from Chipotle Mexican Grill (CMG 2.16%), which has agreed to a year-long tie-in, making Chipotle the Official Fast-Casual Mexican Restaurant of Major League Soccer . I'm not making that up.

Source: Business Wire. LA Galaxy defender Omar Gonzalez, Chipotle's first spokesman.

The wide range of corporate sponsorships
Bigger sponsorships come with bigger parts of the pie. Barclays Bank (BCS 1.41%) isn't the Official High Street Retail Bank of Premier League Football, it's just The Sponsor. It's the Barclays Premier League with sponsorship cash putting the bank front and center. The bank pays £40 million a year, reportedly, and is considering dropping the deal, as it's not seeing enough return on its balance sheet .

One of the hardest parts of sponsorship is getting the balance of cost versus size right. Sponsor a team in New York and your Boston and Philly customers might be upset. Sponsor a whole league and you might never get out of debt. Some analysts have said that the sweet spot is event sponsorship. A single tournament can keep costs lower, but keep everyone happy at the same time. 

Not just for sports
Apart from sports, companies are also getting in on the sponsorship of local initiatives and community events. Citigroup (C 1.78%) has sponsored the New York City bike sharing program to the tune of $41 million for six years of branding on bikes . For Citi, the value of the sponsorship is in the extra reach that the brand gets.

Source: flickr user myophoto

When The Economist Group looked at sponsorship deals, it focused on five areas that companies look at when measuring the value of any buy-in. One of the biggest components is the cost and scope of the reach that comes with sponsorship .

Citi's name is on thousands of bikes rolling through tourist- and finance-focused downtown Manhattan. Every day, millions of people see the bikes or the docking stations. For six years of millions of impressions a day, Citi spent just $41 million.

Chipotle's MLS bet
Looking back at the Chipotle deal, it's easier to see why the restaurant chain got on board with MLS. The World Cup is this year, meaning that soccer in the US will get its once-every-four-years boost of enthusiasm -- even if it doesn't make it out of the "Group of Death."  On the other hand, TV viewership of the MLS has been on the decline, with 2013 viewership lower than either 2011 or 2012 .

On the other, other hand, ticket sales are still strong and in 2013 the average match had 18,600 attendees. A handful of teams surpassed the 20,000 average mark with Seattle topping the league at 43,000 people through the gates, on average .

Chipotle seems to be focused on the at-game experience, offering locals a chance to get buy-one-get-one-free tickets, sponsoring youth soccer events , and generally supporting the brand's local, sustainable, keep it green and healthy approach.

Corporate sponsorship in the future
As social media sharing continues to drive our conversations, companies are going to have to get better at determining how their sponsorship dollars are coming back to them. Gut instinct as to the value of any brand association is being trumped by measures of social media sentiment analysis and post-sale surveys.

For companies that measure and tweak their support, the payout can be substantial. Mars, maker of M&Ms and Snickers, has said that its sponsorship of NASCAR pays out at a four-to-one rate. NASCAR season is roughly equivalent to another Christmas for M&Ms. No wonder the company has been supporting NASCAR for over 20 years.

As time goes on, sponsorship is going to get more and more complicated with brands vying for the most valuable slots. The solution may be to pull a Chipotle, betting on the growth of a sport, project, or event early and getting in for cheap. On the other hand, Chipotle could end up with the sponsorship equivalent of arena football. Only time will tell -- how terrifying.

Andrew Marder owns shares of Barclays PLC (ADR). The Motley Fool recommends Chipotle Mexican Grill. The Motley Fool owns shares of Chipotle Mexican Grill and Citigroup. 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.

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