An NHL executive last week described the league’s new seven-year sponsorship agreement with Molson Coors Canada as a “monster deal.” Monsters typically have a victim, and in this case it’s Molson’s beer rival Labatt.
Molson’s rumoured $375-million deal, which commences with the 2011-12 season, will make its Canadian brand the “Official Beer of the NHL.” It provides the brewer with access to several high-profile events on the league calendar including the annual Winter Classic, the Heritage Classic and the Stanley Cup playoffs.
Labatt has been an NHL partner in Canada since 1997, while parent company Anheuser-Busch and its Bud Light brand currently has sponsorship agreements in place with 22 of the league’s 24 U.S.-based teams.
In the wake of last week’s Molson announcement, Labatt issued a terse statement claiming that it had entered into sponsorship renewal negotiations with the NHL several months ago, and had agreed upon terms extending its deal through 2014.
With the league set to terminate its agreement with Labatt at the end of June, Labatt said it would pursue “all legal remedies available” to enforce the deal.
What’s at stake
It’s no surprise that Labatt would vigorously defend any rights deals with the NHL. David Kincaid, president and CEO of Toronto brand consultancy Level5 and a senior marketing executive with Labatt throughout the 1990s, said that when it comes to sports properties in Canada, the NHL is rivaled only by the Olympics in terms of its importance to beer brands.
“The sport of hockey is as Canadian as it gets, so it’s got great value both from a strategic and brand-building standpoint, in terms of the attributes the sport owns [that] many Canadian beer brands would love to share,” said Kincaid. “It’s core.”
Kincaid was head of marketing for Labatt when it pried away NHL rights from longtime league sponsor Molson in 1997; he speculated there was likely some disbelief among his former company’s management upon learning of the Molson deal.
“To say that there would have been shock is fair,” he said, noting that the brewer may have failed to take the temperature of a league that is increasingly looking to partner with companies that share its long-term vision for brand development.
“If I’m in [NHL commissioner] Gary Bettman’s shoes, I want somebody who’s not just going to write me a cheque, but who shares my vision for where I’m trying to build my brand and who wants to partner with me in that regard,” he said. “If Molson has been able to indicate that they are that chosen partner, Labatt might have been caught a little asleep at the switch.
“Over time, I think that anybody that’s got a lock on something just gets a little lazy,” he said. “They assume it’ll stay the same on the next re-negotiation and that’s not always the case.”
Kincaid noted that current Molson Coors Canada president and CEO Dave Perkins was head of marketing for Molson when Labatt snatched away sponsorship rights in the 1990s. “He’s a really sharp guy, and he probably said ‘I’m not going to get caught again. I view this as a strategic asset. For me it’s more about the relationship and what I plan to do with it and not just the price tag,’” said Kincaid.
But Kincaid said that Labatt hasn’t put nearly the amount of marketing resources behind its NHL partnership as it did during the 1990s. “I’ve got to say, I think Labatt has grown a little lazy in terms of its use and leverage of an asset that we put an awful lot of time and attention into defining and leveraging in its early days,” he said. “I don’t see the level of brand integration or the use of league rights that were part of the Labatt deal. I don’t see them using them and delivering value down directly to the beer drinker.”
Kincaid said that during his time with Labatt, the brewer employed a “3:1 rule” to maximize its sponsorship investment, spending three times as much on marketing as it spent on acquiring sponsorship rights. It was an approach that manifested in in-case giveaways like miniature Stanley Cups and TV campaigns that would build over the course of the Stanley Cup playoffs.
“It was a large multi-media asset,” he said. “I just don’t see that right now.”
The final score
Jolan Storch, who heads up the sponsorship practice at the Calgary law firm Macleod Dixon, said that even if Labatt does successfully force the league to honour the good faith agreement, the two partners could simply end up being stuck in what she described as a “bad marriage.”
“Labatt is feeling scorned and the NHL is feeling like it’s been cheated out of dollars it might have been able to get from Molson,” she said. “I don’t see that as being a great resolution.”
Storch said it’s unlikely that the squabble will reach a courtroom, since both parties are probably keen to avoid the time and expense of reaching a resolution in that manner.
“It’s pretty hard to predict because there’s not only the legal outcome, but the business appetite for pursuing it,” she said. “Nothing goes quickly through the courts, and everything is public. If there’s an arbitration clause or some kind of dispute resolution clause that would allow them to keep the negotiations and the dispute process private. That’s probably preferential to everybody.
“At the end of the day it goes to your contract, which is why you need good lawyers who’ve gone through these things a couple of times and can really help you out.”
Storch predicted that if the sponsorship rights do ultimately end up with Molson, Labatt is likely to aggressively pursue other marketing avenues.
“If [the decision] goes against Labatt, you can bet they’re going to be looking very aggressively for the next best alternative and how they can really effectively market against that to erode Molson,” she said. “They do get pretty aggressive and it makes for really interesting advertising and marketing.”
She also said it’s unlikely the NHL would want to irritate Labatt to the point that it turns its back on the league completely, although Kincaid said that the company could decide to simply chalk it up to the cost of doing business. “Molson lost it and now they’ve got it back,” he said. “It obviously didn’t alienate Molson to the degree that they weren’t allowed in the front door to the NHL. It is business.”
