Brazil is on the receiving end of its worst recession in several decades. The Organizing committees for the 2016 summer Olympics have taken on a novel approach and are concentrating on barter deals for prospective sponsors -- and reaping better results.
Following the precedent set in the previous Olympics -- when London, carried out similar activities when it was suffering from the 2008 financial crisis, Rio is encouraging “value-in-kind” agreements. Rio had planned a 50-50 split, but organizers now are relying on a record of more than 60 percent barter for the 3 billion real in local sponsorship revenue needed to support the Games according to a Bloomberg report.
Hitesh Gossain, CEO of Onspon.com thinks it is the perfect way to go about garnering support for the event, “It is a valid way of functioning. With the economy struggling, not only are companies unfavorable towards cash sponsorships for the right to co-brand with the 2016 Olympics, they possess surplus capacity Olympic organizers can use effectively.”
“For me to go to a company now and say, ‘Hey get money out of your bank account and give it to me’ -- it’s a very tough discussion,” said Rio 2016’s Chief Commercial Officer Renato Ciuchini. “We started seeing VIK as a much easier discussion."
Not stocked with money, organizers will be looking for more deals like the one they recently entered into with Aliansce Shopping Centers. The 2016 Olympics will take several hundreds of car parking spaces close to the games in return for allowing stores to be branded in Olympic signages.
On same lines, Brazilian rental-car company Localiza has signed on as a sponsor. They will be supplying approximately 150 Nissan cars adapted for the 95-day cross-country torch relay and in turn use its Olympics tie-in to attract foreign tourists for rentals, said Herbert Viana, head of marketing. The 2016 Olympics logo will hang from car-rental counters, and a print and digital media Olympic campaign is in the works.
Not all sponsorships can be paid for in-kind. Some 90,000 Olympics workers, including 5,000 staffers within the organizing committee itself, have to be paid in cash, and that cash has to come from somewhere.
As many as 10 new partners still might be signed before the games begin, though organizers aren’t expecting too lure another top tier partner like Nissan.
However, Hitesh predicts a positive spin for those brands that are now looking to power the upcoming Olympics, “Brazil’s currency has dropped by 43 percent in the last year and a half. The value of Rio sponsorships was approximately $1 billion in December. That is just $740 million today. With the deals all paid in real, foreign partners maybe getting more for their money, because the value of goods has increased in local terms.”