Infernal combustion
In a decidedly stealthy move, Philip Morris, the maker of Marlboro cigarettes, reentered motor racing last October through its scientific research subsidiary — branding Ferrari cars with its “Mission Winnow” logo.
There are two things to note, the first lesser known than the other: the attraction of advertising from Big Tobacco has increased as F1 (Formula One) teams struggle to meet budget requirements.
Second, tobacco advertising and sponsorship by cigarette makers was banned at the end of the 2006 season by the FIA, the world governing body of motor racing. On average, tobacco used to bring in $350m a year for F1. Back to the present-ish time.
After its logos featured on Ferrari livery during the Japan Grand Prix in October last year, an investigation by Australia’s communications regulator was launched over whether TV broadcasts of the race breached its ban on tobacco advertising.
This week, almost as quietly as it had appeared, Ferrari dropped Philip Morris’s branding from its official name for the season-opening Grand Prix in Australia.
One wonders if BAT will have to do the same. It too launched an F1 sponsorship deal with Mclaren to advertise its “A Better Tomorrow” initiative, which will promote “less risky” tobacco and nicotine products. Both companies have maintained that they aren’t promoting specific products in their advertising. Since the ban, the sport has looked for revenue elsewhere, focusing largely on tie-ups with tech companies. Of the top 10 drivers in the 1995 world championship, nine competed with the logos of cigarette brands on their cars, and on their overalls.
The cash that cigarette makers would drop for branding and entertainment gave racing teams the hitech expertise to design and build new cars each year and have them raced by the fastest drivers available. In
2015, the last year for which public figures are available, the sport’s 10 teams raised about $750m from sponsorships, a $200m drop from 2012.
Existing sponsors have never quite filled the gap left by the tobacco giants. In 2018, for example, Mclaren raised about $32.4m in new deals with partners including Dell, HTC, Logitech and Airgain. Yes, just $32.4m.
It’s clear (as a soy sauce stain actually) that the days of the big-ticket title sponsor are over.
e:
Where there’s smoke
The tobacco industry has been undergoing a major shift — people are smoking less and countries are tightening regulations. So companies have launched alternative products, such as e-cigarettes, as they rely less on traditional cigarettes.
The industry suffered a further blow this week.
The Canadian units of BAT, Philip Morris and Japan Tobacco were ordered to pay damages of about C$17bn (that’s $12.8bn) after losing an appeal of class actions filed by Quebec smokers.
Already, Philip Morris cut its 2019 profit outlook by 9c. BAT and Philip Morris plan to appeal to the Supreme Court of Canada.
Citigroup analyst Adam Spielman told Bloomberg that if Big Tobacco loses this battle, cigarette makers will probably need to put their Canadian units into administration.
It’s important to note that when legal cigarette manufacturers go under, there’s always the risk of a boom in illicit tobacco — which in itself creates its own basket of problems.