Is Budweiser's US$47m compensation for FIFA 2022 debacle a fair ask?

Is Budweiser's US$47m compensation for FIFA 2022 debacle a fair ask?

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Budweiser’s last minute shift in sale location was the talk of town prior to the start of the FIFA World cup. According to several media reports, the brand is now allegedly asking for a US$47 million discount on the 2026 World Cup set to be held at Canada, Mexico and the US.

A partner of the World Cup for 30 years, the 2022 World Cup deal with Budweiser is worth US$78 million (approximately SG$107 million). For the 2026 World Cup, the deal goes up to US$114 million (approximately SG$156 million), according to media reports, quoted on ST. While understandably the last minute shift in location would have seen the sales of the beer brand highly impacted, asking for a US$47 million discount is no small matter.

According to industry players MARKETING-INTERACTIVE spoke to, whether or not Budweiser will receive a hefty compensation, will eventually come down to the dried ink on the contract.

David Ko, managing director, RFI Asia, Ruder Finn said that at the end of the day the heart of the issue between FIFA and Budweiser is a contractual dispute. Today, every sponsorship deal is a contract that lays out exactly the terms and obligations of all parties, and most importantly, the penalty for breaching the terms agreed. 

"This is why lawyers are paid the big bucks, and why marketing agencies and their clients scrutinise every partnership agreement in agonising detail," Ko said. He added that for a deal of this scale, it would be unthinkable to imagine that Budweiser did not have the legal language in place protecting their interest - especially on a matter so unpredictable as allowing the sale of alcohol to a majority Muslim nation. 

At the end of the day, said Ko, the question is simple: Are FIFA and Qatar legally liable? If they are, they have to compensate Budweiser. He said:

Of course, the devil is in the details, so it will be up to the lawyers to argue over how much of a refund Budweiser is due.

Steeve Cupaiolo, CEO of sports marketing agency Silk Road Sports Consulting, said in his experience such a massive compensation and unpredictable change is not usually common, especially on this level.  When a client pays for a service, there is an expectation of ROI and when this fails, a refund is naturally expected.

In the case of FIFA and Budweiser, Cupaiolo said if FIFA cannot deliver, Budweiser has the right to ask for a deduction. “It’s not about being fair, it’s a legal issue," he added. 

FIFA should have taken more precaution

While both Qatar and FIFA share the responsibility for this situation that Budweiser has been left in, Cupaiolo places a larger share of the blame on FIFA. He said,

If FIFA was my client, I would have checked the rules a long time ago. I would do my due diligence on everything because it can get complicated when a problem like this arise.

Meanwhile, the representatives of Qatar could have mentioned the ban on alcohol sales when the contract was being finalised, and to make the change at the eleventh hour isn’t professional. He added that what will now dictate the price tag is likely to be what was ironed out in the contract, and the relationship between the entities.

Moreover, he advised that future sporting organisations consider where they should host their events more carefully in the future. “For instance, even with the Olympics, the solution is to pick a host carefully and the main motivator should not be money. Qatar is paying FIFA a lot, but look at what has happened. The first motivator that should be considered is if it’s doable – everything the brand wants to do, especially when it’s a world-wide event, is that possible? Make sure the brand is able to promote itself properly,” he said

Branding efforts can still shine

Depending on the terms of the partnership contract, sometimes a mutual agreement involving monetary or value-in-kind compensation would be worked out with the sponsor, Anthea Chee, senior vice president, corporate partnerships, SPORTFIVE Asia, explained.

"Budweiser has been a major, long-term partner of the FIFA World Cup for more than 30 years. We are not fully aware of what goes on behind the scenes but I’m sure FIFA had been in regular discussions with the brand to keep them informed prior to the actual announcement,” she said.

Given that it was a rather late decision to reverse course and ban beer sales, Chee believes that FIFA had spent considerable time and effort and had tried their best to negotiate with the Qatar World Cup organising committee and Budweiser for the best outcome.

“While the ban on alcoholic beers in stadiams at the World Cup will limit their sales revenues and stadium activation efforts in Qatar, I believe that Budweiser will still be able to achieve its global branding objectives from their sponsorship of the World Cup. In today’s digital age, the possibilities to connect and engage with consumers are no longer bound by physical on-site experiences, but rather have extended to the digital realm," she added. 

In fact, Budweiser has always been very clever with their World Cup campaigns – Chee believes they have achieved online engagement success with their 2018 campaign, which leveraged on the high online traffic and social media chatter by fans during the world cup season. FIFA can continue to support Budweiser on their World Cup activations all around the world and maximise their sponsorship value.

Meanwhile Jude Foo, general manager and partner, Nine:TwentyEight, for a sponsor like Budweiser, the biggest ROI will probably come from fan engagement and sales.

“However, it's hard to do any meaningful engagement with the teams for a beer brand so with all that considered, I feel that they are technically 'out' of this World Cup,” he said.

Foo added that clients asking for compensation due to unpredictable changes is not new. But the real question, is in whether or not the amount of compensation is fair.

The next World Cup is held in Canada, Mexico and the US, and it is likely to present Budweiser with a huge potential as a local brand. Hence asking for a US$47.4m discount could be a great reduction for the exponential exposure. 

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FIFA World Cup media officer cuts interview after ambassador calls homosexuality 'damage in mind'
FIFA World Cup 2022 Asian qualifiers postponed
FIFA World Cup a 'landmark opportunity' for brands to target women

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