Euro 2020 is underway, and a slew of top brands are sponsoring the event. One of these is Coca-Cola (NYSE: KO) who made headlines earlier this week when Portuguese footballer Cristiano Ronaldo openly showed his disdain for the product at a press conference.
The Coca-Cola share price fell 1.6%, almost immediately, in response. This short sharp reaction caused the value of Coca-Cola to decline by $4 billion in a matter of minutes.
The next day, French footballer Paul Pogba made a similar gesture, moving a non-alcoholic Heineken (AMS: HEIA) bottle out of viewers’ sight in a deliberate act that he must have known would draw press attention.
Product placement is big business and goes a long way towards long-term brand recognition, loyalty, and desirability.
Coca-Cola and Heineken are two significant sponsors of Euro 2020, so they’re unlikely to be impressed by high-profile players publicly belittling their products.
Do Euro 2020 sponsors make a good investment?
While bad press at an event such as the Euro 2020 can impact the share price, it’s important to consider the bigger picture. If it’s a short-term headline-grabbing incident, such as that with Ronaldo, then it’s unlikely to have a long-term impact on the overall business.
But it should not be dismissed outright as negative overtones from a serious influencer can cause long-term brand damage.
Nevertheless, Coca-Cola is a popular investment, and its share price very quickly rebounded. Year-to-date, the Coca-Cola share price is up 3.6%. Yet, it’s down 2.6% since the tournament started on June 11.
Meanwhile, the Heineken share price has risen 9% year-to-date. Furthermore, it’s up 17% in the past year and 1.6% since the Euro 2020 tournament began.
With the vaccine rollout well underway and the reopening upon us, socializing is set to soar. Drinking alcohol and soft drinks goes hand in hand with socializing, so it stands to reason these products will continue to sell.
Coca-Cola has diversified its portfolio to include a wide variety of soft drinks, some of which appeal to health fiends. Likewise, Heineken has extended its offerings to include non-alcoholic beverages.
Both these stocks seem to be positively valued by the market. Coca-Cola has a forward price-to-earnings ratio (P/E) of 24 and a 3% dividend yield. While Heineken has a forward P/E of 33.
Putting tournament sponsors under a microscope is nothing new. The companies know the scrutiny they’ll be under and willingly sign up. Many believe any press is better than no press, and the coverage often boosts brand recognition for the better.
Campaigners have long petitioned to stop alcohol, tobacco, and gambling brands from sponsoring sporting events. This trend continues in recent years with a stance against sugar and now fossil fuels.
Between the Ronaldo and Pogba incidents, a Greenpeace activist parachuted into the stadium in Munich, protesting against Volkswagen’s position as a Euro 2020 sponsor. The activist intended to drop a ball on the stadium with the message “Kick out oil!” but instead crash-landed in the stadium, causing multiple injuries and disruption.
Volkswagen’s share price has been on a tear this year. It’s up 53% year-to-date, although it’s down 2.5% since the Euro 2020 tournament began.
Is Volkswagen a viable investment?
Considering the bigger picture, Volkswagen has long been a popular car manufacturer and is now making a concerted effort to move into electric vehicles.
Investors and consumers alike have high hopes that Volkswagen will deliver top-quality EVs going by its history of quality manufacturing ability. And so far, its EV sales have surpassed expectations, and it’s enjoying significant demand in China.
There is a level of speculation surrounding this investment. The evolution from ICE vehicles to EVs is complicated and expensive. Car manufacturing is a huge undertaking that involves countless safety tests. Plus, it’s a hugely competitive industry. Volkswagen is also still operating under a cloud of the Diesel emissions scandal, which decimated its share price in 2015.
Volkswagen operates two share classes. One is for ordinary shares (FRA: VOW), and one is preference shares (FRA: VOW3). The ordinary shares allow owners to vote on business decisions, while the preference shares pay income to shareholders. The preference shares are currently trading at a 23% discount to the ordinary shares.
For this reason, investors looking to start a position in Volkswagen may be better to choose the preference shares which offer a dividend.
In light of the Ronaldo/Pogba stunts, are the tournament’s major sponsors at risk of having their market values impacted by how the tournament is being staged?
Going by the share price movements of the sponsors so far, it doesn’t seem to be too much of an issue:
Euro 2020 Tournament Sponsors share price one week in:
Coca Cola (NYSE: KO) -2.6%
Heineken (AMS: HEIA) +1.6%
Volkswagen (FRA: VOW3) -2.5%
Just Eat Takeaway (LON: JET) +1.2%
Hisense (SS: 600060) +3%
Booking.com (NASDAQ: BKNG) +0.04%
Gazprom (ETR: GAZ) -0.47%
When embarking on product placement and sponsorship, the company plays the long game, building brand recognition, and awareness. It’s lucrative for the teams and tournaments involved, and brands enjoy the heightened publicity in the long run.
However, the power of individual influencers has reached another level since social media took off. Therefore it’s a double-edged sword if an influencer chooses to turn on a brand.