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Could Monster deal help NASCAR woo new, young fans?

Steve Phelps, Brian France, Mark Hall and Mitch Covington toast during a press conference as NASCAR and Monster Energy announce their sponsorship agreement at Wynn Las Vegas on December 1 in Las Vegas, Nevada. Monster Energy, which will begin its tenure as naming rights partner on Jan. 1, 2017, will become only the third company to serve as the entitlement sponsor in NASCAR premier series history, following RJ Reynolds and Sprint/Nextel.
Steve Phelps, Brian France, Mark Hall and Mitch Covington toast during a press conference as NASCAR and Monster Energy announce their sponsorship agreement at Wynn Las Vegas on December 1 in Las Vegas, Nevada. Monster Energy, which will begin its tenure as naming rights partner on Jan. 1, 2017, will become only the third company to serve as the entitlement sponsor in NASCAR premier series history, following RJ Reynolds and Sprint/Nextel. Getty Images

In a recent YouTube video, bleary-eyed, 20-year-old motocross star Axell Hodges rolls out of bed at his California home and grabs a Gronk, a Monster Energy drink named after New England Patriots tight end and notorious partier Rob Gronkowski. Hodges Snapchats his mom making him breakfast, kisses his bikini-clad girlfriend and heads out to practice on the nearby “Slayground.”

The day-in-the-life video is one of Monster Energy’s most-viewed in recent months. There’s little content directly related to the energy drink in the video, but its lifestyle appeal is clearly targeted at millennials – a younger demographic to whom NASCAR is also trying to expand its reach.

NASCAR’s naming of Monster to replace Sprint as its new title sponsor earlier this month makes sense given the intended audiences and the additional exposure each could help the other get, experts say. But the partnership also comes at a time when NASCAR’s attendance numbers have been declining, and as energy drinks continue to be scrutinized for their safety.

About a dozen Monster executives were in Charlotte last week to learn more about NASCAR, and so NASCAR could learn more about them. It’s too early to say what kind of specific marketing initiatives the two companies will roll out, but executives such as NASCAR Chief Marketing Officer Jill Gregory describe the two companies as similar, and their relationship as mutually beneficial.

“They’ve done a fantastic job of building that lifestyle (brand), and when you think of us … we kind of started out as a maverick brand. There was some edginess and danger and excitement, and there still is, every time our drivers go onto the racetrack,” Gregory said.

Monster – whose deal with NASCAR is reportedly worth $20 million – is the biggest energy drink company in the U.S. by volume sales, commanding 42.5 percent of the market in 2015, according to data from Euromonitor. Furthermore, the energy drink market grew by over 70 percent in volume sales from 2010 to 2015, Euromonitor figures show.

But the rate of growth in recent years has slowed, a sign that companies are maturing, said Duane Stanford, editor of the trade publication Beverage Digest. “When that happens, you need to take steps to protect that growth,” Stanford said. “One way to do that is broaden your audience.”

What’s more, Monster has never marketed itself traditionally, Stanford noted. The company, for example, doesn’t have TV ad campaigns. It relies instead on event-based promotions, word of mouth and social media.

“In that regard, (the NASCAR deal) is a step up for them because they’re tying themselves to something that’s a national marketing approach. And if that’s the audience NASCAR is trying to reach, there probably aren’t many companies better than Monster or other energy drink companies,” Stanford said.

Monster does have a massive social media presence, though, and that’s another factor that was attractive for NASCAR, Gregory said. The energy drink company has nearly 25 million Facebook “likes,” compared with 2.2 million by current NASCAR title sponsor Sprint. Monster also boasts nearly 3.3 million Twitter followers, and 3.6 million Instagram followers.

In addition to Monster’s digital prowess, experts say the company’s diverse portfolio help make it attractive to a wider audience, something NASCAR says it could benefit from, too. People who drink Monster aren’t just sleepy teenagers – the company has tapped into other demographics with products like Rehab, a blend of tea, lemonade and energy.

“You do get a mix of the blue-collar construction worker, the one who is pulling their truck up to get gas in the morning on the way to the job site. Then you’ve also got young millennials who drink it, and also white collar office workers. (Monster is) able to attack both sides of the spectrum,” Stanford said.

Monster executives would not comment further on the NASCAR deal.

Challenges

Monster has faced questions about its safety and caffeine content in the past. Numerous lawsuits against Monster have alleged that long-term use of the company’s products has caused “irreversible and near-fatal health problems” including kidney disease, stroke and cardiac arrhythmia, according to multiple news reports earlier this year.

But Monster isn’t NASCAR’s first controversial corporate sponsor.

Winston-Salem-based tobacco company R.J. Reynolds ended its nearly 30-year sponsorship of NASCAR in 2003. Under RJR, NASCAR’s premier series was the Winston Cup Series, a nod to RJR-branded cigarettes.

Stock-car racing provided RJR a place to spend its marketing dollars after cigarette advertising was banned from television in 1971, though NASCAR’s relationship with the company grew more controversial as safety concerns about tobacco use increased.

“It’s sadly true that the product those dollars were spent to promote has damaged the health of thousands and thousands of its users,” Observer NASCAR writer David Poole wrote in a 2003 column.

David Carter, executive director of the University of Southern California’s Marshall Sports Business Institute, compared Monster’s sponsorship of NASCAR to beer companies sponsoring college athletics.

“The burden is on Monster in much the same way it has been for companies such as Anheuser-Busch over the years to ensure that their marketing efforts, to include advertising and promotions, are not squarely targeting an underage demographic,” Carter said.

“While scrutiny will surely exist, NASCAR and Monster, working together, will have to straddle this fine line and, in doing so, will likely have a marketing platform that includes public service announcements.”

Monster is disallowed from marketing its products to consumers under 18. But the company did something “very smart” in pointing out in its advertising that its caffeine content often is lower than in other popular drinks such as coffee, noted Stanford of Beverage Digest.

“They hammered that message,” he said. “They got some baseline of facts to use to defend their products, and it worked. There was a lawsuit filed that was dropped.”

Monster and NASCAR did not share the terms of their sponsorship deal, outside of the fact that it’s a “multi-year agreement with some options,” NASCAR CEO Brian France said in the Dec. 1 press conference. But after the deal was announced, ESPN sports business reporter Darren Rovell said that the deal is evidence of NASCAR’s decline. Citing sources, Rovell said the Monster deal is 40 percent of the current Sprint deal, which was estimated at $50 million.

Marc Ganis, the co-founder of Chicago-based sports consulting firm Sportscorp Ltd., had not heard that the deal came at a discount, but said it “wouldn’t surprise me.”

NASCAR’s admissions revenues have slumped for a host of reasons – from anemic wage growth to fans’ distaste for the “never-ending rules changes” and the Chase format, to NASCAR CEO Brian France’s endorsement of President-elect Donald Trump.

“The numbers have come down,” Ganis said of NASCAR revenues. “When Sprint did its deal, NASCAR was the hot property out there, and it isn’t right now.”

Concerns over Monster products’ safety could have also played into the equation.

“It’s hard to tell if Monster received the proverbial good deal as this will be determined over time as they activate their partnership, and do so with NASCAR’s support. However, the extent to which safety concerns existed, they were likely only one of many considerations when crafting the deal,” Carter said.

Still, Gregory is optimistic about Monster’s “edginess and excitement,” which she said will help highlight aspects of NASCAR that draw in fans regardless of age.

“There are things on each side of the partnership that were really attractive to the other partner, and that’s the recipe for any sponsorship if it works,” Gregory said.

Katherine Peralta: 704-358-5079, @katieperalta

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